A Service Portfolio approach to Cost Management

Do Lean Times require Smart IT, or does Lean IT mean Smart Times?

This week a major European IT magazine launched Smart IT, an expert forum dedicated to how smarter IT can help reduce enterprise cost, So not just IT cost itself. It is only fitting that the first case discussed here was a retail case, because there is no industry where cost management is so essential. The traditional thin margins of retail make cost management a way of live and not just something you do in hard times.

But if you now think “glad I did not choose a career in retail”, I have to disappoint you. Fortune magazine described it eloquently in this month’s “My (recovery) Playbook” article. It is time to end the waiting game. The economy we have today, is the economy we have. Any plans need to start from here. High unemployment, low GDP growth and almost impossible to obtain credit is not an anecdote we will tell our grand kids about, it is the economy our kids will grow up in. So let’s see what can we learn from this retail case.

Major European retailer Debenhams announced this week they managed to improve in store customer service while at the same time reducing support related cost by 25%. As in most modern retailer every aspect of Debenhams’ business is supported by IT — from point of sale transactions and its website to the supply chain, warehousing and general ledger. This means a lot of the companies investments and change efforts involve IT. Earlier this year the organization implemented a Project and Portfolio solution to reduce costs and prevent wasting resources on unprofitable or ineffective projects and to boost the success rate of its IT projects. In addition they started formal tracking of 60 separate change programs across the company.

The increased efficiency that PPM brought increased the capacity for delivering more IT projects. Bringing greater value to the business and ultimately Debenhams’ customers. Following the success in IT, the organization started extending Project and Portfolio management to other areas such as training and store planning.

But running projects to create new services is only a part of the total cost and enterprise incurs. Many are familiar with the statistic that only 30% of the average budget can be spend discretionary while about 70% is needed to just “keep the lights on”, or -in service management terms – on delivering the services we created last year. So in a true Service Portfolio Management spirit, this organization expanded their improvements efforts to incorporate their existing services, starting with the support cost of these services. Quit fittingly for a retail organization they leveraged the idea of self service extensively. A whopping 15% of issues now are resolved without any human intervention. This did not only reduce the overall cost of rendering support by 25% but at the same time accommodated another major retail goal. Allowing in-store staff to spend the majority of their time actually interacting with customers , and not on filling out forms or holding on the phone while waiting for the helpdesk.

This organization adopted and adapted ITIL (as it was intended) and took a truly integral approach to Service Management (if you like Service Portfolio Management). After having formalized the creation of new services through Project and Portfolio Management and the support of existing services through Service Operations (Service Support) management, they now are looking at more tightly managing the full life cycle of these services by further maturing the change processes around bringing new services live, maintaining running services and decommission retired services.

Is this all Debenhams did to maintain their margins and bottom line in today’s lean times? No, other new projects and services, where some aspect IT was involved, included opening new stores in multiple countries, introducing a beauty card loyalty scheme, moving consumer preference from (lower margin) concession brands to higher margin “Own bought” brands and integrating in-store and online channels through innovative concepts such as “Click and Collect”, “Track and Trace” and “In-store ordering”. Illustrating that one improvement –in today’s economy – is not enough to maintain the bottom line.

This however means that today’s management needs to be able to cope with the increased complexity of fighting multiple wars at multiple (new and existing) fronts, all at the same time, while simultaneously improving the efficiency of their current “keeping the lights on” operations. Something IT can play a major supporting – or even guiding – role in.

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