How to Assign Value to an IT Service

By Dennis Drogseth

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IT organizations have come a long way from the days when they declared victory because of an SLA around frame relay throughput. Or have they? While many SLAs, OLAs, and other contractual agreements have indeed become more application-oriented and are moving from raw availability to performance and even more complex user experience criteria, meaningfully assigning business-value to an IT service remains elusive at best.

On the one extreme, there are e-business websites where the service is the business and there is a one-to-one link between the IT service and revenue. On the other extreme, you might look at provisioning remote workstations with Microsoft Office for end-user productivity. But in between is a whole kaleidoscope of complexity with Web 2.0, SOA, supply chains, and extensions of IT services into managing business infrastructures (such as manufacturing lines and transit systems).

How do you even begin this discussion? Who do you invite to the conversation? ITIL and other initiatives do a pretty good job providing effective “departure points” for similar conversations within IT. Service Strategy in ITIL v3 begins to tackle this largely uncharted arena as a part of its larger vision for service lifecycle management. It suggests evaluating your market space and competitive landscape, while linking IT services to financial planning as strategic financial assets. Without pretending to be an ITIL expert in service strategy, I can recommend it as one framework with which to get started.

"Common Sense"

But for now I’d like to provide recommendations drawn from my own common sense observations including research and consulting interactions with IT and service provider clients. So, to begin, I would suggest starting with the most low-hanging fruit, and build from my last column It is Time to Think Beyond IT. What opportunities does your vertical suggest in terms of IT services? And where might you extend your capabilities to provide unique value? A few examples might be:

But verticals are only one way to slice the cake. There are various models of IT-to-service-provider-to-consumer-customer interdependencies that are evolving that in many respects may cut across verticals. There are some common lessons to be learned from assessing these ecosystems one by one. EMA will be launching a program to research and document these in more detail, and I’ll follow up with a more definitive list when that research is complete. But I am already running into some rather intriguing dialogs in CMDB/CMS deployments, where effective management of service provider relationships, from both sides of the aisle, is on the rise.

From these and other consulting and research discussions, I’d like to propose the following checklist of sample questions to ask yourself in trying to assign value-to-cost relationships relevant to your services and the services you provide to others:

  1. To what degree are you already a (de-facto) service provider with a defined list of services supporting a defined list of constituencies? These can include internal “customers,” business partners, and external customers/consumers.
  2. Who are the business owners for these applications/services? Who are the IT owners for these applications?
  3. Where are low-hanging business metrics (e.g., revenue, products produced, dire situations as in medical, social care, military, business staffing, etc.) most evident?
  4. How can you assign business vs. technical value around softer services involving productivity, communication, or information access? (Here the answer is dialog with your customer community both in terms of individual users and their executive leadership. But don’t expect any one person to know the answer before hand. Target what you believe to be the most important of these “softer” applications and expect a process of discovery. Don’t assign arbitrary or simply convenient metrics just to get this out of the way—you’ll be living with these metrics for a long time and your organization will be measured by them.)
  5. To what degree are these delivered services dependent on services provided by other “service providers” in the general sense? These could range from hosted data centers, to telecommunications providers, to systems integrators with (broad or narrow) on premise responsibilities, to MSPs, etc. How can you engage your service providers better in your requirements for optimizing value-to-cost in key services? How can you achieve visibility and accountability into these interdependencies? Which service providers are willing to proactively share in that conversation? Usually, I see a mix of “willing,” “willing if nudged,” “dragged kicking and screaming” and “impervious". Feel free to use this ranking and see where it leads you and your service provider friends.
  6. Ditto all of the above (more or less) for business partners who are interactive in your IT ecosystem and with whom you may share critical data, or provide access to geographically, technically or business/customer-related information that you all, as a broader ecosystem, depend upon.
  7. Prioritize, prioritize, and prioritize. Start with a focused approach on what you believe to be your most critical business services and begin this journey from there. You almost invariably will learn things that cause you to re-prioritize, which is all part of the benefit. (This, by the way, is very much a 2009/10 and beyond opportunity, as I believe it’s now safe to say that optimization-to-value has become an imperative rather than a nice-to-have.)

If the phrase “aligning IT with the business” has become an onerous cliché, it’s because both IT and the business have evolved to become so non-generic that the phrase is now little more than a vapid equation. And if the “BS” in BSM (business service management) suggests more colloquial roots, it’s because the monolithic idea of BSM quickly disintegrates before these varied realities. I haven’t done any more than scratch the surface with this list of questions and examples, but I hope I’ve gotten at least some of your creative energy going around this challenge. And, as always, I look forward to hearing your thoughts and perspectives, as well.

Dennis Drogseth is VP of Boulder, Colo.-based Enterprise Management Associates, an industry research firm focused on IT management. Dennis can reached at ddrogseth@enterprisemanagement.com.