6 Best Practices to Successfully integrate

Business and IT
Swen Conrad, PMP
Senior Director Solution Marketing
IT Business Management
Agenda

1. How to Integrate Business and IT?

2. Case Studies and Best Practices
3. SAP Solutions
4. Summary

2011 SAP AG. All rights reserved. 2

Topic Relevance
Source: CIO Survey

[%] 80
60 Aligning IT initiatives
40
20
with business goals
0
Aligning Cultivating IT Driving Cultivating IT and
IT initiatives andbusiness partnership business
with business goals innovation business partnership
[%] 60

40 Driving business
20
innovation
0
Improving IT operations Cost control Negotiating with
and and expense IT vendors
systems performance management

[%] 20

10

0
Managing Security
IT crisis management

Source: 2010 State of the CIO survey, CIO Magazine, January 2010

2011 SAP AG. All rights reserved. 3

Integrate Business and IT!
How to do it? Your thoughts

?
2011 SAP AG. All rights reserved. 4
Talking to IT Professionals
If you want to be a player know the score!

Immerse yourself in your companys business

Understand the business goals
Related business KPIs today and future
What makes your industry tick

Communicate ITs
internal performance
impact on business operations and financials

2011 SAP AG. All rights reserved. 5

 Run IT as a Business
Maximize business value of IT at controlled cost

Do More
IT cost
business value of IT

contribution to business goals

business service availability
managed risk

With Less
cut projects w/ low business benefit
automation, measure and improve processes, e.g. testing
Value

build versus buy decision driven by cost/benefit

Cost

time

2011 SAP AG. All rights reserved. 6

 Making a Difference

Do More
IT cost
business value of IT

contribution to business goals

business service availability
managed risk

Indicator of
IT Performance

With Less
cut projects w/ low business benefit
automation, measure and improve processes, e.g. testing
Value

build versus buy decision driven by cost/benefit

Cost

time

2011 SAP AG. All rights reserved. 7

 IT Health Matters!
Consider long term effects and risk
IT cost
business value of IT

IT cost savings
across the board budget cuts
headcount reduction, no process improvement
knee jerk outsourcing
Value
Cost

time

2011 SAP AG. All rights reserved. 8

 IT Health Matters!
Consider long term effects and risk
IT cost
business value of IT

IT cost savings
across the board budget cuts
headcount reduction, no process improvement
knee jerk outsourcing
IT deteriorates
low contribution to business goals
poor business service availability
high risk to corporation

Reduced
IT Performance!
Value
Cost

time

2011 SAP AG. All rights reserved. 9

 Focus on IT Cost and Value
With a close eye on IT risk

Business value of IT
IT cost
business value of IT

direct impact on
company revenue

IT savings
Value

direct impact
Cost

on bottom line
time

2011 SAP AG. All rights reserved. 10

 Focus on IT Cost and Value
With a close eye on IT risk

Business value of IT
IT cost
business value of IT

direct impact on
company revenue

Increased
IT Performance

IT savings
Value

direct impact
Cost

on bottom line
time

2011 SAP AG. All rights reserved. 11

Integration of Business and IT
The perfect balance of IT business value, cost and risk

Maximize IT Value Delivered

Cost Risk

2011 SAP AG. All rights reserved. 12

Three Case Studies
Balancing IT business value, cost and risk

1. Test and Quality Management

2. IT Planning
3. IT Financial Management

2011 SAP AG. All rights reserved. 13

EXAMPLE 1 Managing Key IT Activities
Test and Quality Management
Statistical IT failure cost
Testing cost

testing time
[person days]

2011 SAP AG. All rights reserved. 14

Balance Risk and Cost
Statistical IT failure cost
Testing cost

testing time
[person days]

2011 SAP AG. All rights reserved. 15

Find Break Even Point
Statistical IT failure cost
Testing cost

Theoretical optimum
balance between deployment risk
and testing cost

testing time
[person days]

2011 SAP AG. All rights reserved. 16

Agree on Calculated Risk
Statistical IT failure cost
Testing cost

Theoretical optimum
balance between deployment risk
and testing cost
Factor
of Safety

testing time
[person days]

2011 SAP AG. All rights reserved. 17

Avoid Wasting Resources or Risking Business!

Too much testing!

high cost
diminishing returns
Statistical IT failure cost
Testing cost

suboptimal use of resources

Theoretical optimum
balance between deployment risk
and testing cost
Factor
of Safety

Too little testing!

high risk
potential business cost testing time
caused by production problem [person days]

2011 SAP AG. All rights reserved. 18

One Size Fits All?

A
B
C
Statistical IT failure cost
Testing cost

Importance of affected business service

not every system has the same importance (ABC)
variable break-even points and safety factors

testing time
[person days]

2011 SAP AG. All rights reserved. 19

Best Practices
Test and Quality Management

1. Build a well defined testing process

Closely plan, monitor and report on testing
Create overlapping testing phases between teams
Utilize ABC analysis for best use of limited resources

2. Take end-to-end lifecycle approach

Test planning starts in requirements design
Correlate production incidents/problems with testing activities
and requirement
Take calculated risk based on solid and transparent analysis
agreed amongst team

2011 SAP AG. All rights reserved. 20

Three Case Studies
Balancing IT business value, cost and risk

1. Test and Quality Management

2. IT Planning
3. IT Financial Management

2011 SAP AG. All rights reserved. 21

EXAMPLE 2 IT Planning
Portfolio and Project Management Process

Project
Requests and
Ideas
Standardized
Projects
Project
Resource Project
Selection
Allocation Monitoring

2011 SAP AG. All rights reserved. 22

 Key IT Planning Step
Selecting the right projects and activities
High

Prioritize IT projects by
contribution and cost

Value
Enable control and insight
with a systematic process

Reprioritize based on real

results and changing
Low
business needs
High Cost Low

IT Projects
Operations projects and activities
Business applications

2011 SAP AG. All rights reserved. 23

Best Practices
Portfolio and Project Management

3. Invest in a Program Management Office (PMO)

Cross functional team across key stakeholders and roles
Single PMO structure across several related business areas
Be willing to kill projects requires senior staff

4. Invest in appropriate tools

Avoid data duplication within silo-ed systems
Enterprise PPM tool with strong integration into HR and
finance system of record

2011 SAP AG. All rights reserved. 24

Three Case Studies
Balancing IT business value, cost and risk

1. Test and Quality Management

2. IT Planning
3. IT Financial Management

2011 SAP AG. All rights reserved. 25

EXAMPLE 3 IT Financial Management
Analyzing activities and processes

Challenges
How to determine true cost and
value of IT or business services?
How to fairly show or charge back
for services?

Activity-Based Costing
Assign overhead to activities
Supports strategic decisions
make or buy decision
service pricing
process improvements

2011 SAP AG. All rights reserved. 26

Best Practices
IT Financial Management

5. Leverage skill set of an IT Financial Analyst

in your organization
Combination of senior IT and finance skill
Make this a senior role with influence

6. Invest in a clear process to manage IT cost,

spending, and performance
You can only manage what you can measure
Minimize unnecessary cost and free up cash
Understand cost on the level of a business or IT service

2011 SAP AG. All rights reserved. 27

Agenda

1. How to Integrate Business and IT?

2. Case Studies and Best Practices
3. SAP Solutions
4. Summary

2011 SAP AG. All rights reserved. 28

 Manage The Business of IT with SAP
A complete and modular portfolio
SAP BusinessObjects Executive IT Reporting analytic application
Provide executives with key IT metrics
Allow detailed data drill-down
SAP Portfolio and
SAP Solution Manager Project Management
Extensible application Project prioritization
lifecycle management and execution
platform IT resource
For SAP and non-SAP management
environments

ALM
SAP IT Service
Management
ITIL-compliant IT SAP Solution Extensions
service and support Testing
processes Batch job management
Shared service Root cause analysis
framework Knowledge management

2011 SAP AG. All rights reserved. 29

Summary
6 Best Practices to Successfully integrate Business and IT

Maximize IT Value
Think and talk business
Delivered
Show IT performance
How IT impacts business
results
How IT performs itself Cost Risk

2011 SAP AG. All rights reserved. 30

Swen Conrad, PMP

Office: 650-461-1320
Mobile: 650-440-1860
swen.conrad@sap.com
APPENDIX
Additional Example for Information Lifecycle Management
EXAMPLE Information & Data Management
How relevant is your data really?

Data in the information lifecycle

business usage

business risk
cost

outdated or replaced by better sources

retired products
old business partners

time

2011 SAP AG. All rights reserved. 33

Information & Data Management
Cost? Storage is Cheap!

Sky-rocketing cost!
low usage
old hardware
business usage

business risk
relative cost

dedicated specialist
resources for live support

Reduced cost of information

higher system utilization
better optimization due to relevance

time

2011 SAP AG. All rights reserved. 34

Information & Data Management
Risk a growing concern!

Increasing business risk!

risk of data loss
business usage

business risk
cost

risk of data breach

risk of litigation

time

2011 SAP AG. All rights reserved. 35

Information & Data Management
Look at the Why and not the How!
business usage

business risk
cost

Time to act!
usage is going down
cost and risk are going up
reduced IT contribution!

IT Optimization
Quick Win

time

2011 SAP AG. All rights reserved. 36

 2011 SAP AG. All rights reserved.
No part of this publication may be reproduced or transmitted in any form or for any
purpose without the express permission of SAP AG. The information contained
herein may be changed without prior notice.
Some software products marketed by SAP AG and its distributors contain
proprietary software components of other software vendors.
Microsoft, Windows, Excel, Outlook, and PowerPoint are registered trademarks of
Microsoft Corporation.
IBM, DB2, DB2 Universal Database, System i, System i5, System p, System p5,
System x, System z, System z10, System z9, z10, z9, iSeries, pSeries, xSeries,
zSeries, eServer, z/VM, z/OS, i5/OS, S/390, OS/390, OS/400, AS/400, S/390
Parallel Enterprise Server, PowerVM, Power Architecture, POWER6+, POWER6,
POWER5+, POWER5, POWER, OpenPower, PowerPC, BatchPipes,
BladeCenter, System Storage, GPFS, HACMP, RETAIN, DB2 Connect, RACF,
Redbooks, OS/2, Parallel Sysplex, MVS/ESA, AIX, Intelligent Miner, WebSphere,
Netfinity, Tivoli and Informix are trademarks or registered trademarks of IBM
Corporation.
Linux is the registered trademark of Linus Torvalds in the U.S. and other
countries.
Adobe, the Adobe logo, Acrobat, PostScript, and Reader are either trademarks or
registered trademarks of Adobe Systems Incorporated in the United States and/or
other countries.
Oracle and Java are registered trademarks of Oracle and/or its affiliates.
UNIX, X/Open, OSF/1, and Motif are registered trademarks of the Open Group.
Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, VideoFrame, and
MultiWin are trademarks or registered trademarks of Citrix Systems, Inc.
HTML, XML, XHTML and W3C are trademarks or registered trademarks of
W3C, World Wide Web Consortium, Massachusetts Institute of Technology.
2011 SAP AG. All rights reserved.
SAP, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, SAP BusinessObjects
Explorer, StreamWork, and other SAP products and services mentioned herein as
well as their respective logos are trademarks or registered trademarks of SAP AG
in Germany and other countries.
Business Objects and the Business Objects logo, BusinessObjects, Crystal
Reports, Crystal Decisions, Web Intelligence, Xcelsius, and other Business
Objects products and services mentioned herein as well as their respective logos
are trademarks or registered trademarks of Business Objects Software Ltd.
Business Objects is an
SAP company.
Sybase and Adaptive Server, iAnywhere, Sybase 365, SQL Anywhere, and other
Sybase products and services mentioned herein as well as their respective logos
are trademarks or registered trademarks of Sybase, Inc. Sybase is an SAP
company.
All other product and service names mentioned are the trademarks of their
respective companies. Data contained in this document serves informational
purposes only. National product specifications may vary.
The information in this document is proprietary to SAP. No part of this document
may be reproduced, copied, or transmitted in any form or for any purpose without
the express prior written permission of SAP AG.
37