manage the margin

© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.

Manage the Margin

Session # ESS119SN

Service Management


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Abstract

The primarily mechanism to building leverage as a contributor to the business is to simultaneously increase business opportunities with the costs of managing a services organization. By separating the pricing of demand from the cost of fulfillment the IT organization is capable of leveraging the “margin” to make on-going investments into its infrastructure while avoiding the organizational entanglements normally related to cost recovery and budgets. This presentation will demonstrate the tools, technology, and artifacts that CA provides to make a transition from a cost-centric IT organization to an investment-centric one.


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Biography

David A Messineo

Computer Associates

David Messineo has been in the IT industry for

close to 20 years and has participated in the

design of many ITSM products currently in the

marketplace. He launched the first ITIL compatible

product in the world, and currently works at CA as

the BSO Solution Manager for ITSM and is one of

the primary CMDB design contributors within the

firm. One of his core contributions in CA is in

assisting clients with managing the financial

aspects of technology investments.


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Agenda

The Issue

The Strategy

The Approach

The Tools

Questions & Answers


The Issue


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Demand Mgmt Supply MgmtStrategic

Tactical

Operational

Capital Investment Mgmt

- IT Accounting Model

(Chargeback)

- IT Service Catalog

Contract Management

- SLA/OLA Automation

- Resource Performance

Resource Capacity Planning

- Throughput Processing

- “Inventory” Tracking

IT Project Management

- Change Planning

- Event Escalation

Infrastructure

Instrumentation

- CMDB Lifecycle Mgmt

- Business Impact Analysis

Availability Mgmt

- Standards Compliance

- Risk Mgmt Automation

The Ultimate “Roadmap”


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Move from a cost centric management model to an investment centric focus model

– Focus on customer issues not cost issuesbecause that is where the cash comes from

– Focus on services because they are responsible for converting costs to investments

Controlling the financial aspects of the IT Production Process that allows you to

achieve customer satisfaction

Organizational Objective


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"Give me a lever long enough and a place

to stand, and I will move the earth."

- Archimedes

How Do We Make the Change?


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IT Spending Breakdown


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Is an aggregation of

business functions

that are perceived by

the customer as a

coherent whole.

App

Facilities

Role

Access

Security

HR

=Biz Service

Role

AccessFacilities Security HR

App

App

App

App

Buildings

Parking

Equipment

Services

Database

Apps

Resources

Community

Buildings

Approvals

Telecom

Data

Policies

SalaryBenefits

Growth

Plan

What is an Business Services?


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Is an aggregation of

IT functions that are

perceived by the

customer as a

coherent whole.

App

Web

Database

Systems

Networks

=IT Service

eMailOnline

OrderingSecurity Networks

App

App

App

App

Web

Web

Web

Web

Database

Database

Database

Database

Systems

Systems

Systems

Systems

Networks

NetworksNetworks

Networks

What is an IT Service?


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VALUE

economy efficiency effectiveness

cheaper provision

of IS/IT services

services support

the business

encourage

economy

lower

prices

higher

productivity

improve

service

delivery

improve

service

quality

optimize

investment

in IS/IT

business

exploits

IS/IT

IS strategy

aligned with

business

Finance Alignment

Products

services improve

business efficiency

Managing IT’s Business Value


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Efficiency is Not Effectiveness

Optimizing Parts is Not Optimizing the Whole


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Business vs. IT – Who Decides?

Judge

according to

local impact

Do not judge

according

to local impact

Control

Cost

Protect

Throughput

Manage

“Profitability”Conflict


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Organizational Conflicts

Use Efficiency as a measure OR Not

Controlling costs OR Protecting throughput

Meeting budgets OR Maintaining customer satisfaction

Encouraging stability to meet service levels OREncouraging changes to meet on-going requirements

Squeezing the maximum out of every resource OR Synchronizing the processes

Controlling the amount of information ORKnowing everything that takes place

Maintaining stability OR Progressing Forward


The Strategy


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What is the output limitation of the process?

What happens to processing power if you increase the capacity of A, of B, of C, of D, and of E?

What does this say about focusing the efforts on the bottleneck?

What does this say about focusing efforts on non-bottlenecks?

A B C D E

(process capability represented by size)

IT Throughput – What is it?


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Marketing

– Awareness creation

– Interest incitement

– Knowledge transfer

– Lead generation

Sales

– Qualification

– Needs assessment

– Letter of Understanding

– Presentation demo

– Solution proposal

– Production demo

– Quotation submission

– Negotiation

– Closing

Order Administration

– Order received

– Approval cycle

– Equipment allocation

– Product integration

– Shipping

Finance

– Invoicing

Customer Support

– Unpacking

– Installation

– Customer training

– Acceptance test

Finance

– Cash Collection

A CxO’s Support of the Process


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Transportation

Education

Public Services

Land Planning and Development

Cultural / Arts

Waste Management

Commercial Development

Justice / Corrections

Elections

Fire/Medical

Licenses

Budgeting / Audit

Consumer Affairs

Environmental (e.g. Air and Water)

A Mayor’s Support of the Process


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Cost Avoidance

– Avoid spending money for unplanned purposes

– Protect services from damaging forces

Cost Reduction

– Reduce expenses of executing cash flow process

– Reduce resources required to deliver services

Protect Revenue

– Avoid disrupting incoming cash flow

– Avoid changing services that disrupt economic growth

Increase Revenue

– Increase opportunities to secure cash

– Increase opportunities to broaden economic appeal

Four Key Finance Objectives


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What We Do

– Portfolio Management

– Project Management

– Release Management

– Change Management

– Risk Management

How We Do IT

– Operations (ITIL Core Processes)

– Application Development

– Technology Infrastructure

– Resource Management

– IT Intelligence

A CIO’s Support of the Process


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1. The way to improve the performance of the IT organization is by focusing on local improvements that have a global impact

2. Cost management does not mean cost reduction; it means cost-effectiveness, which means spending in the most intelligent way to support the necessary creation of value.

Thinking about Financial Control


The Approach


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1. To consistently capture revenue the demands of the marketplace requires new business services – which in turn require new IT services

2. Both these business services and IT services have individual lifecycles that must be managed

3. To synchronize their individual contributions these lifecycles should share a robust and comprehensive process model

4. This process model demands constant information from various sources and will naturally organize it to generate intelligence (CMDB)

5. This intelligence will be leveraged to create smarter (e.g. economically and financially driven) contracts between End-Users and IT

The Service Lifecycle


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Market Opportunities

Introductory

Stage

Growth

Stage

Maturity

StageDecline Stage

Total

Market

Sales

Time

Introductory

Stage

Growth

Stage

Maturity

StageDecline Stage

Total

Market

Sales

Time

Introductory

Stage

Growth

Stage

Maturity

StageDecline Stage

Total

Market

Sales

Time

Introductory

Stage

Growth

Stage

Maturity

StageDecline Stage

Total

Market

Sales

Time


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Demand

Requirements•Info•Problems•Orders

Assignments•Escalations•Projects•PlansSourcing

•Internal•External•Timing•Funding

Performance•Process•Contingency•Policy

Evaluation•Impact•Requirements Gap•Benefits gap

Marketing PLAN

BUILD

ALLOCATEDELIVER

MAINTAIN

CHANGE

Business Service Lifecycle


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Portfolio

Mgmt

CIO

Dashboard

Project

Mgmt

Operations

Mgmt

IT

AccountingSLA/SLO

Metering

Event

Mgmt

Application

Chg Mgmt

IT “Asset”

Mgmt

Catalog

Work/Change

Mgmt

Device

Monitoring

Governance

Global IT Process Model


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Data -> MDB

Process -> IIF

Inte

llig

en

ce -

> C

MD

BPlanning

Financial

Forecast

Capacity

Profile

Transactional

Relational

Impact

Reach/Range

Visualization

Classification

CMDB – IT Intelligence


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To identify adverse side effects of a decision

To ferret out unforeseen and unlikely events and consequences

To highlight uncertainties in the problem and the future

To understand the situation better by seeing it in a new light

To stumble on new options, alternatives, problems, and opportunities

To improve communication among managers and/or analysts

To stimulate the development of improved and better models

To identify errors and inadequacies in the model

To focus on unexamined details

IT Intelligence?


Managing DemandManaging Fulfillment

Managing the “Margin”


End-UserSLA

App

App

App

App

Web

Web

Web

Web

Database

Database

Database

Database

Systems

Systems

Systems

Systems

Networks

NetworksNetworks

Networks

Business “Contracts”


The Tools


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Respond to problems and faults

Ad hoc, manual processes

Standardized processes

Automated responses

Consolidated IT resources

Business-relevant IT services

Service level management

Financial administration of IT

Real-time IT dynamically optimizes to support the business

Transparent enterprise

3

2

1

4 BUSINESS-DRIVEN

ACTIVE

EFFICIENT

RESPONSIVE

The CA Maturity Model


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Financial Management Framework

Quality Transactions

Mitigated Risk

Remove Redundancy

Standardize Performance

Process

Customized Catalogs

Biz Service Level

Agreements

IT Service Level

Agreements

Standardize Catalog

Services

Multiple Interfaces

Network Redundancy

Defined Networks

Standardize Interfaces

Resource

Flexible Configuration

Maximize Availability

Inventory Mgmt

Standardize Configuration

Assets

Revenue Increase

Revenue Protection

Cost Reduction

Cost Avoidance


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Business DrivenResponsiveEfficientActive

Leverage CMDB to enable the following key process capabilities: Business Risk Planning, Business Planning, Business Capacity Planning (Demand)

Leverage CMDB to enable the following key process capabilities: IT Risk Management, IT Planning, and IT Capacity Management

Leverage information to identify root/cause in network and application environments

Leverage information to identify minimal root/cause

Analysis

Track relationships from Portfolio to Business Services to Business Processes

Track relationships from Business Process to IT Services to IT Processes to Infrastructure

Track Ownership, Applications, Data, Network

Track HW/SW assigned to workstations

Relation-ships

Business Planning, Persistent Processes

Manage the following processes: "Warehousing", IT Planning

Manage the following processes: Procurement, Support, Configuration, State Management

Manage the following processes: Setup, Delivery, Disposal

Lifecycle

Track Business Services, Integrations, and Key Transactions

Track Process, Systems, and Interfaces -- links to process tools and discovery tools

Track People, Documentation, Data, Application -- entered manually or through discovery or integration

Track HW, SW –

entered manually or

through discovery

Assets

IT Intelligence Framework


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REVENUE INCREASE

REVENUE PROTECTION

ITIL – Release, Availability, IT Financial Mgmt

Work – Project Driven

Spending – Based on

Value Focused Activities

SLA – focused

on LOB Requirements

Budgeting –

LOB Allocation

Prioritization – Based on

Business impact

COST REDUCTION

ITIL – Change, Configuration, and

Service Level Management

Work – Change Driven


Planned Work

SLA – formal focused

on IT Ops

Budgeting –

IT Allocation

COST AVOIDANCE

ITIL – Incident and

Problem Management

Work – Task Driven

Spending - Reactive

$$$$$$$$$$Maturity Advancement

Building Credibility over Time

ITIL – Capacity, Contingency Management

Work – Portfolio Driven


market opportunities

SLA – Based on

business risk/value

Budgeting –

Based on

business cases

Prioritization –

Based on investment

instruments


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Summary

Think Customers Not Costs

Think Investments Not Costs

Manage the IT Production Process

Manage the Margin

Build Intelligence Capabilities

Leverage a Maturity Model

Avoid Organizational Conflicts

manage the margin

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