Demonstrating Value Changes the “Business” Face of IT
by Tim Stratton

In today’s highly volatile economic environment and rapidly changing landscape of IT best practices, most IT leaders are struggling with balancing competing priorities with ever-shrinking budgets. For many, it’s an ongoing debate with business executives on how to address the costs and risks associated with delivering IT services. Innovation within IT is being achieved by some; however the majority of IT organizations do not know where to begin.

In order to address these concerns, some IT organizations are embracing a new, pragmatic approach to IT value by implementing a measurement process called Value Based Management (VBM). With the end goal of being better equipped to create, document, and predict the business value of IT in mind, these organizations are able to transform their IT teams from cost centers into value-added partners of the business.

The Unique Approach to VBM

Typically designed to start with key IT enabled business services and then expand throughout the entire IT portfolio, the VBM reference model provides a clear description of IT as a business, in simple and straightforward terms.  One of the founding elements is the Value Model, which has been built to address three fundamental aspects of IT:

1. The Value Chain: How does IT design and deliver services?
2. The Service Portfolio: What services does IT deliver?
3. The Value Realization: How does IT leverage this information to innovate?

These components work to identify deficiencies in value and focus improvement initiatives on maximizing the value of IT to the organization. What makes VBM so practical and successful is the simplicity of the value model and understanding the business perception of each component. The IT Value Chain is one of the least valuable components to the business as the business entities are not equipped to understand the technologies and processes that deliver IT Services. 

The IT Service Portfolio is well understood by the business as the set of offerings that IT provides, but it is important to link these to the business drivers that created each service.  Finally IT Value Realization embodies IT’s own opportunities to discover, create and propose innovative improvements within the IT Value Chain and IT Service Portfolio that drive business success.

For example, with the IT Value Chain, VBM combines components from both ITIL and COBIT best practices in a format that make it easy to assess each IT capability in terms of operational effectiveness and efficiency. The uniqueness of this model is that the assessment does not look to “how” each capability is being delivered, just that the capability is functioning, measured and managed within established boundaries. This creates an assessment that is not only rapid but also effective in that effort is not spent trying to understand how a thing is working, just that it is.

For the IT Services Portfolio component, VBM needs to deliver a services library that contains a majority of the typical IT services to help jumpstart the effort.

VBM: Solutions at Work

Perhaps a better way to understand how VBM works is to see the solution in action. Recently, a large corporation needed to streamline its operations, and all departments were asked to produce a plan that would cut costs by 10 percent in the coming year. With no time to spare, the IT department needed to quickly gain a better understanding of the performance, risk and costs of its primary services in order to make intelligent recommendations on where to cut while minimizing risk. They chose a VBM approach because of its focus on IT Service Portfolio and IT Value Chain that helped jump start efforts to construct a business-oriented evaluation of their current services. The result?  …that organization was able to reduce investments in some services that were being “over-served,” which helped them reach the targeted 10 percent cost reduction without reducing headcount. 

In another example, a mid-size IT organization had made significant investments in its IT infrastructure in the previous year. They needed a way to document and report on the incremental value that these investments were delivering to the business. VBM helped them measure and demonstrate how these investments increased the availability of the billing and reporting IT service during key fiscal periods, which directly resulted in an eight percent decrease in delays associated with billing. By improving the availability of these services, IT was able to help the accounts receivable team better manage corporate billing and reporting.

Summary
As IT leaders begin to gain and maintain the necessary insight into the business of IT in a pragmatic, concrete manner, the result will be better decision-making and an enhanced perception of IT across the organization …or the achievement of Business Service Management objectives. A Value Based Management approach can help your organization:

• Gain a more detailed understanding of which services IT performs through a comprehensive IT Service Portfolio
• More clearly document the total cost of ownership and return on IT investment
• More effectively plan for fluctuating business demand on IT services
• Better align your resources, including time, people and hard dollars, with business strategies
• Better inform your organization about how IT can help increase the value of the business.

Tim Stratton is the Managing Director of global IT Service Management services for Emtec. Mr. Stratton is a seasoned professional Consultant, having worked in the field of ITSM for the past 15 years and his depth of experience enables the ability to exploit current technology, anticipate future demands, and provide clients with effective solutions. For more information on Emtec’s approach to VBM, visit www.emtecinc.com.

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