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  • 1. Service Management in an Uncertain Economy How To Achieve Value KC Goodman IBM Distinguished Engineer CTO – IT Strategy & Architecture Services
  • 2. “ YAHOO Q3 PROFIT FALLS 64%; WILL CUT 10% OF STAFF ” “ WORLD BANK DENIES MASSIVE SECURITY BREACH ” Source: IBM GTS Market Insights Analysis based on “IBM CHQ Economics: OCTOBER 2008 GLOBAL ECONOMIC UPDATE”, October 3, 2008 Today’s reality . . . The global business environment is in turmoil “ GM & CHRYSLER DISCUSS MERGER ” “ CITADEL TO REVAMP BUSINESS MODEL ” “ PAKISTAN FACING SHORTAGE OF 5,000-MW ELECTRICITY ”
  • 3.
      • Cutting operating expense
      • Postponing long-term projects in favor of near-term ROI
      • Deferring or reducing capital expenditures
      • Revisiting existing service contracts
      • Seeking productivity increases in their existing infrastructure
      • Postponing hiring of additional IT staff
      • Postponing the launch of new initiatives
    Concerns about economic downturn and industry restructuring are driving CIOs to adjust their IT plans Availability of Key Skills Downturn of Major Economies Over-regulation Low-cost Competition Energy Security Scarcity of Resources Source: PriceWaterhouseCoopers; 11 th Annual Global CEO Survey 2008; n = 1,150 % Extremely / Somewhat Concerned All CEOs Over $10B CEO Concern about Potential Threats CIO Strategies for Managing in an Uncertain Environment
  • 4. Many organizations are looking to service management as a way to extract business value
    • IT Service Management
      • “ IT Service Management is the integrated management of the people, processes, technologies and information required to ensure the cost and quality of IT services valued by the customer.”
    Enterprise Systems Management IT Service Management All Hands on Deck how will IT services support the business strategy how will we manage those IT services 20% budget reduction provide a resilient infrastructure with less
  • 5. Many have reached a “pain threshold”, recognizing the need for a good service management plan
    • What are the services IT provides and how do they support the critical business activities and objectives?
    • How do I put this all together? ITIL, ISO, COBIT…
    • How do we start an IT service management program?
    • We embrace the service management concept – what will it really take to realize it?
    • We want to be “ITIL compliant”. How do you do that? How do you integrated COBIT and International Standards?
    • Our ITIL experience is more like the “Goldilocks Syndrome”. How do we just do this right?
    • How do we best plan, design and implement IT service management best practices in my organization?
    A good service management plan addresses these issues.
  • 6. Your peers recently shared how the recent economic turmoil has affected their service management plans CIOs IT directors CFOs and others Their level of responsibility for investment decisions Who we talked to N=110 U.S.-based respondents 3% 29% 68% Primary Part of core team Knowledgeable Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 7. Flat budgets and changing business requirements are causing most IT organizations to reprioritize 5% 9% 86% Significantly increase Significantly decrease Slight change or remain flat Expect to have more than enough budget Expect to have just enough budget Will have to reprioritize Many projects will be deferred 9% 21% 46% 24% Projects are being prioritized to meet strained budgets Expected change in 2009 budget in comparison to 2008 Which of the following best characterizes your total external IT budget in the next 12 months? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 8. Business priorities causing changes to IT programs and project plans Projects expanded/ newly initiated/ continued Projects cancelled/delayed 0% 20% 40% 60% 80% 100% 47% 40% Reducing capital costs 15% 80% Improving efficiency and reducing costs 11% 76% Accelerating workforce productivity 21% 45% Adapting to consolidations, layoffs and restructuring 29% 42% Improving cash position 11% 75% Improving access to and the leveraging of information 19% 47% Changing business model Increasing customer retention/loyalty 10% 52% Changing mix of products and services 19% 28% Adapting to a conservative customer credit environment 15% 56% Improving asset management 10% 30% Adapting to a conservative supplier credit environment 69% Improving sales 6% 37% Managing supply-chain risks 9% 68% 9% Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009. What impact are these business objectives/actions having on associated IT programs and projects?
  • 9. Top priorities for IT project investments are now security, compliance and improved management Projects continued, expanded or newly initiated 72% 66% 65% 65% 63% 61% 60% 59% 58% 57% 55% 53% 35% 27% 15% 27% 28% 23% 19% 15% 32% 23% 30% 30% 26% 23% 19% 15% 16% 21% 26% 10% 20% 15% 17% 39% 50% 8% 9% 13% 0% 20% 40% 60% 80% 100% Security Compliance IT systems management Service management Server deployment/consolidation Network changes and convergence Virtualization Business performance management Desktop management Enterprise mobility Storage deployment/consolidation Data center facilities Energy efficiency SOA/middleware Projects cancelled or delayed No IT programs or projects Current priorities for IT programs and projects How has the current economic/business environment impacted projects in the following IT areas? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009. 15% 20%
  • 10. Key business drivers for the service management projects that have been continued, expanded or newly initiated Percent selected (Note: Respondents could select multiple objectives.) 5% 9% 20% 22% 35% 37% 0% 5% 10% 15% 20% 25% 30% 35% 40% Other Free up labor Support a specific business function Increase workforce productivity Reduce/control costs Improve quality or value Business objectives for service management programs and projects that have been continued, expanded or newly initiated What is the key business objective for the service management programs/projects you are continuing, expanding or initiating? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 11. Common patterns for the service management projects that have been continued, expanded or newly initiated What is the key business objective for the service management programs/projects you are continuing, expanding or initiating? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009. Objective Approach Priority projects Improve the quality of IT services
    • External provider for process design improvement
    • External provider for software implementation
    • Event management and monitoring
    • Incident, problem and service desk
    • Improvements in governance of service management
    • Service catalog and service requests
    • Service level and availability
    Reduce or control costs
    • Internal process design project
    • External provider for software implementation
    • Chargeback and accounting
    • Asset and configuration management
    • Performance and capacity management
  • 12. Breakdown of service management projects Did not achieve value Not able to measure value 9% Produced measurable value 48% Do not know Too early to measure value 22% 16% 5% Measuring the value of service management projects Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009. Overall, how long has it taken to realize the intended business value/ROI for service management programs or projects completed in the last 24 months?
  • 13. The most commonly reported service management projects that produced measurable value Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
    • Incident, problem and/or service desk
    • Education, training or briefing services
    • Internal project to design process improvements
    • Event management and monitoring
    • Project with an external provider to implement software
    • Performance and capacity management
    • Service level management
    • Asset and configuration management
    • IT services strategy and IT service portfolio
    • Improving IT governance
    Quick hits <12 months
    • Internal project to design process improvements
    • Project with external providers to implement software
    • Performance and capacity management
    • Project with external providers to design process improvements
    • Service level management
    • Incident, problem and/or service desk
    • IT services strategy or IT service portfolio
    • Availability management
    • Asset and configuration management
    • Education, training and briefing services
    Longer term >12 months Noted in blue—ROI in under six months How long has it taken to realize the intended business value/ROI for specific service management programs or projects completed in the last 24 months?
  • 14. The top inhibitors to achieving value from service management projects 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Insufficient software Concerns about technical integration and architecture Issues with infrastructure, reliability, scalability and architecture Lack of lessons learned or assets from similar projects Lack of internal experience Insufficient skills or experience Organizational or cultural issues Insufficient staff Insufficient funding Do you expect the following factors to inhibit your ability to achieve the desired business value/ROI for your service management programs/projects? Barriers to achieving desired business value from service management projects Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009. 82% 80% 68% 67% 66% 61% 56% 55% 55%
  • 15. Demonstrating alignment with business priorities is one of the most effective methods for gaining sponsorship … Percent selected (Note: Respondents could select up to three methods.) Means to obtain executive sponsorship or buy-in 71% 65% 52% 43% 25% 19% 1% 0% 20% 40% 60% 80% 100% Aligning projects with business priorities Demonstrating ROI and business value Demonstrating cost reduction Communicating project importance to stakeholders/end users Reprioritizing other IT projects Establishing governance with business units and IT Other What are the most effective methods your IT organization/department employs in order to obtain executive sponsorship/buy-in for continued/expanded projects? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 16. … and understanding what the critical business processes are in your organization Percent selected (Note: Respondents could select multiple functions/processes.) 67% 62% 60% 59% 55% 43% 43% 41% 35% 35% 30% 0% 20% 40% 60% 80% General accounting Payroll processing Accounts payable Customer service Accounts receivable Billing Payment processing HR administration Customer data analytics Electronic document management Sourcing and procurement Which business functions/processes are the most significant users of IT services to support, enable or automate their business activities? Business functions/processes that are the most significant users of IT services Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 17. Critical success factors for service management projects that generated value As you continue or initiate service management projects in the current economic environment, which of the following will most help to contribute to project success and generation of value? Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
    • Stakeholder communications
    • Detailed project plan
    • Detailed business case
    • Collaboration and technical integration
    • Established project execution roles
    • Skill and staffing planning
    • Selection of appropriate software tools
    • High-level project justification
    • Facilitating cultural change
    • Conducting a pilot
  • 18.
    • Peer-driven recommendations
    • Improve the quality and reliability of IT services that enable business workforce productivity
    • Prioritize smarter ways of doing things and technology consolidation
    • Revise measurements and reporting to stress business-driven outcome metrics, costs and business value
    • Change focus from technology and optimized subsystems to optimization of IT-enabled business activity
    • Apply some investments to tactical quick hits—but also make progress on longer- term service quality inhibitors
    Changed business requirements and flat budgets drive the need for business-driven IT prioritization In an economic downturn, CIOs are prioritizing their investments to help optimize IT-enabled business services Source: IBM Market Intelligence, Service Management In an Uncertain Economy , January 2009.
  • 19. Three Actions To Achieve Greater Value Plan  Measure  Govern
  • 20. Plan: Create a Service Management Roadmap aligned to critical business needs
    • Establish the systems management operational efficiency plan
    • Develop both the IT service plan and the IT service management plan.
      • Identify the critical business activities
      • Identify the IT services that support, enable and automate those activities
      • Establish the service management plan describing how you will improve your ability to manage those IT services
    • The Service Management plan should cover objectives, scope, phases, people, management process, information, technology, integration, collaboration and governance related to those critical IT services.
    • Ensure the service management plan is focused on service management and not just systems management.
    • Make the IT service management plan a visible component of the business plan
    Planning Standardized processes across 27 facilities in seven states, on time and within budget.
  • 21. Measure: You can’t manage what you don’t know
    • Cost of Quality – what is the cost of not getting it right the first time?
    • You always pay for the level of quality you have – the key is to direct spending from failure reaction to proactive approaches to quality
      • Low Quality – consider the impact of low quality on margin, revenue, productivity,
      • Failure Costs - cost of defect/incident reaction, minimize lost production during the incident lifecycle
      • Appraisal Costs - testing to ensure product and process quality
      • Prevention Costs - those things you do to prevent failures from occurring in the first place.
    • What gets measured gets done, so inspect what you expect
    Managing the Cost of Service Quality Measure Performance and Outcomes Reduced rates for server use 10%. Eliminated non-value-added activities Faster processing of service requests In the first year, dramatically improved overall quality of service by reducing system failures 58 percent, IT interruptions 39 percent, and downtime 80 percent Progress toward minimizing the duration and impact of incidents on IT services and business activities … #, % of activities within agreed to parameters Resolution rates at L1, L2, L3, by group – by IT service and business activity % of reopened incidents Quality Cost of resolving incidents by service and business activity Impact of improved incident management Human effort for resolving incidents by IT service and business activity Elapsed time for resolving incidents – by IT service and business activity Trends Cost per activity by IT service and business activity supported Impact of incidents on IT services and business activities Human effort for activities by service and business activity supported Elapsed time for activities by service Duration of activities by service and incident severity Cost Outcomes (KGI) Performance (KPI)
  • 22. Govern: Drive collaborative behaviors and improved decision making for directing, controlling service management
    • Remember – its not just tools and architecture – but decision rights and accountability chains that drive the behavior of “ the people in the process .”
    • Clarify decision rights and accountability chains for directing and controlling each critical process and service
    • Drive collaboration across boundaries
    • Proactively manage the changes that will be required to change behavior
    • Re-evaluate measurements and incentives around business outcomes
    • Consider changes to governance required to get this kind of change in behavior.
    Collaboration and Influence 70% of management system implementations fail, because the process and the organization were not given the proper importance. “The Goldilocks Syndrome”
    • CRM – Implementation failures… imagine a company implementing CRM a second or third time… 65% (Gartner), 60-70% (Giga), 67% (Insight Technology)
    • BPR – 50-70% failure to deliver value (Minnesota State University)
    • ERP – “public flame outs… failures… negative business impact”
            • The Prime Solution , Jeff Thule
  • 23. Questions?