IT leaders often have to deal with the perception that IT is inwardly focused, costly, and inefficient. Providing IT as a service can be a critical step in transforming this perception and establishing a more open, inclusive, and trusting relationship with the business. A key hurdle? The absence of a clear implementation model.
Getting started on an initiative can be challenging when you don’t know how to define success. In this post, we outline a path to successful IT services delivery.
Step one: establish cost visibility
Most organizations know some, but not all, IT cost components. Unfortunately, “close enough” costs don’t cut it in a services model.
To achieve transparency, you have to understand all the cost components that go in to delivering a solution or a service—hardware, software, network, infrastructure, facilities, and the personnel that manage, deliver, and support these solutions. For this reason, cost transparency is both the starting point and the most important determining success factor for IT organizations transforming to a services model.
Cost composition will vary based on how and where your IT service is delivered, and the extent to which your service is consumed. For instance, cloud service providers often price services on an hourly basis, providing clear costs for processor time, storage consumption, and bandwidth utilization. In an IT services model, you must be able to compare these costs across both third-party and on-premise solutions. This requires new levels of insight into internal costs that account for everything from hardware and power consumption to software licensing and labor costs.
Accurately identifying the costs of internally provided services is key. This includes review of IT equipment purchases, software license agreements, power consumption models, physical plant maintenance, staffing requirements, and other financial factors. Taken together, these expenses start to create a picture of the true costs or “fully burdened costs” of an organization’s technology services.
Step two: communicate with the business
Once you have an understanding of your true costs, you can use this data to inform IT services. Applying cost transparency data to design and optimize services can be a huge credibility builder with the business, as it can be used to consult on business decisions, recommendations, and forecasts.
When evaluating how to provide a new service offering, compare the cost of hosting the service internally with outsourcing. Or consider benchmarking your internal IT costs against those of similarly situated organizations to identify cost-saving opportunities. This will help you make recommendations accordingly.
With new Saas-based apps, service demand planning—planning for the consumption of services—is easier than ever before. Enabling a services view in your IT plan helps you establish IT service-based budgets with equitable and justifiable cost allocations and model different service pricing strategies (fixed price, cost recovery, or hybrid) to ensure predictable charges to the business. Embedding service demand planning into your IT planning cycle can also help you pivot IT services quickly to support business priorities.
With full knowledge of costs and quality tradeoffs, your business partners will come to you for trusted recommendations. As a business technology provider, you become a trusted advisor, completely agnostic to whether a solution is delivered by internal IT or third-party providers. Even shadow IT becomes a powerful conduit for conversations about cost and value.
Step three: measure results
As an IT service provider, you will need to measure, monitor, and adjust services based on output and outcome. This requires putting processes in place that provide insight into the quality of services delivered to customers over time, and the return the business is getting from their technology investments. Results-oriented metrics come in two major forms: quality of IT service and achievement of business objectives. These measures should span the services offered by the IT organization, whether they are inside the corporate firewall or provided by external vendors.
When designing metrics that focus on the quality of IT service, look to service-oriented measures that demonstrate the ability of the IT service to meet customer requirements and support business initiatives. Many of these metrics are based upon the service-level agreements (SLA) reached between customers and service providers. For example, you may track the SLA breach rate, showing the number and/or duration of events that failed to achieve the SLA.
Units may track customer satisfaction with IT services, either on a service-specific or overall basis. When taken together, these metrics provide valuable insight into the quality of the IT service portfolio. Unfortunately, quality by itself is meaningless if you don’t know the costs required to achieve those quality levels.
For more information on the benefits of IT services delivery, download our IT services poster.