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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.

Managing Your Brand: Communications and Marketing for Today’s IT

By Alex Salicrup

Let’s talk about the subject in which every IT department lacks expertise — and that is how to effectively market your capabilities and communicate value. And readers may think I am exaggerating on my next statement: IT departments around the world are ubiquitous in that their consumers usually have a less than favorable opinion of them.

Of course, we know that this perception is not true in all cases. However, in my experience, IT does not do a good job at managing consumer perceptions. And in the IT service provider world, managing these perceptions is critical. Unlike yesteryear, IT service providers now have to compete with public cloud providers that manage their brand very well and educate prospects on how their capabilities map to consumer needs.

During my time at VMware, I’ve had the pleasure of working with industry-leading global entities. Many of their IT organizations claim that their consumers are not taking advantage of using external providers, only to find out that they actually are — and in a big way. Others have accepted the fact that competition exists, and that they must address it.

Many IT organizations have concluded that they must manage consumer perception of their capabilities and offerings. In other words, they are trying to figure out how to sell their brand and services internally. Most have no idea how to achieve that. That’s where I come in.

IT communications and marketing is not just building out an IT education campaign.  It’s making a significant change in how IT strategizes and changes its internal culture to think and act like a hungry service provider. IT begins looking at a service as though it were a puzzle, with consumer needs as pieces of the puzzle.

Let me share a few areas to consider as you begin to develop your communications and marketing strategy. I concentrate on eight areas when assembling a marketing and communications plan:

  1. Understand your audience
  2. Interpret consumer perceptions
  3. Define your brand
  4. Identify the catalyst for change
  5. Create your vision
  6. Who, how, and what to communicate
  7. Managing organizational change
  8. Brand perception metrics

Understanding Your Audience
In every organization there are three main levels of strategic and tactical execution, as shown below:Salicrup-Comms Mktg graphicExecution is different at each of the three levels. Individuals within each level listen to and address solutions based on their domain of responsibility, and they understand solutions only from the point of view of addressing the needs of their level. This in turn needs to be addressed with the appropriate message for each level.

Interpreting Customer Perceptions
Marketing campaigns are designed to create perceptions (we’re better than those other guys). Consumer perceptions are always our reality. Understanding consumer perceptions help us identify how to manage them, and, how to package a solution.

The problem with negative consumer perceptions about your IT organization or the service you provide is that those perceptions are hard to change. So how do you communicate to your consumers that your people and services are the best solution for their unique needs?

Defining Your Brand
Brand is synonymous to reputation but also aspiration. However, a positive brand, as with reputation, takes time to build and is easily tarnished. Service providers have a good awareness of their brand perception with their consumers. This allows the provider to shape a consistent message, improve credibility, and enhance its brand through advertising its goals and achievements.

Identifying the Catalyst for Change
Change is not easy. There are two groups within any business that have to experience change. The group most impacted is the IT group. They are transitioning from traditional IT delivery to a service provider model. Therefore the hardest task — the part takes the longest — will be converting the IT personnel. Identifying why change is necessary and “what’s in it for you” can motivate your staff to follow your vision.

Creating a  Strong Vision
The critical aspect of a successful service communication strategy is the clear articulation of the vision.

Your vision must:

  • Be strategically feasible
  • Be effective
  • Incorporate the current position of the enterprise and catalyst(s) of change
  • Be ambitious
  • Be evidently accomplishable

Managing Organizational Change
No one is really happy about change. Turning your organization from traditional IT or project-based consumption to a service-based consumption model will incur role and cultural changes. The former is easier than the latter, and it needs strong leadership to guide it there. Furthermore, IT is changing the way that the business deals with IT. This is why organizational change management is so important. It is not just a operating change, it’s a massive behavioral change that people need to be guided through. If this is done crudely it will impact the brand severely and cast doubt about IT’s capabilities.

Effective communications are key — it’s very important that IT staff understand the unified message. They should become active ambassadors of the IT brand and the services the team provides. Communication, in this sense, refers to the art of persuasion. Crafting a message that is persuasive is a learned skill and essential if a perception is to be changed successfully.

In order to be persuasive, the IT team really needs to learn how their consumers think, and, predict what consumer reaction will be to events and solutions. People who are good at persuasion develop a keen sense of what solutions work and how messages need to be successfully crafted. This is paramount for any emerging service provider. Communication is about knowing what influences decisions at the three levels illustrated in the figures above. Therefore, different messages need to be crafted to persuade the different levels.

However, one of the highest risks a service provider has is individuals within IT not believing in the solution, the need for it, or how it’s being delivered. These individuals that are skeptical pose a threat of creating doubt within the consumers of the solution and its merits or capabilities.

A critical and difficult aspect of change for the IT staff is the understanding, adaptation, and dissemination of the vision and how they choose to communicate it. It is essential that leaders understand the dynamics of their teams, customers, and stakeholders. Understanding how to communicate and use your team to promote your brand and vision is important to your success. (Stay tuned for a future post, where I will talk more about individual motives and capabilities and how they can be mapped to three distinctive groups…)

Measuring Success — Brand Perceptions Metrics
It is imperative that an IT organization gauges how its consumers feel about the services they’re consuming from the service provider. The IT team needs to put in place metrics that capture performance against the needs of the customer and set realistic targets on what is to be measured.

This does not have to be complex — a simple 5-question survey is a great way to start. If the response is mainly positive, the IT team can include that message to its consumers to reinforce the positive perceptions. If the response highlights challenges, it’s a great way for the IT team to focus energy on fixing them — a catalyst for change.

In conclusion, I have covered steps and actions in this post that are fairly simple — perhaps perceived as common sense. However, IT traditionally does not have these communication and marketing skillsets. And, the IT organization has not needed them before the advent of public cloud — but they are needed now.

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Alex Salicrup is a transformation strategist with VMware Accelerate Advisory Services and is based in California.

Beyond Hype: Transforming IT to Deliver Faster Time to ROI

By Ed Hoppitt

ED HOPPITT-cropPhil Richards, Customer CTO for British Telecom’s global arm, BT Global Services, acts as customer champion and provides thought leadership, direction, and strategy to deliver both technical and commercial elegance to his customers.

As part of the extended VMware team partnering with BT, I’ve been working with Phil’s team to help identify opportunities for transformation — not just in the technology space but also people, process, and governance into the team’s key accounts. Phil took some time out for us recently to talk about his business and his relationship with VMware.

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Ed Hoppitt is a VMware Accelerate Advisory Services business solutions architect and CTO Ambassador and is based in the U.K. Follow him on Twitter @edhoppitt

How Do You Know if IT is Truly Transformational?

By Daryl Bishop

Daryl Bishop-crop“Transform your organisation by leveraging the convergence of cloud with the inherent synergies between the information superhighway and the innovation confluence between crowdsourcing and viral inputs.”

We’ve all sat in meetings and presentations listening to meaningless strings of words like these being thrown around with reckless abandon. The biggest offender among these terms is the word transformation. It seems that every IT organization is undergoing a transformation of one type or another.

In the dictionary, transformation is defined as a marked change in form, nature, or appearance. By this rationale, any IT project could be considered a transformation, however I think it’s a little more nuanced than this.

For example, a number of years ago I was involved in a mail platform migration from Lotus Notes to Exchange. Within the technology department, this project was heralded as a major transformation. Was this really a transformation? The first step in deciding is ensuring that we’re all speaking the same language, i.e., we have a common definition.

To decide whether an initiative is truly transformational, there are some key attributes to consider:

  • Aligned to a business transformation
    The surest indicator of an IT transformation is whether it is aligned to a business transformation. When the business undergoes a transformation, for example moving into digital markets, then IT needs to follow suit.
  • Touches technology, process, and people
    Transformation should not be limited to just technology; it needs to reach across the IT organization to include the elements of people and process. The software-defined data center (SDDC) vision is a great example of a transformation that drives efficiency and automation across the entire IT organization and fundamentally changes the way IT does business.
  • Usually a large program of work
    Larger programs of work have more touch points across the IT organization. This is not solely an attribute of transformation, but it’s certainly an indicator. In my earlier example, if the mail migration were a component of a larger activity based working (ABW) program, then it would be a transformation!
  • Often has a cost reduction coupled with a productivity dividend goal
    IT is continually being asked to reduce cost while delivering improved service levels. As a result, transformation almost always has cost reduction, efficiency, and productivity dividends. Otherwise, why would you bother?
  • Is innovative, introduces something new, or modernizes
    By definition a transformation is a change — and real transformation is driven by innovation within the IT organization. Businesses survive and thrive based on driving new innovations within their markets. IT is no different and must continually innovate to remain relevant and deliver the services the business needs, all within budget.

Using my previous mail exchange migration example, the outcome was not transformational as it was purely technology-focused with the business impact being a change in mail platform; evolutionary perhaps — certainly not revolutionary.

Now that we understand and have defined what constitutes a transformation, I’ll talk about how to transform your IT organization using VMware’s end-user computing vision in my next post.

In the interim, if you think of other elements that are required for a transformation or have any feedback, please drop me a line.

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Daryl Bishop is a business solutions architect with VMware Accelerate Advisory Services and is based in Melbourne, Australia.

Reflections on IDC’s Worldwide CIO Agenda 2014 Top 10 Predictions

By Paul Chapman

Paul Chapman-crioAs I read through IDC’s Worldwide CIO Agenda 2014 Top 10 Predictions, I was reminded that in the world of IT, one thing is certain: change. The roles of the CIO and the IT organization overall continue to evolve and increase in complexity at the rapid pace of technology evolution. The IDC report tackles this complexity, presenting areas of focus and solid guidance around critical topics. Here are a few key topics that caught my eye.

Addressing the Skills Gap
While IDC’s first prediction regarding a need for CIOs to focus on innovation and business strategy isn’t news, it reinforces a truth we as IT executives know all too well. The difficulty in shifting from technology services to business strategy and services stems directly from the skills gap. In my organization, I see us trying to move people from deep technical roles into data analytics roles, and it’s not something they gravitate towards. For example, a network engineer is not necessarily the best person to do network forensics. The focus on business services will happen gradually, as new skills are recruited or trained into mature organizations.

The skills gap shows up as an important theme in the report, which says, not surprisingly, that new skills are required for these new cloud-related jobs. I equate the situation today to placing an ad for an Oracle database administrator 25 years ago. You wouldn’t be able to find one because they didn’t exist. We need to create new roles, like cloud services administrators. At VMware, we are developing a college grad program where we immediately put new hires into new types of roles to help seed the acceleration.

A Need for Mobile Services
That leads directly into the report’s call for a rapid shift to ensure support for the “ubiquitous mobile and socially connected lifestyle.” IDC suggests that within the next 12 months organizations “create a portfolio of mobile services for inclusion in the IT service catalog.” This is bigger and broader than mobile. It’s imperative that every organization builds a holistic strategy around end-user computing. IT may place more heavy emphasis on technology but this is really about organizational change management. New generations of employees embrace change much faster then previous digital transients; they adapt much faster, they consume technology differently, and their expectations are different.

New Cloud Security Concerns
IDC also predicts increased exposure to risk through cloud adoption in an attempt to reduce IT costs. Of course, security is always a major concern, but we have to keep in mind the distinction between private and public cloud options. On the public side, cloud services companies’ reputations depend on their ability to provide the best security available. Many organizations worry too much about doubling-down on security when the service provider has it covered more fully than most companies could do themselves internally.

On the flip side, some companies will never move to public cloud because of security and IP protection concerns. That doesn’t prevent them from taking a similar internal private cloud approach. You can take the same kinds of capabilities, flexibility, and agility from a public cloud and build your own internal private cloud. This way you can control the security.

Outsourced Enterprise Architecture?
On the topic of employing consultants to support enterprise architecture, I’m not necessarily sold. I think enterprise architecture will change drastically in the coming years, and what we build today may be obsolete fairly quickly. I see enterprise architecture shifting to a central focus around the network and the data center. We’re moving so much compute into massive data centers and they all have to be connected together; performance and quality of service have to be the focus. Architecture will need to have a heavy focus on networking and physical location. You can’t just push everything out to the cloud and expect them to perform—you need to know where things are and have the right tools and forensics is place to proactively manage quality of service.

Budgets Shift to LOB
When it comes to shifting budget to the lines of business (LOB) for third-platform investments, this typically means the IT organization processes do not get the LOB what they need fast enough. This shift isn’t necessarily a bad thing. Investments in some business processes are better off using an external provider. IT should manage the crown jewels: the cash register, the strategic things that differentiate you in the market place, and the things that need strong protection. Finance has to play a bigger role to say it’s okay for people outside of IT to buy services independently. I think it’s a good thing as long as IT embraces it and partners to deliver, instead of resisting and trying to control it. At the end of the day, the company is paying for all of it. At VMware we embrace this model and partner with our LOB leaders and come up with the right decisions together.

I highly recommend reviewing the IDC paper—there are interesting new insights alongside some core points that bear repeating.

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Paul Chapman is Vice President, Global Infrastructure & Cloud Operations at VMware. You can follow him on Twitter @PaulChapmanVM

Why the “3 Cs” Are Vital to IT When Deploying a Private Cloud

By Joe Chenevey

JChenevey_1Last year, a colleague and I worked with an enterprise IT organization to develop a private cloud strategy. As with many other enterprise IT organizations we’ve worked with, this organization was faced with customers demanding IT infrastructure faster than traditional methods were allowing and increasingly looking outside internal IT. The organization wanted to provide its internal customer base with a viable alternative to creating workloads in the public cloud (where IT has both less visibility and control).

After spending months planning, developing, and testing a private cloud-based infrastructure-as-a-service (IaaS) offering, the IT team met their objective of reducing time to provision and overall request fulfillment times by well over 50 percent. A great achievement for their first release. During a follow-up meeting with our client earlier this year, we learned that after putting the service into production, the IT team fully expected requests for IaaS to coming flooding in from their user base. After all how many times have we all heard, “If you build it, they shall come…” presumed when it comes to private cloud? Unfortunately for our client, it didn’t happen that way.

Cloud Transformation Success InfographicHere’s why: our client overlooked a seemingly low-impact but in fact very important step of our guidance —Internal Sales & Marketing — #6 in a recent interactive infographic — describing seven key pieces of cloud transformation.

This particular enterprise IT organization neglected to engage its internal customers regularly to create awareness of what problems their IT organization had solved, details of the overall IaaS solution that would interest customers, and the benefits to the internal customer base.  Often my clients don’t fully realize that without repeated communications to their prospective user base, it will be difficult to generate the demand necessary to achieve the inherent benefits that come with the utility or scale of a cloud model.

If you want your internal customer base to use your new private cloud and also demonstrate the value your IT organization can provide with that model, remember the 3 Cs:

  1. Communicate (Before): Before you start addressing the architecture and design of a private cloud solution, your strategy should include developing a communication plan.  Your communication plan addresses when, where, how, and how often you will communicate to your potential user base, but it also provides an early description of the new private cloud services, new capabilities, customer benefits, and release timelines. This communication plan serves as the basis for your internal sales and marketing efforts.
  2. Communicate (During): As you go through the service development process, you must continue to promote—market—the services to your potential user base in order to keep up interest and potential demand. I also advise you to identify potential early adopters to help develop and refine the service during development. Early adopter buy-in also generates good word of mouth and demonstrates your new service-oriented approach to delivering IT.
  3. Communicate (After): After you’ve tested and piloted your new private cloud service and are ready to release it into production, support the launch with an internal publicity campaign to create broad awareness of its availability to your prospective user base. I recommend using every means possible including: town halls, webcasts, email, enterprise social networks, and even information booths/kiosks in key locations.  And, provide information on how to request the service, and develop training for your users on how to engage. If you followed the first two Cs, this last C will be icing on the cake.

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Joe Chenevey is a business solutions architect with VMware Accelerate Advisory Services and is based in Oklahoma. You can follow him on Twitter @VIJoe_Chenevey.

5 Tactics Leading IT Organizations Use to Realize the Promise of Business Capabilities

by Barton Kaplan

Almost every IT executive I speak to these days is actively working toward becoming a service provider, and for good reason. VMware survey data[1] indicate that the benefits can be powerful. IT as a service organizations are 37 percent more responsive to requests, invest 50 percent of their budgets in innovation and realize operational cost savings of 30 percent, among other benefits.

But a necessary prerequisite to achieve this status is good IT-business alignment. In order for business partners to feel confident having their service requests brokered through IT, they have to believe that IT understands their needs, that IT strategy reflects business priorities, and that IT will ultimately choose a service provider that best meets their specific requirements.

Unfortunately, this is where many IT organizations fall short. CEB data[2] shows that only 18 percent of business leaders believe IT prioritizes the investments that are most important to them. To align to the business, IT has typically focused either on business strategy or business processes. But business strategy is often too high-level and changes too frequently. Business processes, meanwhile, are too granular and function-specific to be meaningful at the enterprise level.

So how do IT organizations overcome this impasse? Many IT executives I’ve worked with have embraced business capabilities to bridge the divide between IT and the business. Simply put, business capabilities are activities an enterprise performs to achieve specific business outcomes. They are more stable than business strategy, but at a high enough altitude that they can be understood across the enterprise.

Despite their promise, business capabilities are no panacea. IT groups that have embarked on business capability initiatives struggle to realize a return on their investment. Their issues usually fall into one of the following areas:

  • Hard to define: Attempts to create business capability models can quickly become theoretical exercises and use language with which business partners are unfamiliar.
  • Hard to engage: Frequently when these efforts initiate out of IT, business partners become skeptical of the value and are unwilling to take ownership.
  • Hard to execute: Once a business capability model is in place, it should actually inform IT investment decisions. Most often, it does not.

To address these challenges and realize the true promise of business capabilities, leading IT organizations are adopting the following five best practices:

  1. Build business capabilities collaboratively. Successful capability models cannot be built in isolation. If business partners are expected to own the business capabilities, then they have to be involved in the effort to define those capabilities from the outset.
  2. Recognize that capabilities go beyond technology. Without a holistic understanding of what enables a business capability, it’s easy for an IT organization to default to a technology solution when the problem may lie elsewhere. One utility company I worked with that adopted a business capability-based approach went into the exercise thinking that 70 percent of its business issues were technology-related. It came out realizing that in fact only 30 percent were. The other 70 percent revolved around people and process issues.
  3. Prioritize capabilities. Putting together a capability model is a necessary but insufficient step. In order for business capabilities to become meaningful for planning purposes, they must be prioritized. A large government agency I worked with heatmapped its capability model by looking at the strategic importance of a capability and its maturity.
  4. Tie business capabilities to IT services. To ensure the services that IT creates will actually be consumed by end users, those services need to be defined in business terms. Instead of building services from the bottom up based on technology, they should be built top down based on the business capabilities they are designed to enable.
  5. Include business capabilities in IT roadmaps. To raise business confidence that IT investments will be directed to the most important business priorities, all IT programs should be mapped to business capabilities. At one financial services organization, this resulted in 2.5 times more IT spend on strategic initiatives.

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Barton Kaplan is a business solution strategist with VMware Accelerate Advisory Services and is based in Maryland.


[1] VMware “VMware IT Evolution: Today and Tomorrow – Insight from the VMware 2013 Journey to IT as a Service Study.” August 2013
[2] CEB 2013 Business Engagement Assessment Survey

Competing with Shadow IT

By Daryl Bishop

Daryl Bishop-cropOver the last few years, business units have increasingly been bypassing IT and ordering services directly from external service providers (e.g., SaaS applications and cloud IaaS services). IT has been largely oblivious to this threat, believing that the business will continue to rely on IT for technology services.

We’re now seeing the next stage of shadow IT with business openly bypassing IT, in fact the business model for some external providers is now purposely built around dealing direct with the business rather than IT.

The main reason is that IT is seen by the business as being a roadblock to the agility it requires to deliver products to market quickly.

SHADOW IT 1

IT needs to reinvent itself and demonstrate how it can be a competitive differentiator for the business. Let’s look at some of the areas where IT has a natural advantage over shadow IT:

  • You understand your business
    The bottom line is that the IT department intimately understands the business and an external service does not. Use this knowledge to IT’s advantage, aligning and working closely with your business.
  • IT is not just a cost center
    Following on from the first point, elevate your people to work with the business, demonstrating how technology can be used to benefit the revenue generating side of the business.
  • Become a trusted broker of services
    By being a trusted broker of IT services, IT can both centrally manage the costs of external providers and provide internal services when required.
  • Keep your business safe
    External service providers understand risk in the context of the services they provide; however, they cannot understand the nuances of risk particular to your business. Capitalize on this “home field” advantage.

SHADOW IT 2

As shown in the diagram above, embrace new IT. Rather than being threatened by shadow IT, embrace it and use it as a catalyst to provide a superior level of service to your business. You’re bristling with capability, you just need to engage and demonstrate the ways you can help business thrive.

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Daryl Bishop is a business solutions architect with VMware Accelerate Advisory Services and is based in Melbourne, Australia.

CIOs Need to Restructure to Deliver Today’s Innovations

No doubt you’ve heard the argument that CIOs are merely technology brokers who “don’t matter” in the world of digital business. We all know that the opposite is true: CIOs who understand the intersection of business and technology matter more than ever. What also matters is that you understand when it’s time to change your organization to meet the needs of the business.

infoweek coverTake a moment to check out this InformationWeek report, which provides practical advice on when and why to restructure, what guiding principles apply, how to get help, and where it pays to take some calculated risks.

Related: Infographic distills 2014 Strategic CIO Survey results

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.