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Tag Archives: IT business management

The Missing Link of IT: An Effective Service Costing Process

By Khalid Hakim

For years now, there has been much discussion about the urgent need for tighter alignment between business and IT. Why are we still talking about the “need for” alignment and not the “results of” better alignment? Because all too often, IT cannot answer one of the key questions business leaders ask: “What exactly does this service cost?”

In many cases IT does not have an adequate service costing process, which means it does not have a fast, accurate, consistent, fair way to provide cost information about IT services to constituents. And the lack of an effective service costing process is costing both IT and the business—big time.

Cost transparency is important not only because IT service users want to know what they’re paying for, but also because it provides an opportunity for IT to quantify its value to the business.

If IT can provide accurate cost information, both business and IT leaders can make better decisions about IT investments, outsourcing, cost cutting, business strategy, and competitive differentiation.

We’ve all heard the mantra “Minimize IT costs while maximizing business value,” or its short form: “Do more with less.” It’s a core principle of IT business management (ITBM). But without an accurate, transparent service costing process, how can IT leaders truly deliver IT as a service (ITaaS) and run IT like a business?

Take a closer look at your existing service costing process and ask yourself a few tough questions:

  • Is it accurate? Does it take into account all of the CapEx and OpEx elements of delivering an IT service?
  • Is it equitable? Does it charge the right constituents the right amounts for IT services, based on their actual consumption—or does it simply charge a lump sum based on voodoo economics?
  • Is it transparent? Can constituents get an accurate breakdown of what’s included in the final price tag and what isn’t?
  • Is it improving IT investment planning? Your service costing process should enable business and IT leaders to create more finely honed investment strategies that cut costs while creating new competitive advantages. Is it?

If you can look in the mirror and answer “yes” to all those questions, congratulations—you’re a member of a small minority of enterprise IT departments with an effective service costing process. If not, ask yourself the next logical question: How can you develop a better service costing process?

I’ll address that question in my next blog post. So stay tuned.
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Khalid Hakim is an operations architect with the VMware Operations Transformation global practice. You can follow him on Twitter @KhalidHakim47.

VMworld-graphicAnd if you’re heading to VMworld, don’t miss Khalid’s session!

Accelerate Your IT Transformation — How to Build Service-based Cost Models with VMware IT Business Management (ITBM)
A recent VMware survey showed 75% of IT decision makers list the number one challenge in IT financial management as lack of understanding of the true cost of IT services. ITBM experts and VMware Operations Transformation Architects Khalid Hakim and Gary Roos shed light on this alarming figure, and give practical advice for obtaining in-depth knowledge of the cost of IT services so you can provide cost transparency back to the business.

When you visit the VMworld 2014 Schedule Builder, be sure to check out the SDDC > Operations Transformation track for these and other sessions to help you focus on all the aspects of IT transformation.

Does IT Financial and Business Management Matter When Implementing Your Cloud?

 By Khalid Hakim

This is one of the common questions that I keep getting from my clients when building IT operations transformation roadmaps. In fact, one of the key considerations of a transformation roadmap is the business management side of your cloud, which often gets deprioritized by key stakeholders.

Let’s think it through: Can you tell me on the spot what your total cloud spend is, and, what that spend is comprised of? Here’s another one:  What’s the cost for you to deliver a unit of infrastructure as a service (IaaS)? And what about your consumers: Who consumes what service and at what cost?

Can you identify the services used and the cost allocation for each service? How is your cost efficiency compared to that of other public cloud infrastructures? How can you use that type of information to optimize the cost of your existing and future operations? How can you create a showback report to each of your stakeholders?

Let’s say that you’re the VP of Cloud Infrastructure — think through how you would justify your data center investments. Have you proactively analyzed demand vs. capacity along with operations cost of your cloud services?  How can you scale dynamically to fulfill your consumer needs? Have you thought about your goal to optimize the cost of delivering cloud services? Don’t you need closer monitoring to the quality of your delivery, such as continuous analysis and improvement?

(I can hear you thinking, enough with the questions already…)

If you are the IT financial manager, imagine how you can reduce your long-term commitments by moving from CAPEX to OPEX if appropriate. With financial and business management capabilities, your planning and IT budgeting would be based on actual cloud service demand and consumption practices. You would also be able to leverage benchmarking and “what if” scenarios for your cloud service costing optimization opportunities.

What keeps CIOs awake at night during a cloud implementation is the challenge of how they will demonstrate and deliver value for the cloud investment, as well as contribute as an innovator to the business by dynamically supporting growth and transformation as a result of their cloud cost optimization.

In fact, your ability to respond at the speed of business through fact-based decision making and responsiveness to changing needs in a dynamic environment is key to your success. The transparency of your cloud delivery value in context of demand, supply, cost, and quality will help improve your alignment with business goals to cloud services delivered.

In my next blog, I’ll cover some of the built-in functionality and business disciplines of the VMware IT Business Management Suite that can help you succeed in your cloud delivery and accelerate time to value.

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Khalid Hakim is an operations architect with the VMware Operations Transformation global practice. You can follow him on Twitter @KhalidHakim47.

VMworld-graphicCheck out the VMworld 2014 Operations Transformation track for opportunities to hear from experienced VMware experts, practitioners, and the real-world experiences of customers transforming their IT infrastructure and operational processes.