IBM Global Services

Thought Leadership

IT Optimization Solutions: Transforming the enterprise

“ The drive for business value in IT starts inauspiciously if we can’t properly convey the role and intent of the very organization meant to deliver it.” 1

— John Berry, InternetWeek Online

Introduction

In today’s Web-connected world, information technology (IT) has become a

crucial business-level concern and priority — affecting decisions from the

factory floor to the executive suite. CIOs and CTOs alike now sit in the board-

room, joining CFOs and CEOs in shaping strategies for everything from supply

chain management solutions to mergers and acquisitions. Today, the effective

application of technology alone can be the deciding factor in determining

whether companies are, in the end, successful. A formidable and seemingly

contradictory list of challenges — including reducing costs, enhancing busi-

ness capabilities, increasing customer satisfaction and improving performance

across the enterprise — has thus become leading IT imperatives.

Thought Leadership

2

The environment

As companies make the increasingly mandatory

transition to e-business, they are faced with a growing

and fundamental reliance on their IT infrastructure:

the servers, networks and applications; the Web sites,

Internet and intranets; security and e-mail solutions; plus

data centers and storage sites. The current climate calls

for enabling business alignment and streamlining these

infrastructure components which, in turn, requires revis-

iting the organization and the processes necessary to

support it. Just as a manufacturing or retail business

focuses on improving its internal efficiencies to reduce

costs while improving customer satisfaction and introduc-

ing new products, so, too, must the e-business focus

on improving its vital infrastructure. However, address-

ing such a comprehensive spectrum of business and

technological issues is a complex and difficult under-

taking — one that can become costly and cumbersome.

To truly optimize the IT infrastructure, it becomes

critical to create and implement a holistic plan that is

at once manageable, adaptive and highly effective.

“ A typical large corporation depends on 49 different software applications to run its business, and spends up to a third of its IT budget getting those applications to communicate with each other.” 2

— The META Group

The IBM answer: IT Optimization Solutions

In response to the overwhelming complexities involved

in evaluating, rationalizing and optimizing an IT organ-

ization, IBM has formed IT Optimization Solutions, a single

point of contact for an enterprise’s IT optimization needs.

IBM IT Optimization Solutions leverage the vast scope

of IBM Global Services — capabilities needed to under-

stand your enterprise, combine your data centers and

servers, optimize your networks, integrate post-merger

infrastructures and more — all controlled by you via an

IBM-staffed and managed Program Office. This single

focal point brings together the many disparate views of

IT value into one holistic optimization program. Through

a series of prioritized initiatives, centrally managed, your

optimization goals can be achieved more quickly and

successfully than with discrete projects.

3

Establish mandate for change• Gather and evaluate data• Create foundation for change• Identify imperatives• Perform concept checkpoint

Assessment• Conduct preliminary assessments• Establish solution alternatives

Analysis• Validate opportunities• Perform detailed analysis• Recommend optimization plan

Define solution path• Define solution paths• Select best relationship• Establish program office

Implement optimization strategy• Complete detailed design• Execute transition strategy• Track results

Solutionframing

Solution design

Transition planningand governance

Solution delivery

IT Optimization engagement approach

Thought Leadership

4

Provider models: How IT serves the enterprise

Even in today’s fast-paced e-business environment,

companies differ widely in their relationship with IT. Before

executing an optimization initiative, it is crucial to charac-

terize how a company relates to — and leverages — IT.

In many large enterprises, various departments will

have a different definition of “IT value” and fundamentally

want the IT organization to serve different purposes. It

is important to acknowledge and weigh these competing

value requirements when developing appropriate optimi-

zation strategies.

There are four distinct profiles that describe these

varying perspectives:

• Commodity Profile — An enterprise fitting the Commodity

Profile views IT services as a basic investment for automat-

ing fundamental administrative functions at the lowest

possible cost. In optimizing a commodity-framed IT organi-

zation, the primary focus is on lowering expenditures.

• Utility Profile — The Utility Profile fits companies that are

still primarily focused on cost, but acknowledge the impor-

tance of building customer relationships. These businesses

may want to use IT optimization to work on service-level

agreements, response times, availability and other customer-

focused issues.

• Partner Profile — The Partner Profile describes an organiza-

tion in which IT is valued at the business level. While cost

is always an issue, the emphasis is on the business benefit

derived from an investment in IT. In these situations, busi-

ness units partner with IT organizations to achieve overall

quality of service and bottom-line business goals.

• Enabler Profile — Companies in which IT is an important

element in the development of business strategy fit the

Enabler Profile. In these businesses, IT initiatives drive

business strategy and are viewed as essential to achieving

a competitive advantage.

The true challenge in deciding which optimization activi-

ties to undertake is that, in many environments, IT is

asked to take on aspects of all of these profiles — based

on the varying requirements of different business units.

Understanding these differences, and learning to balance

and prioritize them, is a critical step in making successful

optimization choices.

“ The successful IT suppliers of the future will be those that work on developing a basis of trust, and an alliance-type relationship with their customers.” 4

— Dennis Benner, VP and CIO, Fluor Corp.

5

IT value profiles

Bu

sin

ess

ben

efit

focu

s

Cost focus

Provider researches, recommends and implementstechnology to enable quantum leap in business capability

Enabler

Provider works with othersto develop a service and provide resources/skills necessary to support the service

Provider

Provider of a quality serviceat a cost equal to or lower thanthe competition

Utility

Provider of an adequateservice at a cost lower than the competition

Commodity

Thought Leadership

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The Balanced Scorecard

To establish what the internal business, external

customer, overall financial and innovation/learning

perspectives are for the client organization, IBM

IT Optimization Solutions uses the widely accepted

Balanced Scorecard framework. All analyses and con-

clusions are then structured into this framework, which

is used as a way to connect the many optimization

decisions and build a comprehensive business case.

The Balanced Scorecard framework is then used as the

foundation for the optimization plan and to establish

priorities for all proposed initiatives, to track progress

through implementation and to measure what matters

most — results.

“ A company with 25,000 users and seven directories can expect to pay US$364,700 a year to keep all directories up-to-date. It would cost the same company about US$52,100 to maintain a single metadirectory.” 3

— The Burton Group

Each of these Balanced Scorecard Categories is com-

posed of more specific value propositions which may help

you determine your own optimization strategies. Perhaps

your organizations can benefit from one of the following:

• A scalable, adaptable infrastructure supportive of new busi-

ness, e-business, processes and applications — from supply

chain management to customer relationship management

• More effective data management, including improved global

access to corporate data, with an emphasis on sharing all

forms of information across and beyond the enterprise

• An integrated and consolidated infrastructure designed

for optimized use of IT assets and seamless enablement

of new technologies, while maintaining service levels

and operations

• Global consistency of IT management through redefined

enhanced management systems and services, increasing

overall efficiencies and improving the consistency of

service delivery

• A basic and companywide reduction of total IT spending

incorporating critical examinations of the IT expense-to-

revenue ratio, as well as the overall IT capital and opera-

tions budget

• Streamlined technical architectures and vendor networks

through the reduction or standardization of vendor interfaces

and the accompanying architectures

• Consistent service delivery achieved by improved global

systems performance, inclusive of server configurations and

locations, network performance, systems management,

capacity planning application performance and design, as

well as skills and organizational design.

7

Value proposition:• Enable an adaptable IT infrastructure• Leverage data more effectively

Enable new business

Value proposition:• Optimize use of IT assets• Establish global consistency of IT management

Improve internal efficiencies

Value proposition:• Reduce total IT spending• Streamline technical architecture/vendors

Reduce cost

Value proposition:• Provide consistent service delivery

Promote customer satisfaction

Commodity

Utility

Partner

Enabler

Cost Efficiency CapabilityCustomersatisfaction

60%

40%

20%

10%

40%

50%

30%

20%

10%

30%

35%

20%

35%

Balanced Scorecard category (Example)

IT v

alu

e p

rofi

le

The Balanced Scorecard synchronizes the IT optimization value proposition with the client’s business strategy . . .

. . .and drives business-aligned priorities for IT funding allocations

8

Thought Leadership

Characteristics of IT optimization

An early step toward IT optimization is one of simple

but crucial evaluation: In what ways could your company

streamline and advance its position? In what areas—

technology infrastructure, organization or process—

could your business effect such transformation? Only by

evaluating and understanding what your business wants

to accomplish as an enterprise can you effectively work

with IT to achieve your goals.

An IT infrastructure consists of both management and

technical components. These components can be further

segmented into seven discrete, interrelated “domains”

which collectively define the potential areas of analysis

and applied expertise. Because of their general appli-

cability, these domains permit quick linkage to methods,

tools and practitioners who can integrate them into

a cohesive approach. Management domains, including

strategic alignment, process, organization, and finance

and environment are those which apply to the structure

and decision-making processes of the IT organization.

Technical domains, including infrastructure, network and

applications and data, are those which apply to the physi-

cal and logical elements of the infrastructure itself.

The Management Domains:

• Strategic alignment: establish an understanding of your

current and prospective business drivers; documents the

alignment between business and IT strategies; create the

basis for optimization design and investment priorities;

provide the foundation for the Balanced Scorecard

• Process: analyze the extent to which the management

system is formally defined and measured based on the

IT Process Model; assess the effectiveness of the man-

agement system; examine process ownership, efficiency,

effectiveness and consistency; help determine your

preparedness for implementation

• Organization: establish an understanding of the current orga-

nization structure; provide a foundation for change man-

agement; examine roles, responsibilities, skills and change

readiness

• Finance/Environment: identify financial management

system improvement opportunities and validate or refute

the optimization financial justification; establish cost

and benefit business case; examine IT general ledger,

budgeting and procurement policies; data center place-

ment; and regulatory issues.

The Technical Domains:

• Infrastructure: inventory and assess the mainframe, server

and other technology platforms, as well as the overall man-

agement system for the data center environment; examine

architectures, hardware, system software

• Network: understand and assess the voice and data network

design, as well as the associated network management

standards, procedures and policies; examine topology,

utilizations and sourcing

• Application and data: understand and assess the application

portfolio and supporting data; examine application diversity,

portfolio composition, data diversity and business process

alignment.

As opportunities for efficiency and effectiveness improve-

ment often span multiple domains, the individual domain

perspectives should not dominate the design or the opti-

mization plan. Each domain can apply to any or all

value propositions and all aspects of these domains

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Management Domains Technical Domains

Strateg

icali

gnm

ent

Proc

ess

Organ

izatio

n

Finan

ce a

nd

envir

onm

ent

Infra

struc

ture

Networ

k

Applic

ation

s

and

data

Enable newbusiness capabilities

Reduce overallIT cost

Improve internalefficiencies

Enable an adaptableIT infrastructure

Maintain datamore effectively

Optimize use ofIT assets

Establish global consistencyof IT management

Reduce totalIT spending

Streamline technicalarchitecture/vendors

Provide consistentservice delivery

Management and Technical Domains apply to all value propositions

(Example)

Promote customersatisfaction

Primary focus Secondary focus

Thought Leadership

10

must be considered when creating the design. The

key to a successful optimization plan, however, is its

holistic nature — the total must be greater than the sum

of the parts. All seven domains are essential to an IT

Optimization effort; each should be actively explored or

held constant...not ignored!

The IT optimization engagement approach

While the engagement approach delivered by IBM IT

Optimization Solutions is specifically tailored to your

company’s particular requirements, there is a universal

template that effectively describes the teamwork in

this offering.

First, a high-performance team of IBM IT optimization

experts engages with your senior management to

understand your business strategy and develop a

complementary IT optimization strategy. This portion of

the engagement — called Solution Framing — begins with

explicit business and IT strategy discussions that will

result in an initial business plan for optimization and the

development of the beginning element of the Balanced

Scorecard. Once the overall objectives are determined,

a high-level optimization plan is developed, including

a prioritized set of initiatives to attain those objectives,

and the potential rewards if they are successfully imple-

mented. This Solution Design phase serves to evaluate

and acknowledge what opportunities for optimization

exist, and then determine the magnitude of such oppor-

tunities before more significant investments are made.

The resulting optimization plan serves as the blueprint

for the Transition Planning and Governance of the overall

optimization program. Through Solution Delivery, the

Program Office effectively manages combinations of skills

from within your organization, IBM and third parties, to

successfully implement the optimization plan.

From within the Program Office, the focal point for all

optimization project management and decision making,

a dedicated IBM Optimization Principal will oversee the

engagement — through delivery. Resources within the

Program Office will help you not only with the technical

aspects of implementation, but also the management

systems aspects including critical organization change

issues. With the help of the IBM optimization team — and

the active collaboration of your organization’s business

and IT experts — you can evaluate, validate, plan and

establish a streamlined, responsive and adaptive IT infra-

structure, ready to support your enterprise.

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Solution framing

Balanced scorecard

Milestones

IT Optimization engagement flow

Project A

Project D

Project C

Project B

Determine governance modelEstablish mandatefor change

Establishfoundationfor change

Identifyimperatives

Initiate customerdata collection

Completedetaileddatacollection

Evaluatecurrentenvironment

Developalternativeapproaches

Establish program management

Produce optimization plan

Complete detailed analysis

Validateopportunities

Create detailedoptimization plan

Develop detaileddesign

Solution design Solution delivery

Thought Leadership

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IT optimization: An alliance

Our innovative approach to optimization is, in fact, an

alliance — one in which a dedicated optimization team

commits to a level of performance all the way through until

the optimization recommendations are implemented and

results are achieved. For some select initiatives, shared

risk/shared benefit implementation contract arrangements

may be possible. Together with IBM, you can define

an implementation relationship governance structure that

balances your external investment levels and timing

with reductions in program or project risks. During the

Solutions Framing and Assessment phases, an optimiza-

tion solution is designed in response to your business

strategies. The output of these phases is a series of initia-

tives that leads to detailed design and implementation

activities. IBM might be able to support the execution of

these IT transformation activities in a number of ways:

• As a Consultant, IBM would provide the best available

expert assistance as required on a time and materials

or other standard consulting contract basis. You manage all

the risk.

• As a Co-Manager, IBM might assume responsibility

for selected projects as part of an overall transformation

assistance program. You now start to offload some

risk to IBM.

• As a Co-Sourcer, IBM might take on responsibility for

designing and implementing a complete IT transformation

(or significant portion thereof) including interim service

delivery in preparation for re-deployment back to you.

This scenario transfers even greater risk to IBM, while

you still maintain overall ownership.

Additionally, IBM financing may be available to supple-

ment your own investment dollars and rearrange cash

flow to fit your needs.

By joining IBM in this collaborative venture, you may

achieve more rapid and successful execution than could

be expected with in-house optimization resources all

thanks to the world-class disciplines, skills and experi-

ence IBM brings to the table.

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Consultant Co-manager Co-sourcer

Solution delivery sourcing alternatives

IBM Optimization relationship possibilities

Risk

External investment

Imp

lem

enta

tio

n g

over

nan

ce d

ecis

ion

Thought Leadership

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“ Complexity drives services. The more you go to a heterogeneous world, the more services become necessary.” 5

— Tom Bittman, GartnerGroup

Success stories: IBM on IBM

The internal e-business transformation of IBM is perhaps

the most marked example of the IT optimization expertise

IBM Global Services brings to the marketplace. IBM sales

and services engaged IBM Global Services to evaluate,

benchmark, consolidate and optimize its IT organization.

The optimization team identified US$800 million in sav-

ings — achievable through realignment of IT development

spending, a reduction of infrastructure and improved

productivity. A majority of these cost-cutting strategies

are currently being implemented. IBM has standardized

and consolidated systems, unified and integrated its

massive, worldwide enterprise, and at the same time

launched six key value-added business processes,

including Customer Relationship Management, Integrated

Product Development and Integrated Supply Chain solu-

tions. We are confident that IT optimization can be as

powerful and transformative in the marketplace at large

as it has been inside the IBM enterprise.

Could this be you?

A major insurance provider aimed to evaluate, design

and optimize its applications, data and diverse systems

in order to fully support new e-business initiatives and

consolidate its cash management and customer print

initiatives. The organization teamed with IBM Global

Services on a major data center consolidation effort —

bringing the activities of more than two dozen regional

centers into three new facilities while maintaining continu-

ity of all services. The bottom-line result? A savings of

US$50 million, annually.

A large, multinational packaged goods company has pur-

sued an aggressive growth-through-acquisition strategy

for a number of years and, as a result, operates a widely

disparate IT organization. The parent company wished

to reduce overall IT investment and, at the same time,

position itself for enterprisewide supply chain initiatives —

via consolidation, integration and optimization of the

company’s systems, applications and data stores. With

the help of experts from IBM Global Services, the com-

pany protected its future growth initiatives by launching

a three-to-five year strategy toward building a common

worldwide infrastructure.

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About IBM Global Services

IBM is distinctly qualified to deliver world-class optimi-

zation solutions to the marketplace in that the whole

of IBM Global Services is, conceivably, part of the offer-

ing. When appropriate, other capabilities of IBM — includ-

ing specific product expertise and even the IBM research

organization — can be engaged to solve your unique

optimization challenges. As your single point of contact,

IT Optimization Solutions makes available all relevant

skills, methodologies, processes and services. This

means that the demonstrated experience of IBM and

our broad-based capabilities are all available during an

optimization engagement, and will be brought to bear on

your particular set of challenges — as determined during

the early, proactive assessment and strategy phases.

As you consider engaging the extensive capabilities

of IBM Global Services and the unique IT optimization

approach, key decision questions you might ask include:

• Are significant changes in your enterprise causing a

realignment of priorities?

• Is it possible that the evolution of your IT infrastructure

has created redundancies leading to excessive costs

or complexity?

• Does your business have an urgent need for change

driven by competitive forces, e-business strategies or

customer expectations?

Summary

Successful IT optimization is becoming mandatory in

a business culture built on continuous change. However,

the complexity of in-house, end-to-end IT optimization

can be daunting. It is in answer to this challenge that

IBM Global Services offers its world-class skills, proven

technologies and expertise — all via the innovative IT

optimization approach. In the end, teaming with IBM can

mean the difference between an optimized IT infrastruc-

ture enterprise and an obsolete one.

Find out more

For more information about IBM IT Optimization Solutions,

or to learn more about how the people of IBM Global

Services can help your company gain and sustain a com-

petitive advantage in the e-business marketplace, contact

your IBM sales representative or visit:

ibm.com/services

© Copyright IBM Corporation 2002

IBM Global ServicesRoute 100Somers, NY 10589U.S.A.

Produced in the United States of America01-02All Rights Reserved

IBM, the IBM logo and the e-business logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both.

Other company, product and service names may be trademarks or service marks of others.

References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates.

G510-1705-01

References1 Berry, John. “Do Your IT Projects Mean Business?” InternetWeek Online,

March 20, 2000.

2 Leibs, Scott. “Think Before You Link,” citing META Group, Inc. IndustryWeek, April 17, 2000.

3 Violino, Bob. “The Internet and E-Business are Reshaping IT Purchasing,” citing Dennis Benner, VP and CIO, Fluor Corp. InformationWeek, March 6, 2000.

4 Burton Group Study. “The Enterprise Directory Value Proposition,” May 22, 1998.

5 Kirkpatrick, David. “IBM: From Big Blue Dinosaur to E-Business Animal,” citing Tom Bittman from GartnerGroup. Fortune Magazine, April 26,1999.