The Forum - 05/08/2008 (Plain Text Version)
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How to Justify Getting Started with ITIL® by Thinking Outside of the IT Box
By Hank Marquis, Enterprise Management Associates
New EMA research seems to validate the “word on the street” about IT budgets in 2008-2009. A February 2008 survey showed that 37% of IT budgets got increased, 37% got decreased, and the balance was unchanged. If we translated this into a mathematical formula 37% - 37% + 0% = 0%! Or put another way, the IT budget world is flat.The good news is that we don’t look like we in IT are going to get the significant reductions we did at the end of the last bubble. So, in a flat budget world, how does one justify ITIL® initiatives and validate ITIL®’s claims regarding return on investment (ROI) and value to the organization? In today’s business climate and economic uncertainty, IT infrastructure expenditures are scrutinized by senior management. Due to the extreme costs involved with large IT infrastructure deployments and on-going operations of IT infrastructures, executive management including the CIO, CEO and CFO all take an active part in IT decision making. IT purchasers are not only requesting ROI justification -- they are demanding it. IT project sponsors must validate their proposals in precise and measurable ways. Making decisions is a measure of risk and reward. We know the investment; we think we know the rewards. IT has historically been terrible at justifying projects however. Some industry experts put the IT project failure rate at as much as 70%. The costs to the industry are staggering, but worse is the poor reputation we in IT have with the money people. Basing service value primarily on desired business outcomes is the message of ITIL® v3. Further, using risk to those business outcomes is probably the most effective way to get business attention as well. Measuring service value by risk is a wonderfully clarifying process – it quickly shows whether a project is justified. A secondary benefit is that virtually every business manager got their position by making sound risk vs. reward decisions so it enhanced Business IT Alignment. IT traditionally does not “speak business,” and often falls back on techno-babble instead. A great example of this disconnect is the ever-present use of “9’s” to describe IT value and performance, e.g., we provide 99.999% -- five 9’s -- uptime on the three systems most critical to the organization. How can one make a business decision based on a statement of uptime? A better way is to transform IT performance into business impact, expressed as quantified risk. However, one can only understand business impact by reaching outside the boundaries of the enterprise – and this is uncharted water for most IT managers.
Figure 1. Incorrect Model for IT Value Creation
Thinking outside the box means we have to understand transaction boundaries. ITIL® is missing a few key terms – end-customer, end-user, and enterprise product and ITIL therefore offers Complementary Guidance through related publications that augment ITIL® with the required prescriptive guidance. With additions from the Enhanced Telecommunications Operations Model (eTOM) and Shared Information and Data Model (SID) Complementary Guidance we get a very complete model. eTOM is mentioned by ITIL®, SID is not – but it is a part of NGOSS (Next Generation Operational Support System) definitions. NGOSS subsumes eTOM, and defines SID. NGOSS comes from the TeleManagement forum (TMF). Fusing ITIL® with TMF gives us the way to visualize and clearly talk about the boundaries of the enterprise. Without concept of end-customers (and end-users) we cannot understand how (ITIL®) customers and users use IT Services. We need both to get it right. True value from ITIL® appears at the boundaries of the enterprise in managing suppliers, staying abreast of new trends and competitors in the marketplace; and by focusing on the product of the enterprise. Service Portfolio Management as the Starting Point for ITIL® Service Portfolio Management (SPM) is a process for managing IT resources in ways that deliver the highest business value. The goal of SPM is easy to state and understand: To manage IT investments in alignment with business priorities in order to create competitive advantage for the enterprise. SPM aligns IT operations with the business and manages IT services along business lines by using, for example, metrics that have more to do with how the business views things and traditional technology measurements. The primary goals of SPM are:
Operationally, SPM is the emerging best practice for selection and utilization of appropriate IT management frameworks, tools and concepts (including software.) BSM also provides an effective way to determine what and how much IT ought to do, when to stop improving, and which projects are justified. The v3 volume on ITIL® Service Strategy defines a four-step process to achieve business IT alignment, control costs, improve quality and balance resource allocation:
These four steps are the critical path to success with SPM and show exactly how to get started with ITIL®. Correlating IT operations and performance with business impact is the hallmark of effective SPM. By mapping IT investments and operations to the business processes it underpins, and producing metrics to quantify the impact of IT systems on the business process, SPM allows business executives to make investment decisions for IT based on value and risk instead of simply cost. By making better decisions for IT funding and activities, SPM empowers higher quality IT services, and possibly reduced costs, although sometimes SPM in practice can show why an increased investment is justified, such as when IT has been under funded. Effective SPM practices can result in competitive advantage from IT investments even as technology becomes a commodity by focusing efforts on those activities that depend upon IT for successful operation and improving those services at a cost less than that of competitors. ITIL® plays the leading role in SPM by providing the strategy and tactics required for planning and key day-to-day operational and tactical activities to keep the infrastructure functional, supporting customers and users, and manage suppliers and service levels. The ITIL® concepts of Service Strategy, Service Portfolio Management and Service Catalog Management are, in essence, the means to achieve SPM. ITIL® has many tools, techniques, models, examples and samples. Study them; pick and choose what works for your unique situation. ITIL® Service Strategy is an intellectual exercise that sets the context and content for SPM. ITIL® becomes actionable with SPM and the ITIL® Service Catalog makes SPM real. You achieve SPM by following the 4-point plan presented here and detailed in the ITIL® v3.
Here is an example. Imagine you work for Colorado Concrete Company, “CoCoCo.” Your business is making and delivering concrete. The reason for every employee of CoCoCo (including IT!) is to sell, service or support end-customers and end-users consuming the product of the enterprise. Referring back to Figure 2, it is clear that for IT to succeed (and to justify your projects) you must look past the customers and users (e.g., employees) and at the market needs of the end-customers and end-users. In another example, we can look at how we might approach justifying and determining the value of a new IT service project at CoCoCo to install a radio dispatch system. The classic IT way is to say, “it’s cheaper than the old system,” or, “it will be up more often and thus more useful, we will move from 3-9’s (99.9%) to 4-9’s (99.99%).” These are soft benefits that are traditionally very hard to quantify, making the investment hard to justify. These soft benefits are necessary, but insufficient to justify a project in today’s flat budget reality. Instead, ITIL® v3 through its Continual Service Improvement and especially its Service Strategy volumes show how and why we need to think outside the corporate boundaries of CoCoCo. Service Portfolio Management and Financial Management show that we must think about the end-customers and end-users of our concrete products. This is hard for many in IT – it is common for IT workers to have stilted, simplified, or incorrect beliefs about the business in which they work. Few IT workers really understand the dynamics of the products their enterprise offers. They understand the technology, they even know some customers, but few if any know much about the products, end-customers and/or end-users. Thinking about the end-customers of CoCoCo, one could discover that they are unhappy with the inability to shift deliveries for example. This results in a product loss rate of 15% for CoCoCo, as well as an inability to service some market segments for concrete. Following up with the end-customers, we might discover that they have chosen to work with other suppliers for this very reason. Further research shows the reason CoCoCo cannot shift deliveries is the lack of ability to know the precise location of the delivery vehicle – an unexpected finding, and source of an ROI that you could measure. Now we in IT can help – the new dispatch system includes cellular communications, and provides GPS location capabilities. We can now connect the upgrade to a business issue – one outside the boundaries of the enterprise and directly related to the business. By understanding the enterprise marketplace issue and finding a technological response IT adds real value and competitive advantage to the enterprise – SPM in action. The Value of Thinking Outside the Enterprise Box Think about justifying this project now – “the new system includes truck location capabilities that allow us cut loss from 15% to 5%, to meet more client needs and thus expand our marketing and reduce churn, ultimately expanding the business. It also less expensive and will be more reliable.” The classic IT justification becomes a “nice to have,” while the business driver is the “must have.” We can use this information to create a business case for improvement that includes the projected amount of waste prevention – and its associated hard economic value to CoCoCo. You will also be able to talk to budget planners and approvers about critical issues in terms they understand and care about. Aligning your project outside of the enterprise box is a sure way to get it justified, and approved. This simple example shows the need or IT managers to adopt a marketing thought process, and the absolute requirement to think outside the enterprise boundaries. If you do not think you need to think past the enterprise boundaries, try this test. modified for your own enterprise. Develop five questions about a primary product of your enterprise. Work with sales or end-customer support (non-IT support) to get a grasp of the business issues. For example, CoCoCo sells concrete. So, some good boundary crossing questions might be:
Take the time to think outside your own enterprise boundaries. Consider your end-users and end-customers instead of thinking just about your internal customers and users. Take an informal survey of average IT workers and staff to see how well they understand the business in which they work. But do be prepared: the answers you will (not) get are going to amaze you.
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