IBM Global Technology Services © Copyright IBM Corporation 2009

IBM Global Technology Services

© Copyright IBM Corporation 2009

Service Management in an Uncertain Economy

How To Achieve Value

KC GoodmanIBM Distinguished EngineerCTO – IT Strategy & Architecture Services

2



“PAKISTAN FACING SHORTAGE OF 5,000-MW ELECTRICITY”

“YAHOO Q3 PROFIT FALLS 64%; WILL CUT 10% OF STAFF”“WORLD BANK

DENIES MASSIVE SECURITY BREACH”

Source: IBM GTS Market Insights Analysis based on “IBM CHQ Economics: OCTOBER 2008 GLOBAL ECONOMIC UPDATE”, October 3, 2008

Today’s reality . . .The global business environment is in turmoil

“GM & CHRYSLER DISCUSS MERGER”

“CITADEL TO REVAMP BUSINESS MODEL”

3



Cutting operating expense

Postponing long-term projects in favor of near-term ROI

Deferring or reducing capital expenditures

Revisiting existing service contracts

Seeking productivity increases in their existing infrastructure

Postponing hiring of additional IT staff

Postponing the launch of new initiatives

Concerns about economic downturn and industry restructuring are driving CIOs to adjust their IT plans

20

30

40

50

60

70

80

Key Skills EconomicDownturn

OverRegulation LowCostComp Energy Security NaturalResources

Ava

ilabi

lity

of K

ey

Ski

lls

Dow

ntur

n of

M

ajor

Eco

nom

ies

Ove

r-re

gula

tion

Low

-cos

t Com

petit

ion

Ene

rgy

Sec

urity

Sca

rcity

of R

esou

rces

Source: PriceWaterhouseCoopers; 11th Annual Global CEO Survey 2008; n = 1,150

% E

xtre

mel

y / S

om

ewh

at C

onc

ern

ed

All CEOs

Over $10B

CEO Concern about Potential Threats CIO Strategies for Managing in an Uncertain Environment

4



Many organizations are looking to service management as a way to extract business value

IT Service Management

“IT Service Management is the integrated management of the people, processes, technologies and information required to ensure the cost and quality of IT services valued by the customer.”

IT Service Management

“IT Service Management is the integrated management of the people, processes, technologies and information required to ensure the cost and quality of IT services valued by the customer.”

Enterprise Systems Management IT Service Management

All Hands on Deck how will IT services support the business strategy

how will we manage those IT services

20% budget reduction provide a resilient infrastructure with less

5



Many have reached a “pain threshold”, recognizing the need for a good service management plan

What are the services IT provides and how do they support the critical business activities and objectives?

How do I put this all together? ITIL, ISO, COBIT…

How do we start an IT service management program?

We embrace the service management concept – what will it really take to realize it?

We want to be “ITIL compliant”. How do you do that? How do you integrated COBIT and International Standards?

Our ITIL experience is more like the “Goldilocks Syndrome”. How do we just do this right?

How do we best plan, design and implement IT service management best practices in my organization?

A good service management plan addresses these issues.

6



Your peers recently shared how the recent economic turmoil hasaffected their service management plans

CIOs

IT directorsCFOs

and others

Their level of responsibility for investment decisions

Who we talked to

N=110 U.S.-based respondents

3%

29%

68%Primary

Part of core team

Knowledgeable

Source: IBM Market Intelligence, Service Management In an Uncertain Economy, January 2009.

7



Flat budgets and changing business requirements are causing most IT organizations to reprioritize

5%9%

86%

Significantly increaseSignificantly decrease

Slight change or remain flat

Expect to have more than enough budget

Expect to have just enough budget

Will have to reprioritize

Many projectswill be deferred

9%

21%

46%

24%Projects are being prioritized to meet strained budgets

Expected change in 2009 budget in comparison to 2008

Which of the following best characterizes your total external IT budget in the next 12 months?


8



Business priorities causing changes to IT programs and project plans

Projects expanded/ newly initiated/continuedProjects cancelled/delayed

0% 20% 40% 60% 80% 100%

47%40%Reducing capital costs

15%80%Improving efficiency and reducing costs

11%76%Accelerating workforce productivity

21%45%Adapting to consolidations, layoffs and restructuring

29%42%Improving cash position

11%75%Improving access to and the leveraging of information

19%47%Changing business model

Increasing customer retention/loyalty

10%52%Changing mix of products and services

19%28%Adapting to a conservative customer credit environment

15%56%Improving asset management

10%30%Adapting to a conservative supplier credit environment

69%Improving sales 6%

37%Managing supply-chain risks 9%

68% 9%


What impact are these business objectives/actions having on associated IT programs and projects?

9



Top priorities for IT project investments are now security, compliance and improved management

Projects continued, expanded or newly initiated

72%

66%

65%

65%

63%

61%

60%

59%

58%

57%

55%

53%

35%

27%

15%

27%

28%

23%

19%

15%

32%

23%

30%

30%

26%

23%

19%

15%

16%

21%

26%

10%

20%

15%

17%

39%

50%

8%

9%

13%

0% 20% 40% 60% 80% 100%

Security

Compliance

IT systems management

Service management

Server deployment/consolidation

Network changes and convergence

Virtualization

Business performance management

Desktop management

Enterprise mobility

Storage deployment/consolidation

Data center facilities

Energy efficiency

SOA/middleware

Projects cancelled or delayed No IT programs or projects

Current priorities for IT programs and projects

How has the current economic/business environment impacted projects in the following IT areas?


15%

20%

10



Key business drivers for the service management projects that have been continued, expanded or newly initiated

Percent selected (Note: Respondents could select multiple objectives.)

5%

9%

20%

22%

35%

37%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

Free up labor

Support a specific business function

Increase workforce productivity

Reduce/control costs

Improve quality or value

Business objectives for service management programs and projects that have been continued, expanded or newly initiated

What is the key business objective for the service management programs/projects you are continuing, expanding or initiating?


11



Common patterns for the service management projects that have been continued, expanded or newly initiated

Objective Approach Priority projects

Improve thequality of ITservices

External provider for process design improvement

External provider for software implementation

Event management and monitoring

Incident, problem and service desk

Improvements in governance of service management

Service catalog and service requests

Service level and availability

Reduce orcontrol costs

Internal process design project

External provider for software implementation

Chargeback and accounting

Asset and configuration management

Performance and capacity management

What is the key business objective for the service management programs/projects you are continuing, expanding or initiating?


12



Breakdown of service management projects

Did not achieve value

Not able to measure value 9%

Produced measurable value 48%

Do not know

Too early to measure value

22%

16%

5%

Measuring the value of service management projects


Overall, how long has it taken to realize the intended business value/ROI for service management programs or projects completed in the last 24 months?

13



The most commonly reported service management projects that produced measurable value


1. Incident, problem and/or service desk

2. Education, training or briefing services

3. Internal project to design process improvements

4. Event management and monitoring

5. Project with an external provider to implement software

6. Performance and capacity management

7. Service level management

8. Asset and configuration management

9. IT services strategy and IT service portfolio

10. Improving IT governance

Quick hits <12 months

1. Internal project to design process improvements

2. Project with external providers to implement software

3. Performance and capacity management

4. Project with external providers to design process improvements

5. Service level management

6. Incident, problem and/or service desk

7. IT services strategy or IT service portfolio

8. Availability management

9. Asset and configuration management

10. Education, training and briefing services

Longer term >12 months

Noted in blue—ROI in under six months

How long has it taken to realize the intended business value/ROI for specific service management programs or projects completed in the last 24 months?

14



The top inhibitors to achieving value from service management projects

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Insufficient software

Concerns about technical integration and architecture

Issues with infrastructure, reliability, scalability and architecture

Lack of lessons learned or assets from similar projects

Lack of internal experience

Insufficient skills or experience

Organizational or cultural issues

Insufficient staff

Insufficient funding

Do you expect the following factors to inhibit your ability to achieve the desired business value/ROI for your service management programs/projects?

Barriers to achieving desired business value from service management projects


82%

80%

68%

67%

66%

61%

56%

55%

55%

15



Demonstrating alignment with business priorities is one of the mosteffective methods for gaining sponsorship …

Percent selected (Note: Respondents could select up to three methods.)

Means to obtain executive sponsorship or buy-in

71%

65%

52%

43%

25%

19%

1%

0% 20% 40% 60% 80% 100%

Aligning projects with business priorities

Demonstrating ROI and business value

Demonstrating cost reduction

Communicating project importance to stakeholders/end users

Reprioritizing other IT projects

Establishing governance with business units and IT

Other

What are the most effective methods your IT organization/department employs in order to obtain executive sponsorship/buy-in for continued/expanded projects?


16



… and understanding what the critical business processes are in your organization

Percent selected (Note: Respondents could select multiple functions/processes.)

67%

62%

60%

59%

55%

43%

43%

41%

35%

35%

30%

0% 20% 40% 60% 80%

General accounting

Payroll processing

Accounts payable

Customer service

Accounts receivable

Billing

Payment processing

HR administration

Customer data analytics

Electronic document management

Sourcing and procurement

Which business functions/processes are the most significant users of IT services to support, enable or automate their business activities?

Business functions/processes that are the most significant users of IT services


17



Critical success factors for service management projects that generated value

As you continue or initiate service management projects in the current economic environment, which of the following will most help to contribute to project success and generation of value?


• Stakeholder communications

• Detailed project plan

• Detailed business case

• Collaboration and technical integration

• Established project execution roles

• Skill and staffing planning

• Selection of appropriate software tools

• High-level project justification

• Facilitating cultural change

• Conducting a pilot

18



Peer-driven recommendations1. Improve the quality and reliability of IT services that

enable business workforce productivity

2. Prioritize smarter ways of doing things and technology consolidation

3. Revise measurements and reporting to stress business-driven outcome metrics, costs and business value

4. Change focus from technology and optimized subsystems to optimization of IT-enabled business activity

5. Apply some investments to tactical quickhits—but also make progress on longer-term service quality inhibitors

Changed business requirements and flat budgets drive the need for business-driven IT prioritization

In an economic downturn, CIOs are prioritizing their investments to help optimize IT-enabled business services


19



Three Actions To Achieve Greater Value

Plan Measure Govern

20



Plan: Create a Service Management Roadmap aligned to critical business needs

Establish the systems management operational efficiency plan

Develop both the IT service plan and the IT service management plan.

• Identify the critical business activities

• Identify the IT services that support, enable and automate those activities

• Establish the service management plan describing how you will improve your ability to manage those IT services

The Service Management plan should cover objectives, scope, phases, people, management process, information, technology, integration, collaboration and governance related to those critical IT services.

Ensure the service management plan is focused on service management and not just systems management.

Make the IT service management plan a visible component of the business plan

Planning

Standardized processes across 27 facilities in seven states, on time and within budget.

21



Measure: You can’t manage what you don’t know

Cost of Quality – what is the cost of not getting it right the first time?

You always pay for the level of quality you have – the key is to direct spending from failure reaction to proactive approaches to quality

• Low Quality – consider the impact of low quality on margin, revenue, productivity,

• Failure Costs - cost of defect/incident reaction, minimize lost production during the incident lifecycle

• Appraisal Costs - testing to ensure product and process quality

• Prevention Costs - those things you do to prevent failures from occurring in the first place.

What gets measured gets done, so inspect what you expect

Managing the Cost of Service Quality

In the first year, dramatically improved overall quality of service by reducing system failures 58 percent, IT interruptions 39 percent, and downtime 80 percent

Performance (KPI) Outcomes (KGI)

Cost Cost per activity by IT service and business activity supported

Impact of incidents on IT services and business activities

Human effort for activities by service and business activity supported

Elapsed time for activities by service

Duration of activities by service and incident severity

Cost of resolving incidents by service and business activity

Impact of improved incident management

Human effort for resolving incidents by IT service and business activity

Elapsed time for resolving incidents – by IT service and business activity

Trends

Quality #, % of activities within agreed to parameters

Resolution rates at L1, L2, L3, by group – by IT service and business activity

% of reopened incidents

Progress toward minimizing the duration and impact of incidents on IT services and business activities

…

Measure Performance and Outcomes

Reduced rates for server use 10%.

Eliminated non-value-added activities Faster processing of service requests

22



Govern: Drive collaborative behaviors and improved decision making for directing, controlling service management

Collaboration and Influence

Remember – its not just tools and architecture – but decision rights and accountability chains that drive the behavior of “the people in the process.”

Clarify decision rights and accountability chains for directing and controlling each critical process and service

Drive collaboration across boundaries

Proactively manage the changes that will be required to change behavior

Re-evaluate measurements and incentives around business outcomes

Consider changes to governance required to get this kind of change in behavior.

70% of management system implementations fail, because the process and the organization were not given the proper importance.

“The Goldilocks Syndrome”

CRM – Implementation failures… imagine a company implementing CRM a second or third time…65% (Gartner), 60-70% (Giga), 67% (Insight Technology)

BPR – 50-70% failure to deliver value (Minnesota State University)

ERP – “public flame outs… failures… negative business impact”

The Prime Solution, Jeff Thule

23



Questions?