The document introduces a 5E framework for IT consolidation that includes expenditure, effectiveness, efficiency, exposure, and execution. It provides guidance on using each element of the framework to identify consolidation targets and ensure alignment with business strategy. For example, under expenditure it advises considering total lifecycle costs and indirect benefits. Under effectiveness it stresses the importance of strategic alignment and how consolidation can improve business processes. The framework is intended to provide a methodical approach for prioritizing consolidation projects and building a strong business case.

1. IBM Global Business ServicesWhite Paper
IT Consolidation: The 5E Framework
A Methodical Approach to Align Business Strategy and IT Consolidation

2. 2 IT Consolidation: The 5E Framework IBM Global Business Services 3
Introduction
Ted Levitt, a marketing author, observed “People don’t want
to buy a quarter-inch drill. They want a quarter-inch hole!”
When considering IT consolidation, it’s easy to be snared in
the vicious circle of how, when and what. Instead of initially
focusing on what needs to be done (“We need a quarter inch
hole on the north facing wall”), organizations may fritter
energies on the mandating methods of performing the task
(“Let’s buy a quarter inch drill”). Make no mistake, the latter is
important too, but the CIO’s valuable time should be focused
on the former. Operational details can be formulated by
internal IT resources and/or external system integrators.
Drilling a quarter inch hole without severing the wires and
pipes in the wall requires a blueprint, experience and the
knowledge of an experienced professional to execute the
blueprint flawlessly. In other words, IT must be aligned with
the business strategy.
This approach is in consonance with the Federal Government’s
performance-based services acquisition (PBSA)1
methodology.
It also frees up leadership for the core mission. It gives latitude
to internal IT and external system integrators to pick
approaches to best meet strategic objectives that consolidate
objectives. Finally, it simplifies procurement, reduces
contracting oversight and significantly reduces the probability
of expensive contractor protests2
.
But is there a methodical approach to identifying IT
consolidation targets in alignment with the business strategy?
The 5E Decision Framework is such a method - it can
facilitate the due diligence discussion, aligning consolidation
with strategy. With no reprieve from a budget deficit on the
horizon and greater investment scrutiny, this framework
– comprised of expenditure, effectiveness, efficiency, exposure
and execution –allows CIO’s to prioritize projects and
formulate a strong business case.
Expenditure
The basic principle of finance is a dollar spent
today is more expensive than a dollar spent
tomorrow due to cost of capital. Furthermore,
tomorrow’s innovations will likely render today’s technology
cheaper in future (think Moore’s law). CIOs, in partnership
with their CFOs, should balance the need for consolidation
today with savings that postponement can bring. Likewise,
they should scrutinize the relative merits of cost saving
alternatives. For instance, virtualization and cloud technology
solutions will likely meet long-term budget objectives more
effectively than simple hardware consolidation. It’s also
possible, though rarely so in our experience, that a bold cost
avoidance strategy best meets the mission critical needs of the
organization. For investments that cannot be deferred,
calculate the return on investment (ROI) with the following
recommendations:
a) Consider sunk costs with respect to the magnitude of past
investments.
b) Don’t understate indirect costs that are difficult to
determine. Examples of such costs include faster
provisioning and de-provisioning, improved compliance
and risk profile, better availability through expeditious
disaster recovery.
c) Consider benefits outside of the immediate unit with
associated spending.
Expenditure
Effectiveness
Achievement
EfficiencyExecution
Exposure
5E Framework
for IT
Consolidation

3. 2 IT Consolidation: The 5E Framework IBM Global Business Services 3
Introduction
Ted Levitt, a marketing author, observed “People don’t want
to buy a quarter-inch drill. They want a quarter-inch hole!”
When considering IT consolidation, it’s easy to be snared in
the vicious circle of how, when and what. Instead of initially
focusing on what needs to be done (“We need a quarter inch
hole on the north facing wall”), organizations may fritter
energies on the mandating methods of performing the task
(“Let’s buy a quarter inch drill”). Make no mistake, the latter is
important too, but the CIO’s valuable time should be focused
on the former. Operational details can be formulated by
internal IT resources and/or external system integrators.
Drilling a quarter inch hole without severing the wires and
pipes in the wall requires a blueprint, experience and the
knowledge of an experienced professional to execute the
blueprint flawlessly. In other words, IT must be aligned with
the business strategy.
This approach is in consonance with the Federal Government’s
performance-based services acquisition (PBSA)1
methodology.
It also frees up leadership for the core mission. It gives latitude
to internal IT and external system integrators to pick
approaches to best meet strategic objectives that consolidate
objectives. Finally, it simplifies procurement, reduces
contracting oversight and significantly reduces the probability
of expensive contractor protests2
.
But is there a methodical approach to identifying IT
consolidation targets in alignment with the business strategy?
The 5E Decision Framework is such a method - it can
facilitate the due diligence discussion, aligning consolidation
with strategy. With no reprieve from a budget deficit on the
horizon and greater investment scrutiny, this framework
– comprised of expenditure, effectiveness, efficiency, exposure
and execution –allows CIO’s to prioritize projects and
formulate a strong business case.
Expenditure
The basic principle of finance is a dollar spent
today is more expensive than a dollar spent
tomorrow due to cost of capital. Furthermore,
tomorrow’s innovations will likely render today’s technology
cheaper in future (think Moore’s law). CIOs, in partnership
with their CFOs, should balance the need for consolidation
today with savings that postponement can bring. Likewise,
they should scrutinize the relative merits of cost saving
alternatives. For instance, virtualization and cloud technology
solutions will likely meet long-term budget objectives more
effectively than simple hardware consolidation. It’s also
possible, though rarely so in our experience, that a bold cost
avoidance strategy best meets the mission critical needs of the
organization. For investments that cannot be deferred,
calculate the return on investment (ROI) with the following
recommendations:
a) Consider sunk costs with respect to the magnitude of past
investments.
b) Don’t understate indirect costs that are difficult to
determine. Examples of such costs include faster
provisioning and de-provisioning, improved compliance
and risk profile, better availability through expeditious
disaster recovery.
c) Consider benefits outside of the immediate unit with
associated spending.
Expenditure
Effectiveness
Achievement
EfficiencyExecution
Exposure
5E Framework
for IT
Consolidation

4. 4 IT Consolidation: The 5E Framework IBM Global Business Services 5
Exposure
Black swan5
events are highly improbable but
highly consequential events that can only be
explained in retrospect. While these outlier
events are non-computable and unpredictable by definition,
the good news is most negative events can be effectively
modeled. Crafting the Continuity of Operations Plan (COOP)
should be one of the top priorities of the CIO’s team. They
need to ask whether proposed system changes will have
negative implication on the organization’s risk profile. A more
sophisticated CIO will go a step further and ensure that
proposed changes will make the systems more resilient,
minimize the organization’s risk profile and ensure compliance
with regulations. That said, we caution against analysis-
paralysis and over-focus on issue du jour, both of which can
stagnate organizational progress.
Modeling exposure scenarios against catastrophic events,
security breaches, internal failures and human errors to prevent
operational disruption and ensure disaster recovery is fairly
prescriptive, but compliance risk avoidance sometimes doesn’t
get the limelight it deserves. For example, an organization may
pick a “right-priced” third-party data center or cloud
computing provider, but may not have paused to ask itself if
the service provider’s facility is FISMA compliant. If it is
compliant, what level of FISMA exists? As threats intensify and
regulations become more complex, robust management of
“exposure” will increasingly determine the success or failure of
the organization.
Execution
Having skilled personnel and management,
including governance, in place is another
foundational element of picking consolidation
targets. Budget constraints, investment scrutiny and customer
satisfaction concerns necessitate investigation of this final and
likely the most expensive criterion. The consolidation roadmap
requires that personnel demands of proposed systems be
supplied internally or externally within a reasonable timeframe.
Appropriate governance, tools and processes should also be in
place or planned to allow the initiative to succeed.
Some managers erroneously apply Gertrude Stein’s advice – “a
rose is a rose is a rose” – to personnel staffing, probably as a
result of successful marketing by staff augmentation
companies. They forget that people come with different skills
and strengths. For example, a superstar technical manager may
not be an effective project manager and vice-versa. Even those
with the same skills have different levels of expertise that need
to be assessed before considering them interchangeable. It’s
not important to have IT personnel but it’s vital to have the
right IT personnel who are empowered with the right tools.
Another common oversight while evaluating viability is to
derive direct time costs without accounting for the time
personnel will spend in meetings, over the phone and other
sundry tasks.
Effective IT governance is absolutely critical to successful
execution of consolidation projects. The governance
management structure must have representatives from all
stakeholders with decision-making authority. Many projects
fail without an effective governance initiative. According to
Gartner6
“To avoid the most common causes of failure in IT
governance initiatives, design governance as a set of end-to-
end processes to define roles and responsibilities, and create a
practical and action-oriented governance mechanism tailored
to your enterprise's decision-making style and management
culture.” In addition, metrics must be a fundamental element
of the governance structure to enable clear visibility into the
status of projects and value to the business. A tool to capture
an end-to-end view of all investments and business results to
validate the business case will provide the decision makers with
facts to reassess decisions and shape future decisions.
d) Avoid double counting and overlaps.
e) Interlock and reconcile all spending elements (total
lifecycle – concept to end of life for all components of
development, deployment, run and retirement) and
benefits.
It is important that ROI calculations attempt to maximize the
use of the scarcest resources, which typically is the capital.
Finally, check whether the Pareto principle may be applicable
i.e. large value may be achieved from consolidating a small
number of diverse resources.
Effectiveness What does strategic align-
ment mean other than a cliché? It means there
has to be a discernable affinity between systems
proposed for consolidation, business processes,
compliance with regulations and the overall institutional
strategy. While IT-centric view believes that technology drives
business, the fact is that business processes and performance
drive decisions. CIOs should evaluate whether the proposed
system changes will make business processes more effective,
strengthen coupling between them and more effectively meet
organization’s core mission. Moreover, the new systems should
allow flexibility for future changes as the mission evolves.
“Business value”, sometimes deemed an unquantifiable and
fuzzy parameter, can be determined by taking an enterprise
view and determining the delta between current costs vs. the
expected values and impact to the organization.
When evaluating the effectiveness of consolidation, remember
that there is strong evidence3
for Conway’s Law or Mirroring
Hypothesis that states that system boundaries are based on
organization communication patterns. An extension of this
logic would indicate that effectiveness of the system is highly
likely to be limited by abstruse intra-organizational moats.
These impediments should be considered while identifying
consolidation targets. Once the vision is set, the CIO should
mandate the migration new systems by all appropriate
constituents. A Gartner study4
found that “organizations that
mandate usage report satisfaction with their solutions more
than 80% of the time, whereas less than 25% of organizations
that make participation voluntary report satisfaction with the
results.” The barriers to adoption of change is directly
associated with the culture of the organization. Effective
communication of the business value is critical to successfully
restructuring an enterprise’s communication patterns. It
enhances the adoption of change and helps to reshape culture
and organizational boundaries.
Efficiency
The CIO needs to ask whether proposed
consolidation will weed out underperforming
assets and fuel operational efficiency, including
process and IT. Demonstrable changes could be realized as
faster deployment, improved business execution and service
levels, shorter response time, higher availability, ease of use,
quicker environment set-up and automated work flow. These
factors can, for most part, be easily quantified through basic
metrics like reductions in cycle time, man-hours, equipment
down time, capex, opex and help desk tickets.
Customization should also factor in the efficiency assessment.
Deep dives usually reveal parochial interests rather than a real
need for use of non-standardized versions across the
organization. Some customization is understandable and
acceptable to meet specific needs of constituents. But over-
customization is inversely correlated to overall efficiency. It
prevents reuse, increases complexity and reduces business
agility. It may also lead to unique risks and an undesirable risk
profile.
Performance-based services acquisition (PBSA) or contracting
(PBSC) has been a cornerstone of federal acquisition for more
than a quarter century. Prime objective of PBSA is to mandate
objectives rather than methods of performance, thereby
encouraging industry-driven, competitive solutions. This policy
is even part of Federal Acquisition Regulation (FAR) Subpart
37.6, yet it remains grossly underutilized by many agencies and
departments. The Output of efficiency assessment should be
incorporated in either performance work statements (PWS) or
statement of objectives (SOO) for any new systems.
Achievement

5. 4 IT Consolidation: The 5E Framework IBM Global Business Services 5
Exposure
Black swan5
events are highly improbable but
highly consequential events that can only be
explained in retrospect. While these outlier
events are non-computable and unpredictable by definition,
the good news is most negative events can be effectively
modeled. Crafting the Continuity of Operations Plan (COOP)
should be one of the top priorities of the CIO’s team. They
need to ask whether proposed system changes will have
negative implication on the organization’s risk profile. A more
sophisticated CIO will go a step further and ensure that
proposed changes will make the systems more resilient,
minimize the organization’s risk profile and ensure compliance
with regulations. That said, we caution against analysis-
paralysis and over-focus on issue du jour, both of which can
stagnate organizational progress.
Modeling exposure scenarios against catastrophic events,
security breaches, internal failures and human errors to prevent
operational disruption and ensure disaster recovery is fairly
prescriptive, but compliance risk avoidance sometimes doesn’t
get the limelight it deserves. For example, an organization may
pick a “right-priced” third-party data center or cloud
computing provider, but may not have paused to ask itself if
the service provider’s facility is FISMA compliant. If it is
compliant, what level of FISMA exists? As threats intensify and
regulations become more complex, robust management of
“exposure” will increasingly determine the success or failure of
the organization.
Execution
Having skilled personnel and management,
including governance, in place is another
foundational element of picking consolidation
targets. Budget constraints, investment scrutiny and customer
satisfaction concerns necessitate investigation of this final and
likely the most expensive criterion. The consolidation roadmap
requires that personnel demands of proposed systems be
supplied internally or externally within a reasonable timeframe.
Appropriate governance, tools and processes should also be in
place or planned to allow the initiative to succeed.
Some managers erroneously apply Gertrude Stein’s advice – “a
rose is a rose is a rose” – to personnel staffing, probably as a
result of successful marketing by staff augmentation
companies. They forget that people come with different skills
and strengths. For example, a superstar technical manager may
not be an effective project manager and vice-versa. Even those
with the same skills have different levels of expertise that need
to be assessed before considering them interchangeable. It’s
not important to have IT personnel but it’s vital to have the
right IT personnel who are empowered with the right tools.
Another common oversight while evaluating viability is to
derive direct time costs without accounting for the time
personnel will spend in meetings, over the phone and other
sundry tasks.
Effective IT governance is absolutely critical to successful
execution of consolidation projects. The governance
management structure must have representatives from all
stakeholders with decision-making authority. Many projects
fail without an effective governance initiative. According to
Gartner6
“To avoid the most common causes of failure in IT
governance initiatives, design governance as a set of end-to-
end processes to define roles and responsibilities, and create a
practical and action-oriented governance mechanism tailored
to your enterprise's decision-making style and management
culture.” In addition, metrics must be a fundamental element
of the governance structure to enable clear visibility into the
status of projects and value to the business. A tool to capture
an end-to-end view of all investments and business results to
validate the business case will provide the decision makers with
facts to reassess decisions and shape future decisions.
d) Avoid double counting and overlaps.
e) Interlock and reconcile all spending elements (total
lifecycle – concept to end of life for all components of
development, deployment, run and retirement) and
benefits.
It is important that ROI calculations attempt to maximize the
use of the scarcest resources, which typically is the capital.
Finally, check whether the Pareto principle may be applicable
i.e. large value may be achieved from consolidating a small
number of diverse resources.
Effectiveness What does strategic align-
ment mean other than a cliché? It means there
has to be a discernable affinity between systems
proposed for consolidation, business processes,
compliance with regulations and the overall institutional
strategy. While IT-centric view believes that technology drives
business, the fact is that business processes and performance
drive decisions. CIOs should evaluate whether the proposed
system changes will make business processes more effective,
strengthen coupling between them and more effectively meet
organization’s core mission. Moreover, the new systems should
allow flexibility for future changes as the mission evolves.
“Business value”, sometimes deemed an unquantifiable and
fuzzy parameter, can be determined by taking an enterprise
view and determining the delta between current costs vs. the
expected values and impact to the organization.
When evaluating the effectiveness of consolidation, remember
that there is strong evidence3
for Conway’s Law or Mirroring
Hypothesis that states that system boundaries are based on
organization communication patterns. An extension of this
logic would indicate that effectiveness of the system is highly
likely to be limited by abstruse intra-organizational moats.
These impediments should be considered while identifying
consolidation targets. Once the vision is set, the CIO should
mandate the migration new systems by all appropriate
constituents. A Gartner study4
found that “organizations that
mandate usage report satisfaction with their solutions more
than 80% of the time, whereas less than 25% of organizations
that make participation voluntary report satisfaction with the
results.” The barriers to adoption of change is directly
associated with the culture of the organization. Effective
communication of the business value is critical to successfully
restructuring an enterprise’s communication patterns. It
enhances the adoption of change and helps to reshape culture
and organizational boundaries.
Efficiency
The CIO needs to ask whether proposed
consolidation will weed out underperforming
assets and fuel operational efficiency, including
process and IT. Demonstrable changes could be realized as
faster deployment, improved business execution and service
levels, shorter response time, higher availability, ease of use,
quicker environment set-up and automated work flow. These
factors can, for most part, be easily quantified through basic
metrics like reductions in cycle time, man-hours, equipment
down time, capex, opex and help desk tickets.
Customization should also factor in the efficiency assessment.
Deep dives usually reveal parochial interests rather than a real
need for use of non-standardized versions across the
organization. Some customization is understandable and
acceptable to meet specific needs of constituents. But over-
customization is inversely correlated to overall efficiency. It
prevents reuse, increases complexity and reduces business
agility. It may also lead to unique risks and an undesirable risk
profile.
Performance-based services acquisition (PBSA) or contracting
(PBSC) has been a cornerstone of federal acquisition for more
than a quarter century. Prime objective of PBSA is to mandate
objectives rather than methods of performance, thereby
encouraging industry-driven, competitive solutions. This policy
is even part of Federal Acquisition Regulation (FAR) Subpart
37.6, yet it remains grossly underutilized by many agencies and
departments. The Output of efficiency assessment should be
incorporated in either performance work statements (PWS) or
statement of objectives (SOO) for any new systems.
Achievement

6. 6 IT Consolidation: The 5E Framework IBM Global Business Services 7
Conclusion
Investment, deliverables, benefits and metrics require interlock.
Interlock is a sign-off between the CIO, the stakeholders and
the CFO. Even the best laid plans can falter due to lack of
executive support and employee resistance. People want to
understand how the change will impact them. So, it’s vital to
sell the plan to the leadership team while continuing
complementary efforts to champion consolidation at the
grassroots level. Also, bear in mind that incorrect procurement
methodology can debilitate all benefits of consolidation; pure
cost focus is a sign of shallow organizational maturity. It’s more
important to consider the long-term overall total cost of
ownership rather than insisting on low cost during acquisition.
For More Information
To learn more about IBM Global Business Services, please
visit: ibm.com/gbs
About the Author
Ravi Bansal, PMP®
Project Executive
IBM Global Business Services
Ravi Bansal is a project executive and a strategist at IBM
Global Business Services. He is one of IBM Americas’ top
consultants and has also been inducted in IBM’s delivery
excellence circle. Mr. Bansal has experience proposing, leading
and delivering multimillion-dollar business solutions. He
authored 5E framework for targeted IT consolidation and the
strategic framework for cloud alliances. Currently, Mr. Bansal
is a strategist for IBM federal’s cloud computing and smarter
government initiatives.
Contributor
Johnny Barnes
Chief Technology Officer, Public Sector
IBM Global Business Services
Johnny Barnes is the General Manager Technology and CTO
for IBM's Global Business Services. He has held a variety of
product, solution development, system architecture,
management and executive positions. He was appointed to
several critical IBM product and strategy task forces
responsible for establishing the future technical and business
direction for IBM. Currently, Mr. Barnes has responsibility for
IBM’s worldwide Public Sector technical and solution strategy.
Footnotes
1
Seven Steps to Performance-Based Services Acquisition
(www.acquisition.gov/sevensteps/library/SevenSteps_
execversion.pdf)
2
Google claims U.S. excluded it from contract
(www.nytimes.com/2010/11/02/technology/02google.html),
New York Times (November 1, 2010).
3
Alan MacCormack, John Rusnak, Carliss Baldwin,
“Exploring the Duality between Product and Organizational
Architectures: A Test of the Mirroring Hypothesis,”
Harvard Business Review (October 2008).
4
Deborah Wilson, “Strategies for Public-Sector Investment in
Procurement Applications,” Gartner Research (July 2010)
5
Nassim Nicholas Taleb, "The Black Swan: The Impact of
the Highly Improbable" (May 2010).
6
Michael Gerrard, “Creating an Effective IT Governance
Process,” Gartner Research (January 2010).

7. 6 IT Consolidation: The 5E Framework IBM Global Business Services 7
Conclusion
Investment, deliverables, benefits and metrics require interlock.
Interlock is a sign-off between the CIO, the stakeholders and
the CFO. Even the best laid plans can falter due to lack of
executive support and employee resistance. People want to
understand how the change will impact them. So, it’s vital to
sell the plan to the leadership team while continuing
complementary efforts to champion consolidation at the
grassroots level. Also, bear in mind that incorrect procurement
methodology can debilitate all benefits of consolidation; pure
cost focus is a sign of shallow organizational maturity. It’s more
important to consider the long-term overall total cost of
ownership rather than insisting on low cost during acquisition.
For More Information
To learn more about IBM Global Business Services, please
visit: ibm.com/gbs
About the Author
Ravi Bansal, PMP®
Project Executive
IBM Global Business Services
Ravi Bansal is a project executive and a strategist at IBM
Global Business Services. He is one of IBM Americas’ top
consultants and has also been inducted in IBM’s delivery
excellence circle. Mr. Bansal has experience proposing, leading
and delivering multimillion-dollar business solutions. He
authored 5E framework for targeted IT consolidation and the
strategic framework for cloud alliances. Currently, Mr. Bansal
is a strategist for IBM federal’s cloud computing and smarter
government initiatives.
Contributor
Johnny Barnes
Chief Technology Officer, Public Sector
IBM Global Business Services
Johnny Barnes is the General Manager Technology and CTO
for IBM's Global Business Services. He has held a variety of
product, solution development, system architecture,
management and executive positions. He was appointed to
several critical IBM product and strategy task forces
responsible for establishing the future technical and business
direction for IBM. Currently, Mr. Barnes has responsibility for
IBM’s worldwide Public Sector technical and solution strategy.
Footnotes
1
Seven Steps to Performance-Based Services Acquisition
(www.acquisition.gov/sevensteps/library/SevenSteps_
execversion.pdf)
2
Google claims U.S. excluded it from contract
(www.nytimes.com/2010/11/02/technology/02google.html),
New York Times (November 1, 2010).
3
Alan MacCormack, John Rusnak, Carliss Baldwin,
“Exploring the Duality between Product and Organizational
Architectures: A Test of the Mirroring Hypothesis,”
Harvard Business Review (October 2008).
4
Deborah Wilson, “Strategies for Public-Sector Investment in
Procurement Applications,” Gartner Research (July 2010)
5
Nassim Nicholas Taleb, "The Black Swan: The Impact of
the Highly Improbable" (May 2010).
6
Michael Gerrard, “Creating an Effective IT Governance
Process,” Gartner Research (January 2010).

8. Please Recycle
© Copyright IBM Corporation 2011
IBM Global Services
Route 100
Somers, NY 10589
U.S.A.
Produced in the United States of America
March 2011
All Rights Reserved
IBM, the IBM logo and ibm.com are trademarks or registered trademarks
of International Business Machines Corporation in the United States, other
countries, or both. If these and other IBM trademarked terms are marked
on their first occurrence in this information with a trademark symbol
(® or ™), these symbols indicate U.S. registered or common law
trademarks owned by IBM at the time this information was published. Such
trademarks may also be registered or common law trademarks in other
countries. A current list of IBM trademarks is available on the Webat
“Copyright and trademark information” at ibm.com/legal/copytrade.shtml
Other company, product and service names may be trademarks or service
marks of others.
References in this publication to IBM products and services do not
imply that IBM intends to make them available in all countries in which
IBM operates.
GBW03135-USEN-00