Show me the money!!

About this White Paper

IT organisations exist solely to increase the capability of the Business. Our services enable business processes. Yet despite this inherent dependency, there exists an eternal battle to secure funding necessary for improvement projects. Our gain is also their gain, so why on earth are we fighting?

Author

Jamie M Donoghue

Senior Consultant - Asia

Executive Summary

For the ITIL initiated, having completed even the foundation level syllabus we can appreciate the improvement opportunities that exist through the adaption of best-practices. However, more often than not, the real organisational decision makers have not attended an ITIL course.

Without a decision makers approval (and sponsorship), how can we take the ITIL theory to the next level? How can we make it real? How can we demonstrate the positive effect that such changes would bring to the organisation?

These questions can be difficult to answer since many of the benefits realised by adopting best practices are often expressed in broad sweeping ‘increased efficiency’ statements or in organisational and cultural terms. This marketing approach is insufficient in persuading executives to hand over their purse.

So, how can we effectively communicate our intentions? Fortunately whilst IT and the business may speak different languages there is something we both understand, money.

Money makes the world go round, so the old adage goes and the ultimate aim of any business is to acquire it. Unfortunately IT is typically seen as having a draining effect on that goal. Then, to ask for even more funding can evolve into a scene reminiscent of “Oliver” (although slightly less musical). How can we turn this impression of IT being just a cost-centre around and demonstrate that our intended (money-spending) improvement projects will positively influence the bottom line?

To secure this funding will require an approved business-case; real business justification for the investment, with a detailed analysis of the current pain-points versus the measurable improvements the project aims to provide.

This information can be a real challenge to compile as many IT organisations cannot easily establish the required baseline measures to use for such purposes. To create a rock solid business case requires an in-depth analysis of the following:

Process, Service performance
Service to Business alignment
Revenue generated via IT Services
Cost of IT service (total, usage/transaction, per business-unit)

Without this information, IT has a real challenge in clearly stating a cost/benefit ratio and any proposed solutions become subjective.

Although it may be a long journey until we have the internal capability to provide such detailed analysis, it does not necessarily mean we cannot provide relevant and motivational metrics to our stakeholders. You just have to know where to look.

Generic Benefits

If we refer to the ITIL marketing material we can easily obtain a list of generic benefits. Whilst no-one from the business would argue against these objectives, you can certainly expect arguments on how they will actually be achieved. So how can we take it to the next level and break down these desirable, yet still very ethereal ‘end-states’ into tangible achievements?

Improved customer satisfaction through a more professional approach to service delivery	Reduced cost per incident
Improved IT services through the use of proven best practice processes	Reduced hidden costs that traditionally increases substantially the TCO
Improved ROI of IT	Better asset utilisation
Improved morale of service delivery and recipient staff	A clear business differentiator from competitors
Increased competence, capability and productivity of IT staff	Closely aligned to commercial business services and products
Increased staff retention	Greater visibility of IT costs
Reduced cost of training	A benchmark to measure performance against in IT projects or services
Improved systems/ applications availability	Reduced cost of recruitment and training - hiring ITIL qualified people is easier

Quantifiable Returns

As organisations are inherently different in their structure, there is no single formula to calculate potential savings.

The ITIL books do provide many examples on how to quantify the costs and benefits of implementing the processes; however a considerable majority of KPI’s and Metrics are focused primarily towards process performance, rather than cost savings. Whilst those KPI’s are a necessity, they are considered ‘internal’ measures i.e. relevant only for the IT department, not the business.

To make ITIL real for the business will require a translation of these internal measures into financial terms.

In order to provide a complete solution of the cost-savings available to an organisation would require a detailed analysis of the current capability. But to give you a taste of the real opportunities that are available consider the following example.

Let us imagine a typical medium size organisation which has the following baseline measurements:

Multiple untimely, cancelled, or failed project implementations
All employees cost $50 an hour
The organisation comprises 1000 Users
The total number of Incidents is 5,000 per year
The average time to fix an Incident is 30 minutes
A working year has 200 days.

If we translate the objective of the ITIL processes (which is to reduce cost, time, impact and risks) into measurable and financial business benefits a clearer picture forms on the positive influence IT improvement projects can make to the bottom line:

Process	Purpose	Business Benefit
Incident Management	Restore service as quickly as possible following an unplanned interruption	The improvement of the Incident Management process resulted in a decrease in the average down time per user. This is defined as the amount of time a user cannot work because of a failure. If the downtime per user is reduced by only one minute, per person, per day, this would save the organisation *1000 200 * $50 * 1/60 = $166,666 per year.**
Problem Management	Reactive: Stop incidents from reoccurring	Problem Management decreased the number of recurring incidents by 500 (10% of total) per year. This saved the organisation *1000 $50 * 10/60 = $8,333 per year.**
Change Management	Prompt and efficient handling of changes requested by the business	Two changes are implemented simultaneously, resulting in a major problem. The customer support system fails, resulting in the loss of 50 Customers with an average purchasing power of $500. This has just cost the company $25,000 in potential revenue.
Release Management	Ensuring authorised changes are introduced successfully into production.	A vendor has just released a new version of its software. Business executives demanded an immediate upgrade as so this untested version was installed. The result was a system shutdown that lasts for three hours and affects two-thirds of all employees. This would cost the organisation *1000 $50 * 3 * 2/3= $100,000**.
Configuration Management	Controlling the IT assets. Ensuring that only authorised hardware and software are in use.	Following the implementation of Configuration Management, the business had a much greater control over software licenses. Using the information in the CMDB it was discovered that 15 CAD licenses were installed on PC’s that were no longer used. The licenses were recovered into a shared pool saving the organisation *15 $4000 = $60,000**
Availability Management	Ensures the service is there when you need it.	Due to a physical error on a hard disk, a server supporting 100 people crashes. It took three hours to have a new disk delivered and installed before starting up the system again. Costs: *100 3 * $50 = $15,000.** On a critical system, Availability Management processes would have highlighted the need for a mirror disk, which could automatically take over should one fail.
Capacity Management	Ensure the optimal use of IT.	Following rapid growth through mergers and acquisitions there is a disparate infrastructure leading to an over-capacity of 20%. Without adequate Capacity Management this 20% cannot be utilised across the various business locations. Assuming the IT infrastructure cost five million dollars, the organisation stands to lose $1m dollars in unusable assets, plus further investments will be required to cope with future local demand increases.

Process	Purpose	Cost/Benefit Examples
IT Service Continuity Management	Ensure quick recovery after a disaster.	A water pipe breaks, flooding the server room. It takes two days to be operational. Employees have missed 15 hours of work. Total costs (excluding the plumbing fees): *1000 15 * $50 = $750,000.**
Service Catalogue Management	Provide accurate information on the IT services available	Thanks to a clearly defined catalogue, the Service Desk is less troubled with calls that are beyond the available offerings. The five Service Desk employees can now process 10 percent more users. The extra employee requested by the Service Desk manager is no longer required saving the organisation *$50 8 * 200 = $80,000**
Financial Management	Provide insight, control and charge the costs of IT services.	Quite often business units do not understand the inherent costs of providing IT services. Even without a requirement to recover costs, it is useful to demonstrate how much each business unit costs to support. If this information resulted in a 10% reduction in the requests for new services, this would directly result in a reduction of the overall IT capital expenditure.

Conclusion

As outlined in this whitepaper, the benefits of adopting and implementing ITIL are many. Organisations have cut costs, improved processing time and enhanced their overall service delivery significantly. What has been lacking is a simple translation of our internal goals into a format the business can understand. This real-life measurement of our service value provides the business with information they can understand and use for strategic investment decisions.

From small organisations to large multinational enterprise, this best practice framework has been the foundation for many improvement projects. Driving efficiency, effectiveness and bottom line figures puts the true value of IT back into the minds of the business.

About the author

Jamie M Donoghue, Senior Consultant, UXC Consulting

Jamie, originally from the UK, has over 14 years of experience in the IT industry working for best in class companies in the UK, Australia and Asia.

With an extensive track record of success demonstrated in strategy, design, architecture and technology, Jamie’s expertise centers around achieving real organisational benefits by applying effective management practices, organisational change, improvement and the pragmatic application of technologies.

ITIL Intermediate Exams (or lack thereof)

ITIL intermediate pass-rates are worryingly low, for Service Strategy, Continual Service Improvement and Managing Across the Lifecycle it currently stands at around 50-60%. Think about that, of all the students that invest many thousands of dollars on those courses, 50% will likely fail the exam. Would you be happy if it was you? And that’s not all, quite a substantial number of students fail these exams multiple times. I am a member of an ITSM LinkedIn forum where it is common to see posts from ‘ITIL Experts’ who have crashed and burned in an intermediate exam:

(http://www.linkedin.com/groups?home=&gid=1932454&trk=anet_ug_hm)

So what’s going wrong? Surely the course material should be sufficient to pass....

It’s interesting to note that all ATO course material is designed according to an official syllabus and approved by APMG (the private examination company which is responsible for accrediting the ITIL Qualification Scheme).

If every Accredited Training Organisation (ATO) teaches approved material, why are pass rates are so low?

Quite simply, there is a considerable gap between the academic syllabus and the practical examination. That’s right, the exam on the 4th or 5th day, tests you on the practical implementation/usage/tailoring of those processes you have just learned about.... If you ask students who have sat these exams, they will tell you that; even if the exam was open book it would not have provided any benefit.

APMG does recommend 21 hours of personal study before taking the exam, this is on top of the 21 contact hours you need for a 4-day course. Unless you plan on not sleeping for 4 days, is this realistic?

Let’s talk about the exam itself:

8 Scenario- based Questions, Multiple Choice (ranked answers) within 90 Minutes. What is a ranked answer? The structure of an intermediate question asks you to choose the BEST solution from a choice of four. If you get the BEST answer (in ITIL’s view, not usually the real life answer) you are awarded 5 points, 2nd best is worth 3 points, 3rd best 1 point and a ‘Distracter’ for which you do not score.

To pass an ITIL intermediate exam requires a student to analyse a case study and determine the BEST approach for the given situation. And this is where students are falling short. The answers given are remarkably similar; sometimes there is only a one word difference between them. The student has the daunting task of trying to identify the BEST one.

There is no practical element in the official syllabus (although ATO’s do add their own exercises, based on individual experience).

So what’s the solution? Well without a drastic change to the official syllabus, success really seems to depend on the experience of the instructor. It is therefore wise for students to request background information of an ATO’s trainers to determine if their experience matches with the course.

For Foundation level courses this is not an issue, as they are purely academic in nature, however Intermediate and above absolutely require specific expertise in the subject.

My recommendation therefore is not to simply choose the ‘cheapest’ option. Research the available options and make your selection based on:

The credibility of the ATO
The experience of the instructor
The number of practical exercises

This approach is no guarantee of success however but will serve to reduce your risk of failure considerably.

Best of luck!

Your customers are changing (is your Service Desk keeping up?)

ITIL 2011 - The Differences

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ITIL - Show me the money!!

Generic Benefits

Quantifiable Returns

Conclusion

About the author

ITIL Intermediate Exams (or lack thereof)