As a business moves through a program of change, strategic decisions are often required to ensure that business objectives are met.
To facilitate effective decision making throughout the program lifecycle, a Microsoft Enterprise Architect conducts the Program Governance, Risk, and Compliance Management Service. This service is a part of the Value Realization Framework, introduced in our earlier post Welcome to the Value Realization Team’s Blog.
The Program Governance, Risk and Compliance Management service develops Governance, Risk, and Compliance plans to support effective decision making throughout the program lifecycle. The service provides program oversight and status reporting to governance teams within the enterprise, such as steering committees and review boards.
The Program Governance, Risk, and Compliance Management Service:
While performing the service, a Microsoft Architect and team work with the enterprise executives, stakeholders, steering committees, and governance/review boards. The service includes activities for:
The Program Governance, Risk, and Compliance Management service creates effective oversight for a program of change, with appropriate mitigations for risk.
A Microsoft Architect helps scope and optimize governance, risk, and compliance actions for a specific program of change. A business obtains:
To perform the service, an Enterprise Architect works closely with stakeholders throughout a business, using methods for ensuring that technology decisions fully contribute to the value expected from initiatives.
We are all familiar with the many IT mega trends of today: Cloud, Social, Mobile, Big Data, the Internet of Things, etc. The common theme is clear; the role of Information Technology (IT) in the turbulent, digital economy has become absolutely critical in helping organizations respond and adapt to these mega trends.
No matter how dramatic the shifts in digital economy are, an essential requirement that has not diminished or changed is the crucial importance of creating shareholder value.
In today’s connected, global economy, boards and managers increasingly recognize that their primary responsibility is to maximize the total wealth-creating potential of the enterprises under their direction.
For today’s senior executives, finding the answers to the following three questions is still critical:
Even more fundamentally, answers cannot be had without first understanding the following topics:
The fundamental economic principle for creating shareholder value, or shareholder wealth, is for businesses to earn a profit that is greater than the cost of capital. This measure of profit, first described by the British economist Alfred Marshall 250 years ago, is called Economic Profit (EP) or Economic Value Added (EVA©). EP, sometimes called Residual Income, has been known to accountants for decades. EVA is also a standard part of MBA curriculum in most business schools. EP or EVA is a measure of shareholder value that has been adopted by thousands of companies globally.
The EVA framework uses a practical application of well-established corporate finance tenets. The two most important are:
EVA profit is measured by deducting the full cost of debt and equity capital from net operating profit after taxes (NOPAT).
EVA = Net Operating Profit after Tax - A Capital Charge EVA = NOPAT - Cost of Capital x Total Capital
Creating wealth requires that managers grow sales and manage costs. However, they must also effectively manage the capital provided by investors and lenders in order to create wealth.
Calculating company EVA shows whether shareholder value is being created. In order to de-construct the sources of economic value within the company, the economic value contribution of business units, customers and products need to be calculated as shown in the diagram below. Finally, the value contribution of IT services is revealed by tracing these services to the value drivers that impact products and customers.
Unpacking the definition of EVA, the Financial Value Drivers are revealed as:
Measuring IT’s impact on shareholder value is aided by a visual map showing the value drivers that create it.
Using Discounted Cash Flow
The economic value of the firm is simply the sum of the economic value of all the business units and initiatives undertaken by the firm. The best single measure of economic value is the present discounted value of cash flows; or Net Present Value (NPV). The process for calculating the NPV of an IT initiative is diagramed below:
Although there are many methods for mapping IT programs and initiatives to the financial Value Drivers of a company, the two most effective are Activity-Based Management and the Cranfield Business Dependency Network.
Activity-based management (ABM)
ABM is a method of identifying and evaluating activities that a business performs using activity-based costing to carry out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions in an organization. Activity-based costing establishes relationships between overhead costs and activities so that overhead costs can be more precisely traced to products, services, or customer segments. Activity-based management focuses on managing activities to reduce costs and improve process productivity. Acorn Systems, an activity based costing software company, has combined ABC and EVA to calculate the Economic Value Contribution of customers. (1)
Benefits Dependency Network (BDN)
The Cranfield University in England has developed a Benefits Management program for delivering value from investments in business projects and change programs. The Benefits Dependency Network (BDN) is part of a convincing and robust business case. The business case must be aligned to the business drivers of an organization. The means of collecting the information may come in a highly structured process involving many workshops, discovery sessions, and interviews; or management might be able to quickly identify the business benefits or might even have them already documented. The goal is to ensure that the proposed investment is tied to real drivers for the organization. The BDN becomes the communication tool to ensure that management understands, and more importantly, agrees with the relationship between the proposed changes, the benefits, and their objectives and drivers.
The use of the BDN will help to facilitate the necessary discussion to answer the following questions, identified by Cranfield research as critical to the successful development of an effective business case:
Aligning IT initiatives with business goals and objectives is critical. The number one goal of any for profit organization is to improve shareholder value. Consequently, it is essential that technology executives demonstrate to their fellow executives and shareholders how the value of IT is measurable and traceable to shareholder value.
Footnotes
(1)Houston, TX, May 17, 2004-Stern Stewart, pioneer of its proprietary EVA® framework and Acorn Systems, the leader in profit and cost analytics, have partnered to deliver Customer Value Analytics (CVA), a solution that enables companies to measure and identify opportunities to increase the Economic Profit of their customers.
“Acorn Systems’ Consumption-Driven Costing is the most advanced and scalable profitability analytics package in the market today,” said G. Bennet Stewart III, Senior Partner, Stern Stewart. “With CVA companies can now accurately measure the economic profit of individual customers and customer segments and identify actions they can take to grow their most profitable customer base and to increase the profitability of underperforming customers.”
As a business transforms, modernizes capabilities, and enables new ways of doing business, employees often need support and education to adopt new methods. Different businesses have different cultures, and different risks, when it comes to managing change and promoting adoption.
To help prepare for and manage change, and help ensure adoption, a Microsoft Architect performs the Adoption and Change Management Service. The service helps a business achieve more value from investments by carrying out plans for communicating changes, readiness and training, and support.
Adoption and Change Management is one of the services that Microsoft architects conduct with businesses as part of the Microsoft Value Realization Framework, introduced in our earlier post Welcome to the Value Realization Team’s Blog.
The Adoption and Change Management service assesses a client’s Adoption and Change Management capabilities, develops adoption plans (such as training and support plans), and provides oversight and mitigates risk during adoption.
The Adoption and Change Management Service:
The service includes activities for:
The Adoption and Change Management Service helps key stakeholders understand the changes that will occur within their organization and the impact these will have on employees, partners, and customers. The service produces a functioning Value Realization (or Adoption) Center of Excellence that supports value realization throughout adoption planning and execution.
The service promotes full stakeholder support for the overall program of change, and links value metrics to action plans.
The Adoption and Change Management Service provides access to proven offerings focused on enterprise adoption, and includes methods for monitoring and reporting adoption and the impact on value realized. Businesses obtain:
To perform the Adoption and Change Management Service:
During a well-planned initiative to improve business capabilities, a business achieves valuable results throughout the transformation, not just at the end of the project. To help ensure that value can be demonstrated and that a business is achieving objectives, a project team or architecture board can measure and track an initiative’s progress according to specified indicators.
To help a business track established KPI’s and measure value being realized during a project, a Microsoft Architect performs the Value Management Service.
When we perform value management, we measure and validate KPI’s that are integrated with the company’s commitments, its scorecard, and its cadence.
The Value Management Service:
During the Value Management Service, a Microsoft Architect performs many activities, including:
The Value Management Service helps ensure that the plan developed during the Value Planning Serviceis put into action in a way that stakeholders can measure and acknowledge benefits.
The Value Management Service provides a constant focus on delivery of projected business benefits, with full visibility of progress against an agreed plan. A business obtains:
To perform the Value Management service, a Microsoft Architect works with the account team, business and IT stakeholders, and the management and steering committees for the program of change.
1. We verify value measurement approach, confirming key metrics and KPIs that will be used to measure program benefits and costs.
2. We track program costs and benefits, collecting, analyzing, categorizing, and summarizing costs and benefits realized during the current reporting period and on a cumulative basis for the program.
3. We identify and mitigate risks to value realization. We review risks identified through program governance, risk and compliance efforts and adjust value realization projections based on the selected approach to risk mitigation.
4. We periodically aggregate and summarize value realization, measuring the costs and benefits realized by the program. We adjust future projections of value realization based on known risks.
5. We drive acknowledgement of value realization, gaining consensus of value to program stakeholders realized through the program of change.
A business case is indispensable when a team seeks funding for a program of change. The business case provides a defensible financial position for an investment. The business case, and the value model on which it is based, clearly communicate the benefits, risks, and costs of an initiative.
Business Case Development is one of the services that Microsoft Enterprise Architects conduct with businesses as part of the Microsoft Value Realization Framework.
The Business Case Development Service provides financial analysis based on a recommended architecture definition and planned program of change. A Microsoft Architect creates a business case and associated value model to produce detailed predictions of cash flows, costs, and benefits for a program.
When we perform the Business Case Development Service:
The Business Case Development Service produces a business case that illustrates the financial benefits of funding a program of change.
When a business engages a Microsoft Architect to perform Business Case Development, the business obtains:
To perform the service, a Microsoft Architect works with the account team, financial personnel from the client, and the management and steering committees for the program of change. Using information obtained from an enterprise, and expertise and proven practices from Microsoft:
Delivery Documentaries are a behind the scenes look at how our Enterprise Architects (EAs) in the field perform Value Realization activities for customers. The documentaries are raw and real, and the purpose is to share what actually happens on the ground. They are always a learning opportunity, and we hope that over time we can help bridge the state of the art with the state of the practice, and continue to move the ball forward.
How does an insurance company determine the best options for supporting employee productivity outside the office, while complying with necessary security requirements? Let’s take a look …
This is a Delivery Documentary of an engagement led by the Microsoft Enterprise Strategy Program (ESP), which provides services to help customers realize the most value from their technology investments. In this engagement, an Enterprise Architect helped a client develop a security strategy that would protect data while enabling employees to use their own devices for accessing company resources and services.
We had already guided Contoso Insurance towards creating a roadmap that aligned business goals enabling devices with technology. A service delivery plan was prepared, and I joined the engagement as part of the delivery team.
I had previously helped Contoso Insurance with some architecture planning, and had also driven a prior initiative. At the time, I was also participating in several technical efforts around device strategy, security and compliance, and remote access.
Although I originally intended to focus most of my efforts on solution architecture, the company did not have the right combination of internal resources to move the work forward, so I changed my focus to enterprise architecture to help orchestrate delivery while ensuring that Contoso would receive value throughout the planning process.
During the engagement, I also collaborated with other people from Microsoft, including enterprise architects, technology specialists, and members of the account team.
To optimize the engagement, we began applying components of the Enterprise Services Value Realization Framework (VRF).
During the first few weeks of this initiative, we performed an initial assessment of capabilities, and reviewed the enterprise agreement to identify ways to realize the most value from Contoso’s existing IT investments.
Contoso had previously been approaching the challenges of device security in a siloed way, separately attempting to transform several different areas: mobile device management, virtual desktops, and support for diverse end user devices. The company had a goal of increasing employee productivity, even while at home, turning couch time into productive time.
I introduced the Contoso architecture team to some of the larger issues involved in the transformation they were pursuing, such as multi-factor authentication, digital certificate management, enabling multiple operating systems. We had to carefully evaluate the scope of capabilities that Contoso was pursuing, looking for ways to enable the necessary security infrastructure.
After doing some focused assessment, we began conducting stakeholder interviews. I had an idea of the people I wanted to talk to, and began reaching out using prior relationships, as well as cold calling. I showed people the executive level briefing material we had used, and used it to start conversations.
I was able to obtain information from many business units throughout the company, including claims, legal, sales, external party management, and enterprise services.
We discussed how certain capabilities could address Contoso’s business drivers and investment objectives, and identified measurable benefits. The Contoso team was most interested in hearing their options, without rushing towards any particular solution.
For most of the stakeholders, we talked about the ways they wanted to do their business, not technical architecture. I never walked into a meeting with a solution, just questions and options.
For more technical meetings, such as with the core cross-disciplinary team responsible for device security, our discussions evaluated tradeoffs between the benefits and problems of a range of infrastructure solutions.
We looked at requirements from across the organization, looked at the best products to address those requirements, and considered how to integrate new technology with existing solutions already in place.
After gathering information from stakeholders about their pains, needs, and desires, we presented several options that would provide features to support various end user devices, mobility, security, and other important capabilities, while not incurring additional costs for hardware or licensing.
I then reviewed the enterprise portfolio with an eye toward eliminating redundancy, reducing licensing fees, and standardizing processes. We identified several security-related products, and others, that could be eliminated, as they were redundant with core platform services and other licensed applications.
After performing the assessment, stakeholder meetings, and portfolio review, we built out a vision for a program of change, identified a structure for the change. We aligned investment objectives, new capabilities, and benefits for the recommended changes.
Our recommendations presented solutions in a conceptual way that focused on capabilities and business outcomes, referencing architecture only at times.
Our services also included recommendations for adoption and change management, aligned to the new business processes and underlying architecture. For example, though many unnecessary applications needed to be eliminated, there was resistance, as some stakeholders had invested much time and money in the redundant software. Our recommendations for adoption planning promoted the use of the streamlined tools, highlighted the business value and business case, and addressed cultural changes.
Welcome to the Value Realization Team Blog!
Delivery Documentary: Contoso Hospital Goes Mobile
Delivery Documentary: Establishing a Value Realization Center of Excellence (COE) at Contoso Bank
Mobile in the Enterprise: Value Realization with Enterprise Mobility
Introducing the Enterprise Agreement Value Roadmap Service
Introducing the Value Discovery Service
Introducing the Portfolio Optimization Consulting Service
Introducing the Architecture Options and Recommendations Consulting Service
Value Planning is one of the services that Microsoft Enterprise Architects conduct with businesses as part of the Microsoft Value Realization Framework. It’s one of the Value Realization services that we mentioned in our earlier post,Welcome to the Value Realization Blog.
The Value Planning Service establishes a framework assure that an initiative delivers value. The service identifies ways to capture and assess the value during a program of change. The focus of the service is on the totality of change that a client requires to derive business benefit, not just technology changes.
The Value Planning service produces a program plan, adoption plan, value scorecard, and governance plan to support a program of change. The Value Plan describes a program of change that accelerates business value for prioritized customer initiatives. The plan addresses multiple aspects of implementing the initiative, including deploying the solution, managing adoption and change management, and managing governance, risk, and compliance.
When a Microsoft Enterprise Architect performs the Value Planning consulting service with a business:
The service produces a comprehensive, time-specific plan (milestone-driven) to ensure the delivery of expected value and benefits through an analysis of expected benefits, drivers of value realization, and an agreed measurement system.
Using proven methods, and having access to a broad range of expertise and deep platform knowledge, a Microsoft Enterprise Architect brings distinctive value while helping enterprises perform value planning. Companies obtain:
To perform the service, a Microsoft architect uses information obtained from an enterprise, and expertise and proven practices from Microsoft. We generally follow these steps:
Portfolio Optimization is one of the services that Microsoft Enterprise Architects conduct with businesses as part of the Microsoft Value Realization Framework. It’s one of the Value Realization services that we mentioned in our earlier post, Welcome to the Value Realization Blog.
Through this service we help validate and prioritize initiatives and investments, and/or help the customer create and prioritize strategies.
This is where we get to marry a unique blend of technological and business expertise.
While it is called a Portfolio Optimization service, the focus is really on “Initiative” prioritization. We help the customer prioritize their portfolio of initiatives to maximize their value while driving strategic change.
In this service, we recommend changes to and/or reprioritization of the client’s portfolio of initiatives based on a clear understanding of the client’s business intent and ability to execute leading to near term value realization (NPV,IRR, Payback) as well as longer-term improvement of return on IT assets.
The Portfolio Optimization service assesses the client’s Business and IT portfolios including business capabilities, IT services, applications, technologies, and existing program/project portfolio to help execute the current business strategy, and accelerate business value.
When a Microsoft Enterprise Architect performs the Portfolio Optimization Consulting Service with a business:
The customer invests in strategic programs of change that enhance the current and future value of the IT Portfolio.
As part of the Portfolio Optimization consulting service, we aim to answer the following critical questions:
By getting agreement to the value of a given initiative, the time to value, and the ability to execute, the customer gets a clear picture of which initiatives to focus on in order to accelerate business value and maximize their investments.
Architecture Options & Recommendations is one of the services that Microsoft architects conduct with businesses as part of the Microsoft Value Realization Framework. It’s one of the Value Realization services that we mentioned in our earlier post,Welcome to the Value Realization Blog.
Here we evaluate the architecture (in its broadest sense) across multiple perspectives – technical, business, social, commercial, and validate the proposed technology architecture(s) against the business imperatives, business architecture, business outcomes, and expected business value. All to enable various stakeholders to have their concerns about the proposed solutions evaluated and addressed.
The key here is that architectural choices are based on tested and proven practices recommended by Microsoft , as well as our value-driven approach.
When a business explores initiatives for modernizing, becoming more agile, or improving IT services, many tradeoffs become apparent: stakeholders must feasibly balance cost, value, future capability, security, business benefits, and technical demands.
Leaders throughout a business carefully examine their options and constraints, and ask questions such as:
An architect can help a business consider these questions and factors, and choose appropriate solutions and approaches for implementing them.
Microsoft Enterprise Architects provide a service called Architecture Options & Recommendations, which helps businesses explore their options, identify important tradeoffs, resulting in confident choices.
When we perform the Architecture Options & Recommendations service, we create a roadmap for the architecture is grounded in the business case and reduces the complexity for a given initiative.
We evaluate each architecture option against business objectives, business value, architecture principles, IT standards, commercial factors, constraints, and other aspects critical to the business.
Our objectives when identifying and evaluating architecture options include the following:
When performing the Architecture Options & Recommendations Service, a Microsoft architect and colleagues work with many members of the business. Participants include business executives, stakeholders, financial experts, and architectural review boards.
Architects learn about and take into account customer-specific options and constraints while identifying solutions and approaches. Throughout the process, we document rationale and choices with relevant details.
The Architecture Options & Recommendations Service provides documented and substantiated information about architectural tradeoffs and decisions. The service highlights proven and recommended solutions to enable an enterprise to make appropriate architectural choices. By using this nimble yet rigorous approach is key to creating and governing the architecture overtime.
Microsoft architects use well-known approaches to help businesses evaluate architecture options. We introduce additional value through many avenues:
The Architecture Review Board of Contoso Bank became concerned about the growing complexity of the bank’s information architecture and line-of-business applications. Mergers during the last several years had increased the client base and portfolio of offerings for the bank.
As a result, the IT environment had become very complex and difficult to maintain. The Director of Group Technology expressed the impact of the complexity and how it adversely affected agility and time-to-market. We noted also that the technology team’s relationships were eroding with their business partners, such as Retail and Corporate.
The Architecture Review Board decided to evaluate architectural options that would help simplify and optimize the IT environment. Microsoft helped the enterprise architecture team, business representatives, and operations staff to review viable options that would reduce complexity.
Using an approach that was part consultative, and part collaborative, the Microsoft architect worked with the following stakeholders and participants:
The bank considered several options for producing a simpler architecture:
The Microsoft architect helped the Architecture Review Board and other participants to identify the valuable and feasible initiatives. The CIO, having a better understanding of the complexity of the bank’s needs, began pursuing and promoting ideas for configuring ready-made solutions, rather than building new solutions from scratch.
We thought it would be helpful to share some perspectives on how we are seeing customers realize and accelerate business value from the four Mega-Trends (Cloud, Mobile, Social, and Big Data/Analytics), so we asked one of our colleagues to share what he’s learned about how companies are getting business value from Cloud in the Enterprise..
Here is Paul Slater sharing his observations and insights on Value Realization with the Cloud …
As an architect in the Microsoft Services Applied Incubation team, I work with enterprises, service providers, public sector organizations and governments. I get to help these organizations define their cloud strategy, and put that strategy into action.
In this post, I’m going to explain some of the core challenges my team sees organizations face in cloud adoption, and how we propose that these are addressed.
Increasingly, cloud computing is a mainstream concept in organizations. At this point, pretty much everyone knows what cloud is, and who the major players are in private and public cloud computing. Yet adoption still has a long way to go, and many organizations still lack a coherent cloud strategy.
In part, we believe that this is driven by an economic reality. Sure, the cloud can transform the way IT is practiced, allowing organizations to focus on activities that add value, rather than low level infrastructure management. But moving to the new world is not free, and can be highly complex.
New organizations will typically jump into the cloud head first, but for most existing companies, cloud use is limited to net new development, applications reaching end of support in their existing environment, and applications where the migration path is well understood and the benefits well documented. The rest of the applications and data remain in underutilized datacenters, gradually approaching obsolescence.
Ironically, while this approach can be driven by economics, it can costs organizations real money. Hidden inside a portfolio of thousands of applications could be real opportunities for cost reduction or improved revenuefor the business.
And once a critical mass of applications and data move to the cloud, then there are opportunities for real savings and reinvestment. SANs can get shut down, entire network segments removed, platforms retired, facilities closed.
As my team works with customers and partners on their cloud strategy, we are starting to see a series of patterns emerge that suggest a different view of the cloud world. Firstly, as cloud becomes mainstream, it is starting to become the enabler of the other megatrends we so often hear talk about, namely Mobility, Social and Information. In effect, instead of this:
We are starting to see this:
Secondly, except for some very small organizations, hybrid computing models are a reality and they are here to stay. As organizations are deploying new applications they are making decisions on where they should deploy those applications, often by using a decision tree that looks something like this:
The result rapidly becomes a mix of applications sitting across different public and private clouds, but of course the complexity doesn’t stop there. Applications are often interconnected sets of components that may for technology, governance, risk, compliance or even political reasons may sit in different places. You will frequently end up with a mix rather like the picture below:
Another change we see is towards supplementing full public cloud and private cloud environments with in-country service providers. This allows enterprises and governments to choose a mix of services, and trade off cost, control and data sensitivity against each other.
Recognizing this trend, Microsoft is working closely with in country service providers to provide capabilities on a common Microsoft platform that supplement our public cloud and private cloud offerings, as shown in the following diagram.
Amidst all this complexity and confusion, we frequently get asked to help organizations chart there way forward, and while every organization is different, there are a set of hurdles that need to be cleared in most organizations in order to progress:
I’ll go into each of these in a little more detail.
My grandmother had an investment strategy – she put all her money in the mattress. In the same way many organizations have a cloud strategy, but the strategy isn’t necessarily well thought out, consistent, or even actively useful. Microsoft conducts workshops with organizations to help them establish an effective cloud strategy, and there are many things that need to be established in order for it to be useful. These include understanding the business drivers behind cloud adoption, architectural principles pertinent to cloud, capabilities of the organization to execute on the strategy, approach to net new and existing applications, what cost savings are projected and how they will be reinvested, what the business value is of the transition, and how risks associated with migration and the target environment will be managed. If organizations do not have their cloud strategy defined and accepted, it will be very difficult to build effective business cases. For example, moving one application to the cloud may result in a net increase in costs, as you pay for the new cloud service, and resources that you were previously using (technology and people) remain in the organization. Only once you combine each of these individual projects together are you likely to see significant cost savings to the organization.
Cloud eliminates much of the need to care about underlying infrastructure, but organizations still need to care about their data, and how that data is generated and manipulated via applications. After all, when organizations move to the cloud, it is their data and applications that actually move.
Many governments have realized the importance of information classification for some time, and are now in the process of mapping their information classification frameworks to specific cloud solutions, allowing them to determine what data can go where in a complex hybrid world. Some are reevaluating decisions previously made, in the light of changing costs and improved reliability in the public cloud, but also as a result of the Snowden revelations. Enterprise are typically playing catch up here, developing their own information classification frameworks and information strategies. Applications are another critical part of the puzzle, and many organizations do not even know what applications they own, let alone the value they bring to the organization.
We recommend that organizations move over time to make both enterprise information management and IT portfolio management core competencies. By developing a detailed understanding of all of the information and applications in the environment, they can measure the value they bring, and ensure that that value increases over time.
Cloud ready organizations look very different from traditional IT organizations. Many traditional system administration skills diminish or disappear. Other skills, such as architects to manage the transition, and rapid response cloud consultants who help determine the approach for deploying a new capability, and piece together the various parts of a hybrid system that need to work become much more important. Traditional technology siloes, such as compute, networking and storage become irrelevant and destructive.
Building the organization ready for cloud is a very significant challenge for most IT leaders. It can involve significant retooling of existing staff, and sometimes new resources are required. We have worked with our internal IT organization to understand more deeply the types of skills most suited for this new environment, and alongside technical acumen, three skills come to the fore – situational awareness, impact analysis and effective triage.
This is where the hard work really begins, but at least at this point it should be built upon a well-defined strategy for cloud, applications and information in the organization. The IT portfolio actually consists of a number of different related portfolios, as shown here:
Developing a full understanding of each of these portfolios, the dependencies they have on each other, and how they use data is a critical part of maximizing the value of any transition. That said, the reality is that many organizations at this stage will focus on one main area, the set of applications. They will trawl the application portfolio, looking for opportunities to move the cloud, either to improve capabilities, or to bring down costs.
The 5 R’s – Rehost, Refactor, Revise, Rebuild and Replace, are a good way to describe the work that needs to happen to applications. To this, we add two more – Retain and Retire, as in some cases you will actively choose to do nothing to the application, and in others you will eliminate it entirely from the portfolio as it is not adding value.
This kind of portfolio analysis is, unfortunately, always time consuming, and there are few shortcuts if done properly. There are literally hundreds of dimensions to consider when determining the right approach for an application. And to be effective, you need a combination of top down and bottom up analysis. Top down analysis of the portfolio starts at the business capability layer and helps to answer the question “what is the organization supposed to do?” Bottom up analysis starts with just a list of applications, and helps to answer the question “what is the organization actually doing?” There is frequently a surprising delta between the two, and that delta can be the source of significant cost reduction, or even potential innovation, as the organization finds a way to monetize existing capabilities.
Almost every large organization is likely to retain at least some capability on premise. And even those that don’t will likely use in country service providers. Organizations undergoing a cloud transition face a choice, maintain the existing datacenter footprint, consolidate datacenters without modernization, or embrace modernization to improve efficiency and capabilities of the portfolio.
To stay competitive in a cloud services world, Microsoft has fully embraced datacenter modernization. In fact we run some of the most modern datacenters in the world. We have invested more than $15 billion in an infrastructure that supports more than 200 online services, including Bing, Hotmail, MSN, Office 365, Xbox Live, and the Windows Azure platform. The Microsoft Global Foundation Services (GFS) organization is responsible for the Microsoft public cloud infrastructure, and comprises a large global portfolio of data centers, servers, content distribution networks, edge computing nodes, and fiber optic networks.
Sure, we run datacenters at scale far greater than most of our partners and customers. But we have realized that many of the lessons learned from our own experience apply directly to others. Key principles behind building and operating a modern datacenter include:
Organizations that design, build, and operate their data centers according to these principles will be positioned to provide reliable and flexible high-performance services at an effective price point. Those organizations that do not follow these principles will affect the cost and responsiveness of their IT services, and ultimately put their ability to remain competitive at risk.
Once organizations have a good understanding of the portfolio, and the proposed dispensation of their applications, they are now in a position to modernize the applications. As I already mentioned, a good way to think about this is through 7 Rs, but there are some important other considerations.
Firstly, modernization of an application represents a real opportunity to increase its value. So while rehosting an application may seem to be the easiest option, it is not always the best. To fully get to the value, you may need to refactor or even rebuild the application. However in a large portfolio, it can be difficult to build individual business cases for modernizing each individual application, so it’s important to go back to the overall cloud and application strategy and establish the value at that level.
Secondly, when determining candidates for application modernization, many organizations make the mistake of ignoring internal applications, leaving them to become more and more dated. This can have significant impact on productivity and on organizational morale.
Finally, if you are modernizing large numbers of applications in the organization, much of the work may be automated, or at least done following a standard pre-defined process. You may choose to build this yourself, or using a partner that has developed repeatable processes for doing this work.
Building applications for the cloud is requires a very different approach to traditional application development. In general you know very little about the underlying infrastructure, so you cannot rely upon redundancy in the underlying infrastructure to ensure uptime. Demand may scale unexpectedly for public cloud applications, or parts of an environment may fail. Application containers are not segregated from each other physically. Components may span multiple geographies, multiple security boundaries, and even multiple cloud service providers, and you may wish to move those components as platform capabilities improve or costs change. In addition to these challenges, there are huge opportunities to connect together social, mobile and information components into applications with capabilities that were formerly impossible.
To develop effectively for cloud, new skills are required. We have published guidance on this topic, called Failsafe: Guidance for Resilient Cloud Architectures. I’d highly recommend you read it and apply it to your own application services organization.
As I mentioned earlier, some of the larger economic benefits associated with cloud can only be realized by removing legacy environments, from servers and platforms to entire datacenters. This can be very difficult in many organizations – it is so much easier to new environments than retire existing environments. In some organizations, skills shortages are now starting to reach emergency proportions, with the workforce skilled in a particular application or platform literally dying out. Effective portfolio management and application lifecycle management can help with this problem, and it’s important to recognize that in most enterprises this is as much a political or cultural challenge as a technical one.
Fortunately, many organizations are now coming to terms with the fact that eliminating legacy environments has the capacity to redirect significant money away from keeping the lights on and towards technology that differentiates the organization. These organizations are providing top down mandates to enforce change, and ensuring that support for that change permeates throughout the organization.
As I’ve illustrated in this blog, simply building a set of cloud capabilities does not ensure that organizations or individuals will adopt cloud computing. While there are many benefits, the hurdles are big enough to make the journey difficult for most.
Recognizing this, some teams at Microsoft have made some significant investments to help our customers and partners undergo this transition. Our Enterprise Architects are working with organizations to help them define their cloud strategy, their approach to application and information strategy, and to analyze their portfolios. Our Cloud Vantage Services help organizations navigate the transition to Cloud. Some teams at Microsoft have also invested in helping our customers modernize applications, and here we are working directly with customers, but also through our partner ecosystem.
As mentioned earlier, an essential part of our cloud strategy is to provide in country services through cloud service providers, supplementing Microsoft public cloud offerings, and on premise private cloud capabilities. This can be particularly important for local and national governments, so we have also established a National Cloud strategy to support governments in their transition to cloud. You can find more information about their work here.
Looking forward, my team and other teams in Microsoft are continuing work to make cloud adoption easier, and the value proposition of cloud higher. For example we are investigating how organizations can more accurately understand in their existing datacenters, and align them to services, so that they know when moving makes sense from an economics perspective. We continue to explore innovations in datacenter and infrastructure design, and methods to reduce the costs associated with application modernization. And we are working to ensure that when applications are deployed to the cloud, they are done so in the most efficient and flexible way. This will allow applications to be seamlessly redeployed when the capabilities of the underlying infrastructure and platform alters.
While Cloud transformation is well underway, there is still a long way to go for many organizations, and the destination will continue to evolve. However, I’m happy to say that as an organization that is fully committed to the cloud, we will continue to invest in capabilities and services that help our customers and partners navigate the journey.
Welcome to the Value Realization Team Blog!Delivery Documentary: Contoso Hospital Goes MobileDelivery Documentary: Establishing a Value Realization Center of Excellence (COE) at Contoso BankMobile in the Enterprise: Value Realization with Enterprise MobilityIntroducing the Enterprise Agreement Value Roadmap ServiceIntroducing the Value Discovery Service
Delivery Documentaries are a behind the scenes look at how our Enterprise Architects (EAs) in the field perform Value Realization activities for customers. They are raw and real, and the purpose is to share what actually happens on the ground. They are always a learning opportunity, and we hope that over time we can help bridge the state of the art with the state of the practice, and continue to move the ball forward.
What happens when a bank struggling to connect it’s IT investments to it’s business impact decides to implement a Value Realization Center of Excellence to turn things around? Let’s take a look …
This is a Delivery Documentary of an engagement led by the Microsoft Enterprise Strategy Program (ESP), which provided services to help customers realize the most value from their technology investments. In this engagement, a Solution Architect helped a customer to identify shortcomings of the current IT delivery model, and to produce better quality, value, and integration from IT solutions.
The Solution Architect and colleagues proposed that the bank establish a Value Realization Center of Excellence (COE), aligned with the organization of the bank. The Value Realization COE is designed to be responsible for quality deliverables, innovation using fewer commodity solutions, and efficiency from having more uptime and continuous value. The bank agreed to perform a one year assessment of the model while continuing to pursue other IT initiatives.
The Solution Architect was involved with the initial pre-sales, business development meetings; in creating the enterprise agreement; aligning the bank organization with the Value Realization Center of Excellence functions; performing value-based measurement; and engaging as needed upon request of the Services Executive.
During the past few years, Contoso Bank has had prior contact with many vendors, primarily to deploy isolated pieces of technology, and not always coordinated in ways designed to achieve maximum value.
The bank was lacking over-arching envisioning, planning, and value realization. In addition, the bank had not yet maximized and fully leveraged the agreement already held with our Enterprise Services team. One way to address these issues was to create and help staff a Center of Excellence and Innovation for Value Realization for Contoso Bank.
I began shaping a Center of Excellence to focus on three goals:
My next step was to talk to the executive sponsors as to the benefits they would realize if we had a more strategic partnership: one for which we established this Center of Excellence and staffed it with Enterprise Architects on work streams.
I spearheaded meetings to discuss the proposal with the Sr. VP of Contoso Bank, the CIO, and the CIO direct reports. The CIO became quickly interested in broadening the discussion to reveal more details.
Our meetings were just conversations in which the Services Executive, the Account Executive, the Executive Business Director, and I discussed the universe of the possible with the bank executives. We considered the different ways in which things would work and be structured.
We began planning and scheduling “alignment sessions” to involve next tier stakeholders, such as the VP’s in charge of strategy, innovation, revenue, and collaboration.
To prepare for the meetings, and as part of my role of developing the vision, I obtained information from experts in COE structure, and requested research materials from our Global Delivery department on spending patterns and the banking industry in general. I did not yet drill down into capabilities or adoption.
The alignment sessions included stakeholders from the bank and Microsoft participants, including the Services Executive, Account Technology Strategist, and the Account Executive. We also pulled in colleagues from other Microsoft teams.
During the alignment sessions, we started with just a notion and presented a few items about value realization to spur the discussion. But we primarily listened and learned, before we attempted to help shape things.
We used the alignment sessions to get everyone on board about the direction, methods, and budget for our efforts. We walked employees from the bank through the idea of simplifying and transforming the complex and costly to be more efficient and aligned to business requirements.
We painted in broad strokes how Enterprise Architects would be aligned to the structure that the bank already had in place. We didn’t portray that we had everything figured out. Instead, we brought insight from our research. We described successful patterns, and we obtained more information about how such patterns could be applied to the organization, considering the current level of architectural maturity.
The bank faced significant tasks to reach a higher level of maturity. But we demonstrated that this was an opportunity for implementing an easier service model using items they had already purchased. This would enable them to repurpose the IT staff, reduce complexity, reign in expenses, and make the transition to a more mature architecture. The bank could then begin considering offering their infrastructure as a service.
We emphasized that we have a number of Enterprise Architects focused in the areas the bank was transforming. We encouraged stakeholders to work with these service area specialists. Ultimately, we even provided a Program Manager for the Center of Excellence as well, since the bank was lacking the expertise.
When we finished these meetings, the sponsors understood the problems of continuing to grow the bank’s footprint of complexity, and the advantages of establishing a simpler service model.
We prepared a proposal for a one-year engagement to establish and assess a Center of Excellence within Contoso Bank for defining and managing value from IT projects.
I worked with the Services Executive to structure the engagement aligned with our three models:
We assigned an Enterprise Architect to each area to perform the following activities:
The assigned Enterprise Architects worked with executive sponsors. A lead architect within the Value Realization Center of Excellence managed the overall work, address blocking issues, decrease cycle times, and present possible solutions to problems as they arose.
The one year test of the Center of Excellence was a success, and enabled us to build trust in the model with our executive sponsors. Contoso Bank decided to engage additional staffing for the Value Realization Center of Excellence as a more permanent addition to the enterprise, in addition to managing the initiatives that were necessary for transforming to a more mature platform.
The managing architect of Contoso Bank is now the leader of the Value Realization Center of Excellence, with a team of Enterprise Architects, a Program Manager, and an Engagement Manager.
The team performs health checks on deliveries, and the Services Executive and Engagement Manager review the results with an executive committee with business sponsors and a proxy for the CFO.
Welcome to the Value Realization Team Blog!Delivery Documentary: Contoso Hospital Goes MobileThe Enterprise Mobile Story: How To Get Business Value from Enterprise MobilityIntroducing the Enterprise Agreement Value Roadmap ServiceIntroducing the Value Discovery Service
We thought it would be helpful to share some perspectives on how we are seeing customers realize and accelerate business value from the four Mega-Trends (Cloud, Mobile, Social, and Big Data/Analytics), so we asked one of our colleagues to share what he’s learned about how companies are getting business value from Mobility in the Enterprise..
Here is Arno Harteveld sharing his observations and insights on the Enterprise Mobile story …
In my current role I interact on a regular basis with customer executives during customer briefings regarding Enterprise Mobility which gives me an insight what drives customers and what customers are doing in this area. Microsoft recognizes four mega trends which are shifting the industry in profound ways how people work and how we do business. It is changing how we buy stuff and how we interact with others. There is a big opportunity to use the four mega trends to unleash business value.
We recognize mobility as one of the four mega trends (mobility, social, cloud and big data) that are changing how we work and how we conduct business. These four mega trends are likely to be the dominant forces of change in the coming decade and represent what is most important to Microsoft customers today:
These trends are revolutionizing how organizations engage customers, deliver innovative products and services, compete in a global economy, attract and retain talent, and manage expenses. This paper focuses on the effects—and potential uses—of mobile technology in this context.
It’s estimated that by 2016, one billion global consumers will have access to smartphones or tablets, which makes mobile technology a crucial medium for interacting with customers. Considering that 2.4 billion consumers connect to the Internet, one-third of the world’s population is a click away from your business, product, or service.[1][2] Mobile consumers have faster access to better information than ever before.
By 2015, the world's mobile worker population will reach 1.3 billion, representing 37.2 percent of the total workforce.[3] Working at away from an office desk has become the new normal.
To realize the potential benefits of the four mega trends, reevaluate business processes to get business value from mobile IT capabilities. Your organization can take advantage of mobile technology to adapt to today’s changing business environment; however, to do so, it must adapt new agile approaches to delivering technology options and services to both customers and employees. Any of the following three strategies can be used bring mobile technology into an organization:
Figure 1. Three strategies for integrating mobility into an organization[4]
Every organization has different needs, different capabilities, and different available resources. These strategies can help to tailor your mobility strategy to meet the current needs of your organization, and you can update your strategy over time as the organization’s needs, capabilities, or resources change. This paper provides guidance and examples of how these strategies can accelerate adoption of mobile technology in your organization.
The Run strategy outlines how organizations can adopt mobile technology in ways that make employees more productive and business processes more efficient, while at the same time controlling costs and maintaining a secure environment. The objective of this strategy is to reduce total cost of ownership to make the IT organization more efficient; this objective does not affect overall revenue directly, but it can make an organization more efficient while providing new mobility capabilities.
Your organization can adopt mobile technology in the following ways:
Adopting the run strategy will primarily affect mostly the IT organization. However, by carefully planning and implementing your mobility strategy, you can make improvements without compromising security or placing a significant new burden on your IT department. During this process, your organization may need to examine (and change, if needed) the way it does the following:
In addition, your IT organization may need to make changes in the way it supports the following capabilities:
There are a number of ways you can use mobile technology in your organization. This section describes the following popular uses:
The following figure provides an overview of how employees can use devices to work more flexibly and efficiently.
Figure 2. To bring mobility into current business processes, IT supports new ways of working
When your employees can work anywhere, your organization can realize the following benefits:
Implementing the ability to work anywhere is more complex than simply handing devices to your employees. You should adapt your business processes to use the new capabilities most efficiently. Your employees need to carefully consider the following:
In addition, your employees can consider new approaches to their work, such as:
The following figure provides an overview of how you can integrate externally owned devices into your operations.
Figure 3. Contractors bring their own devices into the corporate environment. After they register their devices on the corporate network, they can access corporate resources.
When contractors and other partners can use their own devices to work with you, your organization can bring them up to speed quickly and at the same time reduce device handling costs.
To use their own devices with your network, contractors and other partners need to understand the following:
Overall, your organization can mobile technology to work more effectively with contractors and business partners.
This strategy describes how a business can adopt mobile workstyles in ways that enhance existing business processes and develop new business processes. Organizations can increase revenue and profit by providing employees with new and more efficient ways to work while at the same time improving customer service and customer experiences.
In this strategy, your organization can use mobile technology to accomplish the following:
The changes required for this strategy impact both the IT organization and the lines of business. Planning and implementing such a strategy may require your business to examine (and change, if needed) the way it does the following:
There are a number of ways you can grow your organization’s current business by using mobile technology. This section describes the following popular approaches:
In highly competitive markets, mobile technology can increase the effectiveness of your sales force. Using mobile technology, your sellers can access customer data, product data, and sales data when they want, from wherever they want--even from a meeting with the customer. They can close transactions while still on site with the customer, and share data with sales colleagues. Figure 4 illustrates how this process can work.
Figure 4. A mobile sales rep can record transaction details, provide information to the customer (collaborating with peers as needed), and close the transaction
When your sales people can record, access, and collaborate on information anywhere, your organization can realize the following benefits:
Implementing this approach is more complex than simply handing devices to your sales people. You should adapt your business processes to use the new capabilities most efficiently. Your sales people can consider new approaches to their work, such as:
Using mobile devices, field service workers have access to the information they need when they need it:
Such access makes field service workers more efficient and, more importantly, increases the uptime of capital-intensive equipment. Figure 5 illustrates how field service workers can use mobile devices on the job.
Figure 5. By using a mobile device to receive schedules, store documents, collaborate with colleagues, and file reports, a field worker avoids extra trips to the office
By deploying mobility technology to field service workers, your organization can realize the following benefits:
Implementing this strategy might require redesigning or optimizing business processes instead of simply handing devices to your field service people. You should adapt your business processes to use the new capabilities most efficiently. Your field service people can consider new approaches to their work, such as:
BT (British Telecommunications plc) needed a mobile solution to support more than 6,000 OpenReach field engineers, who provide critical provisioning and repair services for BT (and its millions of customers). The laptops used to that point needed frequent repair and actually hindered customer service.
In December 2012, BT deployed 6,000 Panasonic Toughbook CF-C1s to the field engineers. Key features of the new systems included:
By adopting a mobile strategy based on Windows 8 devices, BT has realized benefits that include the following:
This strategy outlines how a business can adopt mobile technology with smart connected devices in ways that transform your business and give it a competitive edge. In this strategy, your business can take advantage of mobile technology in ways such as the following:
During this process, your organization may need to examine (and change, if needed) the way it does the following:
One approach to transforming an organization’s business is to provide an existing service in a new way that makes your service more economical for customers. For example, instead of providing maintenance service to on-site machinery on a set schedule, provide service on a custom schedule based on the usage of the machinery. As an example, consider Fabrikam, which manufactures and maintains elevators. To differentiate itself from its competition and generate revenue, Fabrikam uses mobile technology to customize maintenance schedules for its elevators. Figure 6 illustrates how this process can work.
Figure 6. Mobile technology generates the data needed for Fabrikam’s new service
By developing a new service that uses data generated by mobile technology, Fabrikam realizes the following benefits:
To plan and implement this strategy, Fabrikam needed to be able to do the following:
Another approach to transforming an organization’s business is to provide an existing service to new groups of customers—for example, customers in geographic areas that the organization has not dealt with before. A bank, for example, can tap new markets by delivering cloud-based services to mobile devices, as shown in Figure 7.
Figure 7. A bank reaches new markets by providing cloud-based services to mobile devices
By delivering services to a new market of mobile devices, the bank realizes the following benefits:
To plan and implement this strategy, the bank needed to be able to do the following:
This article provides overviews of three strategies to integrating mobility technology into an organization to accelerate business value:
To determine which approach or combination of approaches would be most effective for your organization, you can do the following:
[1] Kevin Turner, Financial Analyst Meeting, Microsoft, September 19, 2013
[2] World Internet Users Statistics Usage, June 2012
[3] Crook, Stacy K. et al, Worldwide Mobile Worker Population 2011-2015 Forecast. IDC Corporate USA, January 2012.
[4] Based on Hanford, Michael. The 'Lights-On' Portfolio, but How Many Lights?Gartner, Inc, 2010.
[5] Microsoft, Microsoft Case Studies, “BT: Telecom Boosts Field Staff Efficiency, Service with Latest Mobile Computing Platform.” 2013
In this engagement, an Enterprise Architect supported a hospital facing challenges related to having no strategy for supporting user devices, as the devices rapidly proliferated among the staff.
The EA helped the hospital identify an actionable strategy, educate stakeholders about mobility issues, provide a strategic direction, and introduce a framework for addressing mobility. During the engagement, the EA worked primarily on-site, and with the close support of the engagement manager, services executive (SE), and account technology strategist (ATS).
During the engagement, the EA met with primary and secondary stakeholders to perform assessments, performed research into mobile strategies using existing IP and personal contacts, and created a deliverable that contained key findings for a mobility strategy, recommendations, trends, adoption frameworks, and best practices.
Contoso Hospital was having pre-sales conversations with an account executive (AE), ATS, and SE about the needs of the hospital for a mobile strategy. I began participating because I had experience working with mobility and BYOD (“Bring Your Own Device,” where employees use their own devices to perform work).
I was the point person in the pre-engagement meeting. Our goal for the meeting was to try to understand and scope the engagement. I was joined by the Microsoft delivery excellence director and the account team.
The initial stakeholders were IT decision makers, directors that report to the CIO. We set expectations right from the start about what a strategy is, and what it isn’t. We discussed that the deliverable would lay out priorities and address the issues that the hospital is experiencing now.
We discussed that the deliverable would achieve the following:
We discussed that the deliverable would not:
Over the course of the next two weeks, I visited again with the account team, and did some basic preparation for the engagement while the contracts were signed and the sales motion finalized.
The heart of the kickoff was level setting. During the kickoff, I communicate the following to the stakeholders:
I began working full-time on-site, finding it valuable to be close to the stakeholders. I was able to introduce myself, my work, and my associates. My account team also helped with appropriate introductions.
My engagement manager and account technology strategist attended assessment and planning meetings. They helped provide insight and ensure that we were working towards the goals of the engagement.
When I began working on the deliverable, I had a sense of the stakeholder priorities from the prior meetings, but to identify more details I needed to conduct a wider stakeholder assessment. I decided to use personas as a cornerstone for developing strategy, and for communicating about mobility tools and scenarios.
Following guidance from the key stakeholders, I identified primary, secondary, and additional stakeholders with which to perform assessments. I met stakeholders, learned about their roles, interests, and stakes in the mobility initiatives. For example: how mobility affected their activities, what they saw as the main issues and valuable opportunities, and the look of success.
I then started developing a BYOD strategy for the hospital. I accessed many resources during my research. Here are some examples of the resources I used:
In the final deliverable, I aimed to provide a focused collection of items for the hospital to explore. Here is a list of some of what I identified:
My final deliverable for Contoso Hospital was a presentation supported with a slide deck that included the following topics:
Is there more the story?
You bet.
This was only the beginning.
License Agreement Value Roadmap is one of the services that Microsoft architects conduct with businesses as part of the Microsoft Value Realization Framework. It’s one of the Value Realization services that we mentioned in our earlier post, Welcome to the Value Realization Blog.
[The most common form of Microsoft licensing is “Enterprise Agreement,” which is why in our practice we typically refer to this Service as “Enterprise Agreement Value Roadmap”]
We perform the service to help businesses evaluate current returns on license investments and identify potential to maximize the business value from such investments by ensuring fuller, more effective, earlier use of purchased licenses.
A few questions that an architect might address about license value realization are:
Typically, this type of evaluation occurs near the end of a License Agreement, prior to renewal. But many businesses also like to look into value anytime a major strategic or vision change occurs, from the business or IT side.
One important role an architect plays is helping to clarify the definition of value in different business contexts. To precisely assess this value, an architect needs to review the business capabilities, priorities, and initiatives, in light of the broader business landscape -- all influencing and characterizing business value.
When a Microsoft architect performs the License Agreement Value Roadmap Service with a business:
The License Value Roadmap Service includes activities for assessing value, and for making recommendations to businesses about ways they can optimize the value they receive from license investments. Importantly, architects must go beyond simple auditing of licenses to create a comprehensive analysis:
After we create a value roadmap and present recommendations, the stakeholders at a business clearly understand the value of their investments, and the opportunities for increasing value.
License Agreement Value Roadmap documents how existing licenses are used by the business, what additional value could be derived from this pool of licenses, what specific initiatives would capture that additional value.
As the end of an Enterprise Agreement approached, the CIO Team and Director of Enterprise Licensing for a large bank began examining whether their IT investments were performing and producing value for the bank.
The bank had traditionally used a large amount of free open source software that met internal standards. However, stakeholders at the bank were finding that they needed capabilities that their solutions did not provide, and the IT teams and Head of End User Services were under pressure to meet quickly evolving business needs.
To gather the necessary information, the Microsoft architect consulted with directors and members of many teams at the bank, including:
The Microsoft architect developed an Enterprise Agreement Value Roadmap to help the bank evaluate licensing investments in light of priorities and results: