SESSION 507 Thursday, November 3, 11:15 AM - 12:15 PM

Track: The Specialist

Metrics: How they Apply to Life and Services

Eric Feldman Senior Product Marketing Manager,Flexera Software EFeldman@flexerasoftware.com

Session Description When you think of metrics, do you immediately think of capacity, availability, and performance? Have you considered how other industries use metrics? In this session, you’ll find out how different industries use metrics in their business operations, what metrics are meaningful and appropriate, and what their implications are with regard to business relevance. (Experience Level: Advanced)

Speaker Background Eric Feldman is a senior product marketing manager at Flexera Software, where he works on software license optimization and software asset management solutions. Previously, Eric was a senior principal product marketing manager for service management solutions at CA Technologies. He was also a senior architect in CA’s service management practice group, where he had extensive experience in enterprise customer-facing engagements.

Understanding Metrics in Your Life and the How they Apply to Services

Eric J. Feldman

@ericjfeldman

Speaker and Abstract

When you think of metrics, do you immediately think of capacity, availability, and performance? Have you considered how other industries use metrics? In this session, you’ll find out how different industries use metrics in their business operations, what metrics are meaningful and appropriate, and what their implications are with regard to business relevance.

Eric FeldmanSenior Product Marketing Manager Flexera Software@ericjfeldman

Metrics – Rental Car Example

• How many of you have rented a car in the past year?

• How did the rental company charge you?• Did you pay by the week? Day? Hour?

• Did you pay by the mile?

Performance Information Data

• Used by car fleets to check engine operation or status

• How many of you have rented a car based on…• Average Engine RPM?

• Average Speed?

• Mass air flow rate?

Metrics are all around us

• Restaurants measure weight

• Airlines measure capacity

• Rental trucks measure distance

• Mobile device carriers measure data throughput

• Cooling and heating systems use BTU

• Jewelry companies use weight

• Sports uses time to measure the length of play

A Real “Business” Requirement

• A large financial services company is setting up a chargeback policy for a cloud service. They want to charge individual users with three metrics:• CPU usage• Memory usage• Disk storage

• Technical questions• How is the CPU usage of a cloud service calculated to an individual user?

• Is it percentage of CPU utilization? CPU time? CPU thread count?

• What is memory usage?• It is memory utilization by percentage? Memory usage per process?

What is the business relevance for using these metrics in context individual user

or consumer?

What metrics do you use to charge for IT Services?• CPU cycles

• Memory Utilization

• Disk storage

• Network bandwidth

• I/O Cycles

• MIPS

• ???

Common Industry Metrics

Common Metrics used by the Airline Industry

• Engine hours - an important metric for maintenance

• Flight hours

• Takeoff and landing - pressurization cycles determine lifespan of aircraft

• Metric of "cycles" is the pressurization and unpressurization, aka takeoff and landing

Airline Industry Cost Example Common Usage Metrics For Analysis And Comparison

• Available seat miles• Measures an airline flight's passenger carrying capacity

• Equals the number of available seats multiplied by the number of miles flown

• A 100 seat aircraft with a route of 1000 miles = an ASM of 100,000

• Cost per available seat mile• Unit cost that enables airline comparison

• Expressed in cents to operate each seat mile

• Determined by dividing operating costs by available seat miles

Airline Industry Cost Example Common Usage Metrics For Analysis And Comparison

• The airline industry has decades of experience calculating costs

• Industry average cost per available seat mile is $.1256

• Source: Air Transport Association of America airline 2007 cost index composite data

Expense Item Unit Cost per ASM

Fuel 3.25

Labor 2.96

Rent and ownership 0.89

Non-aircraft rent and ownership 0.56

Professional Services 1.04

Food and Beverage 0.19

Landing Fees 0.24

Maintenance Material 0.19

Aircraft Insurance 0.02

Non-Aircraft Insurance 0.06

Passenger Commissions 0.15

Communications 0.12

Advertising and Promotion 0.1

Utilities and Office 0.08

Transport Related 1.72

Other operating expenses 0.99

Total Composite Industry 12.56

Airline Industry Cost Example Common Usage Metrics For Analysis And Comparison

2015 Selected Airlines Cost Per Available Seat Mile (including fuel) in cents

•Delta 12.68

•United 12.15

•American Airlines 11.97

•Southwest 11.10

•Virgin America 10.61

• JetBlue 10.56

•Frontier 8.57

•Allegiant 8.36

•Spirit 7.64• Source: Source: Massachusetts Institute of Technology, MIT Global

Airline Industry Program, Airline Data Project

How do you buy an airline ticket?

Power Generation IndustryUsing A Suitable Proxy Meaningful To The Business

• Kilowatt hour (kWh)• Unit of energy

• The power in kilowatts multiplied by usage time in hours

• A 100 watt light bulb used for 10 hours will consume one kWh

• Energy bills include• Power supply charge – charges for fuel used to

produce electricity and the purchase of power

• Delivery and system charges – owning, operating, and maintaining the electric system

Power Generation IndustryUsing A Suitable Proxy Meaningful To The Business

• The power industry uses the kilowatt hour as a proxy for the cost of the entire electric grid

• PSEG Long Island• Residential electric rates –

• October 1 to May 31

• Delivery and system charges• Service charge (per day) = $0.36• Energy charge (per kWh) =

• First 250 kWh = $0.0883

• Above 250 kWh = $0.0883

• Power supply charge• Flat rate per kWh = $. 068274

• changes monthly

Public Water Supply Industry

• Similar to power generation industry as it includes sophisticated and costly water and wastewater networks and sewage treatment plants

• Different from power industry as it includes drinking water and wastewater• Two way “movement” of resources

• Sold by the gallon, liter, or other measure of volume

Cable Television IndustryCommon Metrics

• Television universe – the total number of television households in the United States – currently 115.9 million

• Number of Households – total subscribers of a cable network

• Cable network coverage – percentage of universe

• Homes passed – total potential market of a cable operator

• Number of Subscribers – customers of a cable operator

• Viewers – total number watching a TV show

• Ratings – expressed in percentage of total households

Cable Television Ratings ExampleCompared With Top Basic Cable Stations

Network Name Households (000) Coverage %

TBS NETWORK 101227 87.34%

CNN / HLN 101102 87.23%

THE WEATHER CHANNEL 101065 87.20%

DISCOVERY CHANNEL 100891 87.05%

NICK-AT-NITE 100699 86.88%

NICKELODEON 100699 86.88%

FOOD NETWORK 100639 86.83%

USA NETWORK 100480 86.70%

CABLE NEWS NETWORK 100413 86.64%

TURNER NETWORK TELEVISION 100362 86.59%

HEADLINE NEWS 100236 86.48%

A&E NETWORK 100219 86.47%

ESPN 100127 86.39%

LIFETIME TELEVISION 100023 86.30%

ESPN2 100005 86.29%

SPIKE TV 99947 86.24%

HOME AND GARDEN TV 99874 86.17%

DISNEY CHANNEL 99861 86.16%

TLC 99787 86.10%

ADULT SWIM 99746 86.06%

THE CARTOON NETWORK 99746 86.06%

Program Network TimeViewers

(000)18-49

Rating

Walking Dead AMC 9:00 PM 7257 3.8

MLB NLCS TBSC 7:57 PM 5938 1.9

REAL HSWIVES OF NJ BRVO 10:00 PM 3440 1.7

Walking Dead AMC 10:30 PM 2176 1.1

Boardwalk Empire HBOM 9:03 PM 2546 1

Robot Chicken ADSM 11:30 PM 1925 1

Sister Wives TLC 9:00 PM 2321 0.9

Watch What Happens Live BRVO 11:00 PM 2012 0.9

Chopped FOOD 10:00 PM 2186 0.9

KENDRA ENT 10:00 PM 1497 0.8

HALLOWEEN WARS FOOD 9:00 PM 2061 0.8

DEXTER S6 SHO1 9:00 PM 1502 0.7

TALKING DEAD AMC 12:00 AM 1161 0.6

LONG ISLAND MEDIUM TLC 10:00 PM 1456 0.6

INSIDE THE MLB TBSC 12:00 AM 1589 0.6

IRT DEADLIEST ROADS HIST 10:00 PM 1642 0.6

American Pickers HIST 9:00 PM 2110 0.5

MAKE YOUR MARK DSNY 8:30 PM 4020 0.5

JESSIE DSNY 7:30 PM 2948 0.5

SWEET GENIUS FOOD 11:00 PM 999 0.5

IGENIUS: HOW STEVE JOBS DISC 8:00 PM 1060 0.5

Source: TV By the Numbers

How Basic Cable Services Are Sold Wholesale

• Ratings and coverage plus demographics influence what cable networks charge cable operators for services

• Typically charge a flat rate per subscriber per month*• ESPN – $4.08• CNN – .51¢• TBS – .49¢• Nickelodeon – .44¢• Discovery – .33¢• AMC – .23¢• TLC – .16¢

* approximate charge from various sources

How Consumers Pay For Cable TVXFINITY® TV From Comcast

A Common Metric for IT

• IT Resources are measured and consumed by storage, bandwidth, and processing power• There is no IT equivalent of the kilowatt hour

• 2004 Dr. Bernardo Huberman of HP Labs proposed a “computon,” a unit of measurement encompassing all IT resources• “Grid computing” and “utility computing” were embryonic

• Companies were figuring out how to distribute and sell computing resources

Tycoon

• A prototype application from HP Labs that enabled a company to allocate IT resources through a stock market or “clearing house” for shared resources• Lets customers bid for the resources

they need--whether with real money or through another budgeting method

The “Utility Computing” Market Today

What do we have today?

• Cloud computing• Has made the notion of grid computing obsolete and has commercialized

utility computing

• Add Amazon Web Services pricing example• Maybe MS Azure

• Need AWS Info here• Service definition

• Charging metrics

The Cloud Needs to be Managed!

• Cloud services• How many instances are you running?• Who can purchase cloud services?• What is your total spend?• Risk of overspend

• BYOSL• Do you have mobility rights?• Maintain compliance• Requires tracking of licenses in the Cloud• Be careful of Product Use Rights• Control spending Bring Your Own License (BYOL)

Cloud Contracts

PaaS

Subscription

Managing Traditional IT and Cloud IT

Capability Traditional IT Cloud IT

Hardware Asset

Management

Track location of desktops

and servers

Manage IaaS and PaaS

subscriptions

Manage maintenance

contracts

Track utilization of instances

Manage hardware lifecycle

(acquisition to disposal)

Optimize spend

Software Asset

Management

Track software

deployments

Manage SaaS subscriptions

Manage compliance Manage compliance of

BYOSL in IaaS

Optimize spend with SLO Optimize spend with SLO

Software License Models in the Cloud

Cloud

Service

Category

Example

Vendors

Typical

Licensing

Models

Compliance

Risk

Risk of

Overspend

SaaS

SalesForce

ServiceNow

WebEx

User

User Role

UsageLow High

PaaS

Azure

Oracle

Usage

Capacity Medium Medium

IaaS

Amazon

Rackspace

Usage

Capacity High High

Service Definition and Metrics

Service Definition

• What is a service?

• According to ITIL® v3• “A means of delivering value to customers by facilitating outcomes customers

want to achieve, but without the ownership of specific costs and risks.”

• In practice a service is…• An application• Delivery of a physical computer or device• A request for something• Access to a system• Cloud – IaaS, SaaS, PaaS• A Service Provider Deliverable!

ITIL® is a (registered) Trade Mark of AXELOS Limited. All rights reserved.

How do you define a service?

• Extremely business centric

• What do you as a service provider “do for a living?”

• Requires discovery of internal processes, invoices, SLAs, vendor agreement’s

• Define services in collaboration with stakeholders

• What do your end users consume, from their perspective?

• What do you, as an IT organization, do “for a living?”

Service Definition Examples

• What do Song Airlines and “My Cousin Vinny” have in common?• Both give us great examples of a service definition

• Song Airlines – a Delta low cost airline that operated from 2003-2006• Know for Kate Spade designed crew uniforms

• My Cousin Vinny – 1992 comedy starring Joe Pesci and Marisa Tomei• Fish out of water story about contrasting personalities

Song Airlines Service Definition

• Chef Davis has created a feast and captured it in this delicious sandwich. Two slices of cranberry nut bread smothered with cranberry relish and then loaded with thinly sliced smoked turkey breast, cheddar cheese and fresh lettuce make up this delight. Add an ice-cold refreshing Coca-Cola and you have a complete meal worthy of the first Thanksgiving at Plymouth Rock.

My Cousin Vinny Service Definition

• How do you define your services?

• How do you measure them?

• Need Pubic Service Catalog example here (Wisconsin?) with metrics

• Tie metrics back to ITSM and services here

Key Takeaways

• IT does not have an all inclusive unit of measurement similar to the kilowatt hour

• Always understand the business relevance of metrics when charging for your services• Create a suitable proxy as a unit of measurement

• Define your services in a way that is meaningful and relevant to your business and your consumers

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