Developing high potential leaders


What differentiates between success and mediocrity in organisations? Studies show that the high performing leaders are the ones most relied upon to drive the business performance in the years to come. Whether it is the delivery of strategic projects, cost stripping, or managing customer relationships, high performing leaders are the difference between success and mediocrity. High performing employees have a disproportionately higher impact on results. This means that identifying and developing future high performers is a critical priority for any organisation. CIOs have a responsibility to find and nurture these star performers in IT organisations.

While it is easier to name current high performers, identifying high potential future leaders (i.e. stars) is not so easy. Further, once identified, developing and retaining potential leaders is another challenge. This article aims to help CIOs develop  strategies to find and develop future IT leaders.

Future leaders will most probably emerge from today’s high performing employees. Current performance is a predictor of future performance. Indeed 93% of the stars are high performers. Some believe the potential depends on innate ability and the right experience. Leadership skills and ambition to succeed are also seen as indicators of potential. CIO Executive Board conducted a major study in 2006, defining a high potential employee as someone who has a 75% chance of being a top quartile performer at the next level (e.g. junior to middle management or middle to senior management). Only about 8% of the employees have a meaningful chance of being a top performer.

The study found that three indicators of high potential are strong ability, engagement and aspiration to succeed.

  • Ability is a combination of innate and learned skills. These include both technical and interpersonal skills as well as the ability to learn new skills and behaviours. Studies have repeatedly shown that the ability to learn from experience is what differentiates successful from unsuccessful executives.
  • Aspiration indicates to what extent the employee wants to advance and influence, seeks recognition and financial rewards and enjoys the job.
  • Engagement shows the commitment to the organisation, willingness to go the extra mile and intent to stay with the organisation.

Employees who don’t have a good balance of these three attributes tend to fall short. “Unengaged stars” have the ability and aspiration but are not committed to the company (high flight risk). “Dreamers” have aspiration and engagement but lack the ability to succeed at the next level. While “mis-aligned stars” have the ability and engagement but no aspiration to succeed and rise.

Figure 2 – Falling short of the ‘star’ potential

Understanding the profile of current high performing leaders, who are at a higher level in the organisation, on these three dimensions provides a good benchmark profile. Assess how employees on the level below score on these attributes, using feedback from managers, peers and employees. Compare to the benchmark and then make a judgement on how likely these are to be top performers at the next level.

Case for IT leadership development

In a recent Australian IT leadership survey by Donovan Leadership, many opinion leaders said that the professional development of technology leaders was best done within a framework that links performance assessment, and peer and client feedback with the values and leadership behaviours of the company. Opinion leaders believe that many innovative approaches are being used internationally for leadership development.

The changing technology landscape is increasing the need for developing future IT leaders. The major generational shift associated with baby boomers retiring and the exponential rate of technology change is a leadership challenge. Web 2.0, social networking and trends like Software as a service means IT leaders need to give up control and accept a more collaborative leadership style.

Not developing IT leaders will increase the gap between IT and business leaders. We may find people being promoted who don’t have the right people management and commercial skills or understanding of how the business works. Attracting and retaining Gen-Y and other new talent will become even harder.

Development Strategies

Although only about 8% employees are likely to become high potential future leaders, this percentage varies greatly between organisations. Organisation culture (quality, openness, recognition and perseverance) improves employee potential. The quality of an employee’s managers (both present and past) also influences potential.  Improvements in the culture and leadership will increase the proportion of emerging leaders.

Multiple strategies are used for the development of high potential future leaders. These include classroom training, group learning, selected job assignments and coaching / mentoring.

Classroom training and Group learning

  1. Provide training to the emerging leaders in different facets of general business. Understanding finance / accounting, marketing and people management as well as industry specific training on supply chain, credit etc will help them get a fuller understanding of the business dynamics and help learn the language of the business.
  2. Leading graduate universities in Australia and overseas run special management development programs. Depending on your budgets these are great ways to expand horizons, interact with other leaders and obtain new perspectives.
  3. Clarify how senior leaders are expected to behave. Let these leaders see how values and behaviours demonstrated by senior leaders support corporate strategy, culture and priorities. Encourage greater interaction with influential leaders from within and outside. Use guest speakers to educate and challenge.
  4. IT staff are keen to develop their technical skills but don’t show similar interest in their personal development or soft skills. This requires a willingness to take oneself on a realistic personal journey of reflection and learning from the process. IT leadership development programs would need stronger focus on people leadership development.

Selected job Assignments

  1. Involve future leaders in real business challenges involving strategy, values and execution. Being open about the challenges with high potential leaders develops trust and makes them feel involved. Involve them in solutions. They want to see how they can make a difference.
  2. Use “stretch” assignments and task forces to encourage, challenge and take risks. These new experiences will give a rich learning environment. Don’t just think about assignments within IT, consider cross-functional areas to broaden focus and develop relationships outside IT.
  3. Where right consider experiences beyond company boundaries and work with external stakeholders. Industry forums, task forces and secondments may be considered in the development plans.

Coaching and mentoring

  1. Actively involve senior leaders from IT and outside as role models, coaches and mentors to play a role in the development process. Just like elite athletes, high potential employees can benefit from coaching. A good rapport between the employee and the coach is necessary for effective coaching.
  2. Provide support during the inevitable ups and downs. Emerging leaders will experience more changes in roles and assignments than others. These will bring new challenges and at times create self-doubt. High performers have high standards for own performance. Support from managers and a mentor is critical to avoid burnout. Using skip level (next senior manager) reviews is a good way to keep an eye on the issues and barriers in employee development.

Other tips

  1. Assign clear accountability to a senior manager for development of the high potential emerging leaders. Align with corporate programs where possible but don’t delegate all responsibility to the HR department
  2. Focus on junior talent as well as the seniors. Sometimes the seniors get more attention as a part of succession planning and other processes. Create early identification and development opportunities for junior talent. Encourage their upward movement.
  3. Remuneration – show the these employees that they are valued. Give them both recognition and rewards. More frequent performance based pay rises are not unusual. Ensure retention by keeping the remuneration levels higher than others. In tough times, companies have to be more creative with the incentives.

For a detailed discussion and/or information on strategies to develop your high potential future IT Leaders, please contact the author.

Becoming a performance driven organisation with balanced scorecards


A lot of effort goes into developing sound strategies for performance improvement and getting them endorsed by the board and the executives. Initially there is a flurry of new activities and initiatives. But a few months down the track, day-to-day operations seem to take over and strategy is relegated to the bottom of the pile.  The bulk of the organisation continues to do what it did before. As a result, the performance of the organisation remains unchanged.

What is typically missing is the process for turning the broad thrust of a strategy into specific measurable performance goals, and assigning accountability right through the organisation. A balanced scorecard turns a strategic plan from a passive document into marching orders for the troops on a daily basis.

Executive Summary

Strategy describes where the organisation now is and where it aspires to be. It also describes the broad initiatives that the organisation plans to take. It may describe key focus areas, process changes or capability-building initiatives or projects that are necessary for the achievement of goals. Strategy execution needs the ability to take a very broad-brush strategy and find, prioritise and carry out the key things that need to be done to put that strategy in practice. A successful execution means that the goals are set, accountability  assigned and the results reviewed.

A balanced scorecard (BSC) is a one-page document that outlines an organisation’s key performance goals and indicators (KPIs), usually covering financials, customers, execution and people.  These KPIs are driven from the company’s strategic intent. A BSC is critical for a performance-driven organisation as it creates a common view of performance across a range of objectives. For the business, KPIs are the “guiding force” that link strategic goals with day-to-day execution. This allows managers to have a better understanding of how to improve the business. Across and down the organisation, business units and teams then define supporting targets and KPIs, which results in a hierarchy of KPIs cascading down from the corporate strategy.

Why balanced scorecards?

  • We all know that ‘what gets measured gets done’. Organisations are faced with multi-dimensioned challenges (e.g. how to improve service and cut costs?). Balanced scorecards cater for many dimensions by allowing for simultaneous focus on multiple performance areas.
  • Organisations expect the strategy execution to happen in parallel with the ongoing service delivery. Merely tracking strategy execution progress can result in too much attention on strategy and not enough on service delivery. Different managers also have different accountability for delivery and strategy execution. BSC enable addressing these competing demands in a rational way.
  • BSCs also give the ability to assign joint accountability to multiple teams in the areas where joint effort is required to achieve results. Silo behaviours result where managers are held accountable for only the direct performance of their internal processes. External service or customer satisfaction outcomes result from end-to-end process execution. BSC makes this clear and enables teams to be jointly held accountable for the overall outcome.
  • In many organisations, scorecards are used only for the senior managers or executives. In fact, scorecards that cascade down many levels of the hierarchy are more effective. Here, the executives’ KPIs are directly linked to the KPIs of their managers and team leaders. There is clearer accountability for results. Cascading KPIs offer better drill down ability, allowing quick diagnosis and action on performance issues.
  • For teams lower down the hierarchy, this linkage shows, how they are contributing to the overall performance and achievement of the strategy. This can result in staff believing that  “my job matters”.

The goal of metrics is to enable managers to get a complete picture of the performance from multiple perspectives, and hence make wiser long-term decisions. As a management system, balanced scorecards enable regular feedback around both internal processes and external outcomes. Good BSCs capture feedback from the customer (or external) perspective and help analyse it with metrics from the internal processes. This encourages continuous monitoring and improvement by the teams as well as improvement in strategic performance across multiple areas.

Figure 1 – Balanced Scorecard Process

Setting the balanced scorecards is a six-step process. The first step is getting the commitment from the executive sponsor. Strategy mapping then identifies the key performance areas/indicators to focus on. The third step, selection of performance metrics, is at the heart of balanced scorecards. Having the right metrics with well-understood definitions is critical for a successful implementation. Fourthly, it is worth investing time to refine the quality of data used in the measurements and assign responsibilities for data collection to impartial staff. The fifth step, regular review, includes checking the quality and effectiveness of the metrics. The last step is to refine the performance indicators as the performance or strategy changes.

Ten Key Lessons for Balanced Scorecard Implementation

  1. Scorecards are most effective when they are linked to pay and performance management. Without this link there is little incentive for staff to take KPIs seriously. Top-level sponsorship is needed in order for this to happen.
  2. Good scorecards are brief; say one page, with around ten measures of what really matters. A business view of performance is more valuable than an internal view.  Ideally, the scores should show expected and superior performance levels. Scores weighting should be used to derive the performance ratings.
  3. Strategy Mapping will show key areas where performance must be lifted. Typically, the areas covered are financials, customers, execution and people.
    1. Financials cover profits, budgets, return on investment as well as key measures of risk.
    2. Customers cover areas that are important from a customer perspective. These could include customer satisfaction, growth/ attrition in customer numbers, number of complaints, etc.
    3. Execution (internal business process or delivery) covers how well the internal processes of the organisation are running in delivering the strategic mission for our customers. It includes key indicators of service delivery, such as service levels, reliability, on-time-performance etc.
    4. People (learning and growth) covers organisational development and ability. IT is a knowledge-worker organisation. Metrics on ‘learning’, ‘sharing’ and ‘retaining’ knowledge can be used. Metrics can cover talent management, training, turnover, and employee engagement. Some organisations also include “social responsibility”, e.g., volunteering, presentation at industry forums etc in this section.
  4. Unclear definitions undermine effectiveness. It is worth spending time in creating common definitions of the key measures. Assign data collection responsibility and review data for consistency and quality.
  5. Avoid seeking perfection with the measures or the scorecard. Measures that are 80% right can still yield valuable performance data. It is important to set up and practice the process of collecting the data, reporting, review and actions than to seek perfection. Focus on getting an acceptable level of quality.  An iterative approach works best allowing all participants to learn and refine. It is also important to remember that trends are usually more valuable than absolute values. Similarly, over reliance on tools or data collection automation at the beginning will detract from getting value from the scorecards.
  6. Meaningful performance results from understanding the desired outcomes and the internal processes that are used to generate these outcomes. Outcomes are measured from the perspective of customers while process metrics are from perspective of process owners. Usually, process metrics are used for teams while outcome measures are used for department/ service managers. Do not confuse output (what we produce) with outcome (what we produce).
  7. Drill down ability is valuable in analysing performance and improving data quality. Without adequate drill down ability, there will be greater subjectivity in interpreting results, which may result in inappropriate corrective actions being taken.
  8. Assign shared accountability to common measures such as customer satisfaction, where many teams have to work together to deliver satisfactory service to the customers. Joint responsibility will avoid silo behaviours being rewarded.
  9. Organisations that openly share the balanced scorecard results and communicate performance (and the challenges) with their teams and peers create greater commitment from their teams. It also helps to show how everyone is contributing to performance and how collective actions can improve the results.
  10. When planning to cascade scorecards through multiple levels of management in the organisation, it is best to tackle one level at a time and use an iterative approach.

For a detailed discussion and/or information on how you can use balanced scorecards to become a performance-driven organisation, please contact the author.

Tips for a successful Business Process Management implementation


It is a well-known fact that automation without process changes results in only marginal performance improvement. It is also true with process improvements without automation. When business and IT leaders collaborate and improve end-to-end business processes, the resulting benefits are many times higher than the routine cost reduction initiatives. Hence, organisations are increasingly looking at Business Process Management as a tool to increase competitiveness, develop business agility, increase process efficiency and reduce cycle times. According to Gartner, investment in BPM suites is literally twice the growth rate of legacy packaged enterprise applications. Clearly BPM has gained traction.

There are a number of vendors, some offering a plethora of tools that are integrated into a BPM Suite, and others offering the necessary tools in a seamlessly unified environment. All of the vendors see service oriented architecture as a necessary pre-requisite for a successful BPM strategy. Most vendors advocate a more agile methodology of quick, iterative projects and support continuous improvement.

This article aims to help organisations make a successful start to their BPM journey. Here we summarise key learning from our experience. For more information on this topic please contact us by email.

Why BPM?

Today’s businesses operate in a different world than the 80s and 90s when many business systems were developed. Legacy systems are often data-centric as well as product or function centric. They are not designed to be customer facing. They are also cumbersome to change. Business today demands constant change, and with ever shortening change cycles, customers and suppliers expect to interact via multiple channels and there is an increasing demand for self-service and strait-through processing. In this world, new, smarter systems are needed to accommodate rapid changes in the business processes spanning multiple legacy systems.  These systems also need to be able to accept input from a variety of new sources (e.g. web services, data-feeds, internet, forms, call centres and other applications etc).

To achieve this agility, organisations are beginning to adapt BPM approaches and tools. Focus is shifting from applications to managing and optimising business processes. In addition to the operational efficiency, businesses are looking for process agility, which is the ability to change operations, and the way it’s people and systems work, to adapt to change.

BPM use process models to coordinate the interactions between people, systems, policies, and information. A process centric approach has clear advantages. Transactional applications have hard-wired process elements and business logic that are slow to change. Secondly business processes are rarely completed within a single application. A process layer allows processes to be clearly defined, measured and refined. It allows quick changes to process without significant code changes. It also facilitates further automation by filling gaps and linking together applications. This allows greater value to be extracted from existing investment in applications and people.

BPM tools

A BPM suite is an integrated collection of technologies that enable control and management of business processes. BPM technology has roots in process management capabilities of workflow but unlike workflow it is not document centric. Typically a BPM technology suite includes:

Process Modelling – Typically with a visual design tool

Application integration – Out of the box plug-ins or APIs to connect to other applications

Process Engine / execution – Development and run-time environments to design and execute process activities

Process monitoring and analytics – Process measurement, monitoring and data analysis capability

Business Rules management – Rules databases to define business logic that governs and automates the processes

Collaboration portals – Tools for design for customer self-service and business partner collaboration via the web

Some vendors also provide pre-packaged frameworks to help organisations in specific industries get started more quickly.

 BPM Process

Figure 1 – Business Process Management – Process improvement cycle

BPM technologies have now advanced to provide a technology supported process improvement loop from modelling and simulation through to execution, monitoring and dynamic adjustment. Typically, tools cater for different user types and roles at each stage of the process (e.g. business analysts define process models while IT developers develop and integrate).

Gartner BPM magic quadrant contains software offerings with many different approaches to process improvement. Some are domain specific applications e.g. Siebel (CRM)/Guidewire (claims) with high level of domain specific processes. Others take the architectural approach using tools from IBM/Oracle/BEA or Tibco to integrate business processes together. Others are pure-play BPM suits from Lombardi, Savvion, or Metastorm. Pegasystems’ offers BPM Suite together with one or more industry-specific solution frameworks.

Point solution applications can help quickly address critical domain specific needs but may not be extended to other areas. The architectural/integration path is popular with many as it builds on existing investment in these tools and is universal in application. Pure play solutions provide a well-integrated environment for BPM and may be easier to use. Understanding the goals of the BPM initiative and organizations maturity in using technology should facilitate the choice of tools.

Tips for making a successful start in BPM initiatives

  1. Start with an important but contained process where the improvements would matter to the business. However, avoid the temptation to take on highly complex processes. Focus BPM objective to be working smarter and improving customer experience in a consistent manner, rather than head-count reduction.
  2. Start with an understanding of your current state. Take a “measure first” approach and determine the metrics important to your business.
  3. Unlike other IT projects, BPM directly affects how business users perform their daily tasks. Get a project sponsor who is strongly engaged in the initiative and the change management aspects. Business users should play a significant role in dynamically changing a process.
  4. Use experienced process analysts who live and breath process, for the process discovery stage. This stage sets the tone for the entire project and using wrong skills/people here will prove to be an expensive mistake.
  5. BPM projects are ideally suited for iterative or agile development methods. Don’t model to get perfection. Building consensus across silos is a challenge. Start implementing and use iterations to get the business rules and process flows right. Focus on delivering value and not just the requirements. Iterations don’t mean scope creep. Try to get a process operational within a 60-90 day window.
  6. Don’t get bogged down in too much internal detail or the technology. What matters is the benefit the end customer will get as a result of the process (e.g. faster loan approval, correct order fulfilment etc) and not the technology used.
  7. Service oriented architecture is desirable. Well-defined services will speed up integration, reuse and expansion.
  8. Manage expectations. Continuous improvement approach means features that are not there on day-1 can be added progressively. Demonstrations and simulations improve understanding and help get the user experience right. Communicate successes regularly to improve stakeholder engagement.
  9. BPM methodology is different than the typical IT project methodology. Avoid mistakes like “stove pipe” BPM or an “agile waterfall” practice. Engage the vendor full time during the architecture and design stages. Gartner now predicts that half of BPM projects will fail; follow best practices to make sure you don’t.For a successful BPM implementation, designing reusable processes is key.
  10. Rather than planning a silo by silo implementation; experience suggests that identifying and designing common processes and progressively reusing these across each business area will ultimately result in a faster and lower cost implementation. When processes change, cost of change also would be lower.

Figure 2 – BPM implementation options

Have a common team (2-3 members) that will focus on building common and re-usable artefacts and frameworks. Establish governance to reward re-use and discourage rework.

  1. Plan for change. Not only the rules and process models would change but also work patterns. Processes cross silos thus functional fiefdoms and roles of people would be affected. Address the organisational change implications such as roles, responsibilities and rewards early.
  2. Establish a rigorous structured testing, measurement and governance regime to ensure that the process performs as expected and is well controlled. Identify a few important process and ROI metrics to monitor the process effectiveness. Monitor the process to detect any problems before the customers do.

For a further discussion on how you can start BPM implementation in your organisation please contact the author.

Unlocking value from the applications portfolio

Application analysis


In today’s IT dependent world organisations have accumulated an array of applications from the modern to the ancient. Successive mergers and acquisitions have further added to the inventory. What’s more, because they accumulated over time, these IT portfolios are often patchy, redundant and lacking proper management oversight. The resulting IT portfolio has become complex and difficult to manage. According to reports, almost 70% of the IT budget is consumed by sustaining business-as-usual activities. When CIO’s are increasingly being asked to ‘do more with less’, it is necessary to optimise the IT portfolio.

Increasingly executives are using Portfolio Management method to tackle this challenge. IT portfolio management concept is not dissimilar to managing financial assets. In both, the aim is to collect data on the assets to be able to enhance returns and reduce risks. There are two types of IT portfolios, namely, IT asset portfolio and IT projects portfolio. Although the principles of portfolio management are similar there is great deal of difference in the processes used.

Within the IT Assets portfolio, we believe managing the application assets has the greatest upside. In this paper summarises benefits of Applications Portfolio Management and key learning from my experience in implementing APM.

Executive Summary

Organisations are using Applications Portfolio Management (APM) to make rational decisions about reducing the cost of application ownership, improving the functionality and the strategic alignment and reducing portfolio risks. The reason for the rapid growth in the use of APM is that organisations have achieved successes in cost reduction, managing the complexities of hundreds of established assets, and improving budget effectiveness.

Application Portfolio Management is a periodic fact-based assessment of organisations applications. Determining which applications receive same, lower, or increased levels of funding optimizes portfolios over time. The assessment helps refine application management practices, namely, which applications to cut, which to keep, which to renovate. The focus is to make sure that the business value and ownership costs are appropriately aligned and the portfolio is streamlined by rationalizing duplicate or obsolete applications. Over time, the applications portfolios as a whole should show the greatest business value and closest architectural fit with the lowest costs and risks.

APM generally consists of the following elements:

  • Applications Inventory – Identify and catalogue what applications you have and what they do and how much they cost.
  • Applications Assessment – Assess applications in terms of business value, alignment with strategy, technical architecture or standards and cost and ability to support. Identifying cost saving opportunities via removing duplication or overlaps.
  • Recommendations and Roadmaps – Develop changes to the application management strategies and create potential application transformation initiatives or roadmaps. The goal is to get prioritised action plans for tailoring maintenance spending, rationalising or migrating applications and addressing health risks.
  • Portfolio Governance – Assign responsibility for governance including managing the repository and tracking recommendations. Track and communicate the benefits.

Application portfolio management

Figure 1 – Applications portfolio management lifecycle

APM Implementation

APM implementation does not have to be too complex. The focus is on the big picture and identifying aspects that stand out from the norm. First step is the application inventory. Business users, IT support staff, IT architects and IT Managers take part in the data gathering stages. In the second step, gather data on operational performance, fit with the architecture or standards and the known vulnerabilities. This begins to find applications that need further attention. Next step is to analyse the application cost data and compare it with business value from other similar applications. Applications with too high costs or too low costs need further analysis. Final step in the process is to develop recommendations and migration scenarios, engage stakeholders in priority setting and begin detailed business cases for the selected roadmaps.

Where there are many application managers (e.g. in a federated structure), it would be ideal to assign responsibility to a central function such as Head of Architecture for creating uniform application inventory and assessment processes. A common repository would help the identification of duplicate applications across the entire organisation.

Benefits of Application Portfolio Management

APM benefits over time

  • APM improves the understanding of the applications so they can be managed effectively.
  • It helps track and communicate the technical and business health of applications to show problems and take advantage of opportunities.
  • With APM organisations can better align the applications portfolio to the business strategies and the technical architecture, thus improving business value over time.
  • Looking at how the portfolio supports key business processes, creates opportunities to remove the complexities and streamline support.

Over time APM enables focus to shift from application health and costs, to flexibility and responsiveness and ultimately to competitive advantage. By evolving applications in a planned and methodical way, organisations can maximise returns on their existing investments while making steady progress towards a stronger applications environment.

Tips for effective application portfolio management

  1. Executive Sponsor: Project must have sponsorship from the CIO or the Head of Applications. Proper understanding their goals and constraints ensures that the last recommendations can be acted upon.
  2. Engage Business: APM gives an excellent opportunity to tell and engage the business executives. Obtain business value and functional quality data from the real users and owners. Their support is critical for decisions to rationalise the duplicate applications or to adjust maintenance levels.
  3. Be pragmatic: In the first iteration, focus on applications that account for bulk of the costs and business support.  Similarly, in data gathering focus on few important attributes and costs. Where exact data is not available stake-holder/ user surveys can be used.
  4. APM tools: Spreadsheets may be used to record the inventory data. There are a number of third-party tools, which can help manage the applications inventory and the associated information such as costs, business value and risks. Tools would be of benefit for large portfolios and especially to keep inventory up-to-date.
  5. Source code analysis tools: These tools will help analyse the source code of applications and give information about the function points, complexity, etc. This data is valuable for understanding the reasons for complexity and the maintenance cost.
  6.  Assessment: Assessment typically covers business, technical, financial and operational perspectives. The typical questions are:
    1. Business: How well applications support the business process? What synergies we could achieve?
    2. Technical: Are the applications scalable/ extendable/ adaptable/ supportable? Do they fit the architecture?
    3. Financial: Do the applications cost too much to run? Why?  How can costs be reduced?
    4. Operational: Are the applications sustainable? What are the key vulnerabilities? Is the support infrastructure too complex? Can we find the right skills for support?
  7. Analysis: Looking at the data using a variety of criteria from business, technology, operations and financial perspectives would highlight  ‘anomalies’ and areas for actions.  Using a combination of factors would highlight anomalies, such as, if two applications are similar complexity and size but one has high costs, indicates an issue. Some solutions will become obvious when you see the problem, e.g. 17 versions of warehousing applications.
  8. Trend is your friend: Collecting cost and performance trends over time can give you richer insights than just point in time data. 18-24 months data would begin to yield useful information.
  9. Applications portfolio: Typically the assessment results would group each application in one of the four categories. These are Invest, Divest, Re-engineer and Tolerate.Application analysis
    1. Invest – These are applications of high business value and good technical quality
    2. Divest – Low value/ low quality or duplicate applications.
    3. Re-engineer – High business value but low quality applications are candidates for modernisation.
    4. Tolerate – High technical quality but low business value applications are possible candidates for cost reduction.
  10. Ongoing governance: Treating APM as a one time activity is a mistake. Any short-term gains would soon be lost. Assign responsibility for governance and ensuring inventories are regularly updated and assessed and recommendations are followed through. Establish key metrics and scorecards to check progress of the initiatives. Track and publish the benefits.
  11. Link with Enterprise Architecture: APM inventory provides data for the current state and recommendations should be aligned with the Enterprise architecture ‘desired end-state’. Application roadmaps create the migration path between these two states.
  12. Communicate the results:  Widely communicate the logic of the recommendations. Use the application roadmaps with the results of the assessment to tell business executives about the issues/ risks and various choices. This will result in a stronger business agreement.

If you would like further information or help please contact Kogekar Consulting.

Take control of your IT costs


These days there is increasing pressure on the IT group to contain costs. Being a smart manager, you have already negotiated reduced rates with your suppliers, cut headcount, tightened travel / entertainment expenditure but the organisation still needs to find more savings. While resources are cut, the demand from business for IT services continues to grow unabated.

As organisations begin to exhaust the supply side cost reduction opportunities, controlling consumption and demand offer the next level of cost savings.  Organisations have achieved additional long-term savings of 10-20% by managing consumption on top of the supply side savings.

Executive Summary

The challenge of managing costs means that the IT group must look for cost savings beyond the supply side costs controlled within the IT department. Demand Management aims to control consumption of resources by helping the business managers understand how their decisions drive costs, and how IT can help find ways to optimise demand on IT resources.

  • As IT has become an part of business, demand for IT services and resources, continues to grow. Requests for business process changes, enhancements and procurement of new technologies and e-commerce means the demand for services continues to increase unabated despite business cycles.
  • The demand for IT resources appears to be poorly controlled. Most organisations don’t appear to have the right information on the total demand nor credible costs. Appropriate information and incentives for the business to cut the demand do not exist. Two common reasons are:
    • Inadequate IT cost transparency
    • Inadequate responsibility on business heads to control consumption
    • While most organisations have processes to control the demand for the new projects; in areas such as applications support, infrastructure operations and help-desks, such controls are hard to find.
    • Even when there are controls on the discretionary project initiation, once underway, there is limited control and almost no incentive to stop the distressed or wayward projects.

IT Demand management

Figure 1 – IT demand management

While there are many benefits, demand management is also more difficult because, according to Forrester Research, it is not just about assessing the business appetite. For effective demand management IT has to put in place processes and people who can understand the business needs and strategies; and then begin a meaningful dialogue on cost and performance tradeoffs. Demand management requires an ongoing focus. It thrives with a continuous improvement approach. Reducing IT supply costs has many one-off activities and is usually quicker. Increasing the scale helps bring the unit costs down. While demand management is a longer-term initiative, it can offer much larger savings beyond what is achievable by the scale alone. Once managers understand what they are paying for their focus quickly changes. When organisations become wise consumers of IT resources, they begin to have robust control over projects and capital investments. There is a reduction in the redundant applications and reduced maintenance. Hence there is more money available for the strategic initiatives. There is also the benefit of also improving IT’s credibility as responsible managers.

Successful demand management needs a high level of cost transparency from IT in a form and language that is understandable by the business customers. Some form of charge-back / user-pays mechanism too is necessary to create the right incentives. Care should be taken that the charges don’t create unintended consequences such as maverick buying. Benchmarking charge back costs with external providers ensures that they are reasonable.

Some organisations believe outsourcing of IT services and the resulting cost transparency will drive demand management. But the reality can be quite different.  First, the service provider is looking to increase revenue and reduced consumption is against their interest. Secondly, there is very little collaboration between the business and the service provider to optimise costs and increase value. In fact, we have seen one business asking staff not to call help desk to cut charge back but with a possible reduction in the productivity.  Care has to be taken to avoid such unintended consequences.

Tips for successfully managing business demand and consumption

There are three drivers of IT costs. Namely, the demand caused by the business changes, the demand (often unrecognised) resulting from the past business changes/ decisions and the business driven consumption of IT services. Here are a few tips to address each of these three.

Demand created by the business changes

  1. Business case discipline: Question whether the business change will deliver value greater than the costs. Establish a project / investment governance board with business.  Apply the filters of business case, strategy alignment, ease of implementation and risk assessment to weed out low value/ high-risk proposals and to prioritise high value changes. Select only the promising ideas for further detailed analysis. Ensure ongoing support costs are included in the business case.
  2. Revisit business cases: The project scope and risks change over the project life cycle. Reassessing the business case and risk /benefits at critical life-cycle points helps find unviable projects early. Reduce scope, look for increased benefits or stop projects that don’t pass the hurdle.
  3. 80-20 solutions: Avoid gold-plated solutions and always demand alternative solutions that would meet business needs. If 80% functionality can be provided with 20% costs, very good justification is required to go for the 100% solution. Leverage and reuse the functionality already provided by existing applications.
  4. Pilots and trials: Using trials and pilots instead of a full-blown project is a low-cost way to confirm new ideas. It is also easier to end a pilot than a big project.
  5. Benefits realisation: Hold sponsors accountable for the realisation of project benefits. Seek help from CFO/ finance department to make sure that the benefits are tracked and are built into the future budgets. Check if the IT department has fully realised benefits from it’s own past investments.
  6. Realign maintenance: Focus maintenance dollars on high value/ strategic business applications while cutting the budget for changes to others. Eliminate duplicate applications.

Demand (unrecognised) created by the past business changes

  1. Outdated features and applications: Work with the business users to rationalise outdated product/ features that add cost and complexity but little value. Analyse the applications portfolio to find and cut duplicate or obsolete applications thus reducing complexity and the support costs.
  2. Shared Services: Duplicate applications and services increase complexity and cut agility. Consider a shared services function to end the duplicated IT services and functions across business lines.  Virtualization would allow sharing servers for different applications.
  3. Standardisation: Past decisions may have resulted in greater variety of hardware, operating systems and divisional applications, which significantly increase the complexity, need multiple skill-sets to support and add costs.  Aim to standardise and simplify the environment.

Optimise business consumption of IT resources

  1. Adjust service levels: Rewrite service levels based on real business process support requirements. E.g. credit card authorisation within 5 seconds, Order processing completed by 8PM.  Discuss trade-offs between costs and service levels. E.g. 7 / 24 support vs. a lower cost weekday only support.
  2. Business friendly IT service costing: Help the business users understand the cost of IT services and what they can do to optimise the use. Define the service in business terms and use business friendly usage metrics such as ‘number of days’ retention for email, rather than MB. Create ‘service catalogues’ with information about the service; it’s costs and tactics for optimising use. Provide reports to the business on usage and costs.
  3. Realise the savings: As business adjusts IT consumption, IT department needs to adjust related resources and expenses to make sure the resultant savings are realised. Changes to contracts and staffing arrangements may be required to realise the savings.
  4. IT Asset management: Many businesses have unused equipment (PCs, printers, data links, software tools and servers) for which costs are being incurred. Work with business to reclaim/ recycle the surplus equipment and cut costs.  “Sweat existing assets” before acquiring new ones.
  5. Account managers as “buyers”: Use IT savvy “account managers” as “buyers” of IT service and place them within business units. Task them to find ways to rationalise demand and remove duplication.  These “buyers” must have strong knowledge of the business and IT processes to be effective.

For a detailed discussion and/or information on how you can start demand management in your organisation please contact the author.

Gaining traction for your IT strategy

Developing an IT strategy that is understood and accepted by the business and IT practitioners is a major challenge for many businesses. A lot of effort is invested in developing an elegant strategy, the future state architecture is sound and the board is pleased. Still, beyond one or two new projects, the strategy fails to get traction and there is large gap between the strategy and quality of the results.

Unlike most strategy consultants Kogekar Consulting have extensive experience in execution planning. We have helped clients create IT strategies that are well understood and effectively executed. Here we summarise key learning from our experience – how to plan an effective IT strategy and engage stakeholders.

Executive Summary

Creating an IT strategy that is understood and effectively executed by the stakeholders has been a difficult challenge in many IT Groups.  This is rarely acknowledged but results in a lack of adoption or operationalization. There are many reasons for this:

  • Focus of the strategy tends to the board or C-level team, which make the document too high level for the typical middle manager whose support is needed for implementation.
  • Strategists and architects, who focus on big ideas, typically drive strategy development and complex concepts. These concepts are difficult to execute, thus they appear to be disconnected from the on the ground realities of IT. Practitioner involvement can provide a different type of thinking, which enhances the abilities to execute the strategy.
  • Strategy needs to take account of people and operational realities. Often there is little effort made to engage with stakeholders like key business managers, IT middle managers and experts during the strategy development process. Lack of engagement further reduces their buy-in. However, these stakeholders are absolutely essential for bringing realism and ‘owning’ strategy execution.
  • Few understand that a good strategic planning process also requires the utmost attention to the ‘hows’ of execution. It’s substance and detail must come from people who are closest to the action and understand their customers, resources and capabilities.
  • Many strategies underestimate the effort required to create the new organisational capabilities. Strategies also fail to provide a framework for identifying and developing talent – at all levels – talent that is needed to execute the strategies.
  • One key aim of the strategy is to establish a direction and state ‘how we shall operate”. The specific programs and initiatives get all the attention, and overshadow the underlying philosophy.

The successful execution of the strategy requires that not only the board and senior executives of the company approve the strategy. But also, other stakeholders like department managers, project leaders and key support staff understand the strategy and are clear about their role in the execution. Strategy execution requires going down from a 50,000 ft to may be 50 ft level. This requires identification, prioritisation and implementation of very specific actions. Many organizations don’t realise the contribution practitioners can make to a realistic execution planning.
Strategy planning is a great opportunity for engaging stakeholders. It provides a process to understand how well IT is supporting the business, where the business is headed, how the business and technology landscape is changing and what we must do to improve our effectiveness.  It is also an opportunity to communicate, “what we shall do differently” because if nothing changes, the new strategy becomes just a piece of paper.

Strategy Development Process

The strategy process is a four-step process:

1) Where are we now?

2) How is the business/ IT landscape changing?

3) Where do we want to be?

4) How do we get there?

  1. Where we are now? is a comprehensive analysis of the current state of IT in the organization including, what IT does well, how well IT supports the business, how our costs and services compare with others, how flexible or adaptable we are, what the major risks and shortcomings are? Understanding where we are and how we got there is critical to a sound strategy. In this conversation, input is sought from the business leaders, process owners, IT architects, managers and specialists.
  2. How is the business / IT landscape changing? This step is to understand the drivers of change. Often technologists focus only on technical changes e.g. SOA and not other areas. Changes to the business operating conditions and business strategies are an essential driver. Changes in the competition, their strategies and investment programs, and the advent and industry adoption of new technologies are other change drivers.  Emergence of new third party services and service providers can also change the IT landscape. Change in regulation such as GST, anti-money laundering or email discovery create yet another change dimension.
  3. Where do we want to be? Understanding of the current situation and the changing landscape leads us to choices about the desired future state. Stakeholder perspectives are important here as well. How can we best support the business in the future? What capabilities are needed? What do IT staff wants? These multiple perspectives the shape the future state. They will determine shape of the future organization, the technology architecture and what competencies are needed.
  4. How do we get there? Sub-strategies and roadmaps, which move the organization from the present to the future form the migration, plan. Organizations often become too focussed in the migration plans and tend to forget the underlying reasons or principles that guide the migration.

Key Lessons for IT strategy development

    1. IT strategy requires strong sponsorship and participation by the CIO or the IT head. Enterprise strategies driven by head of architecture or other such functional heads have limited chance of success.  Support from other C-level executives is necessary for a strong business engagement.
    2. It is a mistake to consider IT strategy development as an exclusive ivory tower exercise. Design it as a participative process, allowing stakeholder engagement. Identify key stakeholders at the start of the process.
      1. Strategy / planning managers in business and in the CFO’s office can provide great input on business strategy.
      2. Business process owners and project managers can provide input on the current state and help with a realistic migration plan
      3. IT managers and key specialists need to be convinced that the strategy addresses their challenges and is realistic. Getting buy-in from key opinion leaders helps greatly with the credibility of the strategy credibility in the eyes of the troops.
      4. Teams respond well when treated in a mature manner. Allow their manager to lead the communication/ feedback sessions.
    3. IT centric strategies don’t work. There needs to be a strong linkage with business strategy (written or unwritten).
    4. Current state analysis often focuses on architecture and technology issues and ignores organisational capabilities, risks, people and leadership issues. Understanding current service and project delivery capability would provide a stronger foundation for strategy.
    5. IT strategies tend to be too ambitious, hoping to achieve a major turn around in technology, people culture and processes in a relatively short time frame. Considering legacy systems and COBOL have been in place for nearly 40-50 years, one has be realistic about organization’s ability to change. Focus the effort on critical improvement drivers.
    6. The need to develop people capabilities is often forgotten in the rush to new applications or technologies. But without the right people these new technologies will not deliver to their potential.
    7. Strategy defines where we want to go. It must be followed by an operating plan, which defines the path, the one-year goals, programs and initiatives. If the operating plan is not based on realistic assumptions, there is little chance of success.
    8. Including guiding principles for architecture and operating models in the strategy allows greater clarity and provides guidance to the entire organization. Otherwise only the teams working on new projects are engaged in the strategy.
    9. Use of strategy themes and distinguishing high priority items from others will provide flexibility in implementation and allow adjustment as funding and priorities change over time.
    10. Use of balanced scorecards for managers and team helps track the implementation progress on a number of dimensions.

If you would like help with your IT strategy development or more information, please contact us.

Kogekar consulting has assisted banks, insurance companies and other major organizations to develop strategic plans, roadmaps and architectures. For these we integrate the strategy development steps with stakeholder participation and communication activities. Our approach moves the strategy development process out of the ivory tower and increases the organizations buy-in and improves adoption.