Large and mid-size organizations are seeing a dramatic shift in IT responsibility. Gone are the days of the monolithic IT organization. Now, internal IT departments are being integrated with the business side. For example, a 2011 IBM survey of 1,734 CMO’s found that nearly one-fourth of respondents outsourced IT services, and 61% said they would rely on such IT providers over the next five years.
In spite of these tendencies, companies still need IT departments in-house. As discussed in ReThink IT, internal IT departments roles have changed; they must now act as the broker, orchestrator and manager of purchased IT services, as companies begin to shift the way they measure value from IT. Understanding these two points from the new world of IT will help you to do that:
New IT Supply Chain – As IT outsourcing continues to grow as a business strategy, companies still need to vet, secure, and nurture these strategic outsourcing partnerships in order to maximize their investment, capture global trends, and support business innovation. Unlike the IT departments of years past, today’s internal IT department must focus on driving relationships, and addressing changes in platforms, architecture, services, and performance requirements.
New Definition of IT Business Value – Internal IT organizations don’t operate their own costly data centers, they go to the cloud. They don’t build their own applications, they buy them. ip information The IT role and supply chain have shifted so measuring IT purely by cost and efficiency does not work. Instead, today’s most effective, internal IT drives business value for the company. This means that companies must now evaluate their internal IT based on business outcomes that take into account both operational and financial metrics.
With the new IT supply chain, companies need IT that can enable:
Exploratory investment in IT that results in new products or competitive business advantages
The company to improve business processes to react to continuous changes to the market and execute strategy
The company to transform its business model
The company to capitalize on Big Data to better market the brand, products, and services
So if you find yourself asking how internal IT can remain relevant in today’s new IT supply chain, and why companies need internal IT departments that embrace the new role of IT to drive business growth and strategy, you’ve come to the right place. The ReThink IT paper is available with no registration and includes insights on these issues and more.
With more organizations looking for IT alignment with the business, yesterday’s role of a CIO as just a strong technologist no longer applies. More business leaders are outsourcing technology solutions as software-as-a-service and cloud based delivery models become increasingly available. Research firm Gartner further highlights this trend, predicting that spending on IT from outside of the IT organization will grow from 20% of total IT spending in 2009 to 90% by 2020. This will drastically change the way that CIOs have to drive value in order to maintain their seat at the table.
In ReThink IT we discuss how CIOs must evolve if they want to remain viable. The cutting edge CIO should have many roles; as a services integrator, an advisor to the business, and an innovator. They must clearly communicate and collaborate the IT roadmap for an effective business strategy. Most importantly, CIOs need to embrace the new IT organization that runs faster and operates on less technology and decide what activities will drive innovation and value.
To avoid marginalization in the changing landscape of IT, the following new roles and responsibilities should be embraced:
Transforming IT and Business Strategy – Today’s CIO works with smaller, strategic departments, and must help identify those opportunities that hold the greatest, long-term value for the business. CIOs need to convey to business leaders the transformative nature of big data and analytics tools, and develop a streamlined, cost-effective strategy that is business-IT aligned. The new CIO must master the emerging art of business model invention and process re-engineering.
IT Architecture for Seamless IT and Business Integration – IT architecture is an important skill set for the new CIO. With many outsourced business and IT services, today’s CIO must ensure that the business and IT processes are well-codified, data definition standards are well-defined, and the processes to bring together all elements for successful deployment are well-documented. Without these assurances in place, businesses will experience costly downtime, and multiple outsourcing vendors will not have a seamless implementation.
Leadership Role Crossing IT and Business Departments – Today’s most relevant CIO serves as strategic advisor and “facilitator of fulfillment” for the business. The effective CIO must develop and nurture relationships with multiple outsourcing vendors, and become the business’ orchestrator for external suppliers. Ultimately, IT must provide business value, and CIOs who maintain their seat at the table can provide the CEO and CFO calculations and analysis for return-on-investment, facilitate best value for the business, and lead the organization to key market opportunities and strategic partnerships. Effectively, CIOs must increase their strategic and operational value.
For more information, the ReThink IT strategy paper is available for download and includes insights on these issues and more. To download ReThink IT and register for our upcoming webinar discussing the paper’s findings and strategies, please visit:http://thinkwgroup.com/rethinkit/
WGroup, is pleased to announce the release of our new, far-reaching strategy paper entitled “ReThink IT.” (thinkwgroup.com/rethinkit/). Working with the industry’s most progressive CIO’s, WGroup has developed an approach to transform IT into an effective, value creating service equipped to manage the five most disruptive IT trends which include;
the shift in responsibility for IT to the business,
the convergence of ITO and BPO,
the growth in social, big data, mobility and analytics,
the commoditization of IT and global delivery
and the consumerization of IT.
The time has now come for businesses to rethink IT. CIOs must evolve; a CIO can no longer simply manage and plan service delivery capabilities of internal IT groups, hardware, software, and network infrastructures. They must become a choreographer who integrates the services delivered by a diverse group of providers, manages the shift of responsibility for IT to the business, champions effective governance framework and vendor management capabilities and becomes a master of business model invention and re-engineering.
Those who do not will be marginalized. In fact, many CIOS are at a crossroads so today, we are pleased to release ReThink IT (thinkwgroup.com/rethinkit/), a far-reaching global strategy paper that captures and analyzes the five most disruptive IT trends that are singlehandedly changing the role of CIOs and the IT function. ReThink IT also addresses the most relevant issues faced by today’s CIOs and actionable strategies to drive business value from IT. These strategies include:
A new approach to the IT supply and integration into one comprehensive model that addresses: how IT services are procured (in-sourced, outsourced), managed (shared services, multi-sourcing), and delivered (Cloud, Xaas – Offshore, Onshore, Captives)
A new enterprise-wide governance discipline that provides greater accountability for decision-making around the use of IT and a vendor management office to manage not only outsourced vendors, but also, all the sources of services across the IT supply chain
New roles, responsibilities, and skills for the CIO and all IT managers and staff. Above all the CIO must be an advisor to the business.
A new way to manage IT services and the project portfolio, one that will bring high levels of service satisfaction and better allocate limited resources to support a company’s strategic needs
A new way to think about how the IT function can provide value to the business—a broader role that calls for IT to help the company exploit critical new technologies and drive technology-enabled innovation
Redefining the role of a CIO is essential, and above all, today’s CIO must be an advisor to the business. Innovation needs to come from those CIOs who have a real understanding of the services and products available in the market and how to integrate them based on their specific needs. They must capture these opportunities to not only lower costs and increase revenue, but also, to transform their IT organization from pure cost reduction to a top line growth orientation.
The ReThink IT paper is available for free and includes insights on these issues and more. To download ReThink IT and register for our upcoming webinar discussing the paper’s findings and strategies, please visit thinkwgroup.com/rethinkit/.
A trend and direction for IT organizations over the past 5 years or more has been structuring and managing IT organizations to run like a business. This implies that IT has the capability to provide value based services that in turn support business growth and employ a service based delivery model. The concepts of providing IT services are the same as any other consumable service we know of today. The basic tenants of service are; it needs to be simple to order, it needs to be priced in alignment with value, it needs to provide a benefit and the consumption of services needs to be reported in a way that the customer could manage their demand. What defines IT’s customer relationships is service value and performance. Service performance is measured and service value is managed through the Service Level Management process.
Service Level Management (SLM) is a process in the ITIL Service Delivery model that is considered to be one of the most critical service management processes. The objective of SLM is to design and manage meaningful, and measurable, metrics around service performance that is in direct alignment between the IT service and the business processes of their customers. The commitments to service are outlined in service level agreements (SLA’s) and managed through the SLM process.
Developing meaningful SLA’s to support the customers’ business processes and managing them through a consistent SLM process could provide measurable benefits in a number of areas:
Service Quality – the old adage “you can’t manage what you can’t measure” applies. Service performance measured by the agreed upon SLA provides insight to service improvement opportunities on a routine basis. The cycle of service level management and service improvements directly influences service maturity and quality.
Service Cost – as part of the service level management process, service events that impact service performance are identified through incident, event, capacity and problem management. Quantifying and qualifying service constraints provides insight to root cause data that could be used to improve and evolve the efficiency of delivering the service. There is a direct relationship between service efficiencies and the reduction of workload. Together these represent drivers to operational cost reductions.
Service Capability – delivering services is not a static event in fact it is the opposite. Service delivery is very dynamic and needs to adapt and evolve as outside influences come into play like change in business, technology or completive threats. Through SLM the need to evolve the service will become evident. This will drive the need for IT to improve its capabilities and evolve to support the changing business landscape.
Service Value – as mentioned previously, service value is determined by providing a portfolio of well-defined and aligned services to the needs of the business and performing to SLA expectations. Engaging in a best practice service strategy and design process supported by a SLM process provides the framework to ensure IT is delivering service value. Driving IT up the maturity curve to the point of adding value is the point in the journey where IT is considered a valued partner to the business. Service Level Management is highlighted as an opportunity to drive value and influence positive change across the organization. It represents only one process within an integrated service delivery model. It is a piece of the overall IT Service Management process model and cannot provide the expected benefits without the integration and support of the other process areas.
SLM within the context of industry best practice service management will provide overall benefits of improved service value; cost efficiencies improvements and better process controls.
Today more than ever companies need to reduce cycle time, leverage technology innovation, and become more nimble in respond to customer needs. The pace of change continues to accelerate. As successful companies mature they need to ask themselves whether extending their past strategies and activities are always going to secure sustained market share going forward. The answer isn’t always a resounding “yes.” To respond to this opportunity many companies have refocused towards their core competencies and increased reliance on external partners / vendors for:
Software applications maintenance management and development
IT infrastructure management
Professional services, telecommunications, and network services
Business process management
To increase efficiency and decrease costs, business process outsourcing (BPO) as well as IT applications and infrastructure outsourcing continue to grow. To ensure that outsourcing efforts support the organization both today and in the future, executives need to not only maintain favorable relationships, but also update and enhance partnerships with outsourcing vendors over time.
The problem this poses for many business leaders is that although vendors constantly refresh their product offerings as they acquire or sell off product lines, it is a common practice for vendors to have multiple account managers who sell products and services to individual business units with independent pricing, terms and conditions. A business’ lack of centralized visibility to total vendor spend further inhibits the opportunity to discuss innovation with vendors.
As a response to this issue, leading organizations establish a Vendor Management Organization (VMO) in order to drive value and reduce risk. VMOs coordinate outsourcing deals through their respective lifecycles to ensure that business terms, legal terms, information security and risk compliance requirements, vendor performance measures, and optimized pricing are maintained.
VMO personnel become trusted advisors and partners with both IT and Business leaders to develop Vendor Strategies aligned with organizational objectives. VMOs monitor vendor performance, lead dispute resolution, and follow up on remediation plans.
VMOs help leverage corporate buying power and reduce the risk associated with individuals signing contracts without proper due diligence. But most importantly, VMOs ensure innovation is delivered into the ongoing relationship with the vendor.
The closer the VMO works with the IT and Business organizations the greater their ability to drive value. Driving economic value, reducing business risk and increasing communications across multiple business units are some of the reasons why Vendor Management Organizations are being deployed today.
Enterprise architecture (EA) refers to the activity of designing IT strategy, systems, processes, and organizations to directly align to business unit strategy and goals in response to disruptive forces. EA delivers value by allowing business and IT leaders to have a recipe for adjusting policies and projects to achieve business outcomes in response to disruptions.
As a CIO how can you use Enterprise Architecture to transform the way that your business runs? You need to examine your approach to EA. Here are six questions you should ask to help you do that:
Does your EA team focus on standards and the enforcement of standards? If so, loosen the standards and create frameworks instead. The framework components should be coupled to elements of the business strategic plan and roadmap. Key questions that the EA team should be asking about the EA components:
Does it support the potential for new markets?
Does it support the displacement or elimination of competition?
Will it move customer’s business into new markets?
Will it reduce the cost of on-going operations (keeping the lights on)?
Does it support the growth within existing markets?
Is your EA team comprised of mostly IT people? It’s essential to get out of the “ivory tower” and make sure there are at least equal number of business representatives on the EA team as there are IT representatives.
Does your EA governance and decision making focus on standards and the adoption of standards? If so, enable governance in a way that promotes innovation and driving the business instead of critiquing the solution against the standards.
Do you measure success and the performance of the EA team by how they manage standards and adherence to standards? If so, change the way you measure success. Measure performance in terms of how closely EA supports the strategic business outcomes (such as improved customer support, better product quality, less defects, growth in market share, etc.) and how well EA delivers on improving business technology (i.e. cheaper, better, faster).
Is your EA team focused on tools that don’t add value and support the points above? If so, be willing to give up the tools in place today and either get new tools or start over. Be sure to understand the business requirements before focusing on a tool or set of tools.
Do your teams believe that implementation equates to done? If so, change the belief that implementation means completion. It’s a journey not a destination.
Whatever you do and how you approach EA it is important to ensure EA reflects the ambitions of the business and accepts being driven by the stakeholders. Without buy in and active participation from the business, EA may as well stay locked up in the “ivory tower” with its tools and adherence to standards. If you choose to ignore Enterprise Architecture and its power to transform you will miss the opportunity to make a positive mark on the company’s performance.
An effective shared services operation is customer-focused. To keep that focus when building or rebuilding a shared services operation try following these seven steps:
Identify the customer community – Classify customers by respective roles across the entire organization, not just the business units that the shared services directly supports
Assess requirements and expectations – Ask the customer community for specificity around their business needs and confirm their service expectations
Implement analysis measures – Analyze the stakeholder community, by role, and utilize input to establish and maintain metrics to help evaluate effectiveness
Align service functions – Set operational standards for the alignment of shared service functions to the customer business functions and leverage synergies
Measure and Improve – Plan and measure customer satisfaction of the shared services, not just through standard SLAs, but also through outcomes (productivity improvements) and customer satisfaction surveys
Create line of sight – Define, measure and report service levels on a global, regional and market level basis. This promotes customers visibility into the value brought by shared services
Incent behavior – Empower and motivate shared services employees to provide world-class customer service
These are the basics of a customer focused shared service organization, but ultimately in order to advance the organization further, there has to be a cultural evolution to adopt a problem solving mentality, that is aligned with the business needs they support.
When embarking on a shared services strategy and assessment initiative, organizations should consider a range of topics to ensure they reduce risk, quantify cost savings opportunities, safeguard current initiatives, design effective solutions and incorporate best practices. In order to help guide your shared service initiative consider the following points:
Take the time to complete a proper fact-based analysis and business case then use this to aid in decision-making and consensus.
Align the shared services strategy to support growth not just cost reduction and optimization.
Align the shared services strategy with your company’s goals and objectives.
Identify and leverage new delivery models and technology such as cloud and as-a-service.
Do not look at shared services in a silo but consider all the options for an integrated delivery model inclusive of shared services, outsourcing and offshoring.
Design and implement a strong governance framework.
Plan initiatives to achieve on-going process optimization and standardization from the start.
Ensure the strategy and implementation align with ongoing company initiatives (e.g., major ERP implementation.)
Design and manage a focused risk management program to help you stay on track.
Build a customer-focused shared services and customer service mentality.
Incorporate effective internal communications and change management programs.
Consider your company culture when designing solutions and the implementation strategy.
Understand how to leverage the benefits of sourcing and next generation outsourcing.
When these considerations are addressed your shared services strategy will help to reduce costs, improve service, flexibility and agility and allow for process innovation. Shared Services, when properly implemented, helps the business focus more on delivering against strategic goals and objectives and less on managing non-core support services and technology.
IT budgets today typically include a large amount of Application costs. Acquisitions, change in business strategies, business growth and new demand for IT services have contributed to significant growth in application portfolios. Support needs to grow with the portfolio as new solutions are added and the overall complexity and risks increase.
This situation leads to two key challenges for IT and the Business:
Rising costs – while most organizations believe they are spending on highest valued opportunities, this is rarely the case. As the portfolio increases, spending gets spread across too many priorities and very few understand the true costs of each application. In addition, complex infrastructure supporting applications are often shared across multiple solutions which further complicates the true costs.
Outdated Applications – companies rarely initiate programs to simplify or retire applications. Why? It is hard work and usually means that one organization may have to give something up for the companies greater good. However, just like life itself, applications have a life cycle or beginning and end. A burning platform can arise as vendors discontinue support for applications, hardware becomes obsolete, and organizations lose specialized resources that maintain these applications.
It is imperative that organizations adopt an Application Portfolio Management (APM) process to align their portfolio with business, strategic and technology priorities.
One of the best places to start an APM program is to conduct an application rationalization project. This project focuses on building or enhancing an existing inventory of applications, but more importantly it establishes a framework for classifying business value and understanding application assets.
During this process, applications are scored and ranked along with an initial set of issues and opportunities. The ranking provides input to a strategic roadmap of which applications to invest, promote, retire, or enhance in some form (migrate, renovate, etc.) in an effort to reduce complexity and focus resources on new capabilities.
An application portfolio rationalization forms the basis of an organizations application strategy and governance process that can drive business and IT improvement for years to come.
Despite security concerns, the mass migration of IT services to the cloud will be an inevitable macro-trend. The value proposition is just too compelling: cloud computing is evolving into a utility. (See WGroup strategy brief “Cloud Computing: A Practical Guide to Utilize Cloud in the Era of Asset-Light IT.”)
If anything, the recent Edward Snowden saga only goes to show that regardless of tools, technology, policies and procedures, your security measures can only be as good as the people you employ to follow or enforce them.
So what message does that translate into for enterprises already worrying about security in the cloud? Observations:
Private clouds are not necessarily more secure then public clouds (i.e Amazon). Private clouds are only as secure as the people and processes supporting them.
A common approach to improving security is to virtualize security controls, but that in turn adds another layer of abstraction to a key component of the overall cloud environment. More abstraction means less visibility. Thus the underlying trust relationship with the provider is key.
Now that cloud providers have become responsible for much of the security apparatus, the cloud customers should take it upon themselves to check the qualifications of the cloud providers’ security personnel – their architects, coders, operators and policy makers. The practice of “trust but verify” should apply both to the vendor’s people as well as their processes and technologies.
A key subset of the vendor’s personnel that demand scrutiny for security reasons are those with administrative access to the customer’s assets. Cloud has introduced this new tier of privileged users whose oversight and even hiring should be monitored as if they were in-house personnel.
Another common approach to enhancing security is to ask the cloud provider to contribute more to security monitoring processes and making SIEM (Security Information and Event Management) data more available. But that still means the customer should inquire about the provider’s handling of the logging and execution of their monitoring processes.
At the very front end of the provisioning process, risk prevention means careful screening of workloads before deciding whether they are appropriate for migration to the cloud (mission-critical or sensitive data workloads demand more isolation.) But isolation can never substitute for people’s compliance. So it still boils down to the people.
Finally, self-provisioning means governance and training are critical before the end users are empowered and set loose to decide for themselves or to gain access to the cloud.
While technology is a very important component, managing the people component is just as, if not more, vital to security.
Organizations that encounter change due to the loss of an IT leader are often left in a state of flux. An Interim CIO can be an opportunity to quickly fill the role with someone experienced in the business with a playbook for re-mediating challenges. It is important during this period of time that organizations assess the root cause of the departure and work to correct any internal issues.
Choosing to bring an Interim CIO into a newly vacated position is a move that more organizations are making to ‘prepare the ground’ for the next permanent leader. The Interim CIO enters the organization without the baggage of history and can provide an independent assessment of the situation. They offer senior management an unbiased view of the situation and call attention to new ways for IT to add value.
Typically the Interim CIO will:
Function as the Operational CIO – Keep the IT organization running and ensure resources are fully utilized while working to prevent staff flight and ensure business continuity.
Conduct a Robust Set of IT Assessments – Provide independent audit, assessment, and bench-marking in many areas of IT including strategy, business alignment, organizational model, sourcing utilization, application portfolio, cloud utilization, service levels, planned projects, and spend levels.
Build an IT Strategic Plan – Tackle the critical problem areas and take politically inexpedient positions where necessary to ensure IT supports the short and long-term business objectives. Lay the groundwork for a long term manager, make hard personnel decisions, develop a detailed implementation road-map, and establish professional management practices, policies and processes.
Help Hire a Permanent CIO – Fine tune the perspectives and requirements for the next long term leader. The Interim CIO provides a clear view of the capabilities, experience, and culture/personality requirements for a successful permanent CIO. The Interim CIO will develop a profile in connection with top management, and play a significant role in the interview process to ensure a successful placement.
To be successful, the Interim CIO needs to be a deeply experienced executive with both IT and consulting skills to work in complex and sometimes difficult cultural environments. The critical outcome from an interim CIO assignment is the alignment of senior management’s understanding of the proper role for IT in the organization, and their commitment to ongoing collaboration with the future IT leader.
IT leaders are constantly challenged to leverage all elements of technology, resources, and funding to maintain IT’s alignment to changing business requirements. To deliver value to the business, many organizations develop detailed strategic plans and roadmaps designed to guide the IT department toward a desired future state.
IT strategic plans are vital for every IT organization, but even the best engineered strategies are at risk of irrelevance if they don’t adapt as technology platforms, service delivery models, and “best practices” continue to evolve at an accelerating rate.
Opportunities for strategy adjustment can manifest themselves in many ways. At one end of the spectrum are major, unexpected issues that can cause significant business harm if not managed correctly including outages, radical business direction shifts, new regulations, or economic factors. On the other end of the spectrum are new technologies and processes that can create immense value if adopted, but in many cases the IT organization may not even know that they exist. In the middle are regular course of business optimizations that must be managed to ensure continuity including end of life technology, contract renewals, and personnel turnover.
To provide awareness of these issues and opportunities, and to maintain relevancy and progress against the IT strategic plan, leading IT managers should regularly conduct IT assessments or IT audits. Tailored to the specific needs of your organization and industry, the IT assessment should evaluate trends, performance, issues, costs, new models, and peer alignment across the following areas:
Emerging technology – e.g., Cloud, Big Data
IT security and vulnerability
Disaster recovery and business continuity
Application portfolio, architecture, security, risk, and controls
Skills and IT organizational model
Alignment to business strategy
IT Service management
Contracts and SLA performance
Costs, budgets, and spend levels
In some cases, these assessments can be conducted with internal resources during bi-annual or annual IT department health checks and IT strategy revisions. Sometimes, it’s critical to get an outside-in perspective on existing IT strategy and capabilities to inject new ideas and challenge the status quo. Organizations constantly need to re-invent themselves otherwise existing processes may become ossified and an impediment to innovation.
In cases where there are such larger concerns, it is essential to engage an experienced advisor to conduct the assessment to provide an objective, 3rd party perspective, and formal fact-based comparison to leading models and current best practices.
A core function of IT is to evaluate technology and look for opportunities to extend the value of the services portfolio focusing on practical advancements that are aligned to the mission of the business. Among the disruptive trends seen in the marketplace, those having to do with Big Data, the various flavors of Mobile Computing and “X-as-a-Service” stand out as being examples of technology-based opportunities for internal exploration.
The ability to evaluate these new technologies in a practical environment where their technological value and impact on business and IT operations can be assessed is extremely important. Deausiedingroshuowner of domain . IP checker In addition to evaluating the technical capabilities, IT must evaluate:
“Fit” in the production environment and the existing service portfolio or catalog;
A financial business case with certain caveats e.g., traditional ROI metrics may not be as applicable in these projects; and
The potential benefits of the technology at the risk of losing competitive advantage when competitors become early adopters.
Therefore, the research, development and new service introduction process needs to be a structured management model and a core competency required to provide highly competitive services.
New technologies have the potential to generate significant value to the business but it is usually a multi-step, iterative journey, and the investment risks are real. By establishing a robust operating environment CIOs can confidently lead the organization to embrace the opportunities the new technology can provide. Such an environment will drive the creation of value in the form of services that support competitive business growth.
Increasingly, competition is coming from more than traditional outsourcing providers. “The Business” (your customers) have unprecedented access to a range of technology options.
Available options range from infrastructure provided “as a service” from the likes of Amazon and Microsoft, to business process outsourcing to complete solutions such as Salesforce.com.
In the past, IT organizations had some control through requests to connect to the corporate network, options available today have no such requirements. Businesses can purchase basic infrastructure services or complete solutions “in the cloud” and never have a need to inform IT. To be successful, IT must understand these options and how they compare in terms of cost, reliability, security, etc. “Build versus Buy” is no longer limited to Applications – this is an evaluation that is applicable for nearly all IT services today.
Understanding the options available to the customer is critical to the continued relevance of the traditional IT organization. In fact, it may be argued that the traditional IT organization is doomed if it doesn’t evolve to more of a service broker model. If IT is to continue as a service provider, it must look like one to the business. This means moving from a cost allocation mentality to a price for service mentality.
A simple example highlights the difference. Three business units share the cost of an application running on a large, expensive server, each paying a third of the cost. One business decides to migrate to another solution leaving only two business units sharing the cost of the application and the large, expensive server. Traditionally, IT would increase the allocated costs to the remaining two business units by 50% each. But this isn’t how a business operates. A business builds capacity and then has the pressure to sell that capacity.
Formal commitments from “the business” may be required to ensure appropriate return on investments.
In order for IT to remain relevant to the business it must understand the market in which it is competing, and its customer’s expectations.
Whether it is through reading industry publications, being informed by consultants or through internal discussions, the question of how mature or established your organization is in alignment to the Information Technology Service Management (ITSM) model is an interesting one. One which we know you ask yourself from time to time.
Transforming to a best practices ITSM model represents a journey to the promised land of service excellence, process efficiencies and ultimately added value to the business. The good news is the promised land does exist. As the saying goes, a long journey starts with the first step.
So how do you know where you are on that journey?
There is a simple litmus test to gauge where your organization is in the establishment of ITSM. The first step is to pick a service with a moderate level of complexity (moderate level of complexity being defined as multiple components provided by more than one supplier). Next ask the following diagnostic questions about that service:
Was it designed to support a specific business requirement and is it orderable from a single service catalog item?
Is the price based on actual cost to deliver? Is it competitive? Can the same features and benefits of this service be purchased elsewhere for less?
Is there a named service owner who clearly has end-to-end ownership of the service?
Do the service components have documented processes and process owners?
Have KPI’s been established at the service level and are they actively governed?
Have SLA’s been established with suppliers that align to the KPI’s and have OLA’s been established between dependent suppliers?
Is there a process in place to forecast and manage demand?
Do you know the capacity limits in delivering this service and is there a documented process to scale?
Are the supporting foundation processes incident, problem, event, configuration and change management integrated at the service level?
Is there a process discipline in place to routinely evaluate the performance of the service and introduce service improvements?
This is not meant to be a self-assessment; rather it is intended to be a probing, thought provoking set of questions. The challenge in this quick test is that it is difficult to be objective. There is a natural tendency to justify why things are not quite what they should be and move past it. With this exercise I invite you to be critical.
So where should you be? If you answered not sure or no to one or more of these questions you may want to consider assessing how your organization as a whole stacks up to a best practice ITSM model, create a maturity baseline and a stepwise plan to build and measure planned progress.
The outline of a best practice ITSM model provides guidance and structure to assist IT in the transformation from a support organization to running IT as a business.
Embracing ITSM and committing to the journey will prove to pay itself off in dividends not to mention the agility of a predictable service delivery model.
“Running IT like a business” is an idea that has been around for years. With the increasing integration of technology into the business, the expectations of how IT is managed are rising. In order to meet those expectations, IT management must understand their true cost of IT.
No surprises here – isn’t this the basis for running a business? Why, then, is it such a challenge? Here are the typical reasons why:
Many IT leaders make the mistake of treating IT costs as an annual budget exercise.
Too often, costs land in a particular budget for convenience more than logic. And costs, on their own, are of limited use for purposes of managing a service.
How can you begin to face this challenge? The first step in “running IT like a business” must be to align costs with the services provided.
Understanding the component costs of these services – server hardware, server management, service desk, desktop support, etc. – is necessary in order to build a reasonably accurate service cost.
It is important to understand that “the Business” has a fairly simplistic view of IT services; Applications, Service Desk, Collaboration capabilities (video conferencing, web conferencing, etc.), etc. Effectively describing what is in a service as well as the drivers of cost in that service is necessary for success in any business. IT is no different.
In order to remain relevant, the IT organization must begin paying more than simple lip service to the idea of “running IT like a business”. This begins with an understanding of its costs of services provided.
So what role does the Configuration Management Database (CMDB) and Service Catalog play in Information Technology Service Management (ITSM) and Information Technology Infrastructure Library (ITIL)? Well everything. It’s the heart, center or repository of information on services, systems, applications delivered to the business. Most organizations don’t take advantage of what a service catalog has to offer. Most CMDB implementations are standalone when in fact they need to be federated. A Federated CMDB is an enterprise CMDB that accepts CMDB information from many sources. Got Software as a Service (SaaS); need federated CMDB.
Let’s start by looking at the CMDB since we can use it as one of the building blocks for the service catalog.
While the concept of a CMDB has been around for years in the forms of spreadsheets, Visio diagrams and simple databases, the CMDB of today is based on standards from the Distributed Management Task Force (DMTF). The management and operation of a CMDB is defined in the ITIL standards.
A CMDB has three primary components or views:
Ownership and Provider
Many organizations think they have a robust CMDB when in reality they do not. There are many reasons for this including trying to “boil the ocean” and not having the right processes to maintain the CMDB. Populating and maintaining a CMDB is a journey and not a destination. Having a strategy and road-map to implementing, maintaining and assessing the health of your CMDB is critical to long term value.
Start with the basics – server names, locations, ownership, applications installed, relationship to other assets in the infrastructure. Make sure you tie problem and change management to the configuration management processes. Once in place, expand to include desktops, laptops and mobile devices.
As the CMDB is being implemented having a service strategy and road-map becomes paramount to an IT organization’s ability to be effective and add value to the business. Too often the business can purchase SaaS and hosted solutions without the involvement of IT, causing support, inter-operability and service quality issues. Ensuring your services road-map can include SaaS and other services not hosted or provided by the internal IT team means IT can be the service integrator of choice for the business.
As with the CMDB, the service catalog should be implemented in stages and can start with the basics such as services for desktop, laptop, phone, e-mail, new hire, and termination. From there, you can grow the service catalog to include provisioning of computer and storage, access requests, office moves and resource requests for projects.
The worldwide economy shows sluggish growth numbers. Global corporations are posting modest earnings growth. What does this really mean to Business Process Outsourcing (BPO)?
Leadership must not only produce more with less, but they also have to ensure that they are clearing their internal ROI hurdle, as well as realizing their forecasted rates of return on capital projects.
To address this need from customers, BPO service providers have become even more creative and innovative with the financial engineering aspect of pricing. Questions are now being asked, more than ever before, about the feasibility of outcome based pricing.
Corporate management needs to more directly link investment dollars to the velocity of savings. Outcome based pricing, or contingency based pricing as commonly called, can be a pragmatic means of achieving these objectives.
Before heading “full bore” into a BPO agreement with outcome based pricing, there are a few basic principles that lend themselves to the full comprehension of the dynamics of this type of arrangement and its practicability for a BPO project.
Think of these guiding principles in the acrostic ACE… Applicability, Calculability, Enforceability.
Applicability– How strongly interrelated is the outcome to the scope of services being performed? Will the outcome be materially impacted by the proficiency of service delivery? This is the most difficult assessment to make, specifically related to BPO. To date, the evolution of outcome based pricing hasn’t been commonly demonstrated in many BPO towers (HR, Legal, F&A); however momentum is building for outcome based pricing with respect to Strategic Sourcing (managed services) and Call Center solutions.
Calculability– Is the outcome of services being delivered definitively identifiable and quantifiable? Whether the outcome is savings or other business metrics, there should be clear definition with respect to the calculation. For example, as related to strategic sourcing managed services—-what exactly is “realized savings”? What are the measurement periods?
Enforceability – What contractual conditions are being leveraged to enhance the likelihood of the desired outcome? An important caution here is that this driver is not the “run of the mill” service levels agreement (SLA). The main idea is to not only impact price, but to also influence the viability of the contract life, through “push and pull” terms for both parties.
As the market continues to mature, anticipate more and more BPO deals to incorporate some element of outcome based pricing. To take full advantage of the benefits of BPO, business leaders must stay on top of evolving advancements in pricing and service delivery in order to take full advantage of the benefits BPO can bring to their business.
Information Technology Service Management (ITSM) is the framework for delivering technology within a business. While often interchanged with Information Technology Infrastructure Library (ITIL), the two are very different.
ITSM is the organizational implementation of a management model used to design, implement and manage quality services for business customers. ITIL is a library of process standards outlined in 5 core publications that guide the delivery and support of IT services:
Continual Service Improvement
ITIL standards are published by the UK Office of Government Commerce (OOGC) and provide a holistic view of delivering and managing services. ITIL and ITSM together make up the services ecosystem that create the capability to deliver and manage a portfolio of quality services.
Think of ITSM as the organizational function, while ITIL is the process function. ITSM has to have alignment to:
IT Strategy – you must have an organization that supports and delivers on the IT Strategy
Demand Management – a very large part of ITSM is understanding what your customers/business users need and translate those requirements into cost effective and value driven services.
Governance – managing a portfolio of services, managing customer expectations and having the mechanisms to make effective and timely decisions.
Sourcing – staying abreast of where the industry is going and delivering the portfolio of services in the most cost effective and value driven manner, regardless of the source.
Vendor Management – managing the vendors to deliver the products and services in a manner that allows IT to meet their customer satisfaction.
ITSM is a fundamentally different way of delivering IT. Having Service Management capabilities is critical to your organization as it provides a basis for better management controls, improved operational efficiencies, value-based services and integrates well with service providers.
WGroup believes the Service Management organizational model is an evolution. There are differences in organizational alignment, skills and culture which must be factored into the organizational design and implementation. Remember, ITIL is a process framework; a recipe if you will that needs to be adapted for each organization’s capabilities, skills and business requirements. By no means should someone “pull the ITIL reference manuals” and implement every facet of ITIL.
The benefits of IT Service Management Process Maturity provide the ability to deliver continuously improved, high quality IT services to all levels and types of customers – IT as a business! Furthermore, IT Service Management enhances the relationship between an IT organizations internal and external service providers while increasing the linkages across IT and improving service levels.
A decision to move from homegrown and legacy ERP solutions to a packaged ERP solution (e.g., SAP, Oracle, etc.) requires changes to the on-going role and capability of the internal IT organization. It is WGroup’s perspective that the following factors should be considered when developing a new IT organizational model and capabilities:
A move to packaged software requires a change in organizational focus and capability. There will be a need to create Centers of Expertise or Excellence (COE) for managing the ERP solution going forward both from a business and an IT perspective.
During the ERP implementation, new process definition and process improvement is owned by the business and during implementation the business is usually responsible for the adoption of business processes.
Since the package ERP will become the new foundational system, a core team of Business Process owners should be retained post-implementation, to form a Business COE with responsibility for:
Strategic Direction – ERP usage and enhancement
Business Processes – Refinement and improvement
Business Integration and Interaction model
Business Ownership Enablement
Similarly, an organization may create an internal IT capability to support the ERP solution architecture, continued development & integration capabilities – this forms the IT COE.
The IT COE works in concert with the business COE, the implementation team and the outsourced support provider to ensure that the on-going integrity of the ERP solution is maintained beyond the initial deployment and to plan future upgrades and changes
The IT COE has an integral role, even if the support for new ERP environment is to be outsourced
This may require an investment in resources, training and new skills
This also requires strong governance and disciplined execution
A clear IT organizational strategy and the definition of the new IT organization structure post-implementation is a key step. It is recommended that an organization planning or executing a new ERP deployment meet with an experienced IT strategy firm to help craft a cohesive IT organizational strategy, operating model and implementation plan.
Many organizations implementing an ERP (e.g., SAP, Oracle, etc.) plan to partner with 3rd party service providers to contain project costs, fill skill and resource gaps, and ensure strong service levels. It is common for such organizations to consider an outsourced support model to provide ERP application management and support (AMS) starting immediately after go-live.
When planned correctly, this can be a highly effective strategy. It is WGroup’s perspective that additional factors must be evaluated when developing a sourcing approach in new ERP implementations, as opposed to sourcing support for mature or existing ERP environments.
1. Prepare for System Stabilization Issues & Phased Deployment
Typically, ERP functionality is rolled out in phases. Each phase of a new ERP implementation usually encounters issues related to data migration, integration with legacy systems, knowledge transfer, etc., – all of which can negatively impact call volumes and increase support requirements. There will be a potential need for additional “SWAT-team” support resources for 3-6 weeks post-go-live (or longer depending on complexity) to deal with such issues.
Plan to retain availability with some portion of the “implementation team” to support the SWAT-team and troubleshoot & fix issues. Such support must be engaged with an adequate level of contractual rigor and governance oversight to accommodate the selected AMS vendor(s), even if the AMS vendor is the same as the ERP implementation vendor.
Be prepared for a period of stabilization that could last ~3+ months post go-live, after which SLA measurement & monitoring of the AMS service provider should begin.
2. Evaluate Change Management Opportunities
The potential for business impact (to end users) post go-live, as a result of “new” processes and interfaces, and limited hands-on experience with these processes and systems may be significant.
Prior to go-live, support calls and ticket volumes are best guess estimates and service level requirements and implications may not be fully known. Additionally, a spike in call volume and support requests – both from end users (e.g., “how-to” questions) and for technical issues (e.g., integration, data flows, data migration errors) is likely to occur in the first few months of any release.
The size, structure, and make-up of the “super-user” group(s), if any, being considered as part of the overall planning for AMS, should be evaluated.
3. Be Thorough with Vendor Selection and Transition Planning
Resource ramp-up requirements based on the release approach and schedule must be planned and aligned.
Adequate knowledge transfer planning should be ensured with respect to solution design between the implementation team or vendor and the AMS support team or vendor – even if implementation and support requirements will be managed by the same service provider.
Select an AMS provider that understands your industry and business processes to support ongoing process improvement.
The sourcing process for new ERP environments is different and more challenging than a typical sourcing project, and therefore the strategy and approach must be adapted. It is recommended that organizations considering sourcing for new ERP environments meet with an IT strategy-based sourcing advisor to ensure the development of an optimal approach, selection of the best-value vendor, and success in a long term relationship with the AMS service provider. Further Reading: WGroup Case Study – SAP Applications Outsourcing.
To meet changing customer demands and evolving business requirements, organizations regularly evaluate and deploy new applications. The accelerating shift in application ownership from IT to the business units coupled with M&A activity has created a new environment where multiple applications may be supporting similar functional requirements. In order to decrease unnecessary costs in software licenses, support staff, MIPS, and server cycles, we suggest following these seven steps when considering new applications.
Analyze your current Application Portfolio. By understanding what is currently in your organization’s portfolio, you may find opportunities to optimize usage of existing applications and software packages. Utilizing existing applications in new ways may be more cost effective than deploying new applications – especially with respect to database, license, and support costs.
Develop a business case. Gain support from all stakeholders. A well thought out business case includes solution solving alternatives with cost-benefit analysis as well as a risk and sensitivity analysis.
Develop decision criteria for application selection. Coming to agreement early in the project helps to keep emotion out of the selection process. Project members are more likely to make decisions based on facts like TCO, strategic fit with objectives and alignment to functional requirements.
Identify key features and necessary functionality. Consider all stakeholders to determine what features and functionality are most important to the business. It may be helpful to prioritize requirements and prepare a gap analysis against your current application portfolio.
Perform a market analysis to determine available options in this solution space. Research all avenues to understand your options. Make sure you focus on overall value in this market analysis, not just cost alone.
Evaluate options and weigh against the previously developed decision criteria. Consider how each solution will: support both routine and strategic business requirements, accelerate deployment, maintain compliance with complex and ever-changing regulations, and operate within an enterprise-wide IT architecture that is sustainable. Evaluate which solution will provide the most value in the short and long term.
Implement the chosen solution and define long term governance. Having a well-defined project structure can make or break a successful implementation. Establishing a well thought-out governance process will help to ensure the business achieves the optimal value of the selected solution for many years to come.
Read more about a recent application assessment WGroup conducted at a leading Fortune 50 retailer – Click Here
Emerging trends in many industries are opening up multiple opportunities for Big Data analytics. Given the sensitivity of data security, and the fact that leveraging Big Data implies cultural changes that require time to take hold, CIOs need to start preparing diligently now for a secure, robust analytic capability. WGroup has identified 10 things CIOs can do before even the first Big Data project is launched:
Review the organization’s strategic plan for opportunities to apply big data analytics. Identify an analytics-savvy team within the organization to help with brainstorming ideas.
Develop and execute an educational awareness campaign on Big Data possibilities.
Inventory all the data that is available – structured and unstructured, internal and external, streaming and operational.
Architect the required infrastructure and establish an investment plan.
Identify potential third parties to assist if required in specific parts of the process, e.g., opportunity definition, hosting, data modeling, data sourcing, etc.
Develop a Big Data pilot program that is concise, executable and delivers results quickly.
Develop, identify and/or recruit the skills required to execute and capitalize on the Big Data pilot projects.
Develop an organization strategy and governance model to support, manage, and leverage the expanded analytics capability.
Update security policies and key procedures such as change control to establish a foundation for the program.
Chart out the funding profile for a multi-year Big Data program – make it a key part of the strategic plan.
Big Data has the potential to generate significant value to an organization, but it is a multi-step, iterative journey, and the risks in terms of security, compliance and invalid conclusions are real. By establishing a robust Big Data-ready operating environment CIOs can confidently lead the organization to embrace the opportunities Big Data can provide.
Some clients tell us that they have considered or are considering running the sourcing strategy, financial modeling, RFP development, provider selection, contracting, and negotiation process for an IT or business process outsourcing project internally. WGroup’s point of view – the business case for using an experienced, strategy-based sourcing advisory firm can be very strong. Here are 10 considerations:
Outsourcing is a highly specialized IT, strategy, and sourcing process.
Crafting successful outsourcing agreements requires specialized skills, experience, and knowledge in several key areas including; financial analysis, risk management, IT operations, IT governance, service provider capabilities, IT outsourcing “market pricing,” contract negotiations, and contract development.
Advisors understand the service providers.
An experienced advisor, with a full understanding of the service provider landscape including their capabilities, reputation, pricing, strengths, delivery models, cultural compatibility, references, and market momentum, will ensure that you consider all appropriate options.
Advisors ensure the full attention of service providers.
Service providers will bring their best team and best pricing when they know that they have a fair chance to compete for your business.
Strategy design is essential & long term governance must be established.
Experienced advisors possess specialized skills to find and articulate the intersection between sourcing efforts and top-level business strategy. An experienced advisor ensures that long-term governance is never overlooked.
Complete financial modeling is required.
An advisor will: build effective and understandable cost models that capture the true costs of delivering IT services, convert client budget-based costs into something that can be compared to the deal pricing, and establish the cost of retained services and governance.
Risk Management is crucial.
Tracking, measuring, and mitigating risk is an ongoing process in an outsourcing deal. The associated risk to the company and its core functions must be focused on and managed by an expert.
The RFP lifecycle is labor intensive and responses must be normalized.
From writing the RFP, to facilitating provider questions, reviewing RFPs, and conducting due diligence, a lot of work goes into the RFP lifecycle. An advisor augments a client’s staff to ensure a well-organized and efficient RFP process. Beyond price, an advisor will help a client through a thorough evaluation of all provider responses to locate the best fit and value for the client’s requirements
An advisor can quickly identify proposal pricing and establish any areas that might have been over or under scoped. They will also guide a client through negotiating the best price for the services required.
Contract development and negotiation requires a great deal of work.
Master Service Agreement (MSA) creation, Statement of Work (SOW) creation, and all of the associated schedules are required in sourcing relationships. Only an experienced advisor can provide best-practice templates and customize them to the unique objectives of the client. Advisors also possess the negotiating skills and knowledge required to ensure the resulting contract is fair, balanced, and profitable for all parties.
The value an advisor brings far exceeds an advisor’s fees.
It has been WGroup’s experience that in every sourcing deal that we have supported, the additional value (including better price) built into the contracts we create far exceeds the sourcing advisory fees. Just ask our long list of satisfied clients!
One of the biggest challenges organizations face today is the changing relationship between IT and business/functional areas of the company. WGroup sees several major factors contributing to this shift.
Most notably, cloud computing and as-a-service delivery models make it easier for non-IT areas of in terms of internal dissatisfaction, inefficiency, and confusion. WGroup’s strategy is to embrace the change, but with a logical and governed approach.
Governance Cannot be Overstated – the importance of a strong enterprise-wide governance strategy and framework is critical in this new world. Not only has the divide between IT and the business converged internally, but enterprises have to manage the complexity of global delivery models such as outsourcing, multi-sourcing, and shared services.
Partner for Innovation – business functions now have technology tools at hand that give them the ability to support their own needs without having to go through the IT department. Increasingly, software and technology providers are directly targeting and selling to business function leaders such as the CMO. Instead of discouraging or fighting the business functions’, IT should proactively and strategically identify requirements and partner for innovation to bring value to the process through strategy, governance, security, and enterprise IT.
IT Focus on Business Value – this requires a shift of focus from IT services required to run the business and cost improvement initiatives to services and priorities that drive top-line growth, innovation, agility and enterprise business performance improvement.