SONY PICTURES ENTERTAINMENT Measuring IT Value at SPE July 15, 2010 Demystifying IT Spend Each year we are challenged to reduce our IT spend both in terms of Overhead and Capital Our budget challenges are in response to the overall
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SONY PICTURES ENTERTAINMENT Measuring IT Value at SPE
July 15, 2010<br>
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Demystifying IT Spend Each year we are challenged to reduce our IT spend both in terms of Overhead and Capital
Our budget challenges are in response to the overall financial health of the organization and tend to be short term focused
I wanted to establish a more empirical approach to IT investment and set out to answer a few simple questions.
How much do we spend?
Do we spend too much or too little?
Do we spend it in the right places?
Can or should we be correlating IT spend with operational efficiency or profitability? 2<br>
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Historical IT Spend 3 (in Millions) *Total spend includes depreciation<br>
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SPE vs. Average Growth in IT Spending 4 (in Millions) According to Gartner, the average IT organization is increasing IT spending by 17% year over year while SPE has averaged 8% and only 4% YoY over the last 4 years<br>
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Historical Capital Spending 5 (in Millions)<br>
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IT Spend as a % of Revenue 6<br>
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IT Spend as a % of Operational Expense 7 SPE spent 1.72% or $122M vs the benchmark of 7.3% or $518M
Even if we were to increase our profit margin to 10% we are still only at 1.81% of OH, far lower than the benchmark<br>
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Key Metrics for FY11 8<br>
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Conclusions We spend less on total IT (overhead+capital-depreciation) as a % of revenue than the benchmark average of 4.1%
We spend less on total IT as a % of overhead than the bench mark average of 6.3%
Our distribution of spend to support the business vs grow the business can be improved
Our industry saw a increase in IT spending of 1.6% from 2009-2010 while we had a 10% decrease
The question isn’t whether we should be spending more money or not but rather why we should spending money and what will the company will get in return for the investment. 9<br>
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Adding Value Through IT Manage out Complexity – System consolidation, eliminate redundant systems, data center consolidation, leverage offshore resources, reduce system maintenance
Data Insight – Focus on data analysis through reporting and analytics
Variable Computing – Leverage SaaS and create industry SaaS models for non-competitive computing. Look for other variable IT spending models such as Cloud Storage and processing
Focus on IT Value – Focus on managing out costs while investing in areas that will provide a competitive advantage 10<br>
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Continuing the Analysis Other areas to analyze
Detailed spend analysis of hardware, software, licenses, etc
Update our labor analysis, good story to tell
Analyze support, grow, transform
Analyze the results of outsourcing vs. benchmark
Potential implications of SaaS on future spend and investment
Refine benchmark data for better industry comparisons, specific benchmarks or ranges of data
Detailed cost analysis of major area of spend, LOB, EIS, ADM
People analysis compare to benchmark
FY12 capital spend – Grow the business vs. support the business 11<br>
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Financial History 12<br>
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List of Metrics Total IT Spend
Overhead vs Industry
Capital vs. Industry 13 Application spend as a % of total IT spend
Distribution of Costs<br>
