WORKING COUNCIL FOR CHIEF INFORMATION OFFICERS

May 2004
THE EXECUTIVE COMMITTEE AGENDA FOR IT:
CIO BRIEFING ON BUSINESS PRIORITIES FOR IT AT LEADING
CORPORATIONS
Summary
CIOs have expressed keen interest in gaining insight into the most critical challenges
faced by their peers across the executive suite to support goals of proactively partnering
with business leadership and contributing a clear IT voice to discussions at the executive
table. With this mandate, the Working Council has harnessed its unique perspective as
part of the Corporate Executive Board to inventory emerging interests and priorities from
other executive constituencies including CFOs and heads of Audit, Sales, Marketing,
Procurement, Human Resources and Operations. The attached briefing highlights:
The Most Critical Cross-Functional Corporate Imperatives
High-Priority Agenda Items for Key Functional Areas
Emerging IT/Business Communication Gaps
Note to Members
This project was researched and written to fulll the research requests
of several members of the Corporate Executive Board and as a result
may not satisfy the information needs of all member companies. The
Corporate Executive Board encourages members who have additional
questions about this topic to contact the Board staff for further discussion.
Descriptions or viewpoints contained herein regarding organizations
proled in this report do not necessarily reect the policies or viewpoints
of those organizations.
Condentiality of Findings
This project has been prepared by the Corporate Executive Board for the
exclusive use of its members. It contains valuable proprietary information
belonging to the Corporate Executive Board and each member should
make it available only to those employees and agents who require such
access in order to learn from the material provided herein, and who
undertake not to disclose it to third parties. In the event that you are
unwilling to assume this condentiality obligation, please return this
document and all copies in your possession promptly to the Corporate
Executive Board.
Creative Solutions Group Staff
Lead Graphic Design Specialist
Jon Prinsky
Publications Editor
Lacey White
Working Council Staff
Managing Directors
Vikram Capoor Jaime M. Capell
Practice Manager
Kris Hurley van Riper
Project Managers
Andrew Horne Matt McWha
Consultants
Deb Goldberg Carsten Schmidt
Senior Analysts
Eric Tinson
Analysts
Rich Flanagan Kiran Mishra
Vidhya Balasubramanian
Senior Director
Brian Foster
Directors
Sheldon Himelfarb Matt Kelly Stuart Roberts
Associate Directors
Ken Rona Audrey Taylor Ken Weitzel
Legal Caveat
The Working Council for Chief Information Ofcers has worked to ensure
the accuracy of the information it provides to its members. This report
relies upon data obtained from many sources, however, and the Working
Council for Chief Information Ofcers cannot guarantee the accuracy of
the information or its analysis in all cases. Further, the Working Council
for Chief Information Ofcers is not engaged in rendering legal, account-
ing, or other professional services. Its reports should not be construed
as professional advice on any particular set of facts or circumstances.
Members requiring such services are advised to consult an appropriate
professional. Neither the Corporate Executive Board nor its programs
is responsible for any claims or losses that may arise from (a) any errors
or omissions in their reports, whether caused by the Working Council
for Chief Information Ofcers or its sources, or (b) reliance upon any
recommendation made by the Working Council for Chief Information
Ofcers.
Working Council for Chief Information Ofcers
Corporate Executive Board
2000 Pennsylvania Avenue NW
Washington, DC 20006
Telephone: 202-777-5000
Fax: 202-777-5100
The Corporate Executive Board Company (UK) Ltd.
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Telephone: +44-(0)20-7632-6000
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www.cio.executiveboard.com
THE EXECUTIVE COMMITTEE AGENDA FOR IT 3
TABLE OF CONTENTS
1. Overview Materials
i. Orientation to This Research Brief 4
ii. Executive Summary 5
2. Summaries of Executive Suite Priorities
i. CFO/Finance 7
ii. Audit 10
iii. Sales and Marketing 12
iv. Procurement 15
v. Human Resources 18
vi. Operations and Logistics 21
THE EXECUTIVE COMMITTEE AGENDA FOR IT 4
ORIENTATION TO THIS RESEARCH BRIEF
Occasion for the Research
Many CIOs report that their greatest current challenges often have less to do with solving
internal technology issues, than in serving executive peers to derive value from deploying
technology to solve business problems across functions. Frustrated by the IT trade press
and IT research groups preoccupation with issues and perspectives internal to the
information technology function, member CIOs approached the Working Council with a
request for feedback on the top technology issues arising from across the executive suite.
In response, we have leveraged our parent the Corporate Executive Board and its
unparalleled network of senior business executives and functional leaders to illuminate a
demand-side agenda for IT by prioritizing challenges facing the functions internal
customers including:
- CFO/Finance
- Audit
- Sales and Marketing
- Procurement
- Human Resources
- Operations and Logistics
Ambition for the Research
This report has two key goals:
#1: Prepare the CIO for conversations with business and functional leaders by
highlighting emerging business priorities with a focus on projects for which business
enthusiasm exceeds technology maturity and demonstrated business returns
#2: Provide the CIO with an objective checklist against which to evaluate their
personal priorities as well as to screen potential business-initiated projects
A Word of Caution
In contrast to our typical case study-based research, the following brief highlights the top
interests and priorities from various executive constituencies and represents an editorial
distillation of trends to highlight what we consider the Business IT Agenda. Many of
these interests are in early stages and will require greater scrutiny. We should note that
we have not made an attempt to assess their feasibility and business case - our intent is to
provide visibility and advance warning of potential demands on IT from the business.
Methodology
Starting with proprietary Corporate Executive Board research, the Working Council
reviewed the most salient issues, insights, and practices of IT relevance from more than a
dozen other functionally oriented best practices research programs serving more than
1,800 member companies around the world.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 5
Executive Summary
THE BUSINESS IT WISH LIST - FIVE KEY DEMANDS
Amid a nascent economic recovery and early signs of pricing strength in many markets,
IT is being challenged to play a larger role in cross-functional, corporate-wide initiatives,
while helping individual business units and functions advance their own value-creating
agendas. The following represent a synthesis of five recurring business demands from
IT:
#1: Data Visibility Across Business Units and Geographies
A confluence of factors is leading to a step-function increase in business demands for a
single version of truth for product, customer, and supplier data. Drivers of this urgency
include new financial regulations such as Sarbanes-Oxley and International Accounting
Standards, the increased propensity of companies to establish strategic sourcing
programs, and the rise of global sales and solutions-based businesses.
#2: Managerial Dashboards and Early Warning Indicators
Senior executives appear to be deprioritizing democratic (all things to all employees)
self-service portals, focusing instead on business performance dashboards that provide
early warning prompts for timely senior executive interventions.
#3: More Rigorous Documentation and Management of Risks Associated with
Process Outsourcing
While other corporate functions such as Finance, HR, and even Legal report an interest in
leveraging ITs experience in outsourcing, corporate auditors have highlighted risks
embedded in Business Process Outsourcing contracts as a near-term area of focus.
#4: Proactive Identification of Technology-Enabled Opportunities to Boost
Business Value
Mixed news for CIOs: While renewed business interest in technology solutions to
pressing problems represents a recognition of ITs strategic relevance and value creation
potential, the attendant downside is that business leaders believe IT leaders are not
sufficiently proactive in bringing technology solutions to the table.
#5: Greater Systems Flexibility
Conversations across the executive suite have detected early glimmers of a business
backlash against single-instance systems for Enterprise Resource Planning, with business
resistance centered on enterprise software suites inflexibility in accommodating joint
ventures, integrating acquisitions, and enabling extended enterprise collaboration.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 6
Executive Summary
FIVE CRITICAL IT/BUSINESS COMMUNICATION GAPS
While improving alignment requires attention across many fronts, leading CIOs are
focusing on the task of improving communications with ITs internal constituencies.
Presented below are some of the key themes that CIOs within our membership are
elevating to the attention of their peers within the executive suite.
#1: Costs and Complexity of Global Data Standardization
Our conversations across the executive suite reveal a wide divergence between business
leaders and IT executives estimates of the costs, complexity, and ownership of efforts to
standardize supplier, product, and customer definitions. Given the importance of data
standardization to both IT and the business, we believe that few other communication
challenges are as important for the CIO this season.
#2: Overcomplicated Executive Dashboard Projects
A recurring root cause of failure for business dashboards is an excess of metrics due to a
lack of discipline in winnowing business dashboard metrics to a handful of truly
actionable operational indicators. An emerging best practice requires that the executive
team identify the controllable drivers of a single overriding business goal and focus on
metrics that are linked to employee performance and incentive plans.
#3: Optimal Sequencing of Business Process Standardization, Automation and
Offshoring
An emerging view suggests a nontraditional sequence leading to business process
standardization starting with migration to lower-cost geographies and then moving to
process standardization and automation. This sequence allows rapid migration of
nonstandard transactions to lower-cost geographies (such as India, Eastern Europe, and
Central America), thus enabling quick-hit savings to fund future automation and
process standardization efforts.
#4: Increasing Costs and Competition for Indian Application Developers
Senior application executives suggest the business systematically overestimates cost
savings from migrating applications to India. With applications executives projecting
further erosion of labor cost differentials as Indian wage inflation and turnover increase,
they urge CIOs to help the business frame offshoring business cases in terms of benefits
based on flexibility and access to talent not labor cost arbitrage.
#5: Business Absorption as the Greatest Constraint for IT
Several CIOs cited the absorption capability of the business as a significant brake on
IT. In the words of one CIO: We have gone from an era where IT was labor
constrained, to one where we were cash constrainedto one where our constraint is
business users ability to absorb more functionality. A key success factor of IT
departments in the future will be their capacity for usability training and implementing
systems with intuitive interfaces.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 7
Section 1: CFO and Finance
THE CFOS IT PRIORITY LIST
Better Regulatory Compliance
#1: Global Chart of Accounts and Enterprise Information Rollups
Under pressure to comply with regulations ranging from Sarbanes-Oxley to International
Accounting Standards, CFOs are prioritizing technology solutions that expedite the
accounting close process. While the majority of CFOs favor the creation of a single
global chart of accounts, many remain skeptical of the need for consolidation of existing
ERP instances into a single global platform. Furthermore, they express optimism that
middleware and other integration technologies will provide adequate financial data
aggregation without the business disruption associated with end-to-end process
standardization.
Enterprise Performance Clarity
#2: Enterprise Dashboards
Reflecting their new role as enterprise performance stewards, CFOs are expressing
interest in online dashboards that enable click-through tracking of key operational
metrics across all levels of the corporation. Specifically, CFOs are interested in being
able to cascade a handful of key enterprise metrics - such as Return on Invested Capital -
to all levels of the corporation.
#3: Standardized Decision Support Templates
With a view toward embedding rigor in planning, budgeting, and forecasting processes,
CFOs are placing a premium on standardized analytical templates and work-flow tools,
such as business unit planning templates and standardized business case templates for
capital budgets. ITs contribution in enabling these templates is ensuring that users have
access to a uniform set of economic assumptions.
#4: Pro-Forma Customer and Product Profitability
Frustrated with the cost, complexity, and confusion associated with profitability
algorithms that allocate 100 percent of costs to products and customers, CFOs have
expressed interest in directionally correct profitability scorecards that capture revenues
accurately, but allocate only controllable variable costs to products and customers.
#5: Working Capital Optimization
As many CEOs have highlighted working capital reduction as a critical goal, CFOs are
prioritizing IT investments that lead to greater inventory velocity via improvements in
forecasting accuracy, or via in-process inventory tracking tools that provide visibility into
inventory at each link of the supply chain. Warehouse optimization, logistics
consolidation, and returns handling are three investment categories cited by CFOs as
priorities in 2004.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 8
Greater Transparency into IT Costs, Risks and Value
#6: IT Risk Heat Maps
Facing Board scrutiny of the adequacy of risk mitigants, many CFOs have expressed
frustration with IT risk reports that list security incidents and quantify vulnerabilities in
terms of IT downtime exclusively. Driven by Board demands to quantify and prioritize
risks, many CFOs are demanding better visibility to all IT risks extending beyond
security to include risks such as project risks, vendor risks, skills risks, and process
disruption risks.
#7: Standardized Business Case Assumptions
CFOs are pressing for standardized business case templates that reflect empirically
derived total life-cycle costs associated with applications comprehensive calibration not
only of design and build costs, but costs of requisite infrastructure upgrades, user
training, lost productivity during implementation, and the eventual costs of system
retirement.
#8: Post-Project Benefits Audits
Reflecting the fact that IT now represents the largest category within most companies
capital budgets, CFOs are approaching IT project justification with the same rigor as
other capital budget categories. One implication of the extension of traditional capital
budgeting disciplines to IT project prioritization is the requirement of post-
implementation benefit audits to verify achievement of gains stipulated in the
business case.
#9: Business Case for Security Investments
With information security budgets increasing at a faster clip than IT budgets, CFOs are
demanding greater rigor in security investment business cases forcing IT departments to
segment applications based on business criticality, and make informed trade-offs to focus
security investments on the highest-value applications.
#10: Fast-Cycle M&A Integration
Early indications suggest that we are in a new era of M&A, acquisitions are guided by the
desire to acquire unique products or technologies, not rationalize capacity. In this era of
rapid integration, CFOs look to IT to forward-integrate the acquisition process to ensure
Day One connectivity, while building a financials bridge to acquired institutions.
THE COMMUNICATIONS GAP
CIOs have identified three high priority areas that require concerted communications to
maximize transparency with the CFO and the finance function.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 9
#1: The Need for Finance to Play More Active Roles in Software Asset Tracking
As auditors subject IT assets to the same scrutiny as other capital investments, CIOs
underline the need for IT and Finance to work together to assign clear ownership for IT
asset tracking. CIOs suggest that acquisitive and traditionally decentralized companies
will be especially challenged in this endeavor.
#2: The Business Case for ERP Standardization
CFOs are demanding greater rigor in the estimation of lost productivity and business
disruption during ERP implementation. In addition, they are requiring greater precision in
estimating the costs of future upgrade cycles. Finally, many CFOs are requiring IT to
compare the costs including opportunity costs of ERP upgrade cycles. Underlying
this greater scrutiny of ERP investments is the view that upgrade costs are higher than
traditionally projected and a hypothesis that information integration tools such as
middleware may offer faster, quicker routes to compress the financial close process
than end-to-end ERP standardization.
#3: The Business Case for Single-Integrated Customer Data Stores
While CFOs are intrigued by potential revenue gains via the use of data mining tools for
yield management and targeted segmentation, they are expressing concerns about the
long-lead times, multimillion dollar price tags, and low success rates from integrated
Customer Information Files (CIFs). More specifically, CFOs are concerned that these
foundational data investments vastly overestimate the business readiness and ability to
deploy these tools, and instead many projects were launched with the philosophy that if
we build itthey will come to deploy analytics. CIOs attempting to build a cost-
justification for these projects can expect to see resistance on two fronts: 1) to
demonstrate that the user community maintains the skills and analytic capabilities to
leverage the data effectively; and 2) a careful articulation of alternative approaches,
especially those that consolidate proposed business projects already in the queue that
require building new interfaces to existing data stores.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 10
Section 2: Audit
THE AUDITORS IT PRIORITY LIST
#1: Business Continuity Planning
Guided by the Audit Committee to monitor business continuity threats, Internal Auditors
have made auditing the virus protection adequacy of their company a 2004 audit plan
priority. The audits involve the following:
- Determining the current level of virus vulnerability
- Establishing the current level of virus protection
- Continuously monitoring the level of virus protection
#2: Business Process Outsourcing
Outsourcing to India, a country now seen as overwhelmed by the influx of offshore
work, has become a particular focus of Audit Directors. Specific risks cited by auditors
include disruptions in service and compromised data integrity. In addition, Sarbanes-
Oxley creates compliance concerns as external auditors must attest to the controls in
place at outsourcing organizations. In response, many internal audit organizations plan to
intensify contractor reviews, reviewing financial information indicative of the contracts
operational effectiveness and efficiency. Additionally, many internal audit departments
plan SAS 70 - direct audits - of the vendors operations and controls.
#3: Privacy Legislation Compliance
The rise in identity theft and the introduction of privacy legislation such as CA SB 1386
and 2004 revisions to the Fair Credit Reporting Act is bringing data security to the
attention of auditors. Auditors are addressing this concern via proactive monitoring and
testing of companies policies for alerting customers of security breaches and by
collaborating with IT and Legal to construct new data management policies. Reviews of
these policies will include checking the efficacy of records storage training programs,
employee screening processes for sensitive record handling, and the technological record
storage process.
#4: Customer Service
Depending on the industry and company business model, Internal Audit departments
indicate that 2004 customer service audits will review controls for service accessibility,
problem resolution response times, and customer service efficiency and accuracy.
#5: Software Capitalization
With IT accounting for more than one-third of the average large companys capital
budget, auditors are paying greater attention to software depreciation cycles, requiring IT
departments to match depreciation horizons to the useful life of applications.
#6 Document Management and Retention Policies
Auditors are requesting scrupulous documentation of company policies on how to share
and retain unstructured data, such as email, instant messaging, personal communications,
THE EXECUTIVE COMMITTEE AGENDA FOR IT 11
and word documents. Early feedback from auditors suggests that there is a high bar for
retention of unstructured data.
THE COMMUNICATIONS GAP
Many CIOs are concerned that auditors current year focus on viruses fails to fully
account for the increased complexity and diversity of security threats facing large global
corporations. CIOs are increasingly taking upon themselves the task of communicating
the importance of user compliance with security policies, the criticality of embedding
information security procedures in supplier and joint venture e-enablement projects, and
funding backup responses to ERP and other enterprise applications. Both auditors and
CIOs report that a list of applications and infrastructure ranked by impact on key
customer accounts, business processes, and internal users is a useful device for aligning
auditor and IT priorities.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 12
Section 3: Sales and Marketing
SALES AND MARKETINGS IT PRIORITY LIST
Sales Management Tools
#1: Pipeline Sales Tracking
In contrast to prior years, sales heads this year are placing a greater premium on tools that
enable management visibility into the sales process, rather than on sales portals that
provide a single resource for customer data, marketing collateral, and training materials.
Within the rubric of managerial tools, sales heads are especially interested in pipeline
tracking tools that provide managers with consolidated views of customer activities at
each stage of the sales cycle.
#2: Daily Account Updates
Sales managers are requesting key customer dashboards that are updated on a daily basis
and that provide a comprehensive view of customer interactions across channels. Sales
managers have expressed particular enthusiasm for receiving proactive ticklers when
preidentified thresholds are exceeded or when the company is in violation of service level
agreements. Driven by the increase in the number of sales organizations that are
adopting Six Sigma and Voice of Customer methodologies, senior sales executives are
also requesting that customer dashboards include calibrations of customer satisfaction at
multiple levels of the client organization denominated in metrics that are most important
to the customer.
#3: Global View of Customer Buying Behavior
Expressing frustration regarding the multiyear timeframes for obtaining fully loaded
customer profitability analysis across business units, sales managers are clamoring for the
speedy rollout of holistic views of customer revenues, as well as relative estimates of
controllable cost drivers such as particularly onerous product configurations, SLAs, etc.
The ultimate ambition, cited by many sales managers, is to use this information to create
a simplified pricing scorecard that sales professionals may take with them on sales calls
to help customers visualize the impact of specific functionality and features on product
costs.
#4: Lead Tracking Systems
As companies rely on cross-sales across business lines to meet growth targets, sales
representatives are anxious for visibility into all touches to their customers. Two
specific areas of concern include coordination of customer solicitations to prevent sales
fatigue and ensuring that references across channels and businesses are appropriately
handled and do not fall through the cracks. To further their aim of seamless service,
senior sales executives express interest in upgrading IT systems to enable end-to-end
tracking of qualified leads across channels and business units.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 13
Sales Force Knowledge Management and Self-Service Tools
#5: Automated Work-Flow Templates
Closing the productivity gap between high-performers and average performers represents
a high priority 2004 agenda item for sales forces across industries. To advance this goal,
sales managers are looking standardize sales process via online model process work-
flow tools with embedded sales best practices.
#6: Improved Pricing and Sales Order Systems
Amid a general trend of sales forces prioritizing business intelligence tools over self-
service tools, next-generation sales order-entry systems represent one self-service
application that continues to be in high demand by the sales function. Specific
enhancements requested by sales managers in next-generation tools include: expansion of
the number of order elements that can be entered into a single order form, and the
requirement that order entry systems recognize product ID codes and promotion codes
from all producer areas. Additionally, systems that can generate suggested pricing based
on input parameters could greatly reducing the need to bring in additional resources to
help with special pricing.
#7: Asynchronous Product and Service Training
While video and Web-based training continues to focus on sales executives technology
wish lists, the 2004 version of this perennial request includes three nuances:
- Online Discussion Forums Virtual communities of interest for internal networking of
experts across business units
- Employee White Pages Global lists of employees annotated with areas of expertise
that enable sales representatives to identify contacts based on expertise, prior work
experience, or educational background
- Online RFP Configurators Online repositories of RFPs, approved contract terms, and
collateral used in past sales
Distributor Enablement Tools
#8: Web-based Extended Enterprise Collaboration Tools
Secure online venues where sales can collaborate with third-party distributors to share
market and customer intelligence.
#9: Channel Partner Hubs
Online resources for distribution partners that feature: order management systems with
lead-time generators; dealer connect functionality (that enables dealers to sell or swap
over-purchased or incorrectly purchased orders with other dealers); presentation, print
advertisement, and RFP repositories.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 14
Marketing Tools
#10: Marketing Performance Dashboards
Web-based dashboard links companys key strategic goals to marketing department
goals, metrics, and activities. Dashboard allows executive team to review progress
against goals at multiple levels of desired detail.
#11: Marketing Mix Management Systems
Sophisticated statistical tools to disaggregate the impact of various marketing investments
on volume including: advertising spending, advertising copy, trade spending, cross
pricing, and couponing. Marketing executives hope to use these tools to isolate the
impact of each investment to optimize the portfolio and focus energy on the most
effective levers.
THE COMMUNICATIONS GAP
#1: Poor Uptake of Existing Technology Tools
While sales leaders have been aggressive proponents of automation tools, evidence
suggests the sales force is struggling to use the technology that already exists in the field.
For example, one CIO of a company that had completed a global Siebel rollout cited an
internal study that indicated that only 30 percent of the companys sales representatives
had always used Siebel as a sales tool. An additional 50 percent of representatives
used the system only as necessary, while 20 percent of the sales force identified
themselves as reluctant or phobic users. CIOs suggest two implications for
conversations with senior sales executives: 1) to focus on benefits capture via greater
utilization of existing systems; and 2) to include user-readiness assessments as an
integral part of the initial evaluation process for new sales-force technologies.
#2: Scarcity of Analytical Skills to Effectively Leverage Customer Data
As many CIOs look to the imminent completion of data standardization and enterprise
data warehousing projects that can (finally) provide a unified view of customer buying
behavior, there is mounting concern that the business is inadequately prepared to use this
data. CIOs have concerns on three levels: 1) business willingness to repudiate traditional
marketing methods to embrace new revenue models that are made possible by enhanced
information capabilities including risk-based pricing and yield management; 2) business
willingness to steward the data allocating senior talent to ensure compliance with data
quality, privacy, and cross-sales policies; 3) Marketing and sales departments ability to
hire and retain talent with the requisite skill sets to use this data effectively.
#3: Limited Business Value of Broadband Connectivity
While sales executives are eagerly anticipating the replacement of dial-up connections
with broadband connectivity, many companies are reporting that sales representatives use
laptop computers primarily for basic functions, such as email access undermining the
perceived necessity of high-speed connectivity. Anecdotal evidence suggests that some
large corporations are choosing not to replace PDAs for the sales force and are
investigating the replacement of laptops with cellular telephones.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 15
Section 4: Procurement
PROCUREMENTS IT PRIORITY LIST
Enhancing Visibility over Enterprise Purchasing
#1: Automated Data Cleansing and Aggregation Tools
Frustrated by the high level of abstraction in ERP spend data and the limited uptake of
e-procurement tools, procurement executives are keenly interested in software tools that
can extract data from source systems (P-cards, ERP, e-procurement, etc.) and transform
unstructured free-text fields into detailed data about purchases. These tools focus on
cleansing, and normalizing data by extracting product configurations needed by sourcing
such as configuration, size, weight, materials, colors, manufacturer, etc.
#2: Automated Links between Procurement and AP Systems
Seamless connectivity between systems to expedite purchasing cycles, maximize
compliance of procurement policies, and maximize transparency into purchasing
behavior at all levels of the corporation.
#3: Compliance Monitoring and Proactive Identification of Non-Standard Items
Online systems that sit in front of e-procurement and other purchasing systems and
monitor and discourage maverick purchasing proactively by capturing requests for off-
catalog buys before the order is placed.
Leveraging Industry Standards
#4: Third-Party Product Catalog Management
Procurement executives are advocating adoption (wherever possible) of industry
marketplaces and third-party catalog vendors for a master source of product codes,
specifications, and promotions tracking.
#5: Services Buying Clubs
Anecdotal evidence indicates that procurement executives are looking to join with peers
and competitors to leverage scale and buying power vis--vis oligopolistic technology
suppliers. A case in point is that a leading European services company is reputedly
creating a consortium to improve responsiveness from Indian IT outsourcers.
Expanding Procurement Oversight over IT Spending
#6: Functionality Benchmarking
Representing logical next step in procurement oversight over IT purchases, procurement
executives are signaling that they intend to review functionality specifications embedded
in IT business cases. A hypothesis embedded in this expansion of procurements role is
that companies may have exhausted the low hanging fruit available in terms of
THE EXECUTIVE COMMITTEE AGENDA FOR IT 16
extracting vendor price savings: the next frontier of savings lies in reducing the estimated
50 percent of excess functionality that is never used by end users in typical IT software
and hardware.
#7: Software/Maintenance Contract Reviews
Procurement executives have expressed concern that vendor contracts for many
enterprise applications now bar IT departments from migrating maintenance work for that
application in offshore locations. Concerned about potential long-term impact on IT
maintenance and enhacement costs, procurement executives intend to scrutinize these
onshore only maintenance clauses more closely.
#8: Reverse Auctions for IT Services
IT executives have traditionally maintained that wide variations in vendor capabilities
and SLAs impede companies ability to submit IT service contracts to reverse auctions
such as offshore maintenance. However, procurement executives point to the increased
sophistication of auction tools that enable IT departments to account for differences
between vendor capabilities and service levels and the cost savings achieved by
retailers that have pioneered auctions for IT services to push for greater usage of real-
time bids in this cost category.
#9: Vendor Risk Reviews
Concerned about consolidation in key IT software and hardware categories, procurement
executives are pushing IT to map interdependencies between vendors to spotlight
instances in which critical enterprise functionality is dependent on services or
infrastructure provided by small or financially unstable vendors. In addition, procurement
is advocating the tracking of vendors financial stability and recommending that IT
departments create and implement contingency plans in case a critical vendor is acquired
or becomes financially unstable.
#10: Centralized Contractor and Consultant Sourcing
Concerned about cost creep amid a nascent recovery, procurement executives reaffirm
their commitment to centralizing contractor and consultant sourcing activities. Anecdotal
evidence suggests that procurement executives will look to migrate three sourcing
innovations from direct materials procurement to the IT services arena across 2004:
value-based pricing that links a portion of fees to results achieved; clearly delineated
timelines and expectations for midstream deliverables, and user surveys to create
satisfaction-weighted hourly cost estimates by vendor.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 17
THE COMMUNICATIONS GAP
#1: Providing Visibility to Applications Life-Cycle Costs
IT leaders are challenged to articulate and communicate a better understanding of the
economics of applications across their entire life-cycle, beyond just the costs to acquire.
Simply focusing a purchase decision on a comparison of the initial price of a technology
installation could hide the fact that costs to acquire are typically dwarfed by the full costs
of integration, upgrades, underlying infrastructure, and maintenance.
#2: Bulletproofing Requirements Definition
As CIOs explore more complex sourcing options such as large-scale outsourcing and
offshoring of applications development, they are feeling pressure to increase the level of
sophistication and clarity provided in requirements definition. This is a particularly
urgent requirement for the effective use of reverse auctions and fixed-price contracting.
By effectively articulating specific service requirements and expectations, sourcing
leaders can improve the comparability and accuracy of competing bids.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 18
Section 5: Human Resources
HUMAN RESOURCES IT PRIORITY LIST
e-HR
#1: Manager Tools
Mirroring a migration across the executive suites, HR executives are placing a significant
premium on managerial tools. High on the wish list of HR executives are access-
protected management toolkits that enable managers to manage performance evaluations
and make compensation change decisions online, while using the tools to manage
individuals not meeting company performance expectations. Features prioritized by HR
executives within this category include stock option decision-support tools that provide
one-stop shop support for allocation decisions, and e-learning tools that help educate
managers on levers within their control to achieve performance objectives.
#2: Standardized Employee and Location Codes
HR executives have identified a core group of fields across geographies they believe
must be standardized if HR is to reverse the current 70:30 ratio of departmental resources
devoted to transactional activities versus value-added analytics. Initial conclusions from
HR departments that have made headway in identifying essential data elements to be
standardized suggest employee location/site codes are a critical data input that needs to
be aggregated from systems outside HRs purview.
#3: Single Sign On
Authenticated role-level access to systems and applications.
Maximizing Returns from Shared Services
#4: BPO Outsourcing Lessons Learned
After initial headway, the pace of HR outsourcing appears to have stalled at the majority
of large corporations. Under pressure to reduce HR costs, senior human relations
executives indicate interest in leveraging lessons learned from IT in managing
outsourcing relationships.
#5: Data Masking
Concerned about violation of privacy regulations and security ramifications associated
with testing applications in overseas facilities using production data, HR departments are
concerned about the efficacy of data-masking technologies that purport to conceal
sensitive employee and customer data. Furthermore, they are anxious to benchmark their
approaches to safeguarding this data with peers and best practices.
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Aligning the Enterprise
#6: Enterprise Performance Dashboards
Starting with board and executive team priorities, cascade derives talent implications of
business goals and measures against each of those talent metrics prioritized by the
business. One enhancement to the core dashboard requested by many HR executives is
for proactive Code Red triggers that automatically flag business units and individuals
based on preidentified criteria.
Human Resources Excellence within the IT Department
#7: Standardized Roles Definitions
Concerned about the proliferation of IT roles one company counted 190 discrete IT
roles and inconsistencies in role definitions across business units, HR departments are
advocating streamlining IT roles into a manageable number of standardized enterprise-
consistent categories, with each role defined by necessary skills and performance
evaluation criteria.
#8: Enterprise Sourcing Strategy
Concerned about the morale and productivity impact of poorly communicated offshoring
plans, HR departments are urging IT to conduct forward-looking technology assessments
to identify key skills to cultivate internally versus those to externalize. Furthermore, HR
recommends maximizing transparency regarding the roles that the firm intends to
cultivate in house allowing employees to self-select whether they have the interest (or
ability) to stretch into these roles.
THE COMMUNICATIONS GAP
#1: Stock Option Rollbacks
With the most-likely advent of mandatory stock option expensing, companies are
beginning to rethink their approach to stock options. Three resulting trends include the
reduction in the number of employees offered stock options, reductions in the number of
options offered, and the replacement of options by restricted stock or performance
shares are all likely to have impact on companies that have used options as currency to
retain IT talent. In addition, two communication challenges arise including helping
employees understand the need for stock options curtailment and working with HR to
identify alternative rewards such as increasing performance-based bonuses as a
percentage of total compensation.
#2: Career Planning Assistance for IT Staff
To help IT staff prepare for a rapidly globalizing and increasingly externalized sourcing
environment, CIOs need to enlist HRs assistance in expanding the range of career
planning tools available to IT workers. Among the tools needed are greater transparency
regarding core IT skills such as architecture, project management, etc. sample
career paths, skills assessments, and job openings databases.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 20
#3: Alternative Staff Development Models
Pioneers in IT offshoring and outsourcing have identified a key human resources
challenge with long-term implications for the function. In their effort to externalize non
core technical skills, while retaining project, vendor management, and architectural
skills, IT may have undermined the traditional development paths for future managerial
talent. Conversations between IT and HR need to center around ways to develop next-
generation managers whether by selectively absorbing vendors staff who develop
familiarity with the companys business model, processes and systems, or via
accelerating the onboarding of generalists to the IT function.
THE EXECUTIVE COMMITTEE AGENDA FOR IT 21
Section 6: Operations and Logistics
OPERATIONS AND LOGISTICS IT PRIORITY LIST
Creating End-to-End Connectivity
#1: Supplier Collaboration Tools
Healthier supplier markets and renewed questions about supply security are causing
companies that have shifted from strategic relationships to arms-length auctions-based
deals to rethink their supply strategies. Many supply chain executives plan to modify
their sourcing approaches to provide greater focus on supplier innovation and value-
engineering and are architecting a shift toward more creative sourcing strategies that
capitalize on collaborative product design. Finally, supply chain executives plan to
expand supplier benchmarking activities to look beyond price into a greater total cost
focus. Supply chain executives view IT as a key enabler in this next era of strategic
sourcing and are expanding their suite of integrated tools to include richer supplier
collaboration applications, which facilitate relationships between suppliers and
customers, as well as among suppliers.
#2: Seamless Logistics Integration
Logistics, specifically warehousing and transportation, is emerging as a focal point for
supply chain executives. Logistics executives cite three near-term priorities, each with
implications for IT: greater reliance on 3PL providers; greater optimization of reverse
logistics and remanufacturing activities; and integration of inventory/logistics
management applications with procurement systems. To achieve these three goals,
logistics executives are relying on IT to enable expanded supplier visibility into customer
forecasting data as well as more granular shipment-tracking capabilities.
#3: Low-Cost, Reliable China Connectivity
Driven by the large number of supply chain executives KPI that list increasing
percentage of direct sourcing from China as a key near-term goal and the emergence of
China as a critical force in the world of manufacturing, operations executives are eager
for inexpensive, secure ways to extend connectivity to Chinese suppliers and contract
manufacturers.
#4: Automated Supplier Quality Monitoring
Operations executives are interested in remote diagnostic tools that monitor quality and
other process metrics incorporated directly into suppliers production lines.
Upgrading Legacy Systems
#5: Legacy Warehouse Management Systems Replacement
While many supply chain executives have resisted IT efforts to replace legacy
warehouse-management applications with packaged software, increased recognition of
home-grown systems limitations is causing this resistance to erode. These limitations
THE EXECUTIVE COMMITTEE AGENDA FOR IT 22
include incompatibility with emerging scanning technologies, complex integration with
point-of sale systems, and reliance on an ever-shrinking pool of programmers familiar
with the systems intricacies. High on the list of requirements for next-generation
warehouse systems are seamless receipt of purchase orders and compatibility with radio-
frequency technology that enable employees to scan bar-coded items as they pack them.
#6: Integrated Demand Planning
Operations executives are keenly interested in integration architectures that enable them
to obtain a single forecast by linking various functional areas. As they conceive attributes
of such an integrated systems architecture, operations executives underscore three desired
capabilities: multilevel visualization and data manipulation capabilities via OLAP tools;
flexible reporting platforms that enable authorized users to access data components in
greater detail; and software that affords a daily view into suppliers work-in-progress.
#7: Dwell Time Tracking
Newly enacted Hours of Service regulations in many markets require companies to track
dwell time at shipment destinations.
Standardizing Components for Fast Velocity Product Rollout
#8: Cost Estimators
Lack of apples to apples comparability of manufacturing costs across global sites has
been a rate-determining impediment in many companies attempts to optimize
manufacturing on a global basis. Driven by extensive trade press publicity of several
companies success in this area, manufacturing executives are citing interest in estimation
software that allows each manufacturing facility to define, break down, and quantify the
true cost of every part of each product on a comparable basis. The key IT requirement to
enable this capability is a database that links cost information, such as purchase items,
materials costs, and labor rates, to individual plants.
#9: Certified Product Components Library
With technology reuse inhibited by the sheer number of different document formats and
document repositories in use around the world, operations executives are clamoring for
an integrated design repository that allows designers to conduct keyword searches across
all global product, package, and material specification. From a supply chain perspective,
this tool enables closer collaboration with product design teams to create products for
cost competitiveness. This includes making sure designers specify an industry standard
versus a proprietary component, for example, or preventing designers from creating new
product codes and designing requirements for a component that already exists in another
business unit.
#10: Product Life-cycle Management
Looking beyond engineering design systems, manufacturing executives are interested in
enterprise-wide systems based on industry standards. These include new data format
initiatives emerging within the automotive industry that make it possible to view and
THE EXECUTIVE COMMITTEE AGENDA FOR IT 23
share product data and dynamic images worldwide which enables broad-based access to
consistent plant and work-flow data across the product lifecycle from design inception,
through manufacture, deployment and maintenance, and ultimately, culminating in its
removal from service and disposition. In describing the key requirements for PLM
solutions, manufacturing executives cite the creation and enforcement of uniform
standards for creating and changing information as critical attributes for success.
THE COMMUNICATIONS GAP
#1: Impact of Product (SKU) Rationalization
While supply chain executives focus on the costs of complexity arising from process
variations across business units, many CIOs are focusing conversations with their
operations colleagues on the additional costs of product complexities and SKU
proliferation.
#2: Trigger Points for RFID Deployment
While CIOs and operations executives agree that the promise of RFID is real, CIOs are
faced with the challenge of educating the business about triggers for RFID adoption at the
item-level and in industries beyond consumer packaged goods. CIOs suggest that their
RFID communications with operations and supply chain executives track progress
against the following variables cost per tag (currently $0.35 versus $0.05 estimated
necessary for item-level utilization), cost per reader (far higher than optimal for
widespread adoption), resolution of issues with object composition (still incompatible
with metals and liquids), read accuracy levels (approaching 100 percent), and read
distances enabled by still-nascent antenna technology.