Let's face it. During an economic downturn, every dollar earned, spent or saved seems to carry more weight than it does when the economy is growing. With more financial pressure on carriers these days, IT departments are under more scrutiny to rationalize projects and expenditures.Rationalization translates into greater discipline in measuring and managing the costs of IT hardware, software and projects-and the desire to get a more comprehensive, enterprisewide picture of those assets.
In 2000, Gartner Inc., a Stamford, Conn.-based technology research and consulting firm, began receiving more inquiries from clients asking about how to measure and manage the value of information technology, according to Michael W. Smith, vice president in Gartner Measurement.
"It's been a wild ride over the past 10 years," says Smith, who spoke at a Web seminar in March hosted by Primavera Systems Inc., an enterprise project management software provider in Bala Cynwyd, Pa.
In the late 1990s, senior executives were pressured to ensure their IT systems were Y2K-compliant, followed immediately by the urgency to develop e-commerce capabilities, he explains. As a result, companies rushed through traditional due diligence to evaluate technology-and spent a lot of money on IT. Then, the economy slumped, and those same executives became disenchanted, pointing to IT projects that had failed.
Scrutinizing IT expenditures is not new, admits Smith. "We've been . . . justifying IT expenditures for 30 or 40 years now. But the focus has been put back on the topic." Executives are a bit more cautious right now about making investments in technology, he says.
An artificial pull
Recent interest in IT asset management systems appears to be driven by a renewed emphasis on fiscal caution, says Ron Nabors, senior vice president at Tangram Enterprise Solutions Inc., a Cary, N.C.-based IT asset management system provider.
"We've observed that IT is hierarchically starting to report to the financial organization in many enterprises," Nabors says. "And companies are grappling with: What is the return on investment for an IT asset management solution and do we have the resources to deploy it?"
In the late 1990s, those questions had similar gravity as Y2K loomed on the horizon. Y2K produced an artificial pull for IT asset management systems, says Nabors. "There was a huge thirst in people to understand: What do I have, is it Y2K-compliant, and will my network work on January 1, 2000?"
Prudential Financial Inc. was one of those companies. In 1998, the Newark, N.J.-based firm implemented Tangram's IT asset management tool on 40,000 desktops and servers-at the same time that the company began its Y2K program.
"The asset management faction blamed the Y2K people as the reason they needed to get things done, and the Y2K people blamed the asset management people," says Tom Arner, architecture team leader at Prudential. "They both used each other as the impetus, which worked out very well actually."
Using the system over the past four years, Prudential was not only able to capture the inventory data it needed for Y2K compliance, but the company also has expanded the system to manage a variety of other IT costs and risks. For example, Prudential uses the tool:
* To charge back business units for desktop support.
* To track specific pieces of equipment for auditing purposes.
* To manage new software deployments, such as Microsoft Office 2000.
* To determine what machines are surplus and can be reassigned rather than purchasing new ones.
* To monitor contracts and configurations of leased equipment to negotiate better deals and avoid paying extra fees.
* To assess virus vulnerability and track deployment of virus protection on desktops and servers.
"The original objective was to get our hands around what was out there and what we could do with what was out there," Arner says. "But we found a number of ways to use the tool beyond that original objective."
A mad dash
For instance, he says, "virus scan and vulnerability was nothing we ever thought of (originally)." But the company uses the tool to determine what virus scan engine is running on every desktop, what virus footprints are on each computer, and what "fixes," if any, have been deployed. "In one stop, we know what our vulnerability is-and whether we've mitigated it," Arner says. "That's clearly beyond the original scope of the software."
Unlike Prudential, however, which has expanded its use of IT asset management technology since implementing it, many companies that purchased the software in the late 1990s for Y2K didn't maintain their systems, according to Tangram's Nabors.
"There was a mad dash in the market to get some kind of tool in place, and it was a very short-sighted approach. A lot of companies bought something and when everything worked on January 1, 2000, they did not sustain the tool. They just wanted to make sure they'd be okay on January 1," he says.
Research conducted by Gartner Inc. and the Giga Information Group Inc., Cambridge, Mass., indicates that only 20% to 50% of Fortune 1000 companies are using an IT asset management tool. But effective asset management is one of the best ways to achieve short-term IT cost savings, according to Gartner. In fact, the technology can yield savings up to 30% per asset with the first year, Gartner claims.
Rapid return on investment (ROI) from using the inventory and auto-discovery tools, which an IT asset management system provides, can help companies achieve short-term benefits, according to Giga. But positive ROI for enterprise IT asset management often takes 12 months to 18 months.
Indeed, an asset management system requires time and resources to implement and manage-resources some firms can't or won't commit. "I'm guessing that some companies have procurement systems that they deem adequate to track their assets," says Prudential's Arner, speculating on why more companies haven't adopted a dedicated IT asset management system.
In addition, he says, "this is the kind of system that begs to be integrated. It's fine by itself. But the next logical question is: Can I tie it back to my fixed asset system, or my leasing system, or my procurement system?"
In 2001, CNA Financial Corp. decided get a better centralized picture of its IT resources, which were dispersed and siloed in different business units.
"We looked to rationalize everything-software and hardware, our applications and how we do development," says Dmitry Tyomkin, enterprise architect for the Chicago-based insurer.
Along the way, CNA discovered it had many disparate in-house systems and many different approaches to application development. "We decided to put some order to that," says Tyomkin. "We decided to account for every software asset that we have."
Capturing software assets
In its narrowest definition, IT asset management involves tracking the inventory of computer hardware and software installations throughout an organization. But the term is broadening to include accounting for software assets as well-applications, components, services, frameworks and architectures that are critical to operating a business.
"A large enterprise has physical assets that are typically well-tracked and managed. So the CFO is quite happy about how those assets are tracked," says Brent Carlson, vice president and co-founder of LogicLibrary Inc., a Pittsburgh-based firm that developed the software asset mapping and discovery engine that CNA is using.
"Then you get into an organization's software, and the CFO doesn't have a clue what's out there. Yet, the software is what's running the business." Some companies are beginning to realize they have this huge capital base that they're not managing very well, he says.
CNA realized this, and acquired LogicLibary's tool to capture its software assets, map them to its component-based architecture, and publish them to online asset libraries. When fully implemented, CNA developers will be able to search, find and retrieve the software assets that fit their business and technical requirements, enabling them to reuse components or applications that already have been developed.
The company also expects to develop new applications much more quickly and to enable developers to adhere to enterprise frameworks and architectures. "We found that we needed a presentation layer for our abstract assets," says Tyomkin.
"Whether it's at the application level, or the inventory level, or the file level or a development framework-whatever (software) assets we have out there, we need to count them, we need to rationalize them, and we need to present them properly and make them accessible."
CNA has a broad-based initiative to move forward on a Java-based and J2EE-based development platform, LogicLibrary's Carlson notes. "One of the company's objectives is to describe its architecture and best practices in using that architecture to developers at large."
The insurer also wants to understand the dependencies between disparate software assets, Tyomkin says. In fact, understanding dependencies was a selling point of LogicLibrary's tool. "If we make sure everybody knows what dependencies exist, we can save a lot of money, particularly on downtime."
For example, he explains, "if we have a hardware box that needs to be taken down, we (currently) don't know always what the dependencies are-because everything is distributed today. If there is this database on this hardware, and there's an application that depends on that database, we want to know: What is this application? What software does it run? And what is its life cycle?"
Using LogicLibrary's software asset mapping tool, all those questions can be answered, he says.
Critical resources
Understanding dependencies was a deciding factor for American Family Life Assurance Company of Columbus (AFLAC) when it selected enterprise project management software from Primavera Systems. In this case, however, the dependencies THAT AFLAC sought to analyze are between IT resources and projects.
"AFLAC has experienced tremendous growth over the past few years, and we had a lot of work to accomplish on the IT side," says Joe Weider, director of the enterprise project office at the Columbus, Ga.-based voluntary insurance carrier.
"We needed a tool to help us best leverage our resources in house," he says. Primavera's tool enables AFLAC to manage individual projects, to aggressively manage its resources, and it gives the company an enterprise view of our project portfolio, he adds.
Using the software, AFLAC can constrain an IT project or build a dependency between projects based on a critical resource, such as Java programmers.
For example, "Let's say we're building a Web application, and we've got five (Java programmers) working full-time on it for three months," Weider says. AFLAC can build a dependency on the project that stays fixed in the enterprise view of all IT projects, including those that require Java programmers.
This way, if the schedule for the Web application project begins to slip, management can see the impact of that slippage on the entire portfolio. "It really enables us to make a decision," he says. "Should we go out and hire five guys immediately? How big is the fire that's causing the slippage? What impact are we facing? A three-week impact on one project may result in a three-month impact on another."
More informed decisions
With 100 to 200 IT projects and 800 people being tracked by the software at any one time, AFLAC is now running scenarios for every new project to illustrate its impact on the company's overall IT capacity. These scenarios provide the IT governance bodies with quantitative analysis they need to make more informed decisions about IT priorities.
"There's an estimate in every project for each resource," Weider explains.
"We build multiple scenarios, and at the end of the analysis, we're able to say (to the governing bodies), 'If you give us a check for $300,000, there will be no impact on the portfolio. If you give us a check for $200,000 and we can hire this incredibly strained resource, we'll see a slight impact on the portfolio. Or you may choose not to give us any money, in which case we'll use all in-house resources and here's how the portfolio will look,'" he says.
Tracking and managing IT projects with such precision enables AFLAC to reduce the all-too-common failures that occur with application development.
According to The Standish Group International Inc., a West Yarmouth, Mass.-based research firm, 28% of IT projects are cancelled before completion, and 46% are completed over-budget, over the time estimate, and with fewer features and functionality than initially specified.
AFLAC's goal is to complete 98% of its IT projects on time, within budget, and with a respectable ROI. And, implementing Primavera's tool was the first step toward reaching that goal: The software paid for itself within the first three months.
"We were able to see some trouble coming down the road for one of our larger projects. We were able to avoid a lot of expense and time," says Weider, declining to discuss the details.
Enterprise project management is notably helpful in the insurance industry, which is incredibly complex and highly regulated, according to Weider. "Before we had this tool, if HIPAA (the Health Insurance Portability and Accountability Act) would have come in, we would have said, 'It's the No. 1 priority,' and we would have stopped work on a lot of other (projects)-as any other organization would-to focus on HIPAA."
With the tool, when regulations change, an insurer can build a rough plan, add the plan to its project portfolio, and determine how to best staff it to meet the deadlines. And, the insurer can do this while still executing its strategic business plans, Weider says.
"Before an enterprise project management tool is in your environment, you just keep throwing water on the fire. Now, you're actually aiming the fire hose and targeting where you want your resources."
