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Masters of IT Economics


									Masters of
IT Economics
                     How Three Visionary IT Executives
Volume 1 / Issue 1   Improved IT Economics to Realize
                     Greater Value
Managing IT Economics is an art.
Managing IT Economics is about getting more value out of IT.
It involves balancing cost and risk trade-offs. Meeting the endless
demand for services with a finite set of resources. Supporting
business objectives to drive profitability, growth and competitive
advantage, while running a fiscally responsible IT organization.
Becoming a Master of IT Economics requires visionary leader-
ship, business savvy and new approaches for changing the cost-
value equation.
On the following pages, senior IT executives from New York
City Health & Human Services, GE Money and AXA Tech share
their strategies, results and recommendations for improving
IT Economics.
Ahmed Abdelmoteleb, CTO

Kamal Bherwani, CIO

Antonio DiCaro, CTO




A                      Masters of IT Economics
Ahmed Abdelmoteleb
Chief Technology Officer, GE Money Australia and New Zealand

As part of the General Electric family,
GE Money, also known as GE Consumer
Finance, is the personal finance provider
of choice for over 130 million people
worldwide. GE Money has a global
presence across 55 countries. In Australia
and New Zealand, GE Money serves
over 3 million customers.

                                           Career Highlights
                                           • 10+ years in financial sector
                                           • Joined GE, 2003
                                           • Transferred to GE Corporate
                                             in U.S. as Global Infrastructure
                                             Manager, 2004
                                           • Degree in Engineering —
                                             Computer Systems

                                           Personal Interests
                                           • 4-wheel driving and exploration
                                           • Being healthy and active with
                                             family and friends

                      Masters of IT Economics
            Q.   A classic economic principle is leveraging economies
                 of scale to drive down the cost of production — how
                 does this apply to your experiences?
A. In the late ’90s, GE Money in Australia and New Zealand grew primarily through acquisi-
tions. As with a lot of companies that are active in M&A, our primary focus was on integra-
tion projects. About five years ago, GE Money continued the growth agenda with more of an
emphasis on organic growth. As a result, we’ve become more focused on delivering a higher-
quality IT service.
We first engaged our Six Sigma quality organization, something at which GE Money excels
globally. Also, through the help of our GE corporate parent, we’ve been able to take advantage
of economies of scale and our global talent resources. We have made our organization much
more efficient by consolidating our facilities and data centers, rationalizing redundant appli-
cations and improving our processes across the entire organization.
One example of an IT process where we’ve really become much more efficient is provisioning
servers. In the past it could take 34 days to provision a new server. We leveraged our global
relationships with partners like CA and HP, who helped re-engineer our processes and better
leverage our investments to reduce our provisioning effort to six days. That’s a savings of over
$12,000 every time we provision a server. Our new streamlined process involves publishing
offerings through a service catalog, a workflow that automates the approval process and back-
end integration to our inventory and soon our financial systems. This process now frees up
more time for us to deliver a better outcome for our customers.

            Q.   How do you ensure technology investments
                 are aligned with business strategy?
A. Every technology investment we make is discussed at a senior executive level with great
interest from our CEO and CFO on returns and alignment with our business strategy, both
locally and globally.
For example, virtualization is an area that we are investing in. But, for us, virtualization is not
only about saving cost. It’s about adding agility so we can more quickly deliver a business
requirement and ultimately a customer outcome.
When we’re working with a business unit to develop a new service offering, we need to be
able to quickly determine whether the application being developed runs better in a Windows,
Linux or Sun environment, and we want to test multiple versions of operating systems, hard-
ware and software. To take this heterogeneous approach, you’re going to need management
that can handle that.
If our primary goal were to deliver an application in the least expensive way possible, we’d
standardize the platform that applications can be developed on. Instead, we leverage built-
for-purpose, nonstandard platforms, so our business can be more agile and our services
more innovative.

            Q.   I understand you’ve instituted a formal IT
                 Governance process. What were the main drivers
                 and what benefits have you seen?
A. In the past, most of our technology investment decisions were being made as part of the
project execution process. But what we found was that when you have hundreds of developers

                                     Masters of IT Economics
“If our primary goal were to
 deliver an application in the
 least expensive way possible,
 we’d standardize the platform
 that applications can be
 developed on.

 Instead, we leverage
 nonstandard platforms,
 so our business can
 be more agile and
 our services more
 Ahmed Abdelmoteleb
 Chief Technology Officer
 GE Money Australia and New Zealand

                       Masters of IT Economics
unable to continue coding because they are held up waiting for a purchasing decision to be
made — this is not conducive to making sure the right decisions are made.
So, we introduced a formal IT Governance committee that I chair. Now we can make technol-
ogy decisions faster and ensure alignment with both our GE corporate standards and business
strategy. Our Enterprise Architecture team is also engaged in this process, so they can make
the right recommendations, taking into account our long-term requirements.
Our governance process has also given us broader visibility into IT costs, investments, risk
items and compliance issues — we might identify, for instance, that across a series of projects
we’re spending a lot of money on an infrastructure element that doesn’t directly support our
strategy, and we can make an informed decision about it.

            Q.   What steps can a CIO take to begin
                 instilling a service-focused culture?
A. Turning a culture around generally involves turning your processes around. But this is clearly
easier said than done. At GE we must first apply our Six Sigma LEAN methodology to ensure
that we have an optimum process. It’s also important to set realistic goals and build the foun-
dation that will help you improve your processes.
We’re believers in ITIL, but there are some assumptions ITIL makes, and to successfully
implement ITIL requires a level of maturity that many organizations don’t have. For example,
if you don’t have the right monitoring tools in place or if you are organized too deeply into
silos, you won’t be able to make the necessary process improvements.
My view of service management nirvana would be where you know when a particular valued
customer is having difficulty with an application, you’re automatically alerted and informed
what to do to fix the problem. But before you can even think about attaining this nirvana, you
need to have the basics in place. You need to monitor the application performance from the
customer point of view, you need to have built your application so that it can respond in cer-
tain ways when thresholds are crossed.
You will also need to have open lines of communication across the groups responsible for the
different divisions within IT. At GE Money, we have built a dedicated team that is focused on
the delivery of services end-to-end. This team has greatly helped improve collaboration and
has helped us build a service-centric culture.

            Q.   To what degree does your IT management strategy
                 change when the broader market economy changes?
A. No one is immune to market and economy changes, especially what’s happening currently
at a global level. But this is the time when it is most important for us to help manage the busi-
ness to balance our commitment to provide shareholders with acceptable returns and our
customers with competitive products and services.
We put a lot of emphasis on transparency and making sure that the business executives have
insight into both our costs and the value being delivered. There is widespread understanding
of the cost savings we’ve realized in the past four years. So even now, when the economy is
taking a downturn, we haven’t faced pressure to significantly further cut operating expendi-
tures beyond what we are already doing as part of normal business.
We will continue to look closely at balancing our commitment to provide our shareholders with
acceptable returns and our customers with competitive products and services.

                                    Masters of IT Economics
Kamal Bherwani
Chief Information Officer, New York City Health & Human Services

NYC HHS is a domain that comprises nine city
organizations, which focus on social services, criminal
justice and health. In 2008, Mayor Michael Bloomberg
announced a groundbreaking new system, HHS-
Connect, that will link more than a dozen city
agencies so that caseworkers can share client
information without compromising confidentiality.

 Career Highlights
 • 20+ years in technology
 • Has been the CIO of three diverse
   NYC agencies focusing on public
   health, housing and construction
 • CEO and Chairman of Relativity
   Development, a global
   technology investment firm
 • CIO of Bridas Corporation,
   a global energy firm

 Personal Interests
 • Motorcycle enthusiast
 • Traveling with his family

                                  Masters of IT Economics
            Q.   IT has a classic economic supply and demand
                 problem — infinite demand and limited supply.
                 How do you address this challenge?
A. The keys to managing demand are having a consistent methodology for prioritizing
projects and basing decisions on the potential for a project to meet agreed-upon organiza-
tional outcomes.
As new projects are requested, I meet with the business executive spearheading the project
and we agree to the expected outcomes, including the projected timeline. Typically there is
both an expected cost savings and a “mission effectiveness” outcome. For instance, we might
set a goal for how IT can contribute to an organization’s goal to reduce homelessness year-
over-year. No new project enters our pipeline until we have gone through this exercise. We
make decisions about which projects get funding based on the expected value.
Then, we continue to evaluate projects and reprioritize spend even after projects are under-
way. We have created a formula to measure the Net Present Value of all of our in-flight proj-
ects. We compare the cost to finish a project against the expected return of the project. And
because this changes as the project is executed, it’s important to reevaluate this every two to
three months for each project.

            Q.   Too often it seems that IT is seen as a cost
                 center and not an enabler of business objectives.
                 How can CIOs change this perception?
A. In many organizations, the IT organization has a credibility problem. The perception is that
projects take longer and cost more than planned and it’s unclear what value is delivered.
The first step to building credibility is to prove that you know what it costs to manage ongoing oper-
ations. Project and portfolio management can help you make better timeline and cost projections.
If you have bad news to communicate — that costs are going to be higher or timelines longer than
expected — don’t wait to tell the business executives. Communicate early and often. The sooner
you close the gap between what people expect and what they are going to get, the better.
Financial transparency is also important for establishing credibility. Everyone should be on the
same page about where IT spend is going. Finally, don’t forget to take credit for past successes.
Often the true value of a new service offering isn’t fully realized until years after it is launched.

            Q.   What are your strategies for reducing
                 costs without compromising service?
A. I look at IT across three different parameters: Governing services, managing services and
securing services. Increasing automation can help you realize operational efficiencies across
all three of these parameters.
For instance, in the realm of IT Governance, you can realize cost savings by automating the
way work moves between various project teams.
For management, I focus on virtualization and automating data center tasks like provisioning
servers and storage. Service desk is another critical area for cost savings, especially if you

                                      Masters of IT Economics
can help users help themselves with knowledge tools, a self-service interface and automatic
password reset.
For security, I focus on centralizing logging and event correlation. If you have good centralized
data, you can manage threats with a relatively small staff.

            Q.   What role does innovation play
                 in improving IT Economics?
A. Innovation is extremely important in our efforts to support organizational goals.

One of our major initiatives is called HHS-Connect — it’s a massive effort to bring online health
and human service interactions that have typically been handled over the phone, through the
mail or in person. The in-person, paper-based processes are very inefficient and costly.
One recent HHS-Connect example involves the process for applying for free or reduced-price
school lunches. There are 1.1 million schoolchildren in New York City, and 75% of them apply
for the school lunches each year. With an investment of about $900,000 and, in just a matter of
months, we launched an online form for applying for school meals in September. If we can get
households representing just 10,000 children to use the online forms, the project will pay for
itself in under a year. We expect to realize a return of several million dollars over time due to
better allocation of funds and the operational efficiencies created by the online process as
disintermediation occurs from the paper to the online process.
So, this is a great example of a government agency leveraging a modest technology investment
to yield great results in a short period of time. It’s the right thing to do for the people we serve,
and it’s the right thing to do for us.

            Q.   How do you manage innovation at NYC HHS?
A. Establishing an enterprise architecture is essential. Otherwise, every new service offering
would be based on a unique architecture. The result would be even greater complexity, and the
cost of maintaining these new services would be too expensive.
The challenge is that requests for new services and the funding for those services come in a
siloed way. It’s up to IT to allocate funds from individual projects to be able to build an enter-
prise architecture over time — and to convince business executives of the value of moving to a
shared service model.
I’ve found that it works best to incrementally adopt an enterprise architecture. A place to start
might be with a centralized infrastructure, then establishing a centralized approach for middle-
ware, identity and access management, enterprise content management and so on. The order
in which you proceed will likely depend on the new initiatives underway. The business objec-
tives should drive the technology projects, which should drive your enterprise architecture.

                                      Masters of IT Economics
“We have created a
 formula to measure
 the Net Present Value
 of all of our in-flight
 projects. We compare
 the cost to finish a
 project against the
 expected return of
 the project.”
Kamal Bherwani
Chief Information Officer
New York City Health & Human Services

                      Masters of IT Economics
Antonio DiCaro
Chief Technology Officer, AXA Tech

A worldwide leader in financial protection,
AXA Group serves 67 million clients and
had revenue of €93.6 billion in 2007.
AXA Tech is a 3,000+ person subsidiary
that provides IT services to AXA Group.

Career Highlights
• 20+ years in technology
• CTO of AXA Tech since
• 10 years as Trading Floor
  Technology Support
• Hands-on technical

Personal Interests
• Spending time with his
  wife and five children
• Coaching soccer

                              Masters of IT Economics
            Q.   AXA has some very ambitious growth and
                 profitability plans. Can you discuss those plans and
                 how AXA Tech is supporting those initiatives?
A. In 2006, AXA Group launched an initiative we call “Ambition 2012” — the goal is to dou-
ble revenue and triple profitability in six years. Also, we want to become the preferred company
in our industry by improving the customer experience.
AXA Tech is a not-for-profit, wholly owned subsidiary of AXA Group. It was created in 2002
to provide infrastructure services to the companies that make up AXA Group.
Each company within AXA Group was challenged individually to meet the objectives of
Ambition 2012. For AXA Tech, this means significantly reducing our cost structure, while at
the same time providing infrastructure services that can support the growth initiatives being
driven by the other AXA companies, to provide new services and service new markets.
I’m pleased to say that two years into Ambition 2012, we’ve been able to scale our infrastruc-
ture to support increased demand while keeping our infrastructure costs essentially flat —
with only a 2 to 3% increase in infrastructure costs year-over-year.

            Q.   What results have you achieved and how?
A. In the first five years of AXA Tech’s existence — from 2002 to 2007 — we saved 280 million
euro. During this time, too, we’ve been able to deliver infrastructure services priced about 20%
lower than what third-party companies would charge AXA Group for comparable services.
A large percentage of the 280 million euro in cost savings came from pooling together the
IT spend that was previously distributed across separate IT organizations and renegotiating
deeper discounts with vendors.
Another major component of the cost savings came from simplifying our infrastructure. We’ve
standardized on certain software and hardware platforms to reduce training and maintenance
costs. We’re in the process of consolidating 37 data centers to five state-of-the-art, energy-
efficient data centers. And we’ve made great progress in increasing server utilization through
virtualization, which is an area we are going to continue to focus on going forward.
The third major contributor to the cost savings was a result of off-shoring some development
and data center monitoring functions to AXA Tech India.

            Q.   When you measure AXA Tech’s
                 success, is it all about ROI?
A. The success of AXA Tech is not just measured on achieving financial targets. We care very
much about quality of service.
We have formal service-level agreements in place with the AXA Group companies we provide
service to, with penalties if certain service levels aren’t met. Also, every year we rate ourselves
based on a combination of objective availability measurements and a customer satisfaction

                                     Masters of IT Economics
“In the first five years of
 AXA Tech’s existence —
 from 2002 to 2007— we
 saved 280 million euro.
During this time, too, we’ve been
able to deliver infrastructure
services priced about 20% lower
than what third-party companies
would charge.”
Antonio DiCaro
Chief Technology Officer
AXA Tech

                           Masters of IT Economics
survey completed by executives at the AXA Group companies who use our services. For the
objective metrics, we measure the availability of 440 applications that the business units have
deemed mission-critical.

           Q.   Can you describe how virtualization is
                enabling you to improve IT Economics?
A. AXA Tech has been an early adopter and extensive user of virtualization technology. We
are one of the top five VMware users in the world, with about 5,000 guests on VMware today.
We’ve saved about 1 million euro annually since 2004 on electricity costs and we’ve been able
to increase the utilization of some of our servers from 10% to 30%. But we’re looking to drive
our utilization even higher to about 60%, so we still have quite a way to go.
In addition to leveraging server virtualization technology, we’ve also begun using network and
storage virtualization technologies. We’re very interested in some technology CA has devel-
oped to automatically provision and deprovision virtual servers and applications. And we’re
also looking into cloud computing as we build out our virtualization strategy for the next three
to five years. Our goal in exploring all of these technologies is to help us further drive down
costs and be more agile and flexible.

           Q.   When AXA Tech was formed by merging several IT
                organizations, you had to quickly build a unified group.
                What advice would you share with other IT executives
                who find themselves in a similar situation?
A. IT people tend to focus first on technology as the solution to a problem. 99% of the time,
you need to start by focusing on the people, and then focus on the process, and then find the
right technology to support the process.
Some of the things I’ve learned include the importance of setting clear objectives and the
importance of providing opportunities for two-way communication. I’ve also found that face-
to-face team meetings are essential to building trust and relationships.
Once a year, we bring together folks with similar skill sets from across our global organization
for a two-day Technology Summit. The agenda is designed specifically to facilitate dialogue
and foster collaboration. Feedback I’ve received from folks who have participated is that they
have realized that others in the organization are dealing with many of the same issues and that
these summits provide a useful forum for sharing ideas to solve these common problems.

                                    Masters of IT Economics
       Successful strategies for managing IT to deliver more value
       to the business vary. Some executives focus on leveraging
       innovation and governance to ensure that the right short- and
       long-term investment decisions are being made. Others focus
       on virtualization and simplifying IT complexity to drive down
       costs and build a more agile infrastructure. Regardless of
       the approach that makes most sense for your organization,
       one thing is clear: The business of managing IT Economics
       is a delicate balancing act.

       CA Inc. (NASDAQ: CA) is the
       world’s leading independent
       information technology (IT)
       management software company.
       We help companies manage IT to
       better perform, compete, innovate
       and grow their businesses. With
       our Enterprise IT Management
       (EITM) vision and technology,
       customers can unify IT and simplify
       the management of complex
       computing environments.

       Copyright © 2008 CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their
       respective companies. ITIL® is a Registered Trademark and a Registered Community Trademark of the Office of Government Commerce,
       and is registered in the U.S. Patent and Trademark Office.

                                                                                                                       MP 332671108

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