Discussion 2

Pg 57

Four IT Business Management Domains

Distributed computing sent shock waves through IT and system management from which IT has yet to fully recover.

Industry analysts, system management vendors, niche vendors, and IT management all have perspectives on partial

solutions, but none of the stakeholders espouses a complete model or the means to integrate all the perspectives. The

essential management pieces are obviously missing and must come from new management approaches. This section

explores the four IT business domains of capacity optimization, service level management, financial management,

and business alignment as they apply to the current IT industry environment. SAS established these four domains

based on ITIL version 3, our own thought leadership, and industry analyst feedback to form a hybrid model with

invigorated focus and emphasis. The enhancement of these four domains will help lead to the transformation of IT

system and business management into a stable, available, and business-aligned model. This section discusses the

four domains in terms of the current state and emerging opportunities to expand the management of each IT business

domain, to fulfill its promise and enable the other domains to fulfill their strategic promise.

Capacity Optimization

Current State: When discussing capacity management, people often misunderstand the term capacity. As an essential

IT management domain, capacity in this context means maintaining enough infrastructure to meet business

computing requirements where infrastructure means network bandwidth, connections, server capacity, data storage

space, even power and cooling. Capacity management does not refer to human resources, office space, desks, or

parking places. From the SAS perspective, capacity optimization is a desired state for capacity management in terms

of demand management and availability management. IT organizations have long been hampered in this area by

their inability to create an enterprise view of servers, networks, and end-to-end enterprise business applications

performance and metrics. A direct result of the rapid acceptance of distributed computing in the early 1990s, a

heterogeneous, extremely complex infrastructure is now spread out across the globe, and managed and monitored by

heterogeneous systems tools. Large companies generate vast amounts of performance and utilization metrics data,

which they are unable to consolidate into a single enterprise view. Without enterprise views, it is nearly impossible

to forecast capacity and business needs or to synchronize capacity with service views. The end result is that capacity

management is usually done poorly—machine-by-machine or location-by-location—or not done at all.

A broader problem emerges when capacity management is performed server-by-server, location-by-location, or

through educated guesswork. Inadequate capacity management acts to prevent business alignment by improperly

sizing applications, burdening service management, and destroying financial projections. Capacity managers either

buy too much infrastructure or undersize capacity, only to make a panic buy later. Most often, capacity managers

either overbuy pooled infrastructure or buy oversized infrastructure to host a single application. Capacity managers

work under the premise that oversized infrastructure will deliver the necessary performance and stability while

preventing service disruptions during production times. Buying infrastructure sized for cost efficiency can lead to

disruptions if managers can’ t assimilate the views needed to manage for performance.

Opportunities: Beyond the inherent promise to provide adequate infrastructure to run the business, capacity

management presents business management opportunities in terms of both cost management and alignment to the

other three business domains. Armed with end-to-end views of servers, capacity managers can provide a quick and

large ROI by eliminating excess server capacity through server consolidation. Server consolidation requires both a

current utilization baseline and a time series forecast of utilization extending out a year.

Consolidation is a solid maturity approach utilized by forward-thinking businesses. In addition, many IT

organizations look to virtualization as a cost reduction initiative, and are correct in looking to virtualization for cost

gains. Best practice capacity managers properly size virtualization allocations to maximize the cost management

opportunity (i.e., not too big nor too small) by studying the allocation utilization rates and forecasting their growth.

Not involving capacity managers in virtualization projects is a missed opportunity. After determining the optimal

capacity, managing to that level wrings out the costs of idle capacity and also eliminates panic infrastructure buys.

Buying in panic mode never results in a smooth, cost-efficient implementation, and enterprises often come

dangerously close to impacting service levels. A recurring theme in this section is the interconnected-ness of the

processes across these four management domains. Capacity management should not be performed in the isolation of

an engineering silo. To achieve greater levels of IT maturity, capacity managers must cross-pollinate and be cross-

pollinated by performance measurement information flowing into and out of the four other IT business management

domains.

For example, capacity managers need financial information beyond budget allocations for capacity buys.

Determining the cost of capacity not only promotes more effective capacity management but also provides

foundation costs for service management and service management contracts. The cost of capacity includes the cost

of utilized capacity, reserve capacity, and unused capacity. Attacking unused capacity without distressing service

levels is a combined capacity, service, and financial management exercise. Capacity managers must also determine

capacity in nontraditional ways. Predicting the exhaust rates of standardized services and the growth of business

services create other ripe opportunities.

Service Management

Current State: From thirty-five thousand feet above the landscape where fine details are obscured, the various

approaches to service management appear more alike than different. The differences sometimes appear to be more

of a marketing exercise. From that altitude, service managers appear to build catalogs of IT services (Premium Web

Service, Bronze Network Access, etc.) and assemble those components into business service contracts that specify

service parameters in terms of availability, response time, throughput, and service hours. System management and

niche vendors sell this approach, which appears to also follow the engineering focus of Gartner IT Infrastructure and

Operational Maturity Model. Only a small minority of IT organizations has achieved this level of maturity. Best

practice service managers remain vigilant for several issues while implementing this large and very necessary IT

business management domain.

Service managers ignorant of the true cost of service are driving in a thunderstorm without windshield wipers. It ’s

hard to see, and the risk of collision is unacceptably high. For example, service managers run into cost

mismanagement issues when they enter into service contracts with business users who cost more than specified by

the contract. Some niche vendors already address a portion of this issue, but service managers generally fail to make

the connection between IT operational budgets and the planning process for new and ongoing services, as well as the

connection between capacity management and service level management.

Opportunities: The capacity management section discussed the value of forecasting for optimizing infrastructure

over time. Forecasting provides equal value for service management. Service reporting and financial measures are

inherently reactive. Forecasting service level performance, future capacity needs, and cost of service growth

augment service management practices. In addition to forecasting, a management structure that contains value

measures is another essential opportunity for more mature service management. Reporting cost and service results

are inadequate without knowledge of the degree to which the IT organization succeeded in terms of key enterprise

strategic objectives and the metrics that track them. Meeting business goals and objectives are the ultimate measure

of IT value. Forecasting performance is engineering; applying intelligence to enabling and meeting business strategy

is a new level of business maturity for IT management.

Financial Management

Current State: We don’t need to discuss IT financial management from thirty-five thousand feet. So neglected is the

subject that I doubt it would even be visible from that altitude. Most CIOs and their IT organizations need to get

down on their hands and knees at weed level to see the primary problems. Most IT organizations manage their

budgets in spreadsheets. Spreadsheets are easy for individuals to use, inexpensive, and most everyone already has

one. But as widely distributed spreadsheets quickly lose their effectiveness, they become very expensive. Difficult to

consolidate into department views and then into an enterprise view, widely distributed spreadsheets result in

inaccuracies, and a large percentage of expense planning is lost. The wide use of spreadsheets for IT budgeting can

be traced to adoption of corporate budget systems that are not tailored for IT organizations and resource

management. In addition, IT also budgets in another management area where the spreadsheet inaccuracy is even

higher: planning and managing the portfolio of new and existing business service projects. Large corporations have

hundreds and hundreds of such projects trapped in spreadsheets that they ruefully call “the swamp.” With the utmost

difficulty and many complete failures, financial managers attempt to reconcile the hundreds of spreadsheets into an

accurate, consolidated view, and then reconcile the consolidated portfolio view to the operational budgets.

Trapped within this swamp are the answers to essential IT management questions with enterprise-wide strategic

implications: On whom are we spending, and what are we spending it on? Was the spending justified? Optimized?

How are we prioritizing IT support, service, and spend? How do we plan future IT resources and services? How do

we minimize unused IT resources? How does this information inform overall decision making for IT, business units,

and the bottom line?

Opportunity: The opportunity is to create an IT financial management system for a service-oriented IT organization.

IT financial managers may continue to use a spreadsheet for individual operational and portfolio project planning,

but they put all the data in one foundation to preserve its integrity. Financial managers then combine financial data

with capacity and service data, which provide financial intelligence to the other IT business management domains in

a usable format for optimizing their own strategic management decisions.

Capacity managers need to know the cost of capacity, including unused capacity, and cost of the support processes

necessary to manage the infrastructure. Service managers need to know the cost of service, unused service, and who

consumed the service, including relevant support processes for both the standard service catalog components and

each business service.

Business Alignment

Current State: True business alignment, or in Gartner terms, business partnership, is still an illusion as borne out by

Gartner statistics. They report that less than one percent of IT organizations achieve their Business Alignment stage

of maturity—a very small number in any survey sample that includes best practices. Two factors account for the

lack of business alignment in the IT industry. First, vendors do not supply IT organizations with the support they

need for developing portfolio management and system management tools that span metrics collected by various

enterprise and IT monitoring and management systems. IT vendors focus on building maturity from the

infrastructure management up—a purely engineering focus. What tools exist for financial and business management

are neither integrated nor applied by IT managers seeking to solve their business challenges. Second, despite IT

analysts pointing the industry toward aligning visions and techniques, the most important alignment achievement

must include participation by the business intelligence community for new IT strategies with supporting

applications.

Opportunities: Because true examples of business alignment are rare and few people in the industry have actually

seen a single example, the opportunity for business alignment is far greater than most CIOs realize. This IT business

management domain opportunity means that as a key strategic enabler for most enterprises, CIOs would manage the

IT organization like a business with a business. CIOs and their IT organizations will a create value axis for every IT

product and service from the performance metrics in each of the four IT business management domains. Business

objectives that IT products and services must enable will be traced back to overall business strategy through these

metrics. Enabling these strategic business objectives will carry a negotiated price tag to build and support after

implementation. That negotiated price tag must fit within the ROI calculation of each business objective. CIOs will

determine support costs through business user volume and service estimates, which IT will translate into service and

capacity levels. Once built and implemented, the applications and their related IT services will be measured,

forecasted, and optimized from business objectives, service results, costs, and business strategy.

The IT transparency illustrated here requires a different set of tools and processes that have yet to be broadly

discussed in the IT market. While the rest of the enterprise is either already using or receptive to strategic

performance management (SPM), many IT organizations have yet to reach this stage of business maturity. The

utilization metrics increases in value when associated with strategy, initiatives, goals, and objectives that are mapped

to other IT management domains.