Tucker Technology Business Management

The Four Value Conversations Cios Must Have With Their Businesses
1. Auflage 2016
ISBN: 978-0-9976127-2-1
Verlag: Technology Business Management Council
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 292 Seiten

For many CIOs, the value they deliver is elusive. It's not that they do not create positive business outcomes, it's that they have a hard time demonstrating value for the money spent. As a result, many IT leaders find themselves trapped in a vicious cycle of defending their budgets, cutting resources when times are tight, and struggling to keep pace with an insatiable business appetite for innovation. Meanwhile, business leaders increasingly rely on the cloud and other third parties for their technology needs, finding clear tradeoffs between cost, features, risk, and speed of delivery at their fingertips. CIOs must not only compete with these alternatives, they must embrace the new reality of a multi-sourced, service-oriented world. Many IT leaders are taking a more proactive approach to optimizing value. By using shared facts about cost, consumption, quality, risk and performance, hundreds of CIOs have empowered value conversations centered on cost-for-performance, business-aligned portfolios, investments in innovation and enterprise agility. The tradeoffs they've illuminated changed the tone of their meetings and instilled a business mindset in IT decisions.

Autoren/Hrsg.

Tucker, Todd

Leseproben

Introduction: Be the CEO of Your Technology Business Try to imagine your business running without its enterprise resource management system in place. Your CEO would lack a handle on the full state of the enterprise, an essential tool for making informed decisions. Line managers might have their own systems for managing their own teams and resources, but they would fail to see how their decisions impacted enterprise goals overall. It’s not that work wouldn’t get done; it’s that the CEO would lack an important command and control capability; so value wouldn’t be optimized. As an IT leader, hopefully you’ve not let this scenario happen. Instead, you’ve given your business partners1 a system for managing the business as a whole and not just its parts. Your CEO and CFO use that system to translate corporate goals into business unit objectives and incentivize their managers to meet them. This system, denominated in money, connects the top of your business with all its underlying parts. It is an indispensable management tool. Now imagine you’re the CEO of your own technology business. Your revenues come as operating funds from your business; you receive capital to buy or build assets; and you employ people, assets, and outside services to deliver value to your business partners. What you do is no small matter. If your budget is in the tens of millions of dollars, you command more resources than many Silicon Valley CEOs; if it’s more than a hundred million dollars, your business is bigger than most B2B SaaS companies on the planet2. Now consider the systems you are using to manage enterprise value. As the CEO, are you able to connect the top of your business all the way down to your people, technologies, and vendor services? Can you show the corporate impact of the decisions you and your people make? Do you have a system of incentives that drives good business decisions (and not just good technology decisions)? If your technology department is like many others, probably you do not. Instead, you have tools for managing the parts, but not the whole. Your financial information treats IT as an expense center. You know the overall cost of IT, but you can’t easily connect that cost with the value that your department provides. You have few facts available to discuss value, consumption, and cost with your business partners. Worse still, you can’t optimize your resources or shape business demand to create the most value for the money being spent. Does this scenario sound familiar? In today’s digitally-driven business world, this scenario is a dangerous situation. Your company needs so much from you, and yet your resources are very limited — your budget is tight, talent is scarce, and the time horizon you’re given to effect change is constantly shrinking. To give your firm the power to compete, you have little room for error. Consider this as well: the opportunity cost of an inefficient, misaligned technology department is much greater than its actual costs. Wasting precious resources comes at the expense of creating new revenue streams, accelerating a new business model, improving customer service, or reducing business costs. Mistakes in allocating your resources are compounded by both time and the operating leverage of IT. For a typical billion dollar company, misspending just 3% of its IT resources each year can reduce revenues in Year 5 by more than $117 million!3 Optimizing value depends on making tradeoffs to achieve the right cost-for-performance, portfolio alignment, innovation and agility. Should you increase capacity at an extra cost to reduce risk? Where can you shift resources from one service to another to accelerate corporate growth? How can you reduce portfolio complexity to create better economies of scale? How can you better fund an innovation program? Should you invest more in the cloud to improve agility? These are the kinds of tradeoffs you need to make, and just like tuning a modern car engine (e.g., more horsepower or higher fuel economy?), you need instrumentation and data to optimize value. A great example of this optimization comes from eBay. Most people view eBay as an auction company, but in reality they are a technology-driven global commerce company with over 800 million listings at any given second. eBay competes in a diverse array of retail spaces, from electronics, fashion and automotive to online tickets to classified ads. eBay’s markets are highly competitive as both large (e.g., Amazon, Alibaba, Walmart) and smaller (e.g., SeatGeek, Craigslist) competitors have entered the firm’s core spaces. To maintain margins, customer engagement is essential and speed, agility, service and trust are paramount. Dean Nelson leads eBay’s Global Foundation Services, the infrastructure driving the digital engine that connects over 25 million sellers with nearly 160 million active buyers across 190 markets4. In 2011, Nelson’s team was struggling to articulate the value of eBay’s infrastructure to their business leaders. It’s not that they didn’t know their digital engine was essential to their business; it’s that they couldn’t tell if they were spending too much, too little, or the right amount on it. Was their approach the right one? Could they get what they needed cheaper somewhere else? Most importantly, could infrastructure, which represents a large capital investment for eBay, be a competitive weapon? To answer these questions, Nelson knew he had to shift from a technology discussion to a business discussion with his business partners: “We had this bottom up approach and it never got us anywhere. You had so many engineering metrics, so many opinions…but nothing was digestible by an executive.” In other words, his team spoke in bits, bytes and watts, while the business spoke in listings, users and revenue. Nelson’s team decided to change the language they used with the business. “We looked at what types of metrics our business execs cared about — performance, cost, environmental impact, and revenue,” said Nelson. “We then set up a structure to connect those four dimensions to our infrastructure cost and performance. Now, if we want different business results, we can show what we are providing under the hood to deliver them.” Nelson says this approach provides a “miles per gallon” measurement for his digital engine. It makes an end-to-end connection between what eBay’s customers do and the fundamental business metrics that his team influences, such as transactions per kilowatt hour, cost per transaction, and CO2e5 per transaction. These metrics also provide several benefits:    They communicate what value eBay’s digital engine provides and how much that costs in business terms.    They connect business demand to infrastructure cost and utilization, so eBay can plan better.    They provide more useful measures of efficiency, focusing on per unit measures, so eBay can understand the relationship between the volumes it processes and its costs and resources consumed.    They demonstrate environmental stewardship at a business level, going beyond simple data center efficiency metrics like power usage effectiveness (PUE) to show emission equivalents per transaction. However, the simplicity of these metrics belies the power of the underlying model that makes them possible. Nelson’s approach is data driven, relying on many of those underlying engineering metrics that weren’t relevant to his business partners. With their data-driven model, Nelson’s team, along with application owners and architects, are using business-connected metrics to tune their digital engine. Figure Intro-1: eBay’s dashboard shows performance, cost, environment and revenue KPIs for its digital engine For example, eBay’s model provides transparency into the infrastructure consumption and cost of its different business units. The team can connect the infrastructure use of any group (e.g., search, analytics, cloud, development) or customer vertical (e.g., electronics, automotive, electronics, garden) to the revenue that is generated. They also see how new marketing programs drive increases in infrastructure consumption and cost. They then use these insights to refine their engine’s cost for performance. These capabilities are useful for managing changes, too. With transaction volumes like eBay’s, simple changes to application code can lead to a significant increase in infrastructure costs. When the team saw a mismatch in workloads to usage, they worked with the cloud team to do a simple code change that would save $750,000 in operating expenses, avoid $2.6 million in capital expenditures while giving back a megawatt of power. eBay has an enterprise management system for their technology business, i.e., eBay’s digital engine. This system makes tradeoffs clear and accelerates decisions. It provides a business-linked dashboard, so business and technology leaders can optimize the engine and create the best balance of cost, risk, and performance. Yet don’t assume this system is unique to online Silicon Valley businesses like eBay: It has been implemented by hundreds of CIOs, CTOs, VPs, and GMs around the world at banks, insurance companies, hospitals, manufacturers, media companies,...