In order to add value to your company, you have to be as close to the transaction as possible. By having the larger percentage of IT services focused on support processes, you are one layer removed from the transaction and the IT department is doomed to be a cost center forever.
Every time I go down the path of reviewing an existing IT department against the ITSM (Information Technology Service Management) process, it still amazes me how wrong assumptions can be. The purpose of ITSM is to align your IT department and the services it provides to the business. The idea is that you can talk to the business folks and package the IT offerings that IT provides in a way that an IT outsourcer would.
I’ll try to explain that last statement a little more clearly. Let us assume that all the theories (sans Bernie Madoff’s) about the market are true. The whole supply versus demand economic model supports that if there is a need that can be performed more expertly and/or more inexpensively by someone else, then a market exists. You have one party willing to pay for these services and you have a company willing to provide these services. Theoretically, the company providing services exists because it has found a way to add value to a customer that the customer is willing to pay for.
So all of these IT outsourcers (OK, many of these IT outsourcers) have a slick sales presentation and a business model designed to provide a customer better service or more inexpensive services than the company’s existing IT department.
The idea of ITSM is to group your IT services into value-adding products that business managers already understand. You have successfully articulated your department’s value proposition and you as the CIO can objectively compare your services to those of outsource service providers. This is a great tool to make sure that the services you are providing are still relevant and cost effective. You compete on cost, quality, and ability to provide a service. If you can’t compete, then you can proactively seek out an outsource partner to improve your overall IT service portfolio.
So with explanation decently defined, we began the process of ITSM alignment. (By the way, here’s a good book on this alignment process.) You know how all the philosophers say that it’s not the end goal that is the most rewarding, but the journey itself? Well, that’s the case here. When you actually sit down and walk through the ITSM alignment process, much is revealed.
The first step is to look at the business. The core processes of the business can usually be defined or have already been articulated by executive management. Basically, what does your company do to get paid? Then there are other levels of processes. There are supporting processes such as Finance and Human Resources. There are also “Innovation” processes such as Marketing and Sales.
The next step is to identify the IT services that you provide the company. These services are not systems. These are actually the body of work supplied to the company. A financial application may include custom code from programmers, a SAN, a database management system, a set amount of disk space, some servers, software licensing, network resources, help desk support, etc. All of these represent the service of “Providing financial application services.”
After you list the services, you go down the path of mapping IT systems to the IT services. This gives you the necessary granularity to determine the costs of providing this service. How you determine the actual costs can be somewhat more art than science. You can be general by figuring out how many U the financial application takes up in a server rack and use the percentage of data center costs by that or you can get really granular and look at power consumption, CPU utilization, network bandwidth, and disk space. The important part is getting in the ball park.
What I’ve found twice now in performing this exercise with two different companies is that when you map the IT services to the business processes, there is a disconnect as to where the IT services are focused. A huge percentage of time and resources from IT are spent, not in direct support of the core business processes, but in support of the Support or Innovation processes.
A wise friend once told me that in order to add value to your company, you have to be as close to the transaction as possible. By having the larger percentage of IT services focused on support processes, you are one layer removed from the transaction and the IT department is doomed to be a cost center forever.
Instead, look for outsource partners that can support the support processes while you and your team focus on supporting the transaction and how the business makes its money. This way you insure IT’s role in adding value to the organization.