Addressing the Software Drain Crisis

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Cognizant presents Addressing the Software
Drain Crisis Thursday, March 10, 20051pm EST
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AGENDA
100 115 Results of the Cognizant-BPM Survey
on the Software Drain Crisis Kaushik
Bhaumik, Cognizant 115-130 Taking A Lifecycle
View towards IT Portfolio Management Brian
Burke, MetaGroup 130-140 Cognizants ITEM
Approach Kaushik Bhaumik, Cognizant 140
200 Audience QA
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The Software Sprawl
Cost Pits in IT Budget
BPM-Cognizant Study

• Corporations are becoming increasingly dependent
  on Business Applications for everything from
  routine performance to competitive
  differentiation
• An indirect result of this is a slew of redundant
  and obsolete applications found in many
  portfolios with no monitoring mechanisms in place
  to evaluate and manage the portfolio
• These redundant and obsolete applications
  consume a significant portion of the IT budget,
  without giving any major business benefits

• Cognizant commissioned a survey to examine the
  impact of the software sprawl
• 226 top IT professionals and C-level executives
  were interviewed in the third quarter of 2004
• Around 25 of the respondents belonged to
  companies with revenues of 500 million or more.
• While a cross-section of the industry was
  covered, the most represented industries were
  Information Technology (28), Professional
  Services (9) and Financial Services (5)

The Software Sprawl
Software Sprawl is best described as the IT
equivalent of Unchecked Urban Growth -
Uncontrolled, ill-monitored and Inefficient
growth of software applications and processes
The main objective of the Cognizant-BPM Survey
was to measure the extent of Software Sprawl in
order to explore methods of addressing the problem
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Impact of Software Drain A peek into the Survey
Two out of every three CEOs have not clear
visibility on the Return on Investment from IT
efforts
More than 75 of the respondent companies have no
formal process for systems audit
64 of the companies are not even clear about
measures of ROI
Three out of four companies have no formal
procedure for systems audit
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For many respondents more than 20 of the IT
budget is eaten up by obsolete applications
No formal System
64
No Audit
Not clear about ROI
10.87
Less than 1
Others
Clear about ROI
16.85
1 - 5
16.85
5 - 10
17.93
10 - 15
More than 70 of respondent companies feel
that they have redundant, deficient or obsolete
applications
13.59
15 - 20
74 of respondents do not have a systematic
process for retiring applications.
9.78
More than 20
14.13
Don't know
70.09
Yes
0
5
10
15
24.11
No
5.80
Don't know
Nearly half of those surveyed, dont have a
formal system for qualifying, certifying and
validating existing and new software applications
Yes
0
10
20
30
40
50
60
70
No
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What Causes the Software Drain?
The primary reason for software drain is that
most of the companies have no processes in place
to monitor and track the effectiveness of the IT
environment
Retirement Planning Stage
Steady State Stage
Inception Stage

• Lack of control and discipline in monitoring,
  measuring and managing the utility value of the
  applications/processes
• No mechanisms to measure the continuous ROI
  metrics on a periodic basis
• Nearly 41.6 are the applications are terminated
  due to changes in the underlying business
  requirements making them obsolete)

• No robust technology selection process to cater
  to the requirements of the business
• Invariably applications are built with immediate
  short term needs with no detailed future-state
  analysis and enterprise level impact

• No periodic audits to identify redundant and/or
  obsolete applications/processes
• No systemic process for retiring applications
• No regular initiatives towards consolidation/decen
  tralization opportunities

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What is your Portfolio Mix?

• IT spend can be categorized into Run, Grow and
  Transform activities
• Most companies are spending too much just keeping
  the lights on.
• Active management of the asset portfolio enables
  companies to achieve the optimum mix

90 of the effort is directed at managing 40 of
the IT spend
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Applying Portfolio Management To Existing
Applications

• IT assets, like assets in a personal portfolio,
  should be managed with a buy, sell, or hold
  mentality.
• Many organizations, like many investors, are good
  at buying, but have difficulty in determining
  when to sell.
• Portfolio management helps identify the optimum
  buy and sell points

300
200
100
0
2003
2004
Project A
Project B
Maintenance for B
Project A
Unless applications begin to be retired, the
entire IT budget will be spent running the
business.
Ops Increase for B
Base
Maintenance for A
Ops Increase for A
Base
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IT Asset Lifecycle Cradle to Grave

• IT investment decision making must consider the
  entire asset lifecycle
• Criticism continues for increasing run the
  business costs
• And we cant adequately explain why!
• Benefits must be managed throughout the asset
  lifecycle

Realized Value
Benefits
Costs
Decommissioning
Upgrade Project
Upgrade Project
Upgrade Projects
Operating Costs
Implementation Project
Common practice is to analyze implementation
costs, forgetting operations and maintenance
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Analysis Across the Application Portfolio
Year 4 ...

• Compare Attributes Across Applications
• Business Value
• Supported functions
• Functional gaps
• Opportunities
• Technical Quality
• Architectural Alignment
• Service quality
• Costs
• Operations
• Maintenance
• Licence
• Risk Profile
• Operational risks
• Reputation risks

Year 3
Year 2
Excellent
Re-Evaluate/Reposition Asset
Maintain/Evolve Asset
Technical Quality
Re-Engineer/Modernize Asset
Retire/Consolidate Asset
Poor
Low
High
Business Value
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Getting Help!

• PfM Software
• The PfM software market is evolving to include
  Project PfM Mgmt (and vice versa)
• PfM Consulting
• Implementing PfM is politically challenging
• Consultants (e.g. Cognizant) bring experience and
  credibility to enable change

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Challenges in measuring Software Drain

• There are several challenges in the actual
  measurement of software drain
• Common nomenclature for describing the IT
  Portfolio.
• Determination of the effectiveness of individual
  applications/processes and its impact over the
  overall software drain.
• Quantification and measurement of application
  level attributes that could hamper effectiveness
• Identification of the root drivers for poor
  effectiveness of application or any IT asset .
• Unbiased inferences on the metrics providing a
  true picture of the drain.

IT Software drain measured from a unilateral
view gives a skewed picture. It is very crucial
to view it from multiple and all encompassing
perspectives
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Introducing Cognizants ITEM Approach
Why IT Effectiveness?
IT Effectiveness is an approach towards
comprehending any software drain and provide
means for IT Portfolio optimization opportunities
IT Effectiveness

• Identification of pocket inefficiencies within
  the IT organization, Optimal utilization of all
  existing components already built for IT
  Removal of internal hurdles/bottlenecks in
  implementation
• Effective management of the different components
  of IT
• Evaluation of the development and planning for
  future IT strategy significant empowerment of
  Business through Technology
• Identifying avenues for increasing customer
  satisfaction
• Optimal investment (dis-investments) plans for
  the different areas of IT

What is IT Effectiveness?
IT Effectiveness is a measure of how well IT is
organized and how optimally it contributes to the
objectives at the strategic, tactical and
operational level

• IT has emerged from being one of the most
  imperative operational expenses to a Strategic
  Decision Area
• With the increasing importance and complexity,
  comes the need to ensure that components under IT
  are being properly directed and utilized
• Components of IT, such as resources, processes,
  technology quality, infrastructure, have to be
  closely monitored for Overall IT Effectiveness

ITEM - A vigorous and scientifically driven
subjective-less approach towards measuring each
perspective without giving scope for any
individual influences or gut feels
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ITEM Perspectives
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The ITEM Methodology
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IT Effectiveness - Results
Legend for Portfolio Zone
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Thank YouQuestions?