This document discusses how IT projects can be approved in the new economic world. It outlines the challenges facing CFOs, including constraints on access to credit and the need to prioritize short-term financial matters. It then provides advice on addressing the priorities of finance departments by cutting costs, increasing productivity, and seeking alternative financing such as leasing. The document recommends focusing business cases on metrics like ROI, clarity on benefits, and clear execution plans to gain project approval from CFOs.

1. How to get Your IT Projects Approved in the
g j pp
New Economic World
Brett Vincent
General Manager
IBM Global Financing, ANZ
IBM Insight Forum 09 Make change work for you
®

2. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

3. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

4. The 2008 legacy : lack of liquidity
25 US banks and dozens more across
the world failed during 2008. The IMF Financial
had to rescue 6 country economies markets
Financial
turmoil
markets
On average, stocks lost 42% of their
turmoil
value worldwide, erasing almost $30
trillion in market value
NZ economy contracts for 6 successive
quarters
Volatile Stock
Exports down 19% year-to-year consumer market
confidence volatility
International visitors down 4.2% year-to-
year
Unemployment at nine-year high of 6%
nine year
As a result, credit markets continue to
conserve cash

5. Succeeding in uncertain times
Significant uncertainty among
Tightening businesses
credit
markets Many corporations in cash
conservation mode
Economic
uncertainty Access to capital shrinking:
− Less credit available in the
Stock market and more restrictions
market
turmoil − Credit lines being used for core
business needs
− Pressure on IT spending
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What has not changed:
The future success of an organization is still dependent on its ability to invest in
meeting client needs and improving its competitive position

6. Investment Economics
Market Volatility Raises Caution
Pre-crash:
Typical
T i l cost of capital:
t f it l 5.50% to 7.50%
5 50% t 7 50%
Typical investment threshold: 12.00% to 15.00% or 2x
Post-crash: Rates are normalizing; behaviour isn’t:
g;
Previous cost of capital: 5.50% to 7.50%
New cost of capital: 6.50% to 8.50%
CAUTION PREMIUM 250 bp
New investment thresholds: 18.00% 20.00%
18 00% to 20 00%
Capital Planning Scenarios Will Assume
Higher ROI Thresholds for the Next 36 Months
Source: IDC “IT Funding and Financing: Strategies in a Changed World”, July 2009

7. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

8. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

9. The new economy is more challenging than ever for CFOs
New Economic Environment Management Challenges
Unprecedented constraints on access to Manage short term financial matters
credit and capital; Unwinding of over- Review and validate or reset the
leverage company strategy
Falling de a d, increased p ce
a g demand, c eased price Reprioritize projects/investments
sensitivity as consumers and enterprises
cut back Interact with the board to assure
priorities are correct and are being
Disruptions in supply chains, p
p pp y partner and followed
customer arrangements
Take decisive actions
Restructuring of industries: Firms fail,
sold off overnight
New regulatory authorities

10. One result: More power now shifts to CFOs as they become key
players, even leaders, in major decisions
Refocus on short Power shifts to CFO Corporate actions
term financial matters leadership Reset the company strategy
Cost Savings CFO becomes key player, Reprioritize
even a leader in major
leader, projects/investments
Meeting financial covenants
decisions
Cash Flow Inspect all significant
Lead survival plan for the business cases for rigor,
Obtain/maintain access to corporation p y
payback, return and risk
financing
Drive cost out of the - Another check point…
business another delay
Waste no capital Eliminate proposals that do
not fit the survival plan
t th i l l
Assure swift payback on
investments Interact with the board to
assure priorities are correct
and are being followed
g
Source: Jesse Green, Vice President of Financial Management, IBM

11. Enterprises and their CFOs need a three-pronged agenda
Focus on Exploit Act with
Value Opportunities Speed
Do more with less Capture share Manage change
Focus on cash/capital Disrupt weak competitors Communicate clear & simple
Create flexibility Make selective acquisitions goals
Seek and leverage
Focus on the core Build future capabilities experience
Reprioritize businesses Protect & acquire talent
Revisit initiatives Develop required assets Lead
Get the information to act
Re-align relationships Change your industry Set the agenda
Assess financial stability of Make bold moves
suppliers, partners and Position globally Manage risk and improve
customers
t transparency
Revisit/renegotiate Drive performance
management & analytics
Manage risk
Source: IBM Global Business Services, Institute for Business Value

12. The CIO has a set of compelling questions to answer in
p gq
order to support the enterprise in this environment
Focus on Exploit Act with
Value Opportunities Speed
CIO How can I get more from my How can I speed the full How do I create a flexible and
Questions infrastructure while improving IT integration of acquisitions? scalable IT infrastructure that
performance? support rapid business change?
How can I extend the global reach
How do I help my IT staff be
y of the enterprise? How can IT help reduce
more productive? business risk and improve
How can I better align IT with stakeholder information access?
How can I leverage key vendor business objectives?
partnerships for more value?
CIO Improve operational Integrate systems and data Exploit a dynamic
Response
p efficiency and
y to improve responsiveness
p p infrastructure that is
effectiveness – cut costs and drive new insights flexible, resilient and
to fund new business secure
solutions

13. The CFO’s critical questions are not the same
Focus on Exploit Act with
Value Opportunities Speed
CFO How do I do more with less or be How can I leverage financial and How do I create a scalable and
more effective with the same non-financial data to generate flexible information management
Questions timely, relevant insights? framework and financial
within Finance and across the
organization? management model to navigate
ever increasing change and
How do I rethink where capital is provide the necessary control?
deployed
CFO Manage costs Enhance performance Integrate Finance
Response and maximize capital management
Source: IBM Global Business Services, Institute for Business Value

14. Selling to the CFO – three essential issues that must be
addressed
ROI Clarity Execution
CFOs are looking CFOs are looking CFOs will demand
for rapid ROI for clarity to see the execution plan
In today’s environment, they’re
environment They need to understand what the They need to be confident that the
expecting payback in less than 12 proposed solution will do and how it benefits promised will be realized
months will deliver business value They need specifics – if promising to
CFOs are intensely focused on cash Generalities won’t do – the benefits cut costs, they’ll want to know how
flow and the balance sheet promised need to be business-based much, when, and mostly importantly –
The key question CFOs are asking and tangible the plan for delivering savings (e.g.
is: “ … is this the right investment, cutting equipment costs, network
right now.” expense, or staff reductions)
Key point: The metrics for measuring the success of a project need to be clearly
defined up front. If the project can’t be measured in a way that tracks the benefits to
can t
the business, it won’t be approved in today’s environment
Source: IBM Global Business Services, Institute for Business Value

15. Projects to exploit your investments in SAP
Source:
AMR Research,
The Fast-Payback
SAP Projects for
Saving Money in
2009: Detailed Data
for Business
Expense Projects,
June 2009

16. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

17. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

18. CIOs can address CFO requirements in four ways
Cut costs
► Provide immediate
savings and near-term
Get more from existing return on investment
infrastructure
infrastr ct re
► Defer or amortise capital
expenditures
► M
Manage/mitigate risk
/ iti t i k
Increase productivity
► Meet changing business
demands
Seek alternative
financing

19. Some actions to build into business cases
Conduct an
Cut costs assessment to
identify cost
savings
i
Get more from existing
infrastructure
infrastr ct re
Simplify and
consolidate
computing and
p g
Increase productivity networking
Virtualize IT to
Seek alternative reduce costs and
financing enhance
performance

20. Some actions to build into business cases
Ensure IT is
responsive to
Cut costs changing business
needs
Simplify and
consolidate
Get more from existing networking
infrastructure
infrastr ct re
Improve utilization
and capacity through
virtualization & grid
Increase productivity technologies
Reduce expense
Seek alternative associated with
financing downtime

21. Some actions to build into business cases
Cut costs
Improve the
productivity of your
Get more from existing staff
infrastructure
infrastr ct re
Increase productivity
Reduce staffing
pressure … out task
routine management
Seek alternative
financing

22. Some actions to build into business cases
Use a specialist IT
financier
Cut costs
Defer/step
Get more from existing payments to meet
IT budgets
infrastructure
infrastr ct re
Sale/leaseback
Increase productivity existing
infrastructure
Structure project
Seek alternative
funding to align
financing costs and
benefits

23. Financing can help you to justify your infrastructure
projects and achieve a faster “time to value”
Costs are heaviest at the front end of a project, while benefits do not fully
accrue until the project is implemented
When the project is financed, replacing up-front costs with payments over time,
costs and benefits track much more closely
SW Licence
Match the Timing of Project Costs to Benefits Services
Maintenance & Tech
support
Major cost / return
$ mismatch $ $
Year
1 Year
1 Costs more
Year
1 Improved cost / closely aligned
return alignment to returns
Phase Phase Phase
ROI ROI ROI
I II III Year
Y Year 1 Year 3
Year 2
3
Year
2
Year 3
Phases I - III Year 1 Year 2
Years Years Years
Business as Usual Using Term Financing Using IGF Structured Financing

24. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

25. Agenda
A d
1 What is the ‘New Economic World’?
2 What’s important to the Finance Dept?
3 How to address financial imperatives
4 Conclusion and next steps

26. “…a period of discontinuity is, for those with courage and
vision, a period of opportunity. Over the next couple of
, p pp y p
years, there will be winners, and there will be losers. And
though it may not be easy to see now, I believe we will see
new leaders emerge who win not by surviving the storm,
but by changing the game.”
- Sam Palmisano, November, 2008

27. The CFO wants to know how your project enABLes
Alignment:
Question: How are does your project align with your organisation’s key goals?
Action: Develop a deeper understanding from a business and financial perspective as
compared to only a technological one
Business logic:
Question: What is the business logic behind how your project improves performance?
Action: Translate a solution’s feature/function benefits into a practical explanation of how they
help your organisation better manage the activities within business processes and, in turn,
improve key performance indicators (KPIs)
Lasting benefits:
Question: What are the lasting cash flow benefits and overall value to the enterprise?
Action: Build a business case that includes quantitative analyses like the project’s investment
project s
and TCO, the lasting benefits in the area directly affected by the project – and impact on other
areas of the enterprise, payback, ROI and breakeven analysis – plus qualitative analysis like
critical success factors and risk assessment
• Ask your vendor rep(s) to help you build the business case – it is as
much a specialist skill as any technical role.
• Ask your rep(s) for assistance from someone with financial selling
skills.

28. Leverage IBM’s financing capabilities
IBM Global Financing is the world’s largest IT financier, and provides financing for
91 of the 100 biggest U.S. corporations. We offer you financing specialists who talk
the same language as your CFO, and unlike banks, we focus primarily on solution
and technology financing.
Working with IGF provides:
G
Access to funding and cash to enable transformation in tight credit market
An alternative capital / funding source
Allows your organisation to preserve cash and credit lines for other core business needs
Cash Flow Management
Predictable and known costs over a fixed term
Payments matched to solution benefits - a better alignment between the return on investment and
the actual expenditure
Management of the entire technology lifecycle
Leasing eliminates up front investment costs, keeps assets off balance sheet and mitigates the asset
lifecycle management headache
Management of IT hardware assets ensures the asset register is accurate and provides a hedge
against technology obsolescence
Asset recovery solutions can free up cash
Reduced costs
Used equipment provides access to reliable IBM technology at lower price points

29. For more information contact
IBM Global Financing on
0800 408 035
or go to
www.ibm.com/finacing/au
ib /fi i /
or email
mloh@nz1.ibm.com