Strategic Planning to Right the Crisis
The financial markets are in dire straights with global banking stalwarts a mere shell of their former corporate selves. As divestitures, downsizings, asset sales, and in particular mergers and acquisitions proliferate, leaders from the strategic technology planning and information management domains have the opportunity to step forward and provide great value to an otherwise unsavory situation.
We have long understood the power of embracing enterprise architecture methodologies to drive new business strate-gies and future state visions of the corporation. However, the same level of insight that is derived from powerful “what-if” analysis capabilities now must be brought to bear on the current state of enterprise under duress.
BUSINESS AS UNUSUAL
In this environment, we’d expect to see some heroic CIOs rise to the occasion, while others fail. And why will CIOs get fired from this upheaval—clearly not of their making? Too much spending? Not enough spending? An inability to demon-strate control? The truth is that IT executives who cannot justify why they are making the decisions that they are making will find themselves on the sharp end of a cost reduction scalpel being wielded by the CFO, CEO, and board of directors.
In the immediate aftermath of the dot-com crash of 2000–2001, we saw large enterprises retreat from the rapid busi-ness expansion mode they had been in since the mid-90s and adopt a cost management stance. Since then, the fulcrum of corporate investment has moved more and more toward a “grow the business” approach where traditional strategic plan-ning shines.
Now, the balance has rapidly shifted back toward survival through aggressive cost cutting and efficiency gains. This is particularly true of the battered financial services industry where companies like GMAC and Barclay’s are putting ex-treme focus on reducing the burden of their technology investments.
Today more than ever, IT organizations are expected to achieve and maintain maximum cost efficiencies through the rationalization of unnecessary IT assets. IT cost management allows for the accurate identification of underperforming and misaligned assets that can subsequently be targeted for reduction, realignment, or removal. Costs saved may be passed back to the business or redirected to new initiatives.
5 TO 10 PERCENT GAINS ARE NOT ENOUGH
GMAC is an interesting example of a company focused on wielding IT strategy to lead it to the path of financial recovery. GMAC’s audacious goal: reduce IT expenses by $400 million within 12 months!
How can such a goal be accomplished? By identifying and eliminating 1,200 underperforming applications. Such bold strategies can drive a 30 percent savings to the single largest expense for most financial corporations today—their infor-mation technology spending.
POST MERGER INTEGRATION PLANNING
While many banks are the sufferers of the global financial disarray, another set of financial institutions are taking advan-tage of their misfortune. Bringing together the technology asset bases of two large companies can prove to be an incredi-bly inefficient process unless planned and executed with precision.
Financial services firm Lloyds TSB is an example of a company that has embraced strategic thinking to digest its re-cent acquisition of HBOS. Here is a high-level summary of key post-merger integration tasks that firms such as Lloyds are embarking on to drive value to the enterprise.
- Identification of the inventory of acquired operational IT assets and dependent applications and processes.
- Documentation of the business impact of acquired assets.
- Planning of the associative mapping of acquired operational assets and processes with pre-existing operational assets.
- Implementation of consolidation protocols for servers, applications, processes, and systems
- Validation of consolidation for compliance and ROI.
Clearly, the goal of any IT planning exercise in support of business requests is to provide the best possible answer in the quickest possible time. Accurate IT M&A planning helps create action plans that keep costs low and ensure utilization of existing standards, services, and processes. Quick IT planning cycle turnaround is dependent on having the correct in-formation readily at hand during the planning process where up-to-date visibility is an absolute requirement.
CONSULTING AND A SYSTEMS APPROACH
The most successful IT organizations encourage a blend of consulting expertise and effective tools to accomplish rapid cost management and M&A activities.
The front end of a merger is often so hectic and unanticipated that it is not necessarily well suited for a substantial tools-oriented, detailed analysis of options. Consultants such as Accenture, Deloitte, Infosys, PwC, and others have the experience and critical thinking capabilities to assert scales of magnitude for IT merger savings.
Shortly after the deal is consummated, however, it becomes highly valuable to introduce IT planning tools into the process. This not only drives short-term results alluded to in the process steps set forth previously, but also lays a founda-tion for ongoing strategic planning and IT information analysis capabilities that will be critical to move the enterprise forward as the financial sector returns to business as usual.
CIO AS HUNTER OR HUNTED?
In these uncertain times, strategic IT executives should be playing offense. If not already done, IT organizations in the financial services sector should launch the process of automating the collection and analysis of IT’s information from in-frastructure to business process. With this information at hand, they will be prepared to objectively, and defensibly, an-swer whatever inquiries are tossed their way.
Companies such as Lloyds TSB believe that they are realizing an astounding 500 percent return on their strategic IT projects within the first year of their investment. This kind of result can turn the hunted enterprise into the hunter.
by Jonas Lamis, the founding editor of Architecture & Governance Magazine and executive director of SciVestor
