IBM Global Services

The IT Value Model:

Winning the business battle
with the right IT nails
The Horseshoe Nail
For the want of a nail the shoe was lost,
For the want of a shoe the horse was lost,
For the want of a horse the rider was lost,
For the want of a rider the battle was lost,
For the want of a battle the kingdom was lost
And all for the want of a horseshoe nail.
Introduction
The above, paraphrasing the aphorism from Ben Franklin, illustrates the
implicit connection between a battle and its infrastructure. But like the
horseshoe nail on the battlefield, it can be difficult to align the value of a
single information technology (IT) investment with the business at large.
After all, how do you determine which nail is attached to the horseshoe
that could have helped win the battle? To fully exploit each and every
element of the IT infrastructure (the horseshoe nails), it is critical to map
those components to mission-critical business initiatives (the battle-winning
horses) and, in turn, long-term business success (the war). More than
ever, a better understanding of the value delivered by any one IT nail is
critical to informing and guiding IT investments and initiatives.

The IT Value Model

This is a new way to view and manage the IT infrastruc-

Now, with the IBM IT Value Model, it is possible to

ture. Until recently, IT investment decisions have been

establish business/IT linkage and accumulate accurate

a tops down management issue. While organizations

and specific data about the intrinsic value IT brings

viewed IT as a necessary resource in helping to achieve

to specific business activities and components as

and sustain competitive advantage in a global and

well as to an organization, or kingdom, overall. This

dynamic marketplace, it was also viewed as an obvious

type of value-informed decision making can help

target for cost efficiency improvements through server

executives better contain costs, target investments,

consolidation or asset management, for example.

accelerate and optimize ROI (without negatively

affecting business results), and drive profitability.

Mission critical: The state of the IT infrastructure

Todays executives are accustomed to using information

Now, with costs more under control and the economic

technology to enhance capabilities and support specific

outlook brightening, executives are placing more

business initiatives from supply chain management to

emphasis on the strategic business value IT can provide.

e-commerce and customer relationship management.

A recent survey of the worlds top corporate CEOs

Consequently, over time, organizations have increased

reveals that for a large majority, revenue growth is now

their reliance on servers, networks, applications, e-mail

their top priority.1 This research, based on interviews with

solutions, data centers, and storage systems. Similarly,

hundreds of executives from across geographies and

the people and processes associated with a companys

industries, offers valuable insight into corporate trends,

IT organization have become mission-critical resources.

including the emphasis on top-line improvements.

Global economic pressures and uncertainty have placed

While many companies have made improvements in

additional stress on the IT infrastructure. As CIOs and

cost control, there remains a gap when it comes to con-

CTOs struggle to do more with less, many organizations

necting specific IT investments to strategic business

have launched optimization initiatives aimed at evaluating,

gains or benefits. The answer may lie in implementing a

rationalizing and streamlining their IT environment. These

holistic, value-based approach to optimize the entire

efforts have focused on making the infrastructure more

IT environment. By doing this, companies can continue

manageable, adaptive, productive and cost-effective.

to reduce costs and complexities while establishing a

direct relationship between IT services or elements (the
horseshoe nails) and business success or wins.

We are over the crisis and now were in

a new cycle of growing the business.
Media executive in the UK2

The IT Value Model

Serving the kingdom: Optimizing IT for value

Partner The business driver is market share; the cor-

Value-driven optimization initiatives can contribute

porate view of IT is that it is strategically aligned with the

significantly to operational excellence and set the stage

business; IT investment decisions are made according

for evolving to advanced capabilities such as IT agility

to enhanced portfolio management.

and on demand characterized by focused, variable,

resilient and responsive systems and processes.

Enabler The business driver is industry leadership; the

corporate view of IT is as an enabler of corporate vision;

While enterprises (and sometimes even individual

IT investment decisions are based on future options.

business units) can differ in their specific IT requirements and optimization strategies, most could

Business and IT executives should agree on the best

characterize their strategy for using IT according

strategy for using technology in order to achieve

to the following provider profiles:

business-IT alignment and provide context for IT investment priorities. Once this agreement is achieved, the

Commodity The business driver is expense control;

infrastructure can be analyzed for optimization potential

the corporate view of IT is as a provider of technical

in terms of management and technical domains,

capabilities; IT investment decisions are project-based.

pinpointing areas for improvement. These improvement areas can be narrowly or broadly defined; most

Utility Business drivers are business unit measure-

optimization opportunities span multiple domains.

ments; the corporate view of IT is in terms of organizational efficiencies; IT investment decisions are based on
portfolio management of applications within a process.

The IT Value Model

Domains fall into the following categories:

Technical domains
Computing systems and storage The server, desktop

and storage hardware, along with operating software

and middleware that provides the platform for busi

ness applications.
Applications and data The portfolio of business applications
and data used to manage operations and achieve com-

petitive advantage.
Network Voice and data networks, including wide
area, local area, wireless and other technology intercon-

nection capabilities.
Management domains

Strategic alignment Business and IT alignment, complemented by domain alignment.

Process The systems, processes and governance
structures used to manage IT.
Finance and environment The financial structure of
IT as well as the larger legal, geopolitical and environmental context.
Organization The staff, structure and skills of the
IT organization.
For several years, the IBM IT Optimization Solutions
portfolio has offered a proven, holistic approach for
assessing these domains and tailoring a solution to a
companys requirements through the various stages of
solution framing and design, transition planning and
governance, and solution delivery.

The IT Value Model: Identifying and aligning the IT nails

with the objectives and benefits of the business battles
IBM can help companies derive even greater value

A value primer

from their IT infrastructure by incorporating the insights

Business value chain The components, processes

gained through the use of the IT Value Model (IVM)

and services that collectively deliver value to the

into IT Optimization Solutions. Implicit in the IT Value

firms customers.

Model is the recognition that just as businesses deliver

value to their customers by way of business products

IT value chain The IT components, processes and

and services, IT delivers value through IT products and

services that collectively deliver value to the firms

services. The challenge lies in articulating the specific

business components and services and, potentially,

role of the IT processes, technologies and organization

to the firms external customers.

in business terms, and establishing the connection

between the IT capabilities or services and the related

IT services The capabilities provided by a companys

business activities and components. Toward these

IT processes, technologies, applications and organiza-

ends, IVM is designed to assist organizations in mapping

tion, articulated in business terms and linked to specific

the IT nails to the relevant business battles by help-

business benefits.

ing enterprises:
Connect IT services to their specific contributions
to business value.
Assess the potential business impact of
infrastructure investments.
Leverage IT to enable revenue growth and
increase competitiveness.
Discern which IT elements support specific
business results.
Achieving a data-driven roadmap to value: The IVM framework
In the IT Value Model, IBM defines IT as a fabric of
processes, technologies and organization that supplies
or supports IT services. As a part of any value-based
optimization initiative, IBM consultants assess the maturity
of an enterprises IT fabric in the context of its strategic
intent and status (the provider profile) and its structure
(business process integration). Enterprises can, in turn,
articulate the current state and value of their IT infrastructure, and compare that status to desired state data.

The IT Value Model

This is a multidimensional task, best illustrated below by

Moreover, the IBM IT Value Model enables organiza-

the IT Value Model cube a visual representation of the

tions to directly link IT and business value by connecting

firms strategy for the use of IT on one axis; the level of

related business and IT key performance indicators

business process integration on another; and the maturity

(KPIs). KPIs offer a tangible mathematical link between

of the IT fabric on the third. This analysis helps enter-

IT services and business processes by using financial,

prises define and work toward tomorrows best practices,

functional, performance and availability measurements,

while serving the needs of the kingdom today.

such as the cost per transaction or Web site transaction

volumes. KPIs, then, are the mechanism with which we
can quantify the business-IT linkages that are essential
to the IT Value Model. In short, these KPI connections
enable businesses to quantitatively assess the impact of
IT investments on the business.

The IT Value Model provides a framework for fabric

Forward-looking organizations can leverage the

metrics and KPIs to facilitate the IT maturity analysis and

IT Value Model to:

help identify and evaluate potential value-add opportu-

Target particular business or IT pain points

nities. Furthermore, IBM applies proven, leading-edge

Create a model of the current business and

analytics to address the often complex and interrelated

IT environment

characteristics of IT maturity, integration and strategy.

Identify appropriate KPIs

This permits companies to target their value enhancement

Assess the current IT fabric

efforts more appropriately, resulting in a roadmap to an

Map the fabric status to KPIs

improved future state.

Compare the current environment to the desired

ideal state
Evaluate alternative scenarios against the model
to pinpoint improvement potential
Design a roadmap for value-driven optimization
Evaluate the current services catalog

The IT Value Model

In Maslows hierarchy of needs,

basic needs survival and safety
must be satisfied if higher-order
needs such as self-actualization
are to be met. A fully optimized IT
infrastructure requires the same
type of methodical, hierarchical
building process. Basic operational
excellence must be established
before next-generation levels of
responsiveness, integration and
flexibility can be achieved.

The IT infrastructure according to Maslow

In a more general sense, an IT infrastructure reflects
a Maslows hierarchy of attributes. Said differently,
higher order capabilities, such as agility and on demand,
require that fundamental or survival needs, such as
operational excellence, be satisfied. A fully actualized
IT infrastructure will demonstrate a full range of attributes,
building on the effective execution of those attributes at
lower levels to provide the essential platform for delivering more advanced capabilities.
At the base or survival level of this hierarchy
are the fundamental characteristics of efficiency (and
effectiveness): a focused commitment to differentiating
competencies and tightly integrated strategic partners providing non-differentiating activities; operations

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Conclusion
at the lowest possible costs for the given IT strategy;

The IT Value Model can enable companies in every

effective use of automation to reduce complexities and

sector to define and work toward an ideal IT state

management costs; and high levels of reliability to pre-

identified in terms of business value through KPIs and

pare for threats and help enable the business to continue

according to the companys strategy for IT. In this way,

operating consistently.

IVM can provide critical insight into a companys current

environment and help define a strategic roadmap for

Building on this base of efficiency, the IT fabric is now

positive change. More specifically, this approach can be

capable of supporting the needs of an agile business

used to identify potential areas for improvement in the

by delivering commensurate IT agility through the

IT fabric such that IT services deliver more value to the

implementation of open standards, unconstrained by

business and the bottom line.

vendor-proprietary architectures. The agile business is

able to share resources in virtual pools, regardless of

IBM Global Services offers the IT Value Model through

location or application, and can be more responsive by

our IT Optimization offering leading-edge solutions

sensing and responding to rapidly changing requirements.

driven by world-class skills, top technologies and proven

expertise. Our optimization consultants are skilled in

Finally, at the pinnacle of actualization, the fully on

IVM and can help you identify and leverage your most

demand fabric adds to the efficient and agile founda-

valuable IT nails for winning the business battle.

tion by connecting disparate data, applications and

processes across and beyond the enterprise into an

For more information

integrated whole. It can also adapt variable cost struc-

To learn more about the IT Value Model and IBM

tures and business processes to reduce risk and

Optimization Solutions, contact your local IBM sales

increase levels of business productivity, cost control,

representative, or visit:

efficiency and predictability.

ibm.com/services

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About the authors

Copyright IBM Corporation 2004

IBM Global Services

Route 100
Somers, NY 10589
U.S.A.

L. Mark Ernest, Distinguished Engineer, IBM Global Services

lernest@us.ibm.com

Produced in the United States of America

12-04
All Rights Reserved

Albert L. Swett, Principal, IBM Global Services

aswett@us.ibm.com

IBM, the IBM logo and the On Demand Business

logo are trademarks or registered trademarks
of International Business Machines Corporation
in the United States, other countries, or both.

William G. Miller, Global Offering Executive, IBM Global Services

williamgmiller@us.ibm.com

Other company, product and service names

may be trademarks or service marks of others.

Dennis P. Ondik, Senior Consultant, IBM Global Services

References in the publication to IBM products

or services do not imply that IBM intends to
make them available in all countries in which
IBM operates.

ondik@us.ibm.com

Your Turn: Global CEO Study,

IBM Business Consulting Services, 2004.

Ibid.

G510-3887-00