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July 2011 - Posts

An Overview of the Growing Interest in IT Financial Management. What are You Doing About It?

Published: July 28 2011, 03:04 PM | no comments
by Eric Feldman

I spent a day with a customer last week talking about IT financial management. This subject is hot now, and it is easy to figure out why. In many industries, technology costs are one of the largest line items in their operating and capital expenditures.

Many organizations have a yearly budget for technology, and they will exhaust this without necessarily any analysis or rationalization of how technology is being consumed - not in terms of bits and bytes - but in financial terms. While there has always been an interest in IT financial management and its related functions, I have spoken with more companies on this topic over the past year than in the past several years combined. These conversations were not about controlling costs, but rather in methods and solutions to measure and allocate consumption.

I guess it is easy to figure out one driver of this shift - namely the global economic environment. But controlling technology expenditures is often at odds with business strategy. In many cases, growth or efficiencies are enabled through investments in technology. Calculating and understanding service consumption is nothing new - many industries have done this for years--the difference is that now, many businesses have realized that they cannot necessarily grow their business through technology budget cuts.

I like to simplify the approach to IT financial management by separating it into two areas:  costs and consumption. Costs are easy to understand, but can be difficult to calculate. Some costs are easy to conceptualize. There are hardware and software license expenditures, labor costs, and overhead such as electric power and real estate. Where companies find a challenge is the calculating the cost per service. It is the service that is consumed, and before costs can be calculated, the service must be defined.

Consumption, on the other hand is more difficult to rationalize but easier to calculate. Companies are often challenged to define a consumption methodology - by resource unit or metric or by using a standardized allocation methodology. Once the metric or allocation method is determined, understanding service consumption in financial terms can be as simple as taking a metric and either multiply it by a price, or using it to divide a cost.

There are many ways to accomplish this association of service costs to usage. Some companies take a cost and divide it by the number of employees. There is a name for this - it is called high level allocation - using a business metric to divide costs. Other companies take a resource metric and divide that into the service cost to determine a "per unit" cost. This is known as measured  resource utilization, or MRU.

If you want to begin a journey towards understanding your technology consumption, you might want to think along the lines of the following high level process:

  1. Define the service in business terms
  2. Calculate or estimate the service cost within a fiscal time period
  3. Decide upon a unit of measure (metric) that is meaningful to the business and appropriate to the defined service
  4. Collect the usage metrics for the service grouped by the appropriate organizational unit (business unit, cost center, department, user)
  5. Divide the service cost by the total usage to calculate a unit cost or price
  6. Multiply the unit cost by the usage metric attributable to each organizational unit to determine the discrete financial impact of service usage

And if you want to learn more about IT financial management, service consumption, and metrics, I recommend the following two short webcasts I recorded. They are free to view, however a registration is required:

"6 Step Process to Gaining Financial Insight of Service Consumption"
http://www.ca.com/us/lpg/forms/na/fy12/spm/58040_64101.aspx

"Using Metrics to Discover, Manage, and Measure Your Services"
http://www.ca.com/us/lpg/forms/na/fy12/spm/58143_63108.aspx

 

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By: Eric Feldman
Eric Feldman has more than 25 years of experience as a senior architect. With a focus on the areas of service level management and IT asset and financial management, Feldman has specialized in designing and implementing solutions based on CA Service Catalog and CA Service Accounting. He has spoken and...
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Making Sense of Your Service Selection Choices with CA Business Service Insight

Published: July 27 2011, 08:25 AM | no comments
by Erik Hille

Today, CA Technologies announced the release of CA Business Service Insight 8.0, a revolutionary solution building on a strong legacy of contractual service level management technology from our Oblicore acquisition in 2010 to deliver innovative Service Performance Management capabilities.  Today's set of announcements - featuring solutions for enterprises and service providers - focused on tools designed to help our customers handle the increasing complexity created by the many service choices available in the cloud. One way we're addressing this challenge is with solutions that allow our customers to take software and infrastructure that is running in their data centers and "virtualize" it as a service. 

Why is this important?

Creating virtual business services gives enterprises the ability to treat services as portable and move them as needed to the environments that are most effective from a cost and performance perspective.  In other words, they have the opportunity to maximize their IT service portfolios so that they can focus on providing the most mission critical services that ultimately differentiate them from the competition.  For the other, non-mission critical services, they can look to their IT supply chain partners and source them according to which provides the best cost and performance capabilities. 

Should you offer the service directly, or work with an external provider?

At the heart of these sourcing decisions, is a fundamental tradeoff...should you manage services internally or look to external service providers to provide a service.  The dynamics of the cloud raises the stakes even higher.  If someone doesn't like how long it takes the IT department to stand up a server, they now have plenty of external options.  If they don't like the sales force automation tools, they can get one directly from the cloud.  In essence, our own internal "customers" are actively courted by the "as a service" community who speaks in business terms including cost, value, and so forth.  On top of this we don't necessarily do ourselves any favors when we think in terms of ‘the exchange server' instead of ‘the email service' or of ‘time to answer' instead of ‘the helpdesk service.' Speaking the same language as the customer is critical to delivering the best services for the business.

How do you know what services are being used across your organization in this new world of ‘cloud choice'?

IT must be prepared to ask a lot of new questions with this mix of services provided in-house and by outside vendors. For example, how do you reduce your exposure to risks from unknown services?  Or, how do you improve cost, performance and agility around service levels but improve your ability to meet these commitments? And, how do you see through the wide array if internal and external alternatives so that you can make the best decisions regarding vendors and services options?

So, what can you do to get to the bottom of these questions?

CA Business Service Insight addresses these questions directly.  It allows you manage both traditional and cloud-based services by:

  • 1. Understanding which services are currently running in your environment,
  • 2. Understanding how they are performing against operational and contractual SLAs
  • 3. And connecting with Cloud Commons to empower your company to compare performance with benchmark partners and explore alternatives for delivering this service

CA Business Service Insight puts the service at the center and takes a holistic approach to understand the performance of services within your organization.  To do that, it gives you the ability to:

  • Rapidly build a service performance portfolio
  • Compares performance of these services internally and externally
  • Leverages information from Cloud Commons to identify areas that require focus
  • Enables you to research empirically and annecdotally to investigate the "best" option for your organization - what you consider to be best based on your own specific requirements
  • Allows tyou to manage these options using contractual SLAs with suppliers, internal constituents, and external customers.

As a result, a company will always know what services are being used and be able to optimize service performance while reducing operating costs. This new offering helps you make sure you're using the best internal and external services for your business. 

There are a lot of exciting cloud capabilities in our new and enhanced solutions released today. For a full summary of the news, visit the ‘Cloud Choice' Press Kit here.

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By: Erik Hille
Erik Hille joins CA Technologies as part of the acquisition of Oblicore in January 2010. With Oblicore, he was the company’s Marketing Director since July 2006. As an authority in the area of ITIL’s Service Level Management, Service Portfolio Management and Service Catalog Management processes, Erik...
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Is Self-Service a Synonym for Poor Customer Service?

Published: July 26 2011, 03:00 PM | 3 Comment(s)
by Rich Graves

Poor customer service is one of the most common arguments I hear from organizations who aren't providing self-service options for their end users today. Many IT managers believe that their users prefer to pick up the phone and talk to a person about their request or incident. While the option to pick up the phone shouldn't go away it should not be the only option for interacting with IT.

As an example think about shopping on Amazon.com. How frequently does the typical user pick up the phone and call Amazon when they have a question about their order? I would bet it's a very very small percentage of the time. This is primarily because Amazon provides a wealth of information available to users about their orders before they even need to think about picking up the phone. And when you're shopping in bed at midnight in your pajamas do you really want to pick up the phone?

From the perspective of IT, when supporting end users IT should consider the value of self-service from the end user's perspective.

  • Avoid phone hold time- Think about the unproductive phone wait time that employees experience. Why not encourage them to use a knowledge base to resolve their own problem or open a request/incident, keep working on other things and have the analyst get back to them with a solution.
  • Immediate access to support resources- In addition to avoiding wait time there are instances when support staff may not be available such as on a weekend. What happens if an employee is traveling to a customer site on a Sunday night and has a problem? Are they stuck waiting for Monday morning at 9am? A knowledge base gives the user tools to attempt to solve their own problem and be up and running prior to 9am.
  • Consistency in the support experience- This is a trait that the ITIL v3 Strategy book pushes. A self-service channel that has a knowledge base and a well defined process for opening up a request/incident is inherently consistent. The user becomes familiar with the interface and the process and therefore comes to expect a given level of service.

Think about your employees and the value that a self-service option has to them. Ultimately their goal is to interact with IT as little as possible and do their job. Will self-service help them achieve that goal? Will self-service provide them a better overall experience and improve customer satisfaction? When done correctly I can almost guarantee it will. What are your experiences with self-service and customer satisfaction?

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By: Rich Graves
Rich Graves is a Senior Principal Product Manager at CA Technologies. Rich works on a team focused on strategy and innovation for the Service & Portfolio Management Customer Solutions Unit. During his eleven-plus years at CA, he has focused entirely on the Service Management and support market segments...
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Managing Risk and Increasing Value in the Cloud

Published: July 25 2011, 02:55 PM | 2 Comment(s)
by Robert Stroud

There is no doubt that Cloud Computing has become a significant channel of investment for IT organizations. The fear, uncertainty and doubt that many of you may have reminds me of my time in banking when many in IT were concerned about adopting the technology and the business was driving us to adopt it. I personally believe that Cloud Computing will become a primary choice for IT enabled business delivery over the next few years and IT must adapt its process to allow for its use. Cloud Computing is not for every solution or every organization but it needs to be considered as one of the tools in the IT tradesperson's tool belt.

As with the adoption of any emerging technology, there is always some risk associated with its adoption and evolution as we learn how to better use it.  The primary challenges with Cloud Computing has been the perceived or real security issues, and issues with data and business continuity. In an endeavor to assist organizations in ensuring value and effectively determining risk, ISACA has released a new document for the effective use of Cloud Computing called "IT Control Objectives for Cloud Computing: Controls and Assurance in the Cloud."

The publication documents the fundamentals of Cloud Computing, decision making criteria for when Cloud Computing fits into the organization's solution set, the controls that should be implemented and, of course, addresses the primary concern of security.  The key component for practitioners are the detailed Appendix's with provide detailed guidance in the form of the Control Objectives and a detailed Audit and Assurance program. More details are available on the ISACA website and the publication is available to ISACA members for free in PDF form.

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By: Robert Stroud
Robert Stroud serves as VP and as Service Management, Cloud Computing and Governance Evangelist at CA Technologies. Robert also serves as an International vice president of ISACA, is part of the Framework committee and was the former chair of the COBIT Steering Committee. Robert also serves on the itSMF...
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Tweeting the Service Desk away!

Published: July 22 2011, 01:57 PM | no comments
by Robert Stroud

I was speaking to a frustrated attendee at the IT Financial Management Conference this week who reminded me of the value of Social IT and why we need to adopt and embrace to maintain our customers. The conference delegate was telling me how they wasted two hours of their day earlier in the week simply attempting to update their Outlook Out of the Office message.

Having arrived in his office, Pete (name changed to protect the innocent) was attempting to adjust his OOTO message to let all who those who emailed him know he would be at the IT Financial Management Conference this week in San Antonio (Pete didn't I see you at the Alamo several times?).  Pete found a message that his Outlook wouldn't connect to the Exchange Server so he walked over to his colleague's office who advised that he was getting his mail. After working through his mental checklist, he called the service desk and found himself on hold (unusual and the first sign of a major incident). After being on hold for almost 30 minutes he sent a private tweet to a friend in the Data center who confirmed that my Exchange Server was indeed down and it was being worked on - no estimated time to resolution. 

Pete paralleled this experience to another he had that same evening. While sitting in the airport waiting for his flight he received a message via his Delta App that his flight had been delayed. Looking up at the monitor it informed him the plane was on time and few moments later the monitor updated. Another 20 minutes went by and Pete gets another message on his phone that the flight was further delayed, followed by a message of a gate change. Although Pete would miss the evening activities Pete knew what was going on as the airline's app told him what flight he was on and immediately pushed the data and ensured that Pete was informed.

The reality is in this social world where we typically know who is using what service, and when in the interests of effective customer service, we need to offer our customers the choices of being informed. This is not an enhancement; it must be a feature of customer service that we deliver with the consumer choosing what level of detail they want pushed to them. In my opinion this is a fundamental requirement of social IT. We must ensure our consumers are informed and we need to also leverage their experiences and usage to drive the manner in which we deliver information. For instance I now prefer to get "tweets" instead of email (assuming its not private information) as that doesn't require me to install too many apps.  Yes please interrupt my session of Angry Birds with a tweet that my flight is delayed and I will keep on playing!

So back to Pete and his Exchange Server. He gave up waiting on the phone for a Service Desk Operator to assist him and left a voicemail, he tells me they called him back after the service was restored and in future he will "tweet" them his incidents!

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By: Robert Stroud
Robert Stroud serves as VP and as Service Management, Cloud Computing and Governance Evangelist at CA Technologies. Robert also serves as an International vice president of ISACA, is part of the Framework committee and was the former chair of the COBIT Steering Committee. Robert also serves on the itSMF...
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