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.

Is a Thin client also a Lean client? Or are we now Clouding the issue and is not all Chrome that glitters?

Today Google announced their second OS, but somehow this got a lot more attention than their first (Android). I am sure this has to do with the fact it now seems an all out war between two giants, both doing Search, both doing Mobile, both doing Office Suites and now both doing OS’s. All four are multi-billion dollar markets, but strangely this battle seems to be all about the browser, a market where, so far, nobody managed to make a buck.

In fact the idea of a portable browser came originally from a third billion dollar giant. Back then it was called Thin Client. Now we may call it a Netbook, iPhone or AppPhone, but the premise is still to put as little clutter (waste) between the user and the app or the content (the value). Which starts to sound like (minimize waste, maximize value a.k.a. …) Lean IT.

Now, if you live next to a bakery store, we all agree it makes no sense to fire up your oven every morning for some fresh bagels (or croissants depending on which part of the globe you live). But if the nearest bakery is so far away you cannot get there in your pajama, then having you own oven (and a supply of conveniently prebaked bagels) starts to make sense.

So what could Chrome OS eventual mean? It could mean end users go out and buy standard access devices (netbooks, phones, smart TVs and even desktops), which they use to access applications (Gmail, Google Apps, but also business apps like Salesforce or other SaaS providers) that run outside their place of work. Welcome to Consumerization!

There were three reasons this did not happen earlier: 1) the network was too slow for a good (graphical) user experience and 2) Business apps were not available outside the enterprise.
But even with one and two fixed , users would still be going from site to site being their own integration engine by cutting and pasting or retyping all the time. It is here where the OS can help. It took Windows 10 years to go from DDE, via OLE to COM, COM+, DCOM, etc. etc. but today two browser sessions – also due to of security concerns – do not have the same level of integration as desktop apps. Because the Chrome OS is “starting over” they have a chance to tackle this. It will be cool to use a CRM application from one provider and a financial application from another and have them work seamlessly together on the desktop (meanwhile other companies, with Salesforce.com in front, are working hard on getting the apps to also work seamlessly together at the server/database level).

Now will this make our enterprises leaner? Well, only if we use this to replace some of the complexity we already have, not if we just add it to the stack (so instead of 3 OS’s, we support 4 or 5 ). Also we will need to decide what types of bread we want to bake in-house and what types of bread we source from the cloud. And if we are smart, we make our remaining in-house bakeries into little private clouds, so the user sees no difference and we can source these later.

Why is it so complex to make IT simple?

Whenever I tell someone I work for an IT company, you see a little spark of fear pop into their eyes while they quickly check their watch. Probably because they know from experience (with other IT people not with me) that there is a big chance the conversation will become complex, lengthy and likely even incomprehensible. So lately I just tell them I work in marketing, which leads to longer and more engaged conversations. But it did make me wonder how IT got into this position, and more importantly, how we can get out of it.

Now, it was not always like this. On my first working day, fresh out of university, when joining the IT department of AKZO (now Akzo Nobel), there was coffee and cake. Not because I joined (it was the 70ties) but because a colleague was leaving for Spain. He was taking a small server with Akzo business applications and a book “How to learn Spanish in 30 days” with him. Four months later he was back and had implemented all of Akzo’s standard processes in the newly bought Spanish consumer products division. And he had lots of stories about the Spanish consumer market, the competition, the customers the food, the weather and about our new colleagues. He had spend most his time with users (sales people, logistics people, marketing etc.) and almost no time with other IT people (also because we did not have many in Spain) and as a result was consulted regularly by the European Management team on matters concerning Spain or other new markets. Back then we did not have Enterprise ERP, SOA’s or Enterprise Serviced Busses, we just had specific applications for purchasing, inventory, order entry, invoicing etc. (guess we would call these silo’s now) and a good understanding of how AKZO’s wanted to manufacture and market consumer products.

Somehow that got lost, now IT talks mainly about SAP, Oracle or Data warehousing and 90% of the time we talk with other IT people. Granted, IT is more important and there is a lot more IT around than in the past and because scale is larger and the level of (technical) integration is much higher, the complexity is often overwhelming, but there must be a way to get back to what really matters (business).

Luckily there are two recent developments that help achieve that. They are on the one hand Portfolio Management Techniques and on the other hand Lean IT. If you are new to Portfolio Management check out “Laws of IT” explores Service Portfolio Management, Lean IT builds on manufacturing best practices and has been discussed earlier in this blog, but make sure you do not miss this vintage paper The IT-dustrial revolution on Lean IT (literally Lean IT avant la lettre).

Lean times call for Lean IT

The full version of this article was co-developed with CA communications.

CIOs find themselves in a tough spot. Budgets have been cut, but the expectations for service delivery remain high. So CIOs are going lean; applying ‘lean’ thinking to their IT strategies. Lean IT allows CIOs to focus on what’s most important: delivering value to their internal and external customers ― while lowering costs.

This pragmatic management discipline was road-tested in the manufacturing sector, where lean pioneers like Toyota and Xerox identified ways to eliminate any waste long ago. Lean principles make heavy use of simple visual techniques like KanBan cards. Such lean visualisation techniques apply just as equally to the management of IT services and the underlying technology infrastructure. In IT however, business services consist of intangible bits and packets coursing through electronic infrastructure. It’s not visibly apparent which servers and infrastructure components are supporting which services, so it becomes imperative to visualise end-to-end transactions and the infrastructure that sits under these transactions.

Navigating the Lean IT journey
So what steps can CIOs take in their drive to maximise value while minimising waste? What are the fundamental enablers of Lean IT? There are four areas to consider:

Business engagement with IT
Life doesn’t stop in an economic downturn. The business still requires new or updated IT applications and services to support their strategic initiatives. Here, portfolio management can provide insight into the investment planning process to help ensure that funds are allocated to the IT projects that best support business objectives.

Transaction visibility
To improve customer value, it is important to know what the customer is experiencing. Are your customer-facing applications giving you a reputation for first-class service and responsiveness or causing frustrated customers to seek out your competition? As almost any CIO will testify, in today’s complex data centre infrastructure it’s more difficult than ever to trace the root cause of a performance or availability degradation which may be impacting service quality.

Operational excellence
Strategies to achieve operational excellence include identifying and smoothing out bottlenecks, automating processes to reduce wait-time and errors, and maximising IT asset utilisation through technologies like virtualisation. In essence, just-in-time resourcing needs to become a key discipline within IT.

Security and compliance
When thinking lean, you can’t ignore risk and compliance. At many companies, compliance processes are highly manual and redundant; many different groups use their own spreadsheets or other fragmented toolsets, which can quickly get out of synch, leading to further risk and cost. By centralising compliance information and standardising processes and toolsets, you can reduce risk, remove redundancies, and increase agility to respond as regulations change.

There’s no time to waste: think Lean IT now

Download the the full version of this article

More information on Lean IT at British Airways at http://bit.ly/2ExLiI and on Lean IT at Fujitsu at http://bit.ly/19m55B

A Catalog of Ways to Achieve Lean IT

The full version of this article was co-developed with CA communications

Applying ‘Lean’ principles allow IT to identify and eradicate anything that is wasteful within IT management. A Service Catalog can be an indispensible component of Lean IT, helping drive down costs and ensure organisations are better positioned to lead when the economy recovers.

Lean manufacturing is relevant to IT operationsThe principles that originated from manufacturing have a place in the management of IT services and the underlying technology infrastructure. To understand why, it’s necessary to look at the role of IT: to develop, support and enhance business services that deliver value to the organisation and its customers. Similar to manufacturing goods, the development of business services involves managing demand, prioritising activities, marshalling finite resources and controlling defects.

Across this business service production line, there are multiple areas within IT operations that add no value to the finished product or service. These elements of waste range from time spent managing defects (through, for example, fixing problems caused by unauthorised changes), to over-provisioning service capacity, to time-intensive manual procedures that could easily be automated.

Applying lean techniques to IT operationsThe idea of using lean techniques to reduce waste in the manufacture of business services has been explored by many IT organisations. However, its usage has typically been restricted to application development, which shares many of the factory production style techniques. IT operations can also be managed from a Lean perspective. Fujitsu Services, for example, has invested heavily in creating industrialised IT infrastructures and services; making them more efficient, more reliable, quicker to implement and easier to change. as documenten in “Masters of Lean IT
Great opportunities to gain the benefits of lean also exist when organisations optimise those aspects of IT that work closely with the business. The notion of demand management in IT is in many ways similar to pull processing in lean manufacturing.
The role of the Service Catalog in Lean ITOperational and Tactical demand management― often referred to as ‘keeping the lights on’―lends itself particularly well to lean thinking, since it typically consumes up to70% of the IT budget. A service catalog provides IT operations with a process to offer and deliver a broad range of services more efficiently and effectively. Here, IT utilises Service ‘Catalogs’ to document and describe all the services it provides, together with agreed-upon service levels and cost. Users submit requests to the Service Catalog via a web browser, and since these solutions incorporate automated workflows, each request is routed through its required approval cycle.

Today’s IT organisations no longer focus on managing technology, but rather run and optimise a continuous business service production line. And like every production line, waste can surface everywhere. A Service Catalog reduces waste and costs by streamlining and automating request and delivery processes. Those that are successful will not only drive down costs, but also be better positioned to lead business and economic improvement.

Download the full version of this article

Let’s go Lean IT

Lean management has proven extremely successful in managing manufacturing operations. So much so, that people are now applying Lean to managing whole enterprises. Going forward this blog will focus specifically on applying he principles of lean management on Information Technology: Lean IT. Lean IT is not new, successes were documented already back in 2007 (Learning to Love Lean IT, Eliminating waste doesn’t just apply to scrap metal; CIO Magazine April 30, 2007), but it’s popularity is suddenly rising explosively.

For me personally it feels like coming full circle. In 1987 I was one of the first to complete then new curriculum “Business and IT Management” at the economic faculty of the University of Tilburg. After having graduated on the topic of organizing just in time production processes at Philips Medical equipment, I started working at Akzo on implementing a production planning system in their Dutch and Belgian pharmaceutical plants operations. A few years later I moved over to the vendor side, marketing process manufacturing (ERP) solutions. After 10 years of visiting the largest process factories (chocolate, meat, beer, pharmaceuticals) in Europe I abandoned the manufacturing area and started working in a more pure IT technology areas. First marketing XML based solutions for enterprise integration and content management, later at CA marketing IT management software (a market that by that time had surpassed the ERP and application market in size).

And now, 30 years (yes, that long) after graduating on Just in Time, Total Quality and other techniques now known as Lean Manufacturing, Lean reappears to manage IT.

What can I say: Welcome Home!

CMDB, the “Bill of Material” of the IT factory

The full version of this article was co-developed with CA communications

For years manufacturing has relied upon a central document called a Bill of Material, which describes, in minute detail, each component of the product. It serves as the foundation for design, procurement, manufacturing and distribution, and therefore as the foundation for companywide planning, costing and communication. The Configuration Management Database (CMDB) is developing into a similarly foundational repository for IT, describing the configuration items (CIs) comprising each IT service as well as their interrelationships. The CMDB helps IT organizations develop new services more easily, provide current services more efficiently and promptly correct any errors that may occur.

CMDB as the foundation
Service management is a discipline based on the ITIL philosophy. Using a Configuration Management Database (CMDB) service management can provide an integrated view of IT services and facilitate the required cost control. This is crucial as in today’s information based society IT cost becomes an ever more significant part of the total cost. And stringent rationalization and automation as part of industrialized service provisioning can reduce IT costs by at least 10% to 15% annually, contributing significantly to a company’s competitiveness.

Fixing problems faster
The CMDB makes it also easier to find, correct and even prevent errors, because staff can immediately see which IT services will be affected when an IT resource goes down. Moreover, the CMDB reveals which business processes are impacted by an interruption in a given IT service. This helps staff set the right priorities during troubleshooting.

Implementing changes safely
Even today the majority of service outages occur as the undesired and unexpected result of introduced changes. This often results in a common attitude of “if it ain’t broke, don’t fix it”. A CMDB enables evaluating the impact of changes before they are made and as a result enables a proactive continual improvement attitude.

Providing new IT services faster
Better IT service availability and performance are not the only economic benefits of a CMDB. Just as industrial designers, manufacturing engineers and sales personnel can develop new products based on existing Bill of Materials, management, departments, software engineers and IT teams can customize existing IT services to meet new demands or derive new IT services from existing ones based on CMDB information.

Providing existing IT services easier
The CMDB also simplifies the process of establishing and provisioning a front-end service catalog for users in order to show them which services are available, what they cost (depending on the requested service qualities such as response times) and how quickly they can be available. If the CMDB is the Bill of Material of the IT factory, then the service catalog is its online store.

The IT factory can now follow the laws of economics more closely. IT experts become the production planners and finance engineers of the IT factory. They become partners with management and other departments in the delivery and continuous optimization of business services.

Download the full version of this article.

IT services at the push of a button—simple to consume but hard to deliver?

The full version of this article was co-developed with CA communications

In modern companies, IT and business processes are practically inseparable. A business transaction such as a an online banking transaction or making a mobile phone call are business services provided almost entirely through IT services. But also insurance companies, hospitals and government organizations have completely automated certain business processes, with increasingly serious consequences for IT.

As a result companies have a continuing obligation to ensure that IT expenditures and risk, don’t make their business services prohibitively expensive or unreliable. Service management, which has been promoted in the IT industry since the 1980s—primarily through the standards of ITIL, offers a possible way out. Unfortunately, the various tools developed by the IT industry to implement ITIL standards for service management are insufficient. Today’s companies have no use for tools that support individual ITIL disciplines such as service support or service level management. Instead they need an integrated approach to service management that manages business services, keeps track of the cost of these services and provides complete, uniform support.
This includes automating and warranting supply from the “IT factory” as well as advanced support functions such as support automation for a seamless user experience, knowledge management for easy access to know answers and corrective actions and a service desk for uniform collecting and reporting of information. Other key components are portfolio view of the offered services, a catalog to give users easy access to the available services, integrated IT asset management, IT governance, and complete change and release management.

Integration is key
Ideally the heart of such a suite is a Configuration Management Database (CMDB), which serves as a central repository for all IT assets, users, roles, rights and authorizations. For the most part, the CMDB is the main source of information for populating the service catalog to describe the available services in detail, explain what constitute these services from the functional perspective. It can also indicate who can access them and how much they cost.

Automation is growing in importanceThe automation of service operation and support requires that the service management suite can manage and control the corresponding functions in the IT factory, and that it do so by closely working with modern data center automation tools and with traditional system and network management systems.

Today’s requirements ask for a suite concept similar to the idea of Office and ERP suites, simplifying the expansion of functionalities as well as the implementation of the best practices and allows for continually improving processes. All this becomes possible when solutions suites allow for uniform usage, simplified licensing and take a departure from the typical heterogenous patchwork solutions of the past.

Download the full version of this article.

Selling Services by the Pound, a re-birth of economic thinking in IT

Any Genesis fans will immediatly realise the title of this blog dates me. In fact I finished my formal education more than three decades ago. And although I realised at the time that the study I did was quit innovatif, as it tried to combine economics and informatics theory into something we nowadays would call “Economics of IT”, I truly did not expect that it would take twentysomewhat years for it to become as relevant as it is today.

Time to start collecting some thoughts?

“Laws of IT” explores Service Portfolio Management

Laws of IT is a new initiative that discusses serious IT matters in a entertaining way, using a variety of media such as web, video, blogs and discussion groups.

In the first episode you meet Mr. Demand and Mr. Supply, exploring Service Portfolio Management and you will see Peter Hinssen, in a special appearance as CIO therapist extraordinaire.

The media:
Laws of IT on Youtube