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Next Practices in Business Service Management

 

 

Business Service Management: Developing a Business Impact Statement - How and Why
by Bob Multhaup & Ken Turbitt

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Keyworth’s (Editor) Note: In this article, Ken and Bob effectively outline the necessity, value and process behind the development of a “Business Impact Statement” and the importance of crafting this statement in terms and metrics that are meaningful to the business community. The authors highlight its critical role in initiating business-oriented service management.

Let’s say your own personal Eyjafjallajökull volcano or Katrina hurricane of IT disasters actually occurs. Your systems experience an overly long outage during one of the busiest trading periods in your business sector, and your area is singled out as the center of the storm. And now you, as an IT Service Manager, are called in front of the Executive Committee of the business, and put in the hot seat to answer their questions. Of course these are the people who are paying you and your staff’s salary, fund all the expensive equipment that you request, and represent the collective memory and spite of every minor problem that your services have created over the years. So you, after rekindling any religious beliefs that may have somewhat dwindled over time, and summoning nerves of steel, sit back, have a glass of wine (or stronger), and think about ‘how your service truly impacts the business that it serves, both positively and negatively’. And you will need to formulate an answer that the Execs will understand, meaning not a single mention of IT or ITIL buzzwords, because they simply don’t care about it. You need to develop a Business Impact Statement that will help convince the Executive Committee that your service has good value for their money, is being well managed, and that you’re on top of the game.

It begins something like this, with a friendly ice breaking question from the Finance Director:

“So, what do you really do down there in IT?”

Gulp!

(The innuendo here is that you are being viewed as a form of ‘human mole’ who is coming out of their hole and about to be crushed in the sunlight of the true business believers).

If the immediate well intentioned answer is “”We run all the servers in the Shared Service Center. I and my staff of over twenty professionals run over a thousand servers in the three data centers on a 24 x 7 basis”, that might impress someone as to how important and difficult your job may be, but to the person paying the bills you just created an elaborate vision of a major cost cutting opportunity in their capitalistic, cost conscience and non IT oriented mind. So a better answer might be,

“When the SAP Financials went down last week we recognized that this incident was impacting the financial stability of the business, and actually resolved the problem within our agreed service levels, even though it was painful to all. My part is focused on providing the computer capacity, when you need it, in a form you can use and for the budget you allocate to me”.

So you passed phase one of the corporate hazing, in that you’ve made them realize that they are actually using your services to better manage their business, and that you understand that business is all about optimizing their business processes at the lowest cost.

Now the budget question comes up. The first priority of a credible manager is to be sure that you know the cost of the resources and assets that you are responsible for, and what customer applications they support. So step one is to demonstrate your ability to deliver service at a constantly lower price.

So let’s start to build up a Business Impact Statement.

Looking at the ERP Service and SAP Maintenance in particular. Assume the cost structure is as follows:

business

Even though your costs went up in total in the new budget year due to new projects, the cost per user seat has been reduced which demonstrates that you are operating on a more efficient basis. Projects such as Demand Planning need to be treated as separate investments designed to enhance the service.

Next let’s say that the SAP project had a clear business case that the organization based its investment upon. This needs to be constantly brought to light in order to measure if the expected returns are being realized.  This can be done every year as part of the planning and budgeting process.

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Benefits Breakdown:

u

Now you have moved the cost subject from an IT issue right into the user’s lap where the costs are now positioned and owned on a per unit per seat basis, and the benefits of the service have been clearly outlined in financial terms.

Next it is relevant to expose the key demand and cost drivers that drive all this investment in technology capacity. These demand drivers represent the fundamental transactions that are processed through the service, and should be differentiated where major capacity requirements differ: i.e. standard orders vs. web based orders.

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Cost drivers are activities that do not actually improve the service, but are required to maintain the service, thus creating an on-going cost with little incremental benefit. Here an increased effort in Problem Management results in a lower cost of Incident Management. Demand drivers represent the activities that the service is designed to support, and the volume of demand drives IT capacity requirements. Demand drivers have an intrinsic benefit in that they are fulfilling real business demand.

So the economics are to minimize cost drivers, through problem management, and to optimize the unit based cost of the demand drivers, hopefully becoming less and less as volume leverage increases.

Now you may be asking ‘How do I collect all this data’. And at the same time the CIO is saying, ‘I need all my services consolidated into an enterprise view to demonstrate how we are delivering competitive services and creating business value’. The point is that the Service Manager must develop a BIS, not only to tell their own ‘story’, but to communicate to the CIO how their services are contributing to the business. This BIS information can then be consolidated into a business information cube as a means to measure, manage and present the key KPIs and dashboards of the IT Service Portfolio for the CIO.

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Copyright 2009 IT Business Dimensions

And to answer the question, “how do I collect all this information”?, the first response is that it doesn’t all need to be done at once. Focusing on some key problem areas where a greater understanding of the drivers and costs can lead to a real actionable improvement programs is of highest priority. Also it can be a great help to have the CIO recognize that the entire IT Management Team needs this same information, and to sponsor an effort to collect this information in a common usable format. Most of the information exists in some form or other. And what doesn’t exist a good Service Manager should be able to develop (it’s better to take time to do this than to constantly say I’m too busy putting out fires). What’s needed is a unit based cost model of each service along with a value model of the service, and then both models can be combined into an integrated Business Impact Statement view of the IT service portfolio for management review. Most businesses put together these types of models to develop their plans, and IT should be no different. If the process is too time consuming and not familiar to the team, they should look to outside help to develop these models in a standard format.

No longer can we analyze just the data pertaining to IT, or the data pertaining to just the business functions, today they are inextricably linked and ALL TOGETHER  they work to steer the IT Services  toward optimum performance in meeting the business goals and objectives. The Business Impact Statement is an effective means to align the IT Service metrics with the business objectives to demonstrate how IT and the businesses are bound together in common processes.  

In conclusion, a Business Impact Statement is a means for a Service Manager to demonstrate a clear understanding of how his or her service is inextricably linked to the business that it serves. Even if you never get called into the Exec Committee, this information can serve as the basis to aggressively manage and market your service to your customers and communicate priorities to your staff and boss. (And as a defensive measure against the sickle carrying cost cutting zombies that don’t recognize service value).

The key elements of a Business Impact Statement include:

  1. Cost Management – show cost efficiency trends on a per unit basis, cost per seat
  2. Value Management – show how your service contributes to the business objectives as defined in a business case
  3. Demand and cost drivers – show the relationship between customer demand transactions and the costs of the capacity required to meet that demand – both resources and assets
  4. Build a working model of your IT service business

To do all of this, it is necessary to be able to capture key data about your service, and synthesize it into a working model that demonstrates these relationships. This data usually exists but is scattered, and there are emerging tools in the market to help pull it all together into a business model. A key responsibility of a service manager is to capture, connect and communicate this information. This is what managers are paid to do, and the sooner and better they do it, the better they can demonstrate the impact of IT on their customer’s business and become a trusted partner.

Bob Multhaup is the President of IT Business Dimensions and the architect of ITin3D. ITin3D is a multi-dimensional modeling tool used to capture, consolidate and present IT performance information in ‘Boardroom Ready’ reports and graphics. Bob was the Divisional Information Officer located in Basle Switzerland for two Sandoz Divisions globally prior to the Novartis merger. Then was the VP of IT for Henkel in NA. He has a bachelor’s degree from Brown University and an MBA in Finance.

Ken Turbitt is President and CEO of Service Management Consultancy (SMCG) a worldwide, yet UK based Services Company.  SMCG assist’s corporations in aligning with the Best Practices for IT services (eg. ITIL, CobIT, ISO’s, ETom etc), presenting to clients, partners and analysts and Ken is also on the BMC Software Thought Leadership Council. Ken was the creator and implementer to the worldwide market of the first OGC approved ITIL Compliant Audit service, and the 1st licensed software assessor. With over 25years IT experience Ken can identify the procedural and administrative needs of the client around the IT Service management’s alignment with the business, developing an appropriate strategy in support of the corporate objectives, leading to a Business focused Service Management solution. Ken was an official reviewer of ITIL v3 Service Design book and for ITIL Live. Ken is also a Gartner qualified TCO consultant was a founder member of the Institute for the Management of Information Systems (member since 1985) “Outsourcing special interest” group, member of the Institute of Directors (IoD), British Computer Society (BCS), and the ITSMF .

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