This blog post will be interesting for those of you who have been on the other side of the table pushing the envelope for portfolio analysis and rationalization. This is about and organization where for the past 12 months, the business has not seen high impact IT initiatives take off. The COO asks the CIO to embark on an IT cost reduction initiative. Soon, the CIO takes a look at the portfolio comprising 4,000 applications and identifies 500 applications that could be merged and decommissioned. Excited, the CIO schedules a meeting with the COO, who is an astute go-getter and a no-nonsense professional.
CIO: “To hit my cost reduction target, our business-IT task force has recommended consolidating or decommissioning 500 applications”
CIO: “This will deliver large OPEX savings. We have considered self-funding benefits and need a budget to drive this transformation
COO: “Request for more budgets? Not, again! Bah… There is an organization-wide perception, IT is slow and often ends up saying “No” to the business needs. So ‘Chief Slow and No Officer’ please do not ask for additional budgets to pursue your favorite IT programs”
CIO is taken aback but recovers to say: “Let me give you a specific data point. Our benchmarking exercise has showed that we have 1.6 times the number of applications relative to peers.”
COO: “Yes… So what? That been the case for over a decade now. It has not made a material difference to our organization’s position on the competitive league table, sometimes we are up, sometimes down…”
CIO is nonplussed and attempts to think on his feet, nay chair: “Let me give you a specific example to explain the benefits. Today, 40 of our 500 applications are Collateral Management systems.”
COO: “Yes… So what?”
CIO continues: “40 Collateral Management systems give a fragmented view of Counterparty Risk, suggesting a credible Counterparty is risky, vice versa, etc.”
COO: “So what?”
CIO does not give up, continues: “This means we are not pursuing business where we can and are leaving money on the table.”
COO interrupts: “Makes sense, BUT, instead of consolidating 40 Collateral Management systems and build a new IT system (winks), why not create a layer on top to make consistent and aggregated information available? Besides, given the macroeconomic environment and fluctuating business cycles, we are not at bleeding edge of risk-driven business development.”
CIO now realizes why the COO is astute, but still pushes his agenda: “One could create an aggregation system, but that would make us sluggish. IT has to support, apply patches, and make enhancements etc. to 40 systems to ensure fixes, regulatory compliance, and tighter controls. Besides these, playing defense in a ball game like arguments, the senior executives in front-office needs on their mobile devices information in near real-time to (a) enhance trading effectiveness in pricing deals, and win complex deals mindful of the risk-adjusted returns (b) work across multiple asset classes, products, regulatory regimes (c) put controls that will enable checks-and-balances based on position level, etc.
Hence, the new system not only needs to drive constructive destruction, but also create new capabilities for businesses to survive and win in the markets.”
COO now displays body language that his attention has been grabbed: “Makes sense since some of what you mention in terms of playing defense was the reason for a top Financial Service Institution to withstand the 2009 crisis. However, building the new IT system will take time besides money, so what are you going to be doing in the intervening period? And, this time, get me some “smart quick wins”.
The conversation continues, but the mood in the room is now friendly and cordial…
Dear Reader, while the barrage of “So What” kind of probing continues, I stop here, hoping that this vignette has underscored the growing expectations from Application Portfolio Management. There is a growing emphasis on the need to create a net new functional capability while embarking on application consolidation and rationalization. IT organizations have to develop a business case that takes into account the cost of transformation, and identify “smart quick wins” rather than waiting for one bright day in future.
This article was written by Ramesh Kumar Ramamurthy from Capgemini: Capping IT Off and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.