Korean CIO Survey 2008

Korean CIO Survey 2008 Innovation through IT for Business Results

A comparison of Korean and global views on the role of the IT function in business innovation

Innovation through IT for Business Results

Table of Contents

Foreword 1

Participating Companies and Organizations 2

Executive Summary 4

Innovation - A Definition 5

Business Innovation through IT for Delivering Results 6

Areas Where Innovation Delivers Results 8

Strategic IT Capabilities Beyond the IT Fundamentals 12

Building a Relationship for Business Innovation 16

Expanding the Network to Include External Partners 18

A New Start for the CIO as a Leader of Innovation 22

About the Survey 24

About SDS, OpenTide and Capgemini 25

Copyright © 2008 Samsung SDS, OpenTide and Capgemini. All rights reserved. Korean CIO Survey 2008

Foreword

With the global economy changing rapidly, For that reason, this survey addresses the and uncertainty growing in the Korean role of the CIO and the IT function in market, it becomes more important, yet business innovation and proposes strategies more difficult, for organizations to make the that can put CIOs in a better position to right investment decisions. drive business innovation.

Focusing on the right decisions and choices We thank all the CIOs who participated for is particularly critical during the current sharing their opinions with us. We value global economic turmoil. Because of the your effort and commitment. We hope considerable amount of investment and that this report will stimulate discussion costs involved in IT, it is more important about the role of the IT function in Korea, now than ever for CIOs to ask questions its relationship to the business and how it like: “is the IT function focused on business can add value by participating in business values and performing well against business innovation. priorities?” and: “does the IT function have sufficient IT capabilities, and make sufficient use of internal and external resources, to achieve this objective?”

We feel that it is the right time to survey In Kim the views of CIOs in Korea in order to Samsung SDS CEO discover the answers to questions like these. The Korean CIO survey is based on one- to-one interviews with 100 Korean CIOs, representing all industry sectors. It is the result of a close collaboration between Samsung SDS, OpenTide and Capgemini Eui Noung Han Consulting. We have also taken the OpenTide opportunity to make comparisons with 400 CEO of our respondents’ global counterparts, interviewed for Capgemini’s 2008 Global CIO Survey.

During this critical period, global CIOs are making efforts to participate proactively in corporate decision making, to act as drivers Eric Monnoyer Capgemini Consulting of innovation and to stake a claim to be the Vice President focal point for sustainable growth within the BIS Global Leader corporation.

Innovation through IT for Business Results 1 Participating Companies and Organizations

Samsung SDS, OpenTide and Capgemini Consulting would like to thank all 100 participating CIOs and senior managers who gave time to be interviewed for this CIO survey:

Business Services Samsung Investments SungShin Cement Ajou University Medical Center Samsung Life Taekwang Asiana Airline Samsung Securities Public, Government & Social Hallym University Medical Center Ministry of Environment Hansol PNS Korea Securities Depository Korea Tourism Organization Korea Enterprise Data Dong-A Pharmaceutical Military Manpower Korea University Hospital DongBu HiTek-SemiConductor Division Administration Postech Doosan Heavy Industries & Construction Ministry of Foreign Affairs and Trade S1 Eugene Ministry of Public Admin. and Security Green Cross The Bank of Korea Halla Climate Control Consumer Products & Retail Hynix Telecom, Media & Amore Pacific Entertainment CJ CheilJedang LG Telecom CJ Corporation Il Dong Pharmaceutical Samsung Resort Dongsuh Foods IlYang Pharmaceutical Taekwang systems Pulmuone LS Cable MagnaChip Travel, Transport & POSCO Energy & Utilities Charmzone Renault Samsung Motors KEPCO GS Homeshopping Samsung BP Chemical Hmall Samsung C&T - Construction Financial Services IMK Samsung Corning Precision Glass Incheon International Airport Corporation Heungkuk Life Insurance KORAIL Samsung Electro-Mechanics Lotte Mart Korea Development Bank Samsung C&T - Trade Korea Securities Finance Corporation Samsung Fine Chemicals Kyobo Life Insurance SK Networks Additional companies participated in the survey MetLife Korea Samsung Petrochemical but requested to remain anonymous. Mirae Asset Life Insurance Samsung SDI Mirae Asset Samsung Techwin National Health Insurance Samsung Total Petrochemicals National Pension Service SeAH Besteel NHNonghyup SeAH Steel Prudential Life Insurance Korea SK Engineering & Construction SsangYong Motor

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Business Innovation through IT “ ”

Innovation through IT for Business Results 3 Executive Summary

Business innovation is not a new mission Currently, domestic CIOs1 lag behind for CIOs in Korea. In fact, they already international ones in enterprise-level contribute to business innovation, for activities, such as participating in corporate example, by improving efficiency through IT. strategy development, while there also seems to be a lack of participation and Despite this achievement, CIOs are having interest from Korean business management to respond to ever-growing demands in IT strategy and decision-making. One of from top management, because of the key the key concerns for Korean CIOs is how role played by information technology in they can help the CEO, and the business business innovation today. They are well as a whole, to increase their understanding aware that the ability of the CIO and of the of IT. For this, CIOs must secure their IT organization to create business value position as a partner to the business. This, is critical and that the business expects together with strong sponsorship from top the CIO to deliver results. As to how well management, will allow CIOs to discuss they have met these expectations, CIOs ideas and work together with the business themselves admit to some gaps. in pursuit of innovation.

We canvassed the views of Korean CIOs Rapid changes in the technology about the actual and potential role of the IT environment can lead to resource function with respect to business innovation. constraints and can impair a company’s We then compared the responses of our 100 ability to innovate. Many international Korean CIOs with Capgemini’s survey of companies have already established a wide 400 CIOs worldwide. network of IT suppliers, clients, universities and other partners to adopt new ideas and We found that, up until now, Korean CIOs technologies and to develop professional have focused on basic IT performance in knowledge for innovation. To do this in an areas such as infrastructure management effective and timely manner, Korean CIOs and business support. Korean IT must also have the ability to combine and functions were more successful than their utilize different channels as needed. international counterparts in these areas. However, current capabilities are insufficient The unique selling point of CIOs is their to drive innovation further. First, companies combination of deep understanding of must build their strategic IT strengths, such the business, technology market insight as the ability to identify IT-based innovative and their ability to deliver the value of opportunities within and outside of the technology to management and business. company. Organizations must also invest in If they can capitalise on these attributes to these innovation-oriented strengths. deliver business value, then Korean CIOs will be able to secure their position as leaders of innovation.

1 Throughout this report we will use terms like “domestic CIOs” and “domestic companies” to refer to the respondents to our Korean survey; “global CIOs” refers to the respondents to Capgemini’s Global CIO Survey.

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Innovation - A Definition

A definition of innovation is needed here, because what is innovative to one person can be a minor change to another, and what is innovative today is business as usual tomorrow.

For the purposes of this survey we have adopted the definition famously put forward by Peter F. Drucker (writer, sociologist and management theorist, who died in 2005):

“Change that creates a new dimension of performance”

This report is concerned with a specific type of innovation: business innovation and its relationship to the CIO2 and IT function. Innovation in the way that IT is delivered is outside the scope of the report.

2 The Chief Information Officer (CIO) title is not consistently used across organizations and geographies. For the purposes of this report, we have taken it to mean the person who is ultimately responsible for the IT function.

Innovation through IT for Business Results 5 Business Innovation through IT for Delivering Results

Figure 1 Until now we have IT’s key role in business Innovation is a top priority for your business focused on building IT innovation capabilities as a foundation. CIOs, both in Korea and globally, agree that Global 73% “ From now on, we have to innovation is a cornerstone of corporate Korea 88% make the effort to create strategy, and that information technology 0% 20% 40% 60% 80% 100% plays a leading role in driving innovation. Percentage of organizations and show strong business

Percentages represent “Strongly Agree” & “Agree”, results. To achieve this, we As figure 1 shows, 88% of domestic [ answered by interviewee ] need to gain confidence and respondents and 73% of global respondents Figure 2 trust from top management believe that innovation is a top priority IT is viewed as critical for business innovation by your organisation and business users. Without in corporate management. 76% and that confidence and trust, 72% respectively agree that information Global 72% we simply cannot discuss technology has a critical role in driving Korea business innovation (figure 2). 76% business or innovation. 0% 20% 40% 60% 80% 100% Percentage of organizations Furthermore, both domestic and global Percentages represent - CIO in Financial Services “Strongly Agree” & “Agree”, companies responded that their company [ answered by interviewee ] ” is encouraging innovation based on IT (domestic 72%, global 66%). The exceptionally positive views from domestic CIOs seem to reflect high management expectations of IT, and of the IT function, in Korea. Business leaders see Korea as a strong IT nation and Korean CIOs, in turn, feel a strong sense of responsibility to meet those high expectations.

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Transforming CIOs to become What are the core capabilities that top Figure 3 management expects of CIOs? As shown in The IT function is the main initiator business innovators of business innovation However, there is a difference of opinion figure 5, top management believes that CIOs between Korean CIOs and other senior should display strong business knowledge Korea 72% management when it comes to the role and communication skills together with IT 0% 20% 40% 60% 80% 100% Percentage of organizations of the IT function as a driver of business leadership for innovation, and be involved Percentages represent in corporate strategy and decision making. “Strongly Agree” & “Agree”, innovation: 72% of CIO respondents believe [ answered by interviewee ] that the IT function is the main initiator of Top management is demanding tangible business innovation (figure 3), yet the CIOs results. Figure 4 The IT function is viewed as one of report that only 58% of top management the sources of innovation by the business thinks of the IT function as even one of the Only when CIOs are able to effectively sources of business innovation, (figure 4). deliver such performance results will Korea 58%

management acknowledge the central role 0% 20% 40% 60% 80% 100% Percentage of organizations In other words, while CIOs believe of CIOs in business innovation. Percentages represent “Strongly Agree” & “Agree”, themselves to be at the center of business [ answered by interviewee ] innovation, management does not share that view. Figure 5 What are the core capabilities that a CIO requires? Such differences of perspective show that, Business knowledge and communication skills 3.1 despite their efforts, CIOs in Korea are under-recognized by top management. IT leadership for innovation 2.7

Involvement in corporate strategy 2.6 and decision making

IT knowledge 1.5 and skills

0 1 2 3 4

[4: Most important]

Innovation through IT for Business Results 7 Areas Where Innovation Delivers Results

The CEO is not interested A new focus for innovation What is behind this difference? While in what IT has done in the through IT in Korea domestic CIOs are still involved in past. The CEO’s ‘top of mind’ To gain improvements in business IT innovation that is focused on cost “ containment and efficient internal issue is about what IT can do performance, which areas should a company focus on with respect to innovation and, in operations, global CIOs have moved to help the business grow in particular, innovation through IT? on to other areas of innovation, such as future. Unless the CIO has a developing new products or creating new clear answer to this question, The survey shows that, globally, CIOs markets. he or she will be in trouble recognize R&D to be the biggest source of with the CEO. innovation (figure 6) and have focused their Domestic CIOs should broaden their IT innovative activities on R&D. On the perspectives into other areas for IT - CIO in Manufacturing other hand, CIOs in Korea feel operations to innovation, such as R&D, rather than ” be the biggest source of innovation and have solely concentrating on existing operational targeted current operations for innovation processes. To achieve visible results, they through IT. should focus the innovative activities of the IT function on the areas that have most strategic importance for business innovation.

Figure 6 Which areas are the most important in terms of originating innovation?

Research & Development

Operation

Sales

Marketing

IT

Finance

0 1 2 3 4 5 6 [6: Most important]

Global Korea

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Case Study I TGV - service innovation driven by The concept of the services is illustrated in IT the diagram below (figure 7) What started out as an innovative The idea progressed through reframing the technology initiative by the IT function original technical opportunity as a business turned into a business program delivering a opportunity, experimenting to prove the revenue stream in its own right. concept, shaping the offer in terms of An IT opportunity has been reframed as a marketing, service and business model, business opportunity. assembling best-of-breed partners, and implementing and operating the service. Situation The European rail transportation market has Result undergone progressive deregulation at the The new wireless service is providing a same time as it has experienced intensifying revenue stream in its own right, based competition from low cost airlines. The on provision of a portfolio of over 80 French railway, SNCF, has responded by services supplied by a network of internal focusing on developing its image and brand, and external partners. In addition it increasing market share against flights, allows improved customer intimacy and enhancing customer satisfaction and loyalty insight, providing an exclusive one-to- and creating additional revenues with strong one communication channel for direct margins. marketing, customer surveys and cross selling. It is currently being piloted on Approach TGV trains in Eastern France and on TGV SNCF, in collaboration with Capgemini connections in Germany, Switzerland and (an existing business partner for SNCF), Luxembourg, and is progressing to full conceptualized a new wireless service commercial rollout. including internet access and multimedia services – global positioning on a map, hotel and event booking, televised news etc.

Figure 7 Case study: TGV - Service Innovation driven by IT

System Concept Interactive communication between train and station

Real time network between satellite and train

Internet Satellite based station

Wi-Fi Interface

Innovation through IT for Business Results 9 Case Study II Samsung Electronics MPS – Approach business model innovation In 2007, Samsung Electronics and Samsung through servitization SDS, an IT service provider, became Situation partners and entered into the MPS (Managed “Servitization”- the integration of IT services Printing Service) market. The current printer with products - is becoming a key issue market stands at 140 billion dollars annually in the global business field, and there are and both companies recognized that 80% of more and more examples of traditional the printers and 95% of the supplies come manufacturing companies shifting to from the B2B market. They joined forces to become service providers through IT. promote MPS by co-monitoring the status of printers and co-distributing paper and Recently, there have been attempts by toner. domestic companies, such as Samsung Electronics and Hyundai Motors, to Result integrate IT services with their products. Convergence of the provision of its printing Why are global companies interested in equipment with provision of printing servitization? Servitization is based on services meant that Samsung Electronics, fundamental research into enhancing working together with Samsung SDS, was customer satisfaction; it creates a new able to boost value by targeting companies business model through the convergence in the B2B market. of products and services (figure 8) and has great potential for growth.

Figure 8 Servitization

Integration

Service Service

Product Product

Service is a separate factor Product and service are integrated, from sales not separated

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How focused are you on the business values of your “corporation? ”

Innovation through IT for Business Results 11 Strategic IT Capabilities Beyond the IT Fundamentals

Figure 9 We are already under Strong IT fundamentals are the How would you rate the performance of basis for business innovation your IT fundamentals? too much pressure doing what the business expects IT fundamentals are defined as the basic Global 56% “ operational elements of the IT value chain: us to do, such as keeping Korea application management, infrastructure 70% the lights on and handling 0% 20% 40% 60% 80% 100% management and business support. Percentage of organizations numerous service requests.

Percentages represent “1” & “2” where “1” = Very Although we do understand When asked about the performance [ high and “5” = Very low ] the importance of the of IT fundamentals in their company,

Figure 10 business innovation role, we 70% of domestic CIOs responded “very What are the key areas of improvement that do not have room to move on good” or “good”, which is better than the business expects of the IT function? to innovation because of this global performance (56%), as shown in figure 9. Korean CIOs are making efforts Effectiveness of support provided to the business 3.4 situation to standardize and optimize basic IT Stability of system operations 2.4 implementation, as is illustrated by the - CIO in Business Services Cost efficiency achieved by systems 2.2 statistic that 56% apply industry standard Leading the business 2.1 with new innovative ideas ” processes, such as ITIL or COBIT, to their

0 1 2 3 4 operations.

[4: Most important] Such positive results come from the time Figure 11 and effort invested by CIOs in Korea to The IT function has a track record of performing IT fundamentals well meet the demands and expectations of the business for stable operations, business Global 58% support, cost containment and accessible

Korea 64% systems (figure 10).

0% 20% 40% 60% 80% 100% Percentage of organizations Korean business managers acknowledge Percentages represent “Strongly Agree” & “Agree”, that their companies have strong IT [ answered by interviewee ] fundamentals (figure 11).

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So what effect do strong IT fundamentals Though Korean CIOs agree that Figure 12 have on the CIO’s ability to drive IT releases staff for innovation, the survey What effect does an IT function with strong IT fundamentals have on business innovation innovation? findings point to a shortage of IT staff. Global When asked about their most important 33% 33% 28% 2% 4% As figure 12 below shows, CIOs in barriers to participation in innovation, Korea 37% 34% 29%

Korea and around the world share the a majority of domestic CIOs answered 0% 20% 40% 60% 80% 100% understanding that by providing strong “difficulties in recruiting skilled staff”. % of CIOs fundamentals CIOs earn the right to This is borne out by a comparison with Enables focus upon strategic issues with the business participate actively in business innovation. global statistics, as the ratio between the Enables resource to work closely with the business Frees up resources to enable the business to innovate They then have a starting point from which total staff and IT staff in Korea is just half Inhibits IT creativity and destroys flexibility they can deepen their understanding of that of the global ratio (figure 14). No influence strategic issues, improving the relationship with the business and securing available IT Building a strategic IT function will require Figure 13 resources. the recruitment of IT staff with the right Which of the following ways does your outsourced capabilities. This shortage of staff for IT impact the ability to drive business innovation? The survey found that 92% of the domestic innovation is a symptom that CIOs are Global 31% 28% 18% 4% 19% companies who participated in the survey not taking the lead in this area and are not Korea 41% 33% 15% 3% 8% use IT outsourcing to help deliver strong getting management support to do so. 0% 20% 40% 60% 80% 100% IT fundamentals. In addition, the level of % of CIOs outsourcing within their IT budgets is more It releases staff capacity to devote to innovation than equal to the global level (domestic It provides access to necessary capability 39%, global 37%). Figure 13 illustrates that It has no impact on driving innovation It actually inhibits innovation both global and domestic CIOs believe IT We do not outsource outsourcing provides additional capability and releases staff to focus on innovation. Figure 14 Ratio of full-time IT employees to full-time corporate employees

Global 2.1%

Korea 1.1%

0% 1% 2% 3%

Innovation through IT for Business Results 13 New strategic IT capabilities for IT strategy development and execution – Management and improvement of system innovation Create a mission and a strategic route to be operation – Create necessary IT service Excelling in IT fundamentals is not, by itself, taken by IT in the medium term, based on categories and standards for business sufficient for the CIO to become a driver of the opportunities for IT-driven innovation; implementation; maintain and control the business innovation. In other words, strong agree a plan with the business for executing level of IT services through monitoring of IT fundamentals do not mean that a CIO the strategy operational and improvement activities can immediately participate in discussions Establishment and management of Performance evaluation and communication with management and the business about enterprise architecture – Based on an – Set up measures to evaluate the progress the business innovation agenda. There need enterprise business model, establish of IT-driven innovation; use the results to be strategic IT capabilities in place (such standards and principles for applications, to deliver changes that make a real as those described in figure 15) that will data and infrastructure; monitor and contribution to business innovation and enable the move from an operational role to maintain ongoing tasks for IT-driven management. an innovation role. innovation to meet demands from the To summarize, excellent IT fundamentals business are necessary but not sufficient to deliver Developing these strategic IT capabilities Project portfolio management – Deliver business innovation. In addition to provides the platform for the CIO to drive enterprise innovation strategies by creating delivering basic IT operations, there needs business innovation through IT. a project portfolio of IT-driven innovation to be investment in IT resources of the The IT function must become adept at: tasks; make changes and set priorities based right capability and in the right numbers Discovering opportunities for IT-driven on the importance of innovation and mutual for the IT organization to act as a strategic innovation – Be aware of technical trends relationships IT function. Only then will domestic within and outside the business; identify IT organizations get closer to becoming areas for innovation, and create pools of business innovators. potential to exploit these opportunities

Figure 15

Samsung SDS IT Value Management Framework

IT Trend & External ISP Preparation Architecture Project Op Planning/ IT Performance Analysis Planning Embarkation Svc Lvl Mgt. Mgt.

Project Internal Analysis IT Strategy Architecture Deliberation Operations Total Cost Mgt. Planning Development & Mgt. Management

Architecture IT Demand Mgt. IT Master Plan Compliance Project QA IT VOC Mgt. IT Assessment & Change

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Case Study III Global pharmaceutical company with business managers about technology emphasis on outsourced offshore centers, establishing strategic IT function and business trends and possibilities for and on captive near-shore ones. satisfying emerging business requirements capabilities Governance across global, regional and local with new technology. The IT business Realignment of IT and the business is a IT functions was rationalized and made relationship functions were designed pre-condition for participation in business consistent across functions. The following to mirror the business, both in terms of innovation. This company achieved such core processes were re-engineered in line organization and in terms of knowledge. realignment through the implementation with the objective of building a strategic Putting the functions in place was the first of a new IT strategy, best practice processes relationship with the business: and governance aimed at achieving peer- step in identifying and managing business level relationships with the business. demand. █ Budgeting and control █ Change control Situation Trend analysis and case study books were █ Project portfolio management (PPM) One of the world’s most successful created to highlight leading practices and █ Project management office pharmaceutical companies had recently gain insights from the life sciences sector █ Quality management appointed a global CIO to oversee and from other industries. The relationship █ Procurement globalization and create a more strategic role managers took these insights into █ Service management for IT. The CIO decided to refresh the IT discussions with business stakeholders to █ Performance management strategy for all business functions together highlight potential solutions and to establish with the infrastructure strategy, while business priorities. Portfolios of initiatives A new global planning and architecture pursuing organizational excellence. were then identified and prioritized based function was established to gain control on business importance, financial benefit of enterprise architecture and to enable A program was proposed to establish and deliverability. This process is shown in technology-led innovation. governance and core processes in support the diagram below (figure 16). of a more strategic relationship with the Result business, and to establish strategic IT An infrastructure strategy was developed The business was mobilized to take capabilities such as global planning and which linked a vision for infrastructure and ownership of IT strategy at the global level architecture. business requirements to a new globalized for the first time. IT business relationship operating model. Approach functions started to engage in strategic The first phase of work was to align business A sourcing strategy was agreed to ensure discussions with business stakeholders. A and IT strategy. that the right skills and capabilities were basis for joint innovation with the business made available to the business at more was established. IT business relationship functions were put competitive cost. This strategy increased the in place to conduct peer-to-peer discussions

Figure 16 IT Strategy Development Process

Business Context Implications for IM To-Be Design Way Forward Future IM Initiatives Business Trends Transformation Map Technology Trends Business IT Design Opportunities Solutions Capabilities Capabilities Principles Description

To Be process map Business View High level benefits case

Prioritisation Extemal viewpoints Comparisons Best practices and examples

Innovation through IT for Business Results 15 Building a Relationship for Business Innovation

Figure 17 Increasing the value of The current role of domestic Which of the following best describes CIOs: Trusted Supplier the IT function’s role within the organization? the CIO is only possible through the CEO’s firm belief In its 2008 Global CIO Survey, Capgemini 3% “ used an industry model3 that categorized Partner Player in, and strong sponsorship 31% IT’s relationship with the business into three of, IT value. The CIO needs to types: Solid Utility, Trusted Supplier, Partner be recognized as a partner Player. for business innovation Trusted Supplier In the case of CIOs in Korea, a majority of 66% CIO in Manufacturing - them are acting as Trusted Suppliers (figure ” 17). As was discussed earlier in this report, Solid Utility Trusted Supplier Partner Player measuring up to the high demands and expectations of the business is the key factor Figure 18 for domestic CIOs. How is IT aligning with the business?

Global 28% 33% 32% 7% Achieving a new role for innovation: Partner Player Korea 8% 35% 45% 12% Being a Partner Player means establishing 0% 20% 40% 60% 80% 100% Percentage of organizations a peer-to-peer relationship between business and IT. It means achieving a IT participates proactively in the business strategy planning by identifying scenarios with the business level of understanding such that the CIO IT participates in business strategy is able to participate in corporate strategy IT participates but has limited impact on business strategies IT does not participate or has limited input into the business development, aligning it with IT strategy, strategy planning as a distinct entity of the business and the business also participates in the development of IT strategy. Figure 19 What level of involvement does the business have in IT strategy and IT decision making? 8% of CIOs in Korea stated that they fully participated in corporate strategy. This Global 57% implies that their level of participation is

Korea 35% low compared with global CIOs (28%).

0% 20% 40% 60% 80% 100% Also, only 7% of CIOs in Korea responded Percentage of organizations that the business fully participated in Percentages represent “5” & “4” where “1” = No involvement and “5” development of the IT strategy, whereas [ = Full proactive involvement ] global CIOs said 15% (figures 18 and 19).

3 Forrester Research Solid Utility : The focus of the IT function is purely to provide a solid infrastructure and basic applications to support the business: “keep the lights on”. CIO’s focus is operational and to contain costs. Trusted Supplier: The focus of the IT function is to provide critical technology to support enterprise functions like sales, marketing and finance: “do the project right”. CIO’s focus is service- oriented and emphasizes successful delivery. Partner Player : The focus of the IT function is to provide technology that is integral to go-to-market offerings and will drive competitive advantage, e.g. “get the package there overnight” (depends on industry). CIO focus is to be a business partner and to integrate with enterprise strategy.

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Case Study IV The low level of participation from each Samsung Card BA – party means that business and IT do not BSA operations for an effective share a common understanding, which relationship with the business hinders both parties from driving innovation In order to build a strategic innovation and delivering results. capability within the IT department, Samsung Card created and is currently According to the survey, the most operating BSA (Business & System Analyst) important capabilities expected of CIOs by functions that maintain the ongoing management are business understanding relationship with the business department and the ability to communicate, which (figure 20). Through this function, the are both critical for the CIO to earn department manages business IT demand, management’s sponsorship in the area of the prioritization of projects, the PMO innovation. (Project Management Office), process control, resources, system delivery and The key is to make joint efforts as partners operations. of innovation, based on mutual trust and understanding. Successfully achieving this is This case study is acknowledged as a model one of the distinguishing features of global within the Samsung Group showing how Top Innovators4. to connect enterprise management strategy and IT strategy and promote innovation through IT.

Figure 20 BSA Part

IBS(Innovation) CIO

BM, PMO Info. Planning Team Card ITO

Tech. Mgt. , Risk Mgt. Planning Operation BSA Data Center, Call Center Part Part BA SA Back Office (Business Analyst) (System Analyst) System(H/W) and Application Mgt.

PMO: Project Mgt./Monitor BU BU BU BM: BU Service Request Analysis & Mgt. Project Mgt. & Support BSA: Business & System Analyst Integration & Governance of Corporate Process BU: Business Unit

4 Capgemini 2008 Global CIO Survey identified 5% of respondents as “Top Innovators”. Their common characteristics are: the business leadership team thoroughly understands IT; the relationship between IT and the business is effective; IT fundamentals are strong; the CIO reports into Chief Executive Officer (CEO) or Chief Operating Officer (COO) rather than Chief Financial Officer (CFO); the IT function plays the role of partner to the business, as opposed to trusted supplier or utility.

Innovation through IT for Business Results 17 Expanding the Network to Include External Partners

Figure 21 In the electronics industry, In the midst of a fast-changing IT technical External IT partners/providers play environment, customers are demanding an important role in business innovation technology life cycles are getting shorter and shorter new services and prompt responses. In Global 68% “ practice, a company’s internal capability will while the R&D area is prove insufficient to meet these demands. Korea 50% expanding its original scope. As a result, the CIO must identify how best 0% 20% 40% 60% 80% 100% We cannot cover all this with Percentage of organizations to form partnerships (for example with Percentages represent our own resources alone. We outsourcers) to manage that demand. “Strongly Agree” & “Agree”, [ answered by interviewee ] need to expand collaboration

Figure 22 with external partners Utilizing external capability for Why are external partners not important innovation in driving business innovation? - CEO in Manufacturing When asked: “Do external partners play an important role in business innovation?”, Perceive them as subcontractors 58% ” 50% of CIOs in Korea and 68% of global 17% Insufficient capability CIOs answered positively (figure 21). Only 12% High cost 13% of CIOs in Korea “strongly agreed”, as 7% Reluctant to share internal information opposed to 26% globally. 3% Lack of trust and others 3% Etc. This difference between the two reflects

0% 10% 20% 30% 40% 50% 60% differences in how CIOs in Korea see their Percentage of organizations external partners. Figure 22 shows that they seem to regard third parties more as Figure 23 suppliers or providers rather than partners Who else do you work with to drive innovation through IT? in any real sense.

Business 26% Consultancies 45% Apart from external IT partners, CIOs in

23% Korea appear to depend mostly on business Customer 17% consulting firms for innovation, whereas 15% Forum 17% global CIOs make use of a wider network

15% University of partners, such as universities, research 12% institutes and their own customers (figure Research 15% Agencies 8% 23).

Scientist 6% 1%

0% 10% 20% 30% 40% 50% Percentage of organizations

Global Korea

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Creating a network of external Capgemini’s Global CIO Survey report Figure 24 partners describes this approach as an “ecosystem”, Ecosystem Global companies who need to achieve which leverages a network of customers, technical leadership within challenging business stakeholders, and external Consultancies partners for innovation. With a network User Customer cost constraints often adopt what we call Teams Insights an “open innovation” approach obtaining like this (figure 24), the IT organization can new ideas from a network of external proactively research new technologies and Industry R&D Experts Labs resources and contacts that they can flex as solutions from the market and introduce required. Intel5, Procter & Gamble6 (P&G) them to the business before they become a commodity. H/W S/W and others have set up departments within Vendors Suppliers their companies to take responsibility for Research Employees open innovation. They have also created The main pre-condition for a successful Institutes websites such as P&G’s Collaboration ecosystem is a trust-based, equal partner System and Intel Communities. Internally, relationship among all the members of the they are pursuing process innovation and system. Partnership with external suppliers, Marco Iansiti, a professor at Harvard, strengthening innovation capabilities. like partnership with their own businesses, writes in his paper 6 “Managing the Ecosystem”: is an area that Korean IT functions may Externally, they are networking globally “The days of the corporate lone wolf are over. In our through the implementation of IT need to work on in order to increase their increasingly interconnected world, standing alone ability to innovate. is no longer a viable business model. Instead, smart environments with expandable and efficient companies rely heavily on networks of partners, web services based on SOA, enabling them suppliers, and customers to achieve market success and sustain performance. These networks look to partner with universities, research centers increasingly like a biological ecosystem, in which and other collaborators, with economic companies succeed and fail as a collective whole.” benefits for all parties.

5: Intel’s Open Collaborative Model of Industry-University Research (2004, by David Tennenhouse), published by Industrial Research Institute 6: Connect and Develop (2006, by Larry Huston and Nabil Sakkab), published by Harvard Business Review 7: Iansiti, Marco. “Managing the Ecosystem.” Optimize Magazine 4, no. 2 (February 2005)

Innovation through IT for Business Results 19 Case Study V HM Revenue and Customs partners and a myriad of other suppliers (HMRC) - ecosystem approach that are part of HMRC’s ecosystem. The drives business innovation governance model, known as Ecosystem@ through IT HMRC, establishes a tiered operational Situation framework with a number of partners Aspire is HMRC’s 13 year partnership with sharing delivery risk with Capgemini. On Capgemini for the provision of systems a commercial and contractual basis, it gives and IT-led transformation to make it easier HMRC visibility and input into selection and quicker for UK citizens and enterprises and management of Aspire partners who to comply with their tax obligations. share their innovative ideas to help HMRC’s Capgemini’s contract manages a partner transformation. ecosystem to deliver services and foster Capgemini regularly channels information innovation by providing access to the best about HMRC business plans and challenges available ideas, technology and services. through the ecosystem, giving partners a Harnessing capabilities of “best-in-class” chance to put forward ideas and proposals companies-from hardware, software and to improve services. In this way, the specialist suppliers to IT service providers ecosystem shortens the cycle of innovation (often competitors)-Capgemini supports and reduces the costs of procurement and HMRC’s efficiency and transformation sales. targets and provides a window on to the The ecosystem creates a cohesive unit of world of technology, globally. The scale, transparent and connected relationships complexity and criticality of IT for HMRC providing HMRC with access not just mean that no single supplier could deliver to the obvious players but also to niche all the services to meet its needs. Equally, providers, so that Aspire can identify the interdependencies between these different best solution for each need. As a strategic suppliers need careful management. procurement function, the ecosystem HMRC also has a strong requirement for creates a community of pre-vetted partners, IT to drive innovation, so the contract all managed via a set of procedures that encourages innovation and implementation encourage collaborative behavior. of significant changes to support business needs. Result HMRC uses Capgemini’s management of Approach the ecosystem not only to provide itself with Capgemini provides key services and also the best skills and technology in the market manages supplier relationships with three while driving down costs, it also leverages core Aspire partners, another 30 business partner relationships to foster innovation.

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Are you ready to become a leader of innovation? “ ”

Innovation through IT for Business Results 21 A New Start for the CIO as a Leader of Innovation

Figure 25 The pathway to innovation for technology to bring value to the business Two roles of CIO: Innovator vs. Operator CIOs █ Quadrant C: changing the game by Capgemini’s Global CIO Survey includes a business model innovation B C communication tool, the “CIO footprint”. It should be noted that the “CIO footprint” It is used to visualize where a CIO is today model does not imply that all companies

Advantage Innovator Competitive with respect to innovation, and identify must move in the same direction. Efforts where the CIO should ideally be. The must be made to find an appropriate “footprint” has two axes: technology focus balance between the innovator and the Cost Operator versus business focus; and cost containment Containment operator roles to suit each organization. A D versus competitive advantage. Technology Focus Business Service Focus Our findings indicate that Korean Each quadrant within the “CIO footprint” CIOs do need to shift their focus from represents a different type of activity as cost containment towards competitive shown in figures 25 and 26. Quadrants A advantage. This means following the route and D are associated with the operator role of the innovator in the “CIO footprint”, and B and C with the innovator role: focusing on quadrants B and C – see the

█ Quadrant A: applying technology to example in figure 26. reduce IT operating costs

█ Quadrant D: improving business processes to reduce administration costs

█ Quadrant B: discovering innovative

Figure 26 Changing your “CIO Footprint” (example)

Discovering innovative technology Changing the game B to bring value to the business by business model innovation C

“Ideal” footprint Competitive Advantage

“Current” footprint

Cost Containment Applying technology Improving business processes A to reduce IT operating costs to reduce business administration costs D Technology Focus Business Service Focus

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Summary: success factors for commitment that is required to succeed. CIOs The case studies described in the report CIOs in Korea perform well in the show how some CIOs, despite challenges delivery of fundamental IT services. This in their relationships with the business, achievement provides a platform from have succeeded in strengthening strategic IT which CIOs can progress to take on the role processes and building a partnership with of innovator. the business. Successful case studies such as these will be a good guide for CIOs setting Companies need to think about where out on this journey. their “CIO footprint” stands today and what their ideal footprint will be. Though It is very important for CIOs to have a each footprint will be different, based as deep understanding of their business it is on each company’s environment and and use that and their knowledge of the characteristics, a CIO wishing to play the market to identify new technologies that innovator role should be focusing on how can bring value to the business. Building IT can help to deliver competitive advantage an “ecosystem” will allow CIOs to take for the enterprise. advantage of various external resources in doing so. By delivering business innovation To do so, CIOs must strengthen the strategic in this way, CIOs will be able to secure their IT capabilities of their IT function and position as leaders of innovation. establish a partnership with the business. While these may sound like obvious steps to CIOs, and indeed are being adopted as declared objectives by many companies, not all organizations are providing the

It took two years to build the foundation, another two “years to establish a strategic information function and four years for me to get the CEO to understand what IT really is. ” - CIO in Financial Services

Innovation through IT for Business Results 23 About the Survey

Methodology and structure Capgemini’s 2008 Global CIO survey. This survey is based on face-to-face The interviews were conducted by senior interviews with CIOs and other IT consultants from Samsung SDS and executives in 100 companies in Korea. OpenTide. Comparisons have been made with almost 400 global CIOs, interviewed as part of

F i g u r e 2 7

10 3 12 10 Business Services 5 Consumer Products & Retail 1 Energy & Utilities Number of interviewees per industry Financial Services Manufacturing 17 Public, Government & Social Telecom, Media & Entertainment 42 Travel, Transport & Logistics

Special thanks to the following in YongSik Kim EunYoung Lee producing this report: JinHo Yoo

Project Steering Committee YunYeong Cho EuiSeok Oh Contact us: SDS Thought Leadership Center DongHee Lee KyungHo Park SukJoon Hwang ([email protected]) Core Project Team/Support Edward Kim Ivar Sinka SukJoon Hwang Christian Mueller TaeMin Park Stuart Edwards SungIl Ha SeungWan Noh Marketing & PR

24 Korean CIO Survey 2008

About Samsung SDS, OpenTide and Capgemini

Samsung SDS and Capgemini formed About OpenTide a strategic alliance in October 2007. OpenTide Korea Co. Ltd., established Through the alliance, both companies have in year 2000, is one of the largest local committed to engage jointly in business business/IT consulting firms in Korea and opportunities to support existing and future provides integrated consulting services clients of Samsung SDS and Capgemini in spanning strategy, process and IT for their respective markets. major companies in Korea. OpenTide has been providing industry specific and This alliance gives Capgemini’s clients access specialized consulting services since 2000. to Samsung SDS’ consulting capabilities in Starting in 2006, OpenTide has created Korea, while Samsung SDS’ clients benefit a separate technology outsourcing unit from Capgemini’s leading position in Europe called OpenTide Technology Services and other parts of the world. This report (OTS), to fulfill the demand in application is an example of the close collaboration development outsourcing. OpenTide is between the two companies. a private company currently employing over 250 consultants. More information is About Samsung SDS available at Samsung SDS, established in 1985, is www.opentide.com the largest integrated IT services provider of consulting, IT outsourcing, system About Capgemini integration, IT infrastructure, engineering outsourcing, SOC/u-City, and educational Capgemini, one of the world’s foremost services in Korea. Supporting the global providers of consulting, technology and Samsung companies, Samsung SDS has outsourcing services, enables its clients grown to provide thought leadership to to transform and perform through its clients across all industries, receiving technologies. Capgemini provides its clients numerous awards such as the President’s with insights and capabilities that boost their Award for SDS’s packaged software freedom to achieve superior results through applications, the “Most Admired Knowledge a unique way of working - the Collaborative Enterprises” award 7 times in a row, and Business Experience – and through a global was identified as one of the top 4 IT delivery model called Rightshore®, which services vendors by Gartner Asia-Pacific. aims to offer the right resources in the right Samsung SDS employs over 8,000 people location at competitive cost. Present in 36 with revenues of USD 2.16 billion for countries, Capgemini reported 2007 global 2007 across its worldwide offices. More revenues of EUR 8.7 billion and employs information is available at over 88,000 people worldwide. More information is available at www.sds.samsung.com www.capgemini.com

Innovation through IT for Business Results 25 www.sds.samsung.com www.opentide.com www.capgemini.com/consulting