Three is referred to as the triad, the first prime number and “noblest” of all digits; therefore, it’s often considered a lucky number. Well, three in IT is special too. When IT implements the three activities which this blog is focused on, you’ll know that’s where the real IT magic happens. Each one requires commitment, strategy and collaboration to be done correctly. IT organizations that implement a demand management initiative around their service offerings experience almost twice the level of IT success than those that implement just one alone. When all three are implemented together, IT will center its priorities on cutting IT costs, managing IT spend and enabling cost transparency. Service-based IT maturity level correlates with success in the same way that “running IT like a business” is an attribute of IT leadership. It’s important to do all three activities in tandem for the greatest (and most magical) impact.
When defining the service catalog, you can expect to hear one of the following opinions:
- For some, it is basically a “shopping cart” for service requisition. It is an online application with a list of the IT services that allow users to request each one. It may also have a capability for approval as well as reports on the status of each requisition. Some may then indeed call it a service request and fulfillment.
- Others describe it as a way to document information about service performance and service levels. It is a digitized repository of SLAs for each service and tracks service performance against SLAs. I may also measure the business impact of noncompliance. This is the service level management (SLM).
- Finally for some, it is the tracking of IT finances. It includes a detailed cost model for each service, monitors consumption by LOB (line of business), offers some demand planning features and provides financial reporting. This is often referred to as the IT Financial Management approach.
When implementing service costing, you can expect the following results:
- Costs are aligned with consumption, enabling better user decisions (aka demand management) and business analysis such as product or business unit profitability.
- Resources focused on activities valued by the business and wasted spend are eliminated through cost transparency and technical decision support.
- Standardized solutions and economies of scale are improved as the true costs are identified
- Processes and measurements assist in prioritizing activities, benchmarking, and managing and sustaining improvement activities.
- The IT team’s contribution to overall business profitability are improved.
- Continuous improvement programs enhance service quality and lower unit costs.
Unit Cost Management is a discipline focused on improved operational management. Service Managers can develop a more effective management role over their offering, managing both costs and revenues. There is clear visibility of redundancies and non-valued service. Greater efficiencies are seen in work management and problem resolution leading also to improved customer service. Identification of cost drivers that create a language for interaction between business and IT. Clear and efficient communication leads to improved planning and implementation of offerings aligned with business requirements.
Implementing a service catalog based on service cost modeled services with a disciplined cost management process can foster a clearer understanding within the business of value delivered by IT. Charges (prices) are aligned to business controllable consumption, resulting in better decisions.
These types of activities provide a thorough examination of all services and functions being delivered. The IT services and functions are then reviewed by the internal consumers to validate the business value received. Non-value-added services are changed or eliminated. An IT Financial Management (ITFM) Program (including a service catalog, service costing, unit cost management and even chargeback, etc.) will offer the customers the opportunity to influence supply (the IT spend) by controlling the demand for the services. Corresponding cost transparency reduces the need for one-time cost reduction initiatives in the future and leads to continuous process.
Cost savings will be generated and available to invest in new projects or improvements and funds will be available for higher value projects and activities. By running IT more like a business, you’ll gain greater cost transparency, understanding, and business alignment to support operational improvements and corporate changes in the future.
Think of the number three today and how you can create your own magic with your IT activities.