Manage the Margin

© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
Manage the Margin
Session # ESS119SN
Service Management

2
Abstract
The primarily mechanism to building leverage as
a contributor to the business is to simultaneously
increase business opportunities with the costs of
managing a services organization. By separating
the pricing of demand from the cost of fulfillment
the IT organization is capable of leveraging the
“margin” to make on-going investments into its
infrastructure while avoiding the organizational
entanglements normally related to cost recovery
and budgets. This presentation will demonstrate
the tools, technology, and artifacts that CA
provides to make a transition from a cost-centric
IT organization to an investment-centric one.

3
Biography
David A Messineo
Computer Associates
David Messineo has been in the IT industry for
close to 20 years and has participated in the
design of many ITSM products currently in the
marketplace. He launched the first ITIL compatible
product in the world, and currently works at CA as
the BSO Solution Manager for ITSM and is one of
the primary CMDB design contributors within the
firm. One of his core contributions in CA is in
assisting clients with managing the financial
aspects of technology investments.

4
Agenda
The Issue
The Strategy
The Approach
The Tools
Questions & Answers

The Issue

6
Demand Mgmt Supply Mgmt
Strategic
Tactical
Operational
Capital Investment Mgmt
- IT Accounting Model
(Chargeback)
- IT Service Catalog
Contract Management
- SLA/OLA Automation
- Resource Performance
Resource Capacity Planning
- Throughput Processing
- “Inventory” Tracking
IT Project Management
- Change Planning
- Event Escalation
Infrastructure
Instrumentation
- CMDB Lifecycle Mgmt
- Business Impact Analysis
Availability Mgmt
- Standards Compliance
- Risk Mgmt Automation
The Ultimate “Roadmap”

7
Move from a cost centric management model to
an investment centric focus model
– Focus on customer issues not cost issues
because that is where the cash comes from
– Focus on services because they are
responsible for converting costs to investments
Controlling the financial aspects of the IT
Production Process that allows you to
achieve customer satisfaction
Organizational Objective

8
"Give me a lever long enough and a place
to stand, and I will move the earth."
- Archimedes
How Do We Make the Change?

9
IT Spending Breakdown

10
Is an aggregation of
business functions
that are perceived by
the customer as a
coherent whole.
App
Facilities
Role
Access
Security
HR
=
Biz Service
Role
Access
Facilities Security HR
App
App
App
App
Buildings
Parking
Equipment
Services
Database
Apps
Resources
Community
Buildings
Approvals
Telecom
Data
Policies
SalaryBenefits
Growth
Plan
What is an Business Services?

11
Is an aggregation of
IT functions that are
perceived by the
customer as a
coherent whole.
App
Web
Database
Systems
Networks
=
IT Service
eMail
Online
Ordering
Security Networks
App
App
App
App
Web
Web
Web
Web
Database
Database
Database
Database
Systems
Systems
Systems
Systems
Networks
NetworksNetworks
Networks
What is an IT Service?

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VALUE
economy efficiency effectiveness
cheaper provision
of IS/IT services
services support
the business
encourage
economy
lower
prices
higher
productivity
improve
service
delivery
improve
service
quality
optimize
investment
in IS/IT
business
exploits
IS/IT
IS strategy
aligned with
business
Finance Alignment
Products
services improve
business efficiency
Managing IT’s Business Value

13
Efficiency is Not Effectiveness
Optimizing Parts is Not Optimizing the Whole

14
Business vs. IT – Who Decides?
Judge
according to
local impact
Do not judge
according
to local impact
Control
Cost
Protect
Throughput
Manage
“Profitability”
Conflict

15
Organizational Conflicts
Use Efficiency as a measure OR Not
Controlling costs OR Protecting throughput
Meeting budgets OR Maintaining customer
satisfaction
Encouraging stability to meet service levels OR
Encouraging changes to meet on-going
requirements
Squeezing the maximum out of every resource
OR Synchronizing the processes
Controlling the amount of information OR
Knowing everything that takes place
Maintaining stability OR Progressing Forward

The Strategy

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What is the output limitation of the process?
What happens to processing power if you
increase the capacity of A, of B, of C, of D, and
of E?
What does this say about focusing the efforts on
the bottleneck?
What does this say about focusing efforts on
non-bottlenecks?
A B C D E
(process capability represented by size)
IT Throughput – What is it?

18
Marketing
– Awareness creation
– Interest incitement
– Knowledge transfer
– Lead generation
Sales
– Qualification
– Needs assessment
– Letter of Understanding
– Presentation demo
– Solution proposal
– Production demo
– Quotation submission
– Negotiation
– Closing
Order Administration
– Order received
– Approval cycle
– Equipment allocation
– Product integration
– Shipping
Finance
– Invoicing
Customer Support
– Unpacking
– Installation
– Customer training
– Acceptance test
Finance
– Cash Collection
A CxO’s Support of the Process

19
Transportation
Education
Public Services
Land Planning and
Development
Cultural / Arts
Waste Management
Commercial
Development
Justice / Corrections
Elections
Fire/Medical
Licenses
Budgeting / Audit
Consumer Affairs
Environmental (e.g.
Air and Water)
A Mayor’s Support of the Process

20
Cost Avoidance
– Avoid spending money for unplanned purposes
– Protect services from damaging forces
Cost Reduction
– Reduce expenses of executing cash flow process
– Reduce resources required to deliver services
Protect Revenue
– Avoid disrupting incoming cash flow
– Avoid changing services that disrupt economic growth
Increase Revenue
– Increase opportunities to secure cash
– Increase opportunities to broaden economic appeal
Four Key Finance Objectives

21
What We Do
– Portfolio
Management
– Project Management
– Release
Management
– Change
Management
– Risk Management
How We Do IT
– Operations (ITIL
Core Processes)
– Application
Development
– Technology
Infrastructure
– Resource
Management
– IT Intelligence
A CIO’s Support of the Process

22
1. The way to improve the performance of the
IT organization is by focusing on local
improvements that have a global impact
2. Cost management does not mean cost
reduction; it means cost-effectiveness,
which means spending in the most
intelligent way to support the necessary
creation of value.
Thinking about Financial Control

The Approach

24
1. To consistently capture revenue the demands
of the marketplace requires new business
services – which in turn require new IT
services
2. Both these business services and IT services
have individual lifecycles that must be
managed
3. To synchronize their individual contributions
these lifecycles should share a robust and
comprehensive process model
4. This process model demands constant
information from various sources and will
naturally organize it to generate intelligence
(CMDB)
5. This intelligence will be leveraged to create
smarter (e.g. economically and financially
driven) contracts between End-Users and IT
The Service Lifecycle

25
Market Opportunities
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline Stage
Total
Market
Sales
Time

26
Demand
Requirements
•Info
•Problems
•Orders
Assignments
•Escalations
•Projects
•PlansSourcing
•Internal
•External
•Timing
•Funding
Performance
•Process
•Contingency
•Policy
Evaluation
•Impact
•Requirements
Gap
•Benefits gap
Marketing PLAN
BUILD
ALLOCATEDELIVER
MAINTAIN
CHANGE
Business Service Lifecycle

27
Portfolio
Mgmt
CIO
Dashboard
Project
Mgmt
Operations
Mgmt
IT
Accounting
SLA/SLO
Metering
Event
Mgmt
Application
Chg Mgmt
IT “Asset”
Mgmt
Catalog
Work/Change
Mgmt
Device
Monitoring
Governance
Global IT Process Model

28
Data -> MDB
Process -> IIF
Intelligence->CMDB
Planning
Financial
Forecast
Capacity
Profile
Transactional
Relational
Impact
Reach/Range
Visualization
Classification
CMDB – IT Intelligence

29
To identify adverse side effects of a decision
To ferret out unforeseen and unlikely events and
consequences
To highlight uncertainties in the problem and the
future
To understand the situation better by seeing it in
a new light
To stumble on new options, alternatives,
problems, and opportunities
To improve communication among managers
and/or analysts
To stimulate the development of improved and
better models
To identify errors and inadequacies in the model
To focus on unexamined details
IT Intelligence?

Managing DemandManaging Fulfillment
Managing the “Margin”

End-User
SLA
App
App
App
App
Web
Web
Web
Web
Database
Database
Database
Database
Systems
Systems
Systems
Systems
Networks
NetworksNetworks
Networks
Business “Contracts”

The Tools

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 Respond to
problems and
faults
 Ad hoc,
manual
processes
 Standardized
processes
 Automated
responses
 Consolidated IT
resources
 Business-
relevant IT
services
 Service level
management
 Financial
administration
of IT
 Real-time IT
dynamically
optimizes to
support the
business
 Transparent
enterprise
3
2
1
4 BUSINESS-DRIVEN
ACTIVE
EFFICIENT
RESPONSIVE
The CA Maturity Model

34
Financial Management Framework
Quality
Transactions
Mitigated
Risk
Remove
Redundancy
Standardize
Performance
Process
Customized
Catalogs
Biz Service
Level
Agreements
IT Service
Level
Agreements
Standardize
Catalog
Services
Multiple
Interfaces
Network
Redundancy
Defined
Networks
Standardize
Interfaces
Resource
Flexible
Configuration
Maximize
Availability
Inventory
Mgmt
Standardize
Configuration
Assets
Revenue
Increase
Revenue
Protection
Cost
Reduction
Cost
Avoidance

35
Business DrivenResponsiveEfficientActive
Leverage CMDB to enable the
following key process
capabilities: Business
Risk Planning, Business
Planning, Business
Capacity Planning
(Demand)
Leverage CMDB to enable the
following key process
capabilities: IT Risk
Management, IT Planning,
and IT Capacity
Management
Leverage information to identify
root/cause in network and
application environments
Leverage information
to identify
minimal
root/cause
Analysis
Track relationships from
Portfolio to Business
Services to Business
Processes
Track relationships from
Business Process to IT
Services to IT Processes
to Infrastructure
Track Ownership, Applications,
Data, Network
Track HW/SW
assigned to
workstations
Relation-
ships
Business Planning, Persistent
Processes
Manage the following
processes:
"Warehousing", IT
Planning
Manage the following processes:
Procurement, Support,
Configuration, State
Management
Manage the following
processes:
Setup,
Delivery,
Disposal
Lifecycle
Track Business Services,
Integrations, and Key
Transactions
Track Process, Systems, and
Interfaces -- links to
process tools and
discovery tools
Track People, Documentation,
Data, Application -- entered
manually or through
discovery or integration
Track HW, SW –
entered manually or
through discovery
Assets
IT Intelligence Framework

36
REVENUE INCREASE
REVENUE PROTECTION
ITIL – Release, Availability, IT Financial Mgmt
Work – Project Driven
Spending – Based on
Value Focused Activities
SLA – focused
on LOB Requirements
Budgeting –
LOB Allocation
Prioritization – Based on
Business impact
COST REDUCTION
ITIL – Change, Configuration, and
Service Level Management
Work – Change Driven
Planned Work
SLA – formal focused
on IT Ops
Budgeting –
IT Allocation
COST AVOIDANCE
ITIL – Incident and
Problem Management
Work – Task Driven
Spending - Reactive
$$$$$$$$$$
Maturity Advancement
Building Credibility over Time
ITIL – Capacity, Contingency Management
Work – Portfolio Driven
market opportunities
SLA – Based on
business risk/value
Budgeting –
Based on
business cases
Prioritization –
Based on investment
instruments

37
Summary
Think Customers Not Costs
Think Investments Not Costs
Manage the IT Production Process
Manage the Margin
Build Intelligence Capabilities
Leverage a Maturity Model
Avoid Organizational Conflicts

Manage the Margin

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