ITASSET

MANAGEMENT

(From Booz-Allen & Hamilton)

PERSPECTIVE ON ASSET MANAGEMENT

• What are the management issues and challenges we see at large multinationals?

• What is an asset management capability?

– What are the best practices?– What benefits have been achieved through improved

asset management capabilities?

• What steps do companies take to implement improved asset management capabilities?

ASSET MANAGEMENT ENCOMPASSES THE PROCESSES OF PLANNING, PROCURING AND

MANAGING HARDWARE, SOFTWARE AND SERVICES

Acquisition Planning

For Hardware,Software and

Services

Supplier and Contract

ManagementProcurement

InventoryManagement

ASSET MANAGEMENT PROCESS

ASSET MANAGEMENT PROVIDES THE FOUNDATION TO OPTIMIZE THE RESOURCES OF THE BUSINESS

• Control over the infrastructure provides the ability to plan ahead– Capacity -- How many assets are installed? How many more do

we need?– Ownership -- Where are the assets located? Can we cascade to

reduce excess capacity?– Capability -- What assets will be required to support the critical

business applications?

• Asset management standards minimize complexity in the infrastructure– Higher service levels due to a controlled number of software

packages and hardware configurations– Reduced inventory of non-standard equipment

• Expertise can be focused on high priority business objectives rather than supporting non-standard applications and configurations

POOR ASSET MANAGEMENT PROCESSES WILL LEAD TO HIGH COSTS IN THE BUSINESS

• Extra Capacity -- especially in distributed computing– Extra desktops: hardware and software– Excess network bandwidth– Server capacity

• Increased fixed costs reduce financial flexibility– Long Contract Terms -- especially in dynamic services

areas, e.g., telecommunication, desktop services

• Insufficient consideration of “total cost of ownership”– Upfront hardware costs are usually key priority– More attention should be given to standards and reduction

of ongoing support costs– Decide the right level of maintenance service required to

support the business

FINALLY, POOR ASSET MANAGEMENT CAN IMPACT AN ORGANIZATION’S ABILITY TO RESPOND EFFECTIVELY TO BUSINESS REQUIREMENTS

• “Just-in-time” Justification: Infrastructure and assets often justified on a project by project basis

– Affects the economics of the project– Slows down the process of acquiring new equipment to

meet a business need– May lead to the lowest-priced hardware solution, even if it

is non-standard

• Planning: Often reactive following ad hoc, last minute capacity and functionality requirements to deliver new solutions

THE NEXT SLIDES WILL DEMONSTRATE THE APPROACH USING PROVEN CASE STUDIES

AND BEST PRACTICES

• Summarize key case studies

• Demonstrate the key economic drivers and models

• Present current Best Practices and capabilities in the marketplace

– Tools– Outsourcing services

BEST PRACTICES FOR EACH OF THE ASSET MANAGEMENT PROCESSES PROVIDE GUIDELINES

FOR BUILDING NEW CAPABILITIES

Acquisition Planning

For Hardware,Software and

Services

Supplier and Contract

ManagementProcurement

InventoryManagement

ASSET MANAGEMENT PROCESSBEST PRACTICES

• Minimized ad-hoc requests

• Managed IS user demand

• Standardized hardware and software configurations

• Forecasts of user demand

• Requirements base planning

• Business driven requirements only

• Minimized number of suppliers

• Maximized service component for products and services

• Purchase only “right” hardware/ software

• Achieve economies of scale through consolidation

• Minimize purchasing admini- strative costs

• Minimized excess assets

• Manage equipment effectively

• Maximized life of assets

• Includes installation and disposition

THESE BEST PRACTICES ARE USED TO IDENTIFY GAPS IN CURRENT CAPABILITIES

EXAMPLES OF CAPABI LI TY GAPS

PROCESSBEST PRACTI CE

OBJ ECTI VERECOMMENDED CAPABI LI TY

I MPROVEMENT

Eliminate unnecessary work(minimize ad-hoc requests)

Develop f orecasts f or userdemand

Acquisition Planning Optimize asset utilization among

business units

Standardize hardware and sof twareconfi gurations across business units

Define strategy to cascadeequipment to optimize capacityutilization

Supplier and ContractManagement

Achieve lowest total cost ofownership, best service levels,and simplified asset acquisition

Rationalize the number of suppliers

Enforce standards

Leverage buying through scaleeconomies

Establish contracts that deliverongoing improvement

Procurement Optimize capacity Align to an acquisition planningprogram to reduce excess capacity

Achieve physical control of assets I mplement a single inventory

management tool-managed regionallyor locally

I nventory Management

Achieve f ullest utilization andsharing of assets

Maximize the lif e of assets throughthe ref resh program

Define process to re-deploy assets

See Overhead Slide

INFRASTRUCTURE STANDARDIZATION REDUCES “TOTAL COSTS” BY ENABLING HIGHER SUPPORT

RATIOS

STANDARDIZATION IMPACT ON SUPPORT RATIO(Greater Than 2000 Users)

40% ABC (at 40%standard)

41 - 69% 70%

% Standardization

I/SProductivi

ty(AverageSupportRatio*)

Low Standardization leads to low

productivity

Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis

EXAMPLE

INFRASTRUCTURE STANDARDIZATION IS KEY TO DELIVERING I/T SERVICES MORE ECONOMICALLY

PRODUCTIVITY(Greater Than 2000 Users)

SERVICE COSTS(Greater Than 2000 Users)

I/SPRODUCTIVITY

(AverageSupportRatio)

40% 41-69% 70%

AVERAGEI/S

SUPPORTCOST

17% 18-25 26-33 34

% STANDARDIZED SUPPORT RATIO

A “Common”Standard

InfrastructureImproves Service

Productivity

HigherProductivity

Results in LowerService Costs

Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis

Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis

CASESTUDY

STRATEGIC SOURCING PROVIDES OPPORTUNITIES FOR COST SAVINGS BY MINIMIZNG THE NUMBER OF SUPPLIERS

PURCHASI NGCATEGORI ES

I SSUESI MPROVEMENTOPPORTUNI TES

Desktops

Multiple desktop confi gurations andmultiple vendors lead to

– Lost opportunities to capture volumediscounts

– I ncreased desktop complexity and thereforehigher support costs

Defi ne desktop standardconfi gurations (limited number ofmodels)

Rationalize desktop supplier base

– Start with regional suppliers

– Migrate towards global suppliers onlywhen it provides lower costs

Servers

Multiple server confi gurations andmultiple vendors lead to

– Lost opportunities to capture volumediscounts

– I ncreased network complexity

At large campuses, divisionsindependently manage their networks andservers – leading to excess servercapacity

Defi ne standard serverconfi gurations

Rationalize server supplier base

Transfer control and managementof servers to desktop supportorganization to enforce standardsand to reduce server over capacity

Sof tware

Diffi culty in enforcing sof twarestandards – e.g., sof tware purchases canbe submitted using expense accounts

Sof tware suppliers may exist butfurther leverage is possible bycoordinating purchases and f rompurchasing sof tware in “bundles”

Defi ne a set of standard sof twarepackages

Purchase these packages insof tware “bundles” f rom globalsuppliers

MaintenanceServices

Multiple hardware maintenance vendors –lost opportunities to rationalize andreduce maintenance costs

Rationalize number of maintenancevendors

LAPTOP COST COMPARISONPurchase vs. Lease

DESKTOP COST COMPARISONPurchase vs. Lease

Leasing ismore costeffective

Leasing is morecost effective forrefresh periods

lessthan 4 years

COST(NPV)

COST(NPV)

2 Years 3 Years 2 Years 3 Years 4 Years 5 Years

REFRESH PERIOD REFRESH PERIOD

Lease

Purchase

PROCUREMENT BEST PRACTICES PROVIDE THE OPPORTUNITY TO SELECT THE “RIGHT” HARDWARE AND

SOFTWARE TO SUPPORT BUSINESS REQUIREMENTS

DESKTOP LAPTOP

CostPerSeat

$2,800

$3,800

0% 20% 40% 60% 80% 100%

Total Cost(per 1000

users)

% Laptop

Desktop/Laptop Cost Comparison

Total Cost Impact of Laptop Mix

CASESTUDY

PURCHASE VERSUS LEASE ALTERNATIVES MAY PROVIDE FINANCIAL OR OTHER BENEFITS

PROCUREMENTALTERNATIVE

BENEFITS RISKS

Purchase

May be lower cost alternative f orlonger ref resh cycles (over 3 or 4years)

Minimizes incremental f ees f orextending the ref resh cycle

Risk of asset ownership associatedwith obsolescence of equipment

Lease

Provides financial incentives toimprove the asset managementprocess through visibility to:

– Monthly payments

– Lease extension and termination fees

Balances the cash flow impact ofprocuring new equipment

Fees will be assessed if ref resh cyclechanges

– Lease extension fees apply whenlengthening ref resh cycles

– Lease termination fees apply whenshortening the ref resh cycles

A SHARED SERVICES ORGANIZATION LEVERAGES IMPROVED PROCESSES, STANDARDS, AND

ORGANIZATIONAL CHANGES TO ACHIEVE ECONOMIES OF SCALE

SCALE CURVE FOR I/S COSTS

Cumulative Company A

Group B

Group A

Group C

Group DI/S cost-curve

100 1,000 10,000 100,000

No. of I/S Users (Log Scale)

Source: Interviews, surveys, BA&H analysis

I/S

Cost/

User

Economies of scale areachieved through a

shared serviceorganization

A STRUCTURED APPROACH CAN BE USED TO IMPROVE ASSET MANAGEMENT CAPABILITIES

I. What is the Business Case?

II. What are the Asset Management Capabilities?

III. How to Implement These Capabilities?

FinancialTools and

Models

ProcessModel and

Tools

Organizational Model

• Internal

• External Partners

TechnicalTools

• Baseline current “total” cost structure

• Define Business Unit service requirements

• High-level benchmarking

• Identify gaps and benefit opportunities

- Service

- Cost

- Capability

• Architecture

• Standards

• Best Practices

• Leveraging Price - Performance

ASSET MANAGEMENT APPROACH

HIGH-LEVEL BENCHMARKS

I MPROVEMENTAREA

TYPI CAL I SSUES

Support Costs

Duplicate and sub-scale organizations exist

Little eff ort is made to share practices across desktop organizations

Control and coordination of discretionary activities is limited

Desktop standards are not adequately enforced

Desktop EquipmentAsset Ratio

Excessive number of desktops

– People of ten have both laptops and desktops when they only need one

– Some locations have more desktops than employees

Desktop Ref reshRate

Desktops are replaced too f requently; ref resh rate is higher thannecessary

Replacement rate may be driven by technical and not business needs

Procurement I nsuffi ciently leveraging purchasing scale

– Lack of (HW/ SW) standards

– Lack of coordination of desktop purchases

Automation –Managed ComputerEnvironment

No standard computer environment exists, limited opportunities toautomate desktop services

Many technical support activities can be automated/ done remotely

DESKTOPEXAMPLE

THE BUSINESS CASE DEFINITION VALIDATES IMPROVEMENT OPPORTUNITY AREAS IN ASSET

MANAGEMENT

• Develop a baseline of the “total” cost for asset management

– Quantify “total” costs -- hardware, software, maintenance, procurement, help desk/support, installation, and other asset management costs

– Include business unit and geographic specific costs– Identify key levers -- asset ratios, refresh rates, etc…

• Utilize high-level benchmarks to identify the opportunities

– Define and utilize analytics to be used to evaluate the current processes

– Compare the baseline with the benchmarks to identify the gaps with best practices

• Identify and quantify the benefits that can be obtained through an improved asset management capacity

• Define key levers and controls that can be used to manage the process improvement

NEW ASSET MANAGEMENT CAPABILITIES MUST BE ALIGNED WITH BUSINESS IMPERATIVES,

ARCHITECTURE AND STANDARDS, AND BEST PRACTICES

BusinessObjectives and

Priorities

Architectureand

Standards

BestPractices

NewAsset Management

Capabilities

• Identify new capabilities required by the business

• Prioritize initiatives based on business priorities

• Quantify capacity and functionality requirements

• Align architecture and standards with business objectives

• Define new capacity targets

• Design new architectural changes

• Review list of standards

• Apply best practice to improve the process

• Define standards and measures to control compliance and process improvement

BUILDING NEW ASSETMANAGEMENT CAPABILITIES

CAPABILITY GAPS CAN BE IDENTIFIED USINGTOOLS AND MODELS

CATEGORY EXAMPLES

Financial Tools Financial Models

– Purchase vs. lease

– Key drivers: ref resh cycles, asset ratios, capacity curves

Technical Tools

Architecture and standards

Capacity, f unctionality and project plans

Technical specification f rameworks

– Desktop vs. laptop hardware

– “Power” user vs. average/ standard user

Process Models

Outsourcing criteria f or internally supported vs. outsourced

Scorecard to measure and monitor the process improvements

Procurement practices

– Clear asset ownership

– Selecting key products as standards

– Strategic sourcing

– I nventory management tools

Organizational Models Organizational roles and responsibilities

Approach … Implementing Capabilities ...

ONCE THE CAPABILITY GAPS ARE IDENTIFIED, AN EVALUATION CAN BE COMPLETED TO DETERMINE WHETHER TO OUTSOURCE OR INTERNALLY

SUPPORT THE SERVICES

SAMPLE CRITERI A DESCRIPTI ONS

Total Cost Comparison

Compare internal costs vs. outsourcing total costs (retained costs +outsourcing f ees)

– Project these cost comparisons over the term of the contract to determinewhich service alternative is lower cost

– Make sure that the “net” transition costs will be amortized by thesecommitments

Unit Cost Comparison

Quantif y and compare the unit costs f or each of the desktop servicecategories

– Ensure the unit costs reflect the “true” costs – not allocations – associated withdiff erentiated service levels

– Verif y that the pricing structure provides the granularity without being toocumbersome to manage service and demand

Scaleability and PriceSensitivity

Test pricing structures against varying workload assumptions

– I ncreases and decreases in the number of seats and technical support callvolume

– Change in mix (e.g., laptop vs. desktop)

Clarif y conditions to invoke scaleability and quantif y any applicablecosts

Cancellation Terms Quantif y one-time costs and ensure flexibility without paying highpenalties f or cancellation or termination of the agreement

Contract Duration Commitment to the preferred contract term

Geographic Scope Quantif y and evaluate which locations will participate in the deal

A SCORECARD PROVIDES THE ABILITY TO CONTROL AND ENSURE THE ONGOING IMPROVEMENT

Approach … Ongoing Improvement ...