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Tag Archives: service management

Streamlining Service Management to Achieve Cost Savings Targets

By Reginald Lo

ReginaldLo-cropIT departments continue to face aggressive cost saving targets.  During the recent recessions, many IT departments did not just “cut the fat” but they have also “cut into the bone.”  How can IT cut more?  Every stone must overturned to find even more cost saving opportunities.  A legitimate question is, “how does Service Management help achieve the cost saving targets?”

To answer this question, there are a number of perspectives that will help:

  1. How does Service Management directly save costs?
  2. How do we reduce the cost of Service Management?
  3. How do we change the conversation around Service Management so the Business becomes more interested in maximizing the value of IT Services as opposed to minimizing the cost of IT services?

This discussion is focused on cost savings so we will investigate the first two perspectives.

How does Service Management directly save costs?
The adoption of mature Service Management processes can improve productivity and (let’s be honest as to what Executives are looking for) opportunities for reducing head-count:

  • Reducing the re-work.  The biggest cause of re-work is failed changes.  Better Change Management, Release and Deployment Management, and Testing and Validation, can reduce this largest contribution to waste.  Configuration Management can enable Change Management and make it more effective.
  • Reducing the fire-fighting. Many organizations do not realize the high cost of constantly fire-fighting.  Fire-fighting pulls resources from strategic project work so there are the direct costs to fight the fire as well as the indirect opportunity costs that the projects must bear.  In contrast, a proactive approach, giving people time to think strategically and plan reduces the number of fires and frees the resources that were fighting fires.  Being proactive means emphasizing, among many other things,  the Service Design processes, Event Management, Problem Management and Continual Service Improvement.  Another not well recognized cost of fire-fighting is the impact on the Business.  Fires, by its very nature, do not just create costs and inefficiencies within IT but also create costs (real and opportunity costs) for the Business.  So a reduction in fire-fighting will help IT as well as the Business.
  • Consistent adoption of efficient and effective processes. Too often, processes vary across the organization: different teams follow different processes, different individuals perform processes differently, there are differences between geographic regions, between different legacy organizations (due to the history of mergers and acquisitions), and between different services that IT provides.  If an organization identifies/defines the best practices for its organization and ensures consistent adoption, the organizations as a whole will experience a productivity boost.

How do we reduce the cost of Service Management?
Many of the cost saving arguments for Service Management have been discussed before.  However, a “dirty little secret” is that Service Management is sometimes the cause of “non-value-added” cost to the organization.  This is not the fault of Service Management framework but of an adoption that does not focus on business value.

If you hear comments like “I spend more time writing up a Change record then implementing the Change,” there are probably many cost saving opportunities within Service Management to:

  • Streamline processes and make the more efficient
  • Remove bureaucracy and administrative “busy work”
  • Remove overlapping controls, e.g., between Change and Release
  • More efficient use of tools that support Service Management

Another way of finding to reduce the cost of Service Management is to analyze who is doing what activity within each process.  For example:

  • Can the activity be performed by a less expensive resource?  What training and tools can we provide the less expensive resource so they can be successful at the same tasks as the more experienced / more expensive resources?
  • Can the activity be off-shored (again to a less expensive resource) in a way that we can still keep the process coherent?

To ensure Service Management is not causing a burden to the organization, you need metrics to measure the cost and value of each process.

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Reginald Lo is Director of Service Management Transformation with VMware Accelerate Advisory Services and is based in California.

Identifying Cost Savings with Service-Based IT Cost Modeling

By Reginald Lo

ReginaldLo-cropResponsible service provisioning requires an appropriate balance between quality and cost. But this balance cannot be achieved without a clear understanding of the service costs and the relationship between cost and service levels. With this knowledge comes the power to make decisions on where and how to spend to reach the desired balance.

To achieve this, you need to:

  • Create a cost model for a service and thereby
  • Understand what contributes to costs
  • Provide levers and/or options for the business to control costs within acceptable service levels.

The major activities in this approach are:

Reg-service-based cost modeling

The availability of the right information, along with processes and procedures for capturing and maintaining the information, is critical to the success of this approach. However, I have found that many of my customers do not have all the information they need and their information processes usually need to be strengthened. Hence, you may want to conduct a pilot first with a small subset of services, identifying the information and process gaps, and creating and executing plans to address the gaps, before applying this approach to a broader set of services.

This approach can be used prior to or in parallel with a cost transparency / show-back / charge-back IT financial management assessment to prepare your IT organization to track and understand service-based costs and help prepare the business for taking a more direct role in making IT cost decisions. It provides the business with levers to control their IT spend.

IT cost modeling is not simple – information may be missing and creative solutions may be required to estimate certain costs; policies need to be established on how to categorize and track costs, and repeatable procedures for creating and maintaining the cost model must be established. However, if IT cost modeling is done well, the benefits of true transparency and effective cost controls can far outweigh the challenges.

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Reginald Lo is Director of Service Management Transformation with VMware Accelerate Advisory Services and is based in California.