White Paper

Show Me the Money

How Life in the ITIL Fast Lane Can Deliver Success

A discussion paper from Numara Software and Pink Elephant

White Paper Show Me the Money

Introduction
In this white paper, authored by Numara Software and Pink Elephant, leaders in service and asset management software and ITIL consulting and training respectively, we examine the critical role of having effective processes in driving down service costs. In particular, the paper demonstrates the importance of process and automation in helping IT executives stretch their IT budget further. That means C-Level executives can now see the progress of their IT investments and place a value against that investment in terms

How Life in the ITIL Fast Lane Can Deliver Success

of the IT budget devoted just to maintenance and operations, so they can release funds for new development and businessprocess improvements, such as the adoption of collaboration technologies to increase the sharing of knowledge within the business, or the use of virtualised servers for sustainability purposes. Companies have adopted a variety of tools, technologies and techniques, but few have genuinely succeeded in stretching that 80:20 ratio to 70:30, never mind 60:40. Yet those companies that can achieve that goal by making effective changes to business processes can generate significant returns. Process automation will help, provided you are not simply taking an existing business process and automating it without actually considering whether there is an opportunity for cost savings, and if so, how, why and where to change the process. The encouraging story for those organisations struggling to turn their 80:20 ratio to 70:30 is that success stories do exist. One US firm transformed its IT thinking and reversed the 80:20 rule between systems maintenance and technology innovation. Now, of the companys $200m IT budget, only 20 to 25 percent is spent on maintenance and operations. The key was to standardise the technology architecture and then adopt ITIL, a key set of policies and concepts for managing IT infrastructure assets, operations, development and review to manage its core IT processes, while standardising the way it tackled IT problems. Adopting and enforcing an enterprise architecture together with ITIL can make a dent in IT spending of up to 30 percent when fully deployed, automating typical IT processes including change management, configuration management, incident response and problem management which are typical processes that make up the everyday IT environment. There are 24 processes within the ITIL framework, with the most popular, according to Pink Elephant, the worlds leading supplier of ITSM consulting services, training and conferences, being: 1. Incident Management/Problem Management 2. Change Management 3. Service Request Management 4. Software Asset and Configuration Management 5. Service Level Management 6. Service Catalogue Management 7. Release and Deployment Management 8. Availability Management 9. Capacity Management

of the number of service desk incidents, how quickly they were fixed, and the number of transactions that went unfulfilled. Service management is no longer simply about matching SLAs, but about ensuring service value to the business. Standards and automation are a vital delivery mechanism in delivering that value. Equally important is understanding the human factor. Whether your adoption of a service management framework is in ITIL-mature Europe, in the US where take-up has recently been rapid, or in the fledgling Asian markets where ITIL is less welladopted, getting people to embrace process change continues to be a benchmark for success. This paper demonstrates that if you manage change effectively then youre on a fast-track to success; struggle to deliver that change, especially where people are concerned, and youll be stuck in the slow lane.

1. Beating the 80:20 rule

They call it the Pareto Principle after an Italian economist called Vilfredo Pareto. Its also known as the 80-20 rule and in IT it means most IT departments spend as much as 80 percent of their budgets on routine maintenance and day-to-day operations, while only 20 percent I put my heart and my soul is spent on new technology, into my work, and have lost innovation or new business my mind in the process. processes that can lead to a competitive advantage.

Vincent Van Gogh

According to the Gartner research group, this just keeping the lights on approach means that its a struggle to argue that IT is adding value to the business, and so deserves larger budgets to spend on new software, hardware and innovative ways of doing things. Value is an important word here, as well discuss later. The smartest companies have recognised this disconnect and lack of respect for ITs role and are taking steps to reduce the amount

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The first three are arguably the most important. Incident managements goal is to restore service operation as quickly as possible with minimal disruption to users; Problem management is a process designed to minimise the adverse effects of incidents and problems caused by infrastructure errors. It also seeks to proactively prevent the recurrence of these incidents and problems. Change management is a process of controlling changes within IT services or systems, with proper approval and minimal disruptions. According to the leading analysts, 75-80% of Incidents are caused by Changes. The reality is that automating such processes by adopting standards so that routine tasks become repeatable processes is a basic step that every IT department should be taking. That is because service management or IT process frameworks such as ITIL can help enforce discipline. This can lead to far more sophisticated ways of managing IT value. How effective are your processes? Are you a so:so 80:20 player? Or do you have greater ambitions? Read on to learn how effective adoption of standards will help you move up the league table. IT service management is the lubricant that makes the business engine tick along nicely, providing a supporting mechanism for running the business and establishing a framework for best practice, such as ITIL. One car engine oil used to be described in advertisements as liquid engineering; something similar could apply to the role of service management in smoothing the working of business processes, automating them and putting in place measurement and reporting systems. A codified repeatable process should be automated because it lowers the possibility of mistake, lowers costs, maximises optimisation, and frees up human resource for where automation is less useful (e.g. exceptions and decision making) This is where that word value comes in. C-Level executives can now see the progress of their IT investments and place a value against that investment in terms of the number of service desk incidents, how quickly they were fixed, whether they were fixed by self-service an increasingly important metric because selfservice is cheaper - and the number of transactions that went unfulfilled. Indeed, the mantra is no longer about matching SLAs, but ensuring service value to the business. At the same time as its importance in measuring service delivered to customers and partners, IT service management is also fulfilling an important role in helping drive compliance and corporate governance throughout organisations. There is no escape from compliance, whether it is Sarbanes-Oxley or PCI DSS driven, the potential impact on organisations of non-compliance means IT service management has become the warning light in helping organisations meet their regulatory requirements. But how does best practice IT service management work? What is ITIL? And what does that means for organisational processes?

2. Continuous service improvement

IT service management may not have the raciest of reputations. But smart organisations recognise that understanding the concept of delivering an effective service to the business built on understanding and delivering IT professionals have a agreed metrics creates a platform responsibility to understand that not only delivers effective the use of standards and IT, but can also play a part in the importance of making informing strategy. The IT Director web applications that work or CIO who craves a seat at the with any kind of device. top table and wants to play a key role will understand that service management has long since Tim Berners-Lee evolved beyond handling trouble tickets.

3. Where the rubber meets the road

ITIL is a set of policies and concepts for the management of IT infrastructure assets, operations, development and review. Originally developed by the UK government, it may not be the first such framework, sitting alongside standards such as ISO 20000 and other Adopting the ITIL frameframeworks such as COBIT, work is a proven method but it has galvanised and for streamlining IT processintegrated approaches so es and properly aligning IT that the concept of IT service systems and services with management is much better the business they support. understood and adopted. Indeed, rigidly following one framework such as ITIL could Sharon Taylor be unwieldy; often what the ITIL v3 Chief Architect

Indeed to some, IT service management has actually become business service management. Instead of fumbling around trying to get the business to consider IT-originated SLAs that bear little resemblance to business requirements, the new measurements will not only ask whether the service was available, but also how fast and responsive it was, and whether it was tailored to critical business dates, such as financial year-end, how far it satisfied users and which users consumed which services.

and Chief Examiner

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doctor orders is a light-touch, pick and mix approach, adopting whats right for your organisation. And clearly, the potential cost savings of ITIL and IT service management are compelling, according to a paper produced by Numara Software. Organisations mentioned in this paper, from Robert Wiseman to Specsavers have all recognised the benefits of ITIL, without necessarily wedding themselves to it. Almost every company that executes a well-planned, well-run IT service management programme based on ITIL guidelines reports benefits. Most of these benefits are expressed qualitatively because of a baseline. For example, one Dutch IT Department that used ITIL to improve the way it delivers services saved millions of euros and recouped its investment in a year. Where the take up of ITIL has been rapid across Europe, especially in the Netherlands, companies are seeing similar successes. In todays cost-conscious financial climate, ITIL goes beyond process control: it offers a roadmap for being able to do more with less. Thats a boon for IT departments who often have no idea of their own worth, and even if they did, could not communicate it to their business masters. IT departments often leave matters of money, value and worth to the business, which in the absence of seeing any IT worth, chooses to make decisions based on costs. That mandate do more with less goes out, and is immediately translated into cost reductions associated with working harder. The trouble is, that demoralises IT and only serves to reduce the quality of services, when the real way to do more with less is to work smarter, not harder. As you reduce costs in IT through attrition, outsourcing etc, the service quality drops, and so does the productivity, leading eventually to lost revenue and profit. Its a vicious circle of cost and technology. However, one way of breaking it is to adopt ITIL which turns the vicious circle into a virtuous one of worth and service by focusing on four key areas of savings potential: Cost savings - money that is currently being spent can be reduced Cost avoidance money allocated for spending can be saved Higher IT productivity increased productivity and reduced costs Increased business productivity resulting from higher quality IT services their origins in poorly executed changes. The consequences of these changes are often dire in terms of both service availability and regulatory compliance. So, instead of focusing on incident management - which deals with the problem after it presents itself IT organisations are looking at change management to prevent problems before they occur. If you dont improve the way you manage change, your IT department will be predisposed to constant firefighting. If incidents related to changes are not brought under control, IT service provisioning - and consequently the business itself - can spiral out of control. IT becomes locked in a deadly embrace where the number of incidents rises and each incident requires a firefight, leading to more and more incidents. ITIL change management breaks that embrace by balancing flexibility (facilitating change) with stability (preventing changes from creating problems). Corrective measures reduce the number of incidents and IT can then drive innovation and improvements.

Getting started on ITIL

Theres actually no correct or incorrect place to start ITIL. Depending on your service delivery model and maturity, certain processes will naturally take precedence. Managing change, however, should be reviewed sooner rather than later since it is pivotal to driving continual service improvement. If it is left unchecked, it will bite you later. CIOs should invest in process automation that supports change management compliance initiatives, while not forgetting practical ways of addressing the biggest inhibitor to ITIL itself - cultural and organisational resistance to change. Many organisations start by taking measures to overcome cultural and operational conflict. One effective approach is to supplement formal training with ITIL simulation workshops. Workshops demonstrate the benefits of process models when dealing with crisis situations. So, rather than being force-fed ITIL theory without practical experience or examples, participants work together to understand how process models can improve both organisational and individual ability to deal with high-stress situations. The following strategy advocated by Pink Elephant can be a useful route to follow:

Strategy/Visioning
Undertaking a work stage that establishes a vision for the project is a major contributor to the successful implementation of IT service management. It provides a clear focus for the implementation and gives all participants a sense of direction. The vision also provides a flag for all staff involved in the project to rally around and it helps to bring all stakeholders together around a common objective.

The Importance of change management

Earlier we mentioned the importance of incident management, problem management and change management in business processes. These are critical processes within the ITIL framework. Change is the root cause of many incidents. A significant percentage of the problems that threaten critical IT services have

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Assessment
Measurement is indispensable to good management and in todays competitive environment, you need to demonstrate to your business customers that you are providing lean, low cost and highly effective services. Having a benchmark of the current state is essential for any improvement programme aiming to achieve improved internal controls it is also a pivotal starting point to achieving a quality standard, or meeting governance and compliance regulations. adopting, the common thread is people. And people are resistant to change. Its not going too far to describe this as the most decisive factor in ITIL implementations. There are few ITIL projects that detail a focus on the quality of the IT or service desk personnel and their receptiveness to change. Yet some critical questions must be asked: Do the people have skills that fit with an ITIL-based service organisation? If not, how can they change?

Planning
This phase of the roadmap approach provides a sound basis for the IT service management solution design and implementation by building upon the output from the visioning and assessment phases. Typically a service management implementation or improvement programme is developed consisting of a number of projects which focus upon specific processes, functions or regions within the overall programme. The strategic vision provides the desired future state of where you want to be; assessment services allow your organisation to identify where you are now and what is required to move forward; then the planning phase delivers the How are we going to get there? piece.

Is there a realistic expectation of the time and manpower required for an ITIL implementation? Will people who have been working to the same pattern for years be able to adopt ITIL in just a few months? Experienced ITIL implementers believe it is impossible to implement five to ten ITIL processors in six months. Organisations that claim to have done so may indeed have introduced procedures for five to ten ITIL processes, but after such a short period, can employees really be said to have changed their processes to work differently or better? Success comes down to having an effective culture that will drive effective ITIL adoption. Ask yourself the following questions: Are there elements in the culture of the IT organisation which explains why it is performing inadequately? Does the way the employees interact lend itself to the application of ITIL? Does implementing ITIL processes and procedures generate more bureaucracy?

Build
This focuses on building the planned strategic IT service management solution that will take the organisation to the defined future state (Vision). If service level management is a process that requires improvement, then the Build stage looks at; the process design, tools, governance, and organisation. Analysis of the process should look to improve efficiencies removing any wasted or redundant actions, information or steps, re-engineering until it is as effective as it can be.

Transition and Control

This is about concentrating on the implementation of the IT service management solutions that have been designed within the Build and Initial wins work stages. It also introduces the regular cycle of control reporting showing the current health and state of all implementation strands. Up until now, the solutions have been designed and tested and at this stage they are deployed, operated and measured.

5. Milking the benefits of ITIL A customer casebook

Its no coincidence that organisations that embrace IT service management tend to save millions. And in a still cost-conscious world, thats a smart move. What ITIL does is provide a suitable framework to ensure that you do IT service management

Almost all quality improvement comes via simplification of design, manufacturing, layout, processes and procedures.

4. Dont forget the human factor

Man is the only creature that refuses to be what he is.

Albert Camus

There is a common factor in ITIL implementations from which there is no escape, whether youre adopting a service management framework in Europe, the US or Asia. Actually, it doesnt matter which service framework youre

Tom Peters reasonably well. And doing IT service management even only reasonably well will save money. Tackle it with rigour, as the organisations in the examples below have done, and youll be equally as successful as they have been at saving money. According to Clive Longbottom, Service Director for Business Processes Facilitation at Quocirca, by following ITIL guidelines,

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you cant go far wrong and IT service management can be automated to a high degree. As soon as you start changing ITIL, thinking you can do it better, you start running into problems. It should be remembered that ITIL has changed. While ITIL V2 offered advice with an operational focus on individual service management processes, the release of ITIL V3 in 2007 made a significant shift towards more mature guidance on service management practices based on a service lifecycle and with greater focus on management issues. As Longbottom puts it, ITIL V3 has extensions that take ITIL into the business. ITIL V3 emphasises the importance of creating business value rather than simply executing processes. It reflects todays webcentric environment and demonstrates that ITIL has matured to become a fully integrated, modern business model and not simply a set of technical support processes. ITIL V3s five volumes - Service Strategy, Service Design, Service Transition, Service Operation, and Continual Service Improvement - take the IT manager through the entire lifecycle, from understanding how to use IT assets strategically, through the design of appropriate and innovative IT services, to the continual alignment of IT services and changing business needs. What that means for IT managers is that they can adopt a more strategic approach to service delivery. By acknowledging that IT is the business, ITIL V3 can enable the IT Service Manager to deliver improved client retention, cost control and profitability. That will make even the most-hardened CFOs eyes light up. A cost reduction of 3.5 million Euros. Business benefit: a 30 percent reduction of time-to-market for applications. Incident Management: a staff reduction from 50 to 25 employees dealing with incidents. Business benefit: a 50 percent reduction in incident resolution time. In the UK, when Robert Wiseman Dairies set about embarking on the implementation of an ITIL best practice framework to enhance its service desk and IT offering, it turned to Numara FootPrints. The company was going through massive changes and needed to adapt workflows and processes on a continuous basis. Fast and smooth implementation of ITIL was successfully completed within one year. Since we followed the ITIL framework, weve found that strategically weve seen a number of benefits, notably having more manageable, streamlined processes throughout the business. That does not mean its an easy path to follow. New processes and changing processes are an adjustment for everyone. That is changing the way people work and can be difficult when you are also trying to manage the day job. But the benefits in the long run will far outweigh the extra time investment spent upfront, says Alex Barelle, IT Service Delivery Manager for Robert Wiseman Dairies.

Connect + Develop
The Cincinnati consumer products giant Procter & Gamble has realised significant savings since starting to use ITIL. For example, over the years the company has seen a six to eight percent cut in operating costs and a 15 to 20 percent drop in technology personnel company wide. The Procter & Gamble ITIL initiative focused on problem management, which involves root-cause analysis of trends in helpdesk requests. The initiative has resulted in a 10 percent reduction in helpdesk calls. Like other standard initiatives, support from IT executives is critical. Procter & Gambles Associate Director of IT Mike Ackerman says one way to improve interest is to tie ITIL adoption to other company initiatives. Within Procter & Gamble, ITIL was marketed as a way to help meet a company-wide directive from the CEO to cut costs by $2 billion over a five year period. As with most things, some people are very receptive and other people are like, I dont have time for this stuff, Ackerman says.But if you can make ITIL an enabler for a larger initiative, its like a knife through butter. Two ITIL implementations with strong Pink Elephant involvement produced the following effects: Change Management: a staff reduction from 70 to 35 employees needed for technical implementations of changes.

Should have gone to...

Specsavers, the worlds largest independent optical retailer, has also rolled out Numara FootPrints as its service management solution of choice to complement a major expansion plan around the world, while transforming the way its service desk manages calls. It needed a new solution that was ITIL-verified and would improve the service level it offers to stores. Specsavers now has different Service Level Agreements (SLAs) for different priorities of calls and is now regularly filling 99 percent of its targets.

Case Study: ITIL in action

With ITIL having originated in Europe, through the UK Governments Central Computer and Telecommunications Agency in the mid-1980s, European adoption of ITIL is more mature than in the US and Asia, though adoption, certainly in both the public and private sectors in the US, has seen significant growth. Many

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IS organisations have planned programs to improve their service management. Several have used ITIL guidelines as a starting point. This case study focuses on a midsize Dutch IS organisation. It has more than 300 IS staff, started its two-year program in 2001 and has spent around 2.6 million euros on it. Expenditure includes external resources like training and consulting, software licences for service management tools and internal costs such as staff costs directly associated with the program. The company recouped its investment within the first 12 months and benefited from a stream of less quantitative returns during the second year.

Benefits
Tangible effects on revenue and costs: A saving of just under 3.5 million euros a year (approximately 7 percent of IS operating costs) as a direct result of improved asset management that is, through the identification of unused or under-utilised resources like software licences. This represented about 90 percent of the tangible savings formally identified to date. Improved productivity, in terms of the number of customers each member of staff can support. Before the change, fewer than 5 percent of incidents were recognised as a known problem, with a known resolution. Now, more than 30 percent of incidents have a known resolution, reducing incident handling times. Half are solved in less than 1 hour and 80 percent within 24 hours. The IS organisation is now billing around 1 million euros (approximately 2 percent of total billings) for services that were being delivered but were not being charged for. Intangible effects on revenue and costs:

Problem
The company, and thus the IS organisation, had grown through a series of acquisitions. As a result, processes were inconsistent and fragmented, making stable, reliable and consistent service delivery impossible. Multiple tools from different vendors were performing the same function but at least tools were deployed. The organisation was not starting from scratch and the company expected to grow in the future, but the processes and ways of working used in 2001 simply could not accommodate growth.

Objective
The intent was to become a best practice service delivery group, able to compete favourably on price and performance with external service providers.

Improved service levels. Higher customer satisfaction rating (up from 6.8 to 7.6 out of 10). Improved relationships with customers. Much better reporting to IS and customer management. Improved IS staff satisfaction. Much better control over the infrastructure, resulting in better reliability, availability and predictability.

Approach
The whole program was dealt with as a substantial change management program. The company recognised that service management is about people and behavioural change. Although tools and process definition played a large part in the work and took most of the investment, they were not the focal point of the program. The IS management team chose to use ITIL as the starting point for the process work that was at the heart of the change program. Managers decided early on to use external consultants. However, they believed that using suitably trained internal staff where possible, experienced in the ITIL methodology to make changes was critical to success. It forced the organisation to take responsibility for the change itself and encouraged buy-in from the staff. The company used Pink Elephant for ITIL training and process re-engineering.

Critical Success Factors/Lessons Learned

Measure performance before making changes. Many companies miss this stage out, yet demonstrating a tangible return is very important. Take time up front to define the future vision and involve everyone. Focus on improving asset management early. Focus on customer facing processes first. Treat the service management initiative as a program of change. Try to find a Program Manager who has been through this change already, or at least have someone senior with this experience on the team. Build a strong case for change. Gain executive-level support. This proved to be a critical part of this companys success.

Results/Benefits
The program has been perceived as a success by IS and executive management, because it achieved the very broad goals it was given, and has allowed the company to grow.

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Continue to train staff and communicate with them as the program progresses, so everyone knows what is going on. Like many service management programs, early benefits come from improved asset management, consolidation, standardisation and improved management of incidents. Benefits from later stages of the transformation come from improved reliability and service quality. But these benefits can take two years to start making a substantive difference. This company is now feeling those benefits. The slicker your IT operations, the quicker you can react. If an organisation is in acquisition mode, it is much easier to integrate and influence if it is following best practice. Also, if youve got good processes, you can measure a lot better and you can see how much things cost. Essentially, ITIL is a driver of return on investment, examples of which include avoiding the high cost of redundant infrastructure investments; reducing costs through idle capacity identification and re-allocation; identifying vendor credits and rebates; saving money on IT infrastructure maintenance renewals; proactive performance or capacity problem forecasting; and increased network uptime and its associated increase in user productivity. The following lessons are important: Only if you can break away from the 80:20 rule will your IT department truly prove its worth to the business. It is good practice to cherry-pick the best bits from service management best practices ITIL, Six Sigma, Cobit rather than rigidly following one framework. Change Management is a good ITIL starting point. Dont forget the human factor. When well executed, ITIL can focus an IT organisation on business strategy. But ITILs processes are only effective if your staff adopt them. A key concept of ITIL V3 is Continual Service Improvement how are you going to improve what youve already got? Your attitude should be, Lets try and make a continual improvement by looking for waste and inefficiencies and making a thorough process of it.

6. Are you in the ITIL fast lane?

ITIL is meant to keep you

between the kerbs of the road. People spend way too much time creating complex diagrams instead of understanding the processes and how best to apply them.

ITIL essentially re-engineers the services provided by IT departments from the perspective of their customers, eliminating unnecessary duplication of effort and presenting a consistent service offering to end-users. Adopting and enforcing an enterprise architecture together with ITIL can make a large dent in IT spending of up to 30 percent when it is fully deployed.

Brent Stahlheber
CIO, The Auto Club Group

If youre considering ITIL or have already launched down the ITIL path, you dont really need to worry about whether it works. It does. According to Alan McCarthy, Director at Pink Elephant, there are three clear benefits from adopting ITIL: Reduced cost. Reduce risk of downtime. An increased customer service ethos i.e. keeping your clients happy. Understanding the knock-on effect of process change and poor change management is important. Take the example of a travel company. One Friday evening, an IT engineer makes a minor change to an IT system and thinks nothing of it. The next day, the knock-on effect of that unlogged and unmanaged change causes the system to crash, which means no-one can book anything online for four hours. Guess what? The unforgiving customer goes somewhere else, to another website where change has been managed effectively and the systems are up and running. It is all about getting good processes in place to make things more efficient. The processes are the important bits. You do need a tool that increases the efficiency. However, the mistake people make is theyll buy a tool and think it will magically solve their problems, but what a tool will do is automate processes. So if you had a bad process, a tool will simply automate it, says McCarthy.

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About Numara Software
Serving over 50,000 customer sites worldwide, Numara Software is a global leader in providing practical software solutions for service management to IT professionals. From a single technician running a help desk to 1000 technicians managing a complex service desk, IT organizations of all sizes trust our award-winning solutions, featuring Numara Track-It! and Numara FootPrints, to track requests, automate workflows and support internal and external customers. Unlike other complex, difficult-to-implement, and costly products, we offer robust, affordable and easy-to-use solutions that can be quickly deployed without disruption to your business. Our flexible solutions can be implemented right out of the box or configured to match your unique IT environment and business processes. They can also be leveraged to support non-IT operations, such as human resources and facilities, allowing you to optimize your investments in licensing, maintenance, training, and support. Were passionate about helping people successfully manage their IT environments. Find out how we can help you by visiting: www. numarasoftware.com.

2009 Numara Software, Inc. All rights reserved. Numara and the Numara logo are registered trademarks of Numara Software, Inc. FootPrints is a registered trademark of Numara Software, Inc. Pink Elephant and the Pink Elephant logo are registered trademarks of Pink Elephant ITIL is a Registered Trade Mark of the Office of Government Commerce in the United Kingdom and other countries

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