B. PEVZNER:  Barry, when you began tackling the issue of strategic management of IT Service demand and examined the business problems that prompted this sort of initiative, what were the primary issues for Alliance Data?

B. CARTER:  Three main things pop out: customer frustration, lack of cost-transparency, and poor IT and business alignment.  We’re in the culture today that everyone is their own IT shop because they have a PC at home, so you get the questions of “why do things take so long” and “why does it cost so much” ? You also have the traditional problem of the business being under continued pressure to bring incremental profits, and them looking to a Shared Services organization to come up with ways to reduce their costs as well as help them bring in additional revenue.

B. PEVZNER:   Those issues are certainly consistent with what I have seen in the current market.  As you explored these issues further, what kind of questions came up as you established your value proposition?

B. CARTER:  When exploring the demand management value proposition, we asked ourselves first, “Why do we have these problems?”  One reason is we all don’t speak in the same language, so we need to get to a value-based conversation with our business partners.  Can the IT organization offer a basic hamburger instead of a gourmet hamburger that satisfies their value proposition?  And, when we speak, can we be sure we are speaking about the same hamburger?

When it comes to customer satisfaction, how do we take cost out of the organization without impacting our capacity to execute?  Can we deliver a service with fewer bells and whistles without decreasing service levels?  How do we align with the desired service levels while eliminating unnecessary consumption or components of the consumption that don’t really satisfy the value needs of the service customer.

B. PEVZNER:   So as you worked to answer these questions, what basic principles did you establish?

B. CARTER:  Our business problems were IT business alignment, cost transparency, and customer satisfaction, so we adjusted our basic principles as such.

For IT business alignment, the easiest way to get to “business speak” is to define your services in a Service Catalog using “business speak.”  We also want to get the Catalog out there, not only for service requests, which I call “retail transactions,” but we need to use it to support a quarterly or semi-annual finance forecast mode, which I call “wholesale planning.”  So once we can get the Service Catalog into “business speak,” it really makes the planning and forecasting tremendously simpler, the request processing easier, and the likelihood of meeting the expectations of the customer significantly higher.

In regards to cost transparency, the customer conversations change; you create conversations based off of transparency and choices, and you know that you’re winning when the customers begin to pull out the Service Catalog and reference the services and service costs.  To shift consumer behavior, you need to place responsibility for consumption on the customer, and conversations around and fulfillment through the Service Catalog helps you do this.

Ultimately these things lead to creating greater customer satisfaction, effectively creating a partnership, defining optimal cost and performance balance, and improving service level tracking with greater clarity of expectation within the delivery of those services.

B. PEVZNER:  So now that we understand the framework, goals and objectives for this initiative, can you tell us a bit about Alliance Data’s own journey?

B. CARTER:  In my organization it took us about a year to define our chargeback rate in “IT Speak,” and to get agreement within the IT organization around what are the things we deliver with a service for each of the defined rates that we had.  From there it took another 3-4 months to translate it into business language that we could present to the end user.

What we’ve been working on this year is a partnership to provide online distribution of the catalog, integrating the service request process with the Catalog, connecting the request process to online service level reporting, linking the request process to the inventory management process system, and then integrating the chargeback system and service level reporting system.

We have also been working to implement complete tracking and management of requests from order to completion, thereby refining the critical performance indicators.  This includes partnering with the business to define more services and service bundles or tiers, and putting together a 5 year service roadmap with critical decision points for product management.

B. PEVZNER:  What are some of the results you have seen so far?

B. CARTER:  To date we have cut greater than a third of the annual IT spending across all business units just from our analysis and implementing service bundles.  We have also dramatically improved our customer satisfaction, whereas three years ago the conversations were “we’d really like to outsource you,”  today they are, “we’re really pleased about the service delivery, we’re excited about the cost reduction, and we really like the Service Catalog.”  As a result of that we have much greater business alignment and our forecasting has improved.  We are no longer a cost center, we are moving into the realm of strategic partner.

B. PEVZNER:  What is your advice for an organization just starting to apply service demand management principles?

B. CARTER:  I feel that to be successful with Service Demand Management you have to want to have service governance, you have to have a huge desire to run IT like a business, you have to be comfortable with the fact that you’ll now be doing product management, and you have to do wholesale service planning. 

You also have to have dedicated people out there having value based conversations with our customers and work hard to change the culture such that your business units become accountable for service consumption, because you can be penalized and perceived as having a high cost because your business units have a high appetite for IT.

If you align your services with consumer demand, and you put the processes and procedures in place to support a great Service Catalog, you can significantly improve the predictability of delivery and ultimately win the war on customer frustration due to cost transparency and fulfillment issues.

B. PEVZNER:  Thank you Barry for your insights into service demand management and Alliance Data’s journey toward it.  The key takeaway here, I think, is that service portfolio management, particularly in customer business speak, is the key to customer satisfaction, IT business alignment, and cost transparency, and this key really opens the door to effective service demand management.  Incidentally this is also the path that is consistent with where the industry is going, particularly ITIL® v3 with its focus on the customer-centric IT Service Portfolio around which service delivery processes now revolve.

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