manage the margin
TRANSCRIPT
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
Manage the Margin
Session # ESS119SN
Service Management
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Abstract
The primarily mechanism to building leverage as a contributor to the business is to simultaneously increase business opportunities with the costs of managing a services organization. By separating the pricing of demand from the cost of fulfillment the IT organization is capable of leveraging the “margin” to make on-going investments into its infrastructure while avoiding the organizational entanglements normally related to cost recovery and budgets. This presentation will demonstrate the tools, technology, and artifacts that CA provides to make a transition from a cost-centric IT organization to an investment-centric one.
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Biography
David A Messineo
Computer Associates
David Messineo has been in the IT industry for
close to 20 years and has participated in the
design of many ITSM products currently in the
marketplace. He launched the first ITIL compatible
product in the world, and currently works at CA as
the BSO Solution Manager for ITSM and is one of
the primary CMDB design contributors within the
firm. One of his core contributions in CA is in
assisting clients with managing the financial
aspects of technology investments.
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Agenda
The Issue
The Strategy
The Approach
The Tools
Questions & Answers
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
The Issue
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Demand Mgmt Supply MgmtStrategic
Tactical
Operational
Capital Investment Mgmt
- IT Accounting Model
(Chargeback)
- IT Service Catalog
Contract Management
- SLA/OLA Automation
- Resource Performance
Resource Capacity Planning
- Throughput Processing
- “Inventory” Tracking
IT Project Management
- Change Planning
- Event Escalation
Infrastructure
Instrumentation
- CMDB Lifecycle Mgmt
- Business Impact Analysis
Availability Mgmt
- Standards Compliance
- Risk Mgmt Automation
The Ultimate “Roadmap”
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Move from a cost centric management model to an investment centric focus model
– Focus on customer issues not cost issuesbecause that is where the cash comes from
– Focus on services because they are responsible for converting costs to investments
Controlling the financial aspects of the IT Production Process that allows you to
achieve customer satisfaction
Organizational Objective
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"Give me a lever long enough and a place
to stand, and I will move the earth."
- Archimedes
How Do We Make the Change?
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IT Spending Breakdown
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Is an aggregation of
business functions
that are perceived by
the customer as a
coherent whole.
App
Facilities
Role
Access
Security
HR
=Biz Service
Role
AccessFacilities Security HR
App
App
App
App
Buildings
Parking
Equipment
Services
Database
Apps
Resources
Community
Buildings
Approvals
Telecom
Data
Policies
SalaryBenefits
Growth
Plan
What is an Business Services?
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Is an aggregation of
IT functions that are
perceived by the
customer as a
coherent whole.
App
Web
Database
Systems
Networks
=IT Service
eMailOnline
OrderingSecurity Networks
App
App
App
App
Web
Web
Web
Web
Database
Database
Database
Database
Systems
Systems
Systems
Systems
Networks
NetworksNetworks
Networks
What is an IT Service?
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VALUE
economy efficiency effectiveness
cheaper provision
of IS/IT services
services support
the business
encourage
economy
lower
prices
higher
productivity
improve
service
delivery
improve
service
quality
optimize
investment
in IS/IT
business
exploits
IS/IT
IS strategy
aligned with
business
Finance Alignment
Products
services improve
business efficiency
Managing IT’s Business Value
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Efficiency is Not Effectiveness
Optimizing Parts is Not Optimizing the Whole
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Business vs. IT – Who Decides?
Judge
according to
local impact
Do not judge
according
to local impact
Control
Cost
Protect
Throughput
Manage
“Profitability”Conflict
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Organizational Conflicts
Use Efficiency as a measure OR Not
Controlling costs OR Protecting throughput
Meeting budgets OR Maintaining customer satisfaction
Encouraging stability to meet service levels OREncouraging changes to meet on-going requirements
Squeezing the maximum out of every resource OR Synchronizing the processes
Controlling the amount of information ORKnowing everything that takes place
Maintaining stability OR Progressing Forward
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
The Strategy
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What is the output limitation of the process?
What happens to processing power if you increase the capacity of A, of B, of C, of D, and of E?
What does this say about focusing the efforts on the bottleneck?
What does this say about focusing efforts on non-bottlenecks?
A B C D E
(process capability represented by size)
IT Throughput – What is it?
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Marketing
– Awareness creation
– Interest incitement
– Knowledge transfer
– Lead generation
Sales
– Qualification
– Needs assessment
– Letter of Understanding
– Presentation demo
– Solution proposal
– Production demo
– Quotation submission
– Negotiation
– Closing
Order Administration
– Order received
– Approval cycle
– Equipment allocation
– Product integration
– Shipping
Finance
– Invoicing
Customer Support
– Unpacking
– Installation
– Customer training
– Acceptance test
Finance
– Cash Collection
A CxO’s Support of the Process
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Transportation
Education
Public Services
Land Planning and Development
Cultural / Arts
Waste Management
Commercial Development
Justice / Corrections
Elections
Fire/Medical
Licenses
Budgeting / Audit
Consumer Affairs
Environmental (e.g. Air and Water)
A Mayor’s Support of the Process
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Cost Avoidance
– Avoid spending money for unplanned purposes
– Protect services from damaging forces
Cost Reduction
– Reduce expenses of executing cash flow process
– Reduce resources required to deliver services
Protect Revenue
– Avoid disrupting incoming cash flow
– Avoid changing services that disrupt economic growth
Increase Revenue
– Increase opportunities to secure cash
– Increase opportunities to broaden economic appeal
Four Key Finance Objectives
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What We Do
– Portfolio Management
– Project Management
– Release Management
– Change Management
– Risk Management
How We Do IT
– Operations (ITIL Core Processes)
– Application Development
– Technology Infrastructure
– Resource Management
– IT Intelligence
A CIO’s Support of the Process
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1. The way to improve the performance of the IT organization is by focusing on local improvements that have a global impact
2. Cost management does not mean cost reduction; it means cost-effectiveness, which means spending in the most intelligent way to support the necessary creation of value.
Thinking about Financial Control
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The Approach
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1. To consistently capture revenue the demands of the marketplace requires new business services – which in turn require new IT services
2. Both these business services and IT services have individual lifecycles that must be managed
3. To synchronize their individual contributions these lifecycles should share a robust and comprehensive process model
4. This process model demands constant information from various sources and will naturally organize it to generate intelligence (CMDB)
5. This intelligence will be leveraged to create smarter (e.g. economically and financially driven) contracts between End-Users and IT
The Service Lifecycle
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Market Opportunities
Introductory
Stage
Growth
Stage
Maturity
StageDecline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
StageDecline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
StageDecline Stage
Total
Market
Sales
Time
Introductory
Stage
Growth
Stage
Maturity
StageDecline Stage
Total
Market
Sales
Time
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Demand
Requirements•Info•Problems•Orders
Assignments•Escalations•Projects•PlansSourcing
•Internal•External•Timing•Funding
Performance•Process•Contingency•Policy
Evaluation•Impact•Requirements Gap•Benefits gap
Marketing PLAN
BUILD
ALLOCATEDELIVER
MAINTAIN
CHANGE
Business Service Lifecycle
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Portfolio
Mgmt
CIO
Dashboard
Project
Mgmt
Operations
Mgmt
IT
AccountingSLA/SLO
Metering
Event
Mgmt
Application
Chg Mgmt
IT “Asset”
Mgmt
Catalog
Work/Change
Mgmt
Device
Monitoring
Governance
Global IT Process Model
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Data -> MDB
Process -> IIF
Inte
llig
en
ce -
> C
MD
BPlanning
Financial
Forecast
Capacity
Profile
Transactional
Relational
Impact
Reach/Range
Visualization
Classification
CMDB – IT Intelligence
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To identify adverse side effects of a decision
To ferret out unforeseen and unlikely events and consequences
To highlight uncertainties in the problem and the future
To understand the situation better by seeing it in a new light
To stumble on new options, alternatives, problems, and opportunities
To improve communication among managers and/or analysts
To stimulate the development of improved and better models
To identify errors and inadequacies in the model
To focus on unexamined details
IT Intelligence?
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
Managing DemandManaging Fulfillment
Managing the “Margin”
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
End-UserSLA
App
App
App
App
Web
Web
Web
Web
Database
Database
Database
Database
Systems
Systems
Systems
Systems
Networks
NetworksNetworks
Networks
Business “Contracts”
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
The Tools
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Respond to problems and faults
Ad hoc, manual processes
Standardized processes
Automated responses
Consolidated IT resources
Business-relevant IT services
Service level management
Financial administration of IT
Real-time IT dynamically optimizes to support the business
Transparent enterprise
3
2
1
4 BUSINESS-DRIVEN
ACTIVE
EFFICIENT
RESPONSIVE
The CA Maturity Model
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Financial Management Framework
Quality Transactions
Mitigated Risk
Remove Redundancy
Standardize Performance
Process
Customized Catalogs
Biz Service Level
Agreements
IT Service Level
Agreements
Standardize Catalog
Services
Multiple Interfaces
Network Redundancy
Defined Networks
Standardize Interfaces
Resource
Flexible Configuration
Maximize Availability
Inventory Mgmt
Standardize Configuration
Assets
Revenue Increase
Revenue Protection
Cost Reduction
Cost Avoidance
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Business DrivenResponsiveEfficientActive
Leverage CMDB to enable the following key process capabilities: Business Risk Planning, Business Planning, Business Capacity Planning (Demand)
Leverage CMDB to enable the following key process capabilities: IT Risk Management, IT Planning, and IT Capacity Management
Leverage information to identify root/cause in network and application environments
Leverage information to identify minimal root/cause
Analysis
Track relationships from Portfolio to Business Services to Business Processes
Track relationships from Business Process to IT Services to IT Processes to Infrastructure
Track Ownership, Applications, Data, Network
Track HW/SW assigned to workstations
Relation-ships
Business Planning, Persistent Processes
Manage the following processes: "Warehousing", IT Planning
Manage the following processes: Procurement, Support, Configuration, State Management
Manage the following processes: Setup, Delivery, Disposal
Lifecycle
Track Business Services, Integrations, and Key Transactions
Track Process, Systems, and Interfaces -- links to process tools and discovery tools
Track People, Documentation, Data, Application -- entered manually or through discovery or integration
Track HW, SW –
entered manually or
through discovery
Assets
IT Intelligence Framework
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REVENUE INCREASE
REVENUE PROTECTION
ITIL – Release, Availability, IT Financial Mgmt
Work – Project Driven
Spending – Based on
Value Focused Activities
SLA – focused
on LOB Requirements
Budgeting –
LOB Allocation
Prioritization – Based on
Business impact
COST REDUCTION
ITIL – Change, Configuration, and
Service Level Management
Work – Change Driven
Spending – Based on
Planned Work
SLA – formal focused
on IT Ops
Budgeting –
IT Allocation
COST AVOIDANCE
ITIL – Incident and
Problem Management
Work – Task Driven
Spending - Reactive
$$$$$$$$$$Maturity Advancement
Building Credibility over Time
ITIL – Capacity, Contingency Management
Work – Portfolio Driven
Spending – Based on
market opportunities
SLA – Based on
business risk/value
Budgeting –
Based on
business cases
Prioritization –
Based on investment
instruments
© 2005 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.
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Summary
Think Customers Not Costs
Think Investments Not Costs
Manage the IT Production Process
Manage the Margin
Build Intelligence Capabilities
Leverage a Maturity Model
Avoid Organizational Conflicts