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CHIPS Articles: IT Vendor Business Case Analyses

IT Vendor Business Case Analyses
Driving Savings Today and Sustaining Relationships in the Future
By Floyd Groce, Brian Fischbeck and Behrad Mahdi - April-June 2012
The Department of the Navy Chief Information Officer (DON CIO) and the Information Technology/Cyberspace Efficiency Integrated Product Teams (IPTs) have undertaken a number of initiatives that have important implications for the future of the DON business IT environment. Specifically, the DON Enterprise Software Licensing (ESL) IPT developed business case analyses (BCAs) that provide enterprise-level visibility of how much money is spent with specific IT vendors, insight into relevant market and technology trends, and recommendations for better managing vendor relationships, optimizing resources and negotiating favorable contract terms. This article details the methodologies and approaches used to develop the BCAs, as well as some of the anticipated results of this work.

The BCA Process: An Inclusive, Data-Driven and Fact-Based Approach

The BCA methodology was developed collaboratively using an inclusive process to ensure perspectives from stakeholders across the DON's technical and business IT communities, as well as other enterprise stakeholders, who have years of technical and customer experience. Additionally, the BCA methodology ensures the most complete and detailed understanding of the current context of the DON's relationship with any particular high-interest IT vendor with whom the department has invested significant funds in its products, as well as an understanding of the vendor’s particular position within its own industry and market.

The BCA is focused on developing strategies that address the full range of a given IT vendor's offerings. This is a critical element of strategy development because many IT vendors provide software, hardware and professional services, often packaging two or more of these products together in an attempt to bind customers to a particular solution. The primary goal of each BCA is to ensure a foundational set of strategies that comprehensively addresses each IT vendor.

Additionally, market research and experience have demonstrated the trend of IT vendors pressing for deployment of combined "appliances" — solutions that combine hardware and software components. While these technologies suggest potential performance improvements, they also have potentially negative implications for the DON's total cost of ownership and technical flexibility in the future. Additionally, the DON Enterprise Software Licensing BCA development teams work closely with the DON Enterprise Software Licensing IPT members tasked with executing near-term activities to ensure that the BCA findings are well understood and support their efforts to achieve near-term savings. In short, the DON CIO believes that this process-oriented and disciplined BCA approach arms the DON with the tools, insights and data to achieve both near-term and long-term goals. The following sections detail each element of the BCA process and provide further description of the approaches taken to mitigate some of the key challenges identified earlier.

Step 1: Launching the Business Case Analysis Process

At the onset of the BCA process, BCA teams collaborated with stakeholders from across the DON. The teams used a holistic, enterprise-wide approach with a number of key stakeholder groups, including, but not limited to the DON CIO; U.S. Marine Corps Director for Command, Control, Communications and Computers (USMC C4) and the Marine Corps Systems Command; Deputy Chief of Naval Operations for Information Dominance, N2/N6; Echelon II organizations; ASN (FMC) and the ASN Office of Budget; and, where appropriate, representa-tion from major programs and initiatives, including the Data Center Consolidation IPT. As a result of this work, a high level of concurrence and a common understanding were achieved. This makes the BCA relevant to achieving the DON's goals based on the realities of the department’s business IT environment.

Step 2: Spending Visibility and Projecting Projecting Future Spending

The data analysis portion of the BCA process allows stakeholders to address visibility challenges related to understanding what the DON has spent historically with particular IT vendors, as well as to develop a confident, fact-based projection of future spending on products and services from these vendors. Developing fact-based future estimates of potential DON spending with an IT vendor allows the DON to understand the "as-is" state and estimate the potential savings that can reasonably be achieved based on the implementation of specific near-term strategies. The work toward achieving enterprise visibility to better understand both historical spending and fact-based future spending has taken the DON Enterprise Software Licensing BCA teams across the department's landscape to search for every piece of data available from internal procurement documents, financial records, inventory lists and budget data systems, as well as information directly from vendors and resellers.

The goal of developing a future projection in the BCA is to understand what the current environment looks like if no effort to identify and execute efficiencies and savings opportunities is made. Clearly, this baseline is critically important as BCA teams also attempt to understand the implications of specific strategies on future business IT costs to the DON.

Step 3: Leveraging Vendor Insights and Market Trends

Thorough market analysis is a critical component of IT vendor BCAs. The market analysis process includes developing an understanding of the vendors and broader markets and industries in which they operate. To identify key areas where the DON can work more effectively with a particular IT vendor, it is important to understand the vendor’s core business, its existing and emerging technologies and capabilities, and its strategic focus areas. Moreover, it is critical to develop an understanding of an IT vendor's competitive landscape and market positioning to identify areas for negotiations or opportunities to better leverage the market’s competitive dynamics. Developing an understanding of vendor-specific and broader market trends and dynamics informs DON leadership of what drives an IT vendor’s business behaviors and how they relate to identifying savings opportunities.

Step 4: Building the Roadmap for Savings

BCA development, which identifies a DON-specific set of business opportunities with a particular IT vendor. The quantitative data assessment of the current DON environment is combined with the spending visibility analyses of key market insights to rank and prioritize identified opportunities. The primary outputs of this process are comprehensive business case analyses which quantify the hard savings impact of implementing a set of strategies for a particular IT vendor and a DON-specific IT vendor strategy roadmap to support the sustainment of savings over the long-term.

The roadmap provides a high-level view of a slate of initiatives proposed for coordinated execution over time across all DON agencies and offices that acquire a particular IT vendor's products and services. The roadmap includes a combination of actions that may be initiated immediately as an integral part of driving near-term savings, as well as key strategic enablers to be implemented over time to ensure sustainable long-term savings and improved vendor relationships. Some examples of these strategic enablers include performance management, vendor scorecards, requirements optimization and demand management.

Making "Doing More with Less" a Reality

The work of the BCA teams has provided unprecedented visibility into the magnitude of the DON's spending with particular IT vendors and contributed to the understanding of key constraints and opportunities for the department in achieving the goal of reducing business IT costs. Moreover, stakeholders have already begun to see the benefits of this inclusive, data-driven and fact-based process. Some of the key benefits include:

  • Achieving unprecedented visibility into complete DON spending on a portfolio of products and services for specific vendors;
  • Providing critical input into future data systems to support increasing spending visibility;
  • Strategically engaging vendors at the enterprise level and encouraging them to be a source of data for the analysis;
  • Building organic collaboration and knowledge sharing across stakeholder groups focused on particular IT vendors; and
  • Providing input into near-term acquisitions that will have immediate impact on achieving near-term savings.
  • The BCAs are living documents that support ongoing collaboration and coordination with critical stakeholders from across the department. As the department continues to meet the challenges of the fiscal environment, the BCA processes will contribute to the collective successes of the DON Enterprise Software Licensing IPT and help achieve the goals of efficiently and effectively meeting the needs of the warfighter.

    Floyd Groce is director of commercial IT strategy for the Department of the Navy Chief Information Officer (DON CIO) and co-chair of the Department of Defense Enterprise Software Initiative program.

    Brian Fischbeck and Behrad Mahdi provide support to the DON CIO in a variety of business IT management, acquisition and cost-reduction initiatives.

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