Author: Alex Salicrup
In my earlier blog, I described the challenges of competing with third-party service providers that many modern CIOs face. And, I closed by promising to come back with tips on how to transform a reactive, risk-adverse IT organization to one that’s more proactive and customer-centric. Here are some suggestions:
Your IT organization needs to run operations with the fewest number of IT staff possible. Now, don’t get excited—I’m not talking about reducing headcount. Rather than focus on reacting to requests, trouble tickets, and other events that can be fully automated, what I suggest is that your headcount be utilized to innovate, plan, and execute on new strategic initiatives that provide business results faster. In fact, companies that the Accelerate team has worked with and that have tried this approach discover that their attrition rate reduces as their employees learn new skills and gain focus in more rewarding tasks—job satisfaction increases.
Average Revenue Per User (ARPU)
It’s a strange term considering we’re talking about business users, but it translates to what is your average business user expects to pay for the average service they receive. What are your business users willing to pay AWS or other IaaS and SaaS providers for infrastructure and application solutions versus those of your IT organization? ARPU forms the basis of any service that is designed and added to the IT service catalog—this number drives everything. If your service is more expensive than the competitor, then what is the value that you are providing the user to justify that premium?
Keep your service catalog relevant and enticing—but as lean as possible. Rather than offer a large number of bundles, narrow it down to basic offerings that will meet the needs of most of your users. Augment those services by adding additional features that have proven valuable to your users or your competitors’ users. These decisions can be complicated. This is one area I find most IT departments have to exercise constraint. The advice I give to my customers is that a small number of offerings can meet the need of the majority (70-80 percent) of users. When exposed to many choices, users will only be confused and distracted from your value proposition.
From this point forward, think of your IT department as a start-up company. Every time you have a business initiative that requires capital, you need to fight for it from other startups in the enterprise. It’s not good enough to prove how your initiative will mitigate a risk. Your business case will need to show projected service uptake over time, and how profitable it will be within an acceptable timeframe. Yes—I used the word “profitable.” Profitable should be the end goal for an IT organization. Even if internal finance practices are not suitable for this type of profit setup, it’s a cultural mindset that you will thank me for adopting.
Service Level Agreements (SLAs)
Your SLAs have to be aggressive and comparable to what external service providers offer. Why? Service providers are very innovative about how they mitigate all risks, including SLA risks, without expending a lot of capital. The same goes for the modern IT organization. This is an opportunity to let your business users differentiate between the levels of service they would like versus what they are willing to pay for. If your users want tighter SLAs, provide an SLA matrix with varied levels of risk mitigation (time-to-resolution, availability, performance targets) to choose from—they will pay according to level of risk assumed by IT.
An SLA matrix also sets users’ expectations for what can be demanded as a response from their IT organization. In my experience, this is typically a significant improvement for an IT organization’s service management. Of course, the organization will need to deliver on these SLAs, and metrics will be essential in keeping IT honest and to be able to demonstrate the value of SLAs. The business user must have a compelling reason to pay for the premium, which usually translates to consequences if SLAs are breached. Some are monetary penalties; some are services not charged for during breach. Your organization’s solution will be unique to your environment.
These are my high-level observations and suggestions based on personal experience as a service provider in a former life, as well as through my work with our Accelerate customers. Most of the IT organizations I work with have been running in reactive mode for years, and their biggest challenge in transforming to a more proactive role as service provider is cultural. To form a new partnership with business stakeholders based on the ability to deliver real business value, I encourage CIOs to guide the discussion from one that’s risk adverse to one of innovation and opportunity. Success is out there if you know how to get there.
Alex Salicrup is a business solutions architect for VMware Accelerate Advisory Services.
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