Posts Tagged ‘IT Costs’

IT Services Costs, why so hard…

Customers today are well equipped with the latest and greatest IT management software that is more than capable of track and understanding what is in their environment today from a technical perspective. However I am still finding that customers see IT as just a cost and nothing more than a cost. This is not true of partners or organisations whose primary core business is IT related, but for the other 98% of the customers I interact with this sure rings a bell.

Now with the Economic change and the subsequent IT climate change, more and more organisations are pushing hard for more value from IT with less cost. The problem is that IT has never really been required to justify itself at a Service level back to business and therefore they are finding it difficult to do this. They understand what is there, but making the association between a Service and Value is very difficult for them. I still find that customers are thinking in terms of technology (Which is a tool), people, (Which are also tools) and process (Which is also a tool) as individual elements, rather than part of a larger end – to – end Service to the organisation.

This lack of understanding or visibility of the end – to end Service leaves IT in a very dangerous position where it is not able to explain to business, in business terms the value it provides. In order to overcome this obstacle they need to visibly (Not literally) break up the IT organisation into their Services they supply (Either directly to the business or to other internal IT departments) so that they can analyse each component individually. In this way they can balance the cost of the Service with the end value it provides, as well as the unavailability cost of the Service to business.

In saying this I understand and agree that even in a small size business there could be hundreds, if not thousands of Services. So here is my advice:

Start simply. Pick one Service that you understand well and go back to the business requirements of that Service. Create a Service Map for the Service including streams like:

  • Hardware Stream
  • Software Stream
  • Settings Stream
  • Customer Stream
  • Dependent Services Stream
  • Underpinning Agreements Stream
  • Process Stream
  • Metric Stream

Based on the business requirements understand what metrics you will use to measure the Service and on this bases create your processes to conform to these metrics. Understand your dependent Services and negotiate OLAs with them to get to you lowest common reliability (Reliability includes IT Continuity, Capacity, Availability, Security and Monitoring) metrics for this Service. Create a costing model that makes sense for your organisation, there are many ways to do this, but the simplest I have seen is as follows; break up the costs of the Service into the following components:

  • Corporate Costs

This is anything you can’t directly attribute to either the Service or one of its dependencies (Examples include but are not limited to Human Resources department, Finance Department etc…)

  • Direct Service Costs

All the costs that are directly related to the Service. (Examples include but are not limited to Hardware, Software, Settings and Staff directly related to the Service)

  • Dependent Service Costs

This is a percentage allocation of the costs of the Services your Service is dependent on. (As an examples for a messaging Service, they would include elements like WAN, LAN, Active directory etc…)

Understand your customers of the Service and based on your lowest common reliability metrics from your OLA negotiations and your costing model negotiate the SLAs, finding a balance between cost and value.

This will allow IT to justify not only its existence to business today and in the future, but also to show the HUGE value that can be leveraged from the capabilities that IT provide.

Next week I will take a more detailed look at how to establish a Service Baseline and how to get going with making improvements. If you don’t know where you are you can’t show progress…

See you then and remember always keep it SIMPLE….