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Tag Archives: vmworld 2014

VMware’s Call to IT Professionals: Be Brave

At VMworld last week, VMware CEO Pat Gelsinger laid it out: IT is no place for the timid. In a world where business has become not only lightning fast, but also increasingly fluid, he said, “…the biggest risk is perpetuating the status quo.” Success depends on willingness to move fast, be decisive, and take calculated risks.

No matter where you are on your IT transformation journey, learning from others who have taken those risks and moved their organizations forward can help you take the next step. VMworld attendees had plenty of opportunities to do just that, with companies like Medtronic and Boeing sharing their stories of operational transformation. In addition, VMware consultants and experts dug into practical application around SDDC and more.

Medtronic: Taking Risks to Improve Health
Medtronic SessionAs the world’s largest healthcare technology company, Medtronic provides some of the most critical types of technology solutions: those that alleviate pain, restore health, and extend life. Steve Arsenault, Medtronic Vice President of Global Application and Infrastructure Services, subscribes fully to risk taking as a requirement for IT. He told the keynote audience that even more important than taking risks, “…you have to be able to articulate those risks to your business stakeholders in a way that they understand.”

Later in the day, Medtronic IT’s Adrian Woodward and John Bistodeau shared how Medtronic is leveraging the VMware vCloud Automation Center and the vCloud Suite to jumpstart IT transformation and ultimately lead them to delivering both infrastructure and platforms as a service.

There was also an air of realism in their IT journey, as they had to be bold within the confines of the all-too-familiar flat IT budgets. Remarkably, they were able to reduce a 27-step process to four steps, and from 10 days to a single day turnaround time. The results speak for themselves, and it’s safe to say that VMware is helping Medtronic IT live up to its internal marketing slogan “Medtronic runs on IT.”

Boeing: Virtual Technology, Real Results
Operating within a company that has innovation in its DNA, Senior IT Director Enes Yildirim introduced ways that Boeing IT has shown tangible business results through its move to IT as a service. The aerospace giant’s cloud strategy includes program goals around performance, cost, operational maturity, differentiation, and strategy. Within that framework, the organization follows guiding principles that lay a foundation for a culture of innovation in IT:

  • Bank on Success
  • Leverage the Good
  • Self-Fund Innovation
  • Partner for Success
  • Don’t Accept the Status Quo!

By fostering innovation and adopting the cloud strategy, Boeing IT has significantly reduced cost per virtual machine, while increasing capacity to serve the business.

vCenter Operations Manager: People and Process Considerations
One of the most popular sessions in the Operations Transformation track at VMworld was Rich Benoit, VMware operations architect, presenting Maximizing the Out-of-the-Box Functionality of vCenter Operations Manager: People and Process Considerations. Rich cautioned the group against the “technology-only” approach. Instead, he encouraged getting in front of change by identifying roles and processes that will be impacted even before initiating a project. This way, as the silos break down and collaboration begins, people can focus on moving forward. In an implementation as broad as vCenter Operations Manager, Rich detailed the new organizational requirements and how to ensure the top 20 dashboards in the tool are used and the data shared to show business value. Stay tuned for a future blog and deeper dive by Rich.

Medtronic and Boeing have embraced the calculated risk taking required to make operational changes. With the right technology tools and an open approach to people and process changes, it’s a little easier to take Pat’s advice and be brave in the face of IT challenges.

Check out videos from VMworld 2014.

 

 

How to Create a More Accurate, Useful, and Equitable Service Costing Process

By Khalid Hakim

In my last post, I described the pressing need for a more effective IT service costing process (as a solution to the pressing need for tighter business/IT alignment!). The question now… is how.

How can companies create a service costing process that is fast, accurate, transparent, granular, fair, and consistent—without introducing yet another time-consuming and expensive project to the IT docket?

To answer this question, I’ll use a real-world example—a company that has recently been through the process and achieved excellent results.  I won’t name the company but I can assure you it’s a real enterprise, and the results were also quite real. I’ll refer to it as “The Company.”

In the past, The Company charged for IT services by simply allocating the total IT costs among service consumers based on the number of desktops and laptops they used. This “lump sum” cost allocation of course led to the perception that “IT is always expensive.” The Company knew it needed to move to a more service-oriented, customer-centric model.

Our team provided guidance in setting up a better service costing process. The implementation began with three key steps:

1. Create a service-based cost model diagram.
A cost diagram depicts the flow of IT costs from the general ledger or cost sources all the way to the services being provisioned—in such a way that IT can present consumers with a statement showing all service costs.

2. Develop a service-based cost allocation strategy.
The Company already had a cost allocation process in place, but it did not deal with service-to-service cost allocation. So The Company’s lump-sum allocation did not demonstrate any IT value but only the cost of IT when running the business. That’s why a service-to-service costing method was needed that would account for everything:

  • Servers and their related hardware
  • Network and security allocation to servers
  • Data center, storage and data center facilities costs
  • Software and enterprise license agreements
  • Support and operations contracts
  • IT project costs
  • Labor costs
  • IT overhead

This way The Company was able to fully load IT costs into services being delivered and transfer these costs to the business.

3. Develop a service-based cost classification strategy.
The Company classified all IT service costs into the following categories:

  • In/Out Service Costs: All direct service-related costs should be part of a service cost, while non-related service costs should be part of accounting period costs.
  • Fixed vs. Variable costs. Variable costs vary based on usage or time (i.e. data center utility bills, support tickets, or service consumption). Fixed costs are fixed regardless of service or resource usage (i.e.  software license costs, hardware purchases and support contracts).
  • Direct vs. Indirect. A direct cost is directly related to a service and can be easily traced. Indirect costs are indirectly related to a service and are typically spread over a number of services.
  • CapEx vs. OpEx. Capital expenditures are major expenses incurred whose costs have to be depreciated (split over) over the useful life of an IT asset, while operational expenditures are incurred periodically.

After the strategic IT/business processes were carried out, service-specific tasks began. These included defining and charting individual services, developing service-specific cost packages, and tracking and managing service costs over time.

Next it was time to consider the “people” aspects of service costing. Technology cannot provide a solution on its own; it must be developed and deployed in conjunction with stakeholders.

Along the same lines, handling IT financial management (ITFM) activities is not a one-man show. At The Company, the following roles were defined, along with specific responsibilities:

  • Financial Controller
  • IT Financial Manager
  • Service Manager
  • IT Manager
  • CIO
  • Customer Relationship Manager
  • VP of Infrastructure Services

Developing a roles/responsibilities chart (known as a RACI) then provided a concise and easy way to track who does what along with the level of contribution and accountability.

Next came identifying the right technologies to use in the service costing process. In this case The Company made a strategic investment with VMware and deployed the VMware IT Business Management Suite. This is the technology that will help them gain cost transparency, align with the business, enable the CIO’s transformation agenda, and control and optimize the IT budget and costs.

In addition, The Company has implemented basic CIO and Service Manager dashboards to provide insight into the financial performance of all managed services. The dashboards define the visual layout of the user experience. Each dashboard is composed of frames that display customized information designed for the intended user. The dashboards enable the CIO, IT Financial Manager, and Service Managers to gain access to cost information and make data-driven decisions.

SCP white paper coverToday The Company’s IT department is well on its way to being more business-oriented and service-oriented through better service costing. The Company can now trace IT costs from general ledger all the way to all business units consuming IT services. The new costing model also lays out the key roles and responsibilities, and VMware technology helps provide cost automation, transparency, and service-based cost modeling.

I’d encourage you to get full details about the service costing process outlined in this blog post by reading my white paper, Real IT Transformation Requires a Real IT Service Costing Process.”

Until next time—may all of your IT service costs be allocated with fine granularity and full transparency!
—-

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 #OPT1572!

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.

 

How to Drive Tighter Alignment Between Business and IT

Many IT stakeholders have limited trust in the IT organization as a result of the way it has operated in the past. In this short video, Kevin Lees shares tips on how IT can deal with this real-world problem that is almost always overlooked.

Kevin Lees is principal architect of the VMware Global Operations Transformation Practice. Coming to VMworld? Don’t miss his session OPT1547 – Organizing for the Software-Defined Data Center (SDDC): Practical Advice for Practitioners

Driving Biz Alignment front coverRelated: Read Kevin’s recent post 5 Ways Cloud Automation Drives Greater Cost and Operational Transparency and download eBook Driving Business Alignment Through IT Transformation for more information.

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.
——-
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.

The Operations Transformation Track at VMworld: What’s It All About?

VMworldVerticalGIF_07.14.14 (1)As businesses move toward the software-defined data center model, it’s not just the technology that changes. IT organizations must evolve – sometimes radically – to ensure a more service-oriented and business value focused way of operating. Sure, that’s a logical argument, but how do you make sure those operational changes happen? How do you hire or retrain employees with the right skills to manage these new technologies? Which processes do you need to overhaul? Which processes are no longer necessary? Is your org chart even relevant anymore?

Come hear real-world experiences from companies like Boeing and McAfee, which have successfully shifted their operating models. Boeing’s Enes Yildirim explains how the company put itself on the path to multi-million dollar cost savings. McAfee’s Meerah Rajavel details how the security software firm turned the vision of IT transformation into business achievement.

Check out the SDDC > Operations Transformation track in the Schedule Builder for these and more sessions that will share best practices and key considerations to accelerate your journey to the software-defined data center.