Real-World Service Management:

Ivor Macfarlane on Looking Beyond Costs to Improve IT Service Management

Cost reduction has historically driven IT investment

Service Management in Action.

Service management, implemented skillfully, can lead to a better outcome for organisations and the entire ecosystems of which they’re a part—their clients, customers, partners, and in some cases, their host communities.

Unfortunately, service management isn’t always implemented skillfully. All too often, in fact, it’s an afterthought. And even when business leaders know how important it is, they might be reluctant to pursue it in a difficult economy, when cost considerations weigh more heavily on the decision-making process.

That’s true even in the case of IT service management...despite the increasingly strong relationship between IT services and business success. And it’s been true for quite some time.

Historically, one could argue, IT was implemented and deployed only reluctantly, because cost was the dominant factor. The traditional perspective—back in the old days of mainframes and batch processing—was that IT business value was unpredictable in the long run, but IT solutions were definitely going to be expensive in the short run.

Therefore, IT investment only happened with approval from the Finance Director (today: CFO). And because IT was something Finance had to pay for, the Finance Director wanted IT to come as cheaply as possible.

The emphasis on cost considerations also came about because, at the time, the focus was on ‘computerisation’—taking something that was already being done (by a small army of clerks) and doing it instead via computer.

It wasn’t that the company got something new; common IT functions of the time, such as staff payroll, stock control, and others had all been around and worked well for many years. They simply got cheaper.

In this way, cost control became a more important factor than it should have been.

Organisations came to perceive IT in these terms: If you‘re doing something mostly because it will be cheaper, then clearly you want to do it as cheaply as possible. And by extension, if it turns out not actually to be cheaper, then you should not have computerised it in the first place.

Times have changed—and a larger perspective will yield better results

That was then; this is now. Today, we could not even begin to achieve basic business goals without IT to serve as the central nervous system of the organisation.

This means that IT, in the 21st century, delivers a lot more than economic savings. It creates new possibilities, generates new business advantages, empowers new services and strategies, connects organisations with new customers and markets, and much more.

And just as IT’s business value has long since outgrown cost considerations, the way we measure it—specifically, the way we pursue IT service management—must expand to acknowledge a far more comprehensive picture than mere costs.

"Perhaps, instead of TCO (Total Costs of Ownership), we should be talking about CCO (Complete Consequences of Operation). Implied by that shift from Costs to Consequences is a truly important idea: that as IT becomes more and more pervasive, so too the consequences of problematic IT service management become more and more significant"

Many organisations already pursue this to a limited extent, as reflected in metrics such as Total Cost of Ownership (TCO)—the attempt to track and quantify the costs of an IT system across all aspects and its whole lifetime.

If we respect that thoroughness, and take inspiration from the successful energy, environmental and the broader sustainability initiatives at many organisations, we realize that cost itself, even TCO, represents only one aspect of services to consider. And we see that we must find new ways to measure the other aspects as well to establish and improve effective service management (or even determine whether a given service is viable at all).

For example, we need to establish value in a much larger sense. To illustrate this idea, consider that the world’s leading IT service management best practices framework, ITIL, puts the word “value” front and centre in its definition of a service. This is because merely reducing costs doesn’t automatically make a service more valuable. On the contrary, a service that is cheap but wholly unnecessary generates no value, and shouldn’t exist at all.

Even the concept of cost itself might be revised to encompass a broader range of ideas, since there are certainly more costs incurred by IT today than can be expressed in purely financial terms. Here, too, sustainability serves to make the point. More and more organisations are calculating the carbon dioxide generated and energy consumed by their services; these represent costs of a different kind, and tracking them is critical to improving the overall business value of IT.

And going forward, that sort of perspective will become more powerful yet, and more popular and widely utilised as a result. Establishing the full range of resources consumed by each service will likely become an increasingly critical part of successful decision-making in organisations of all sizes and in all industries.

Effective IT service management requires understanding consequences—not just costs

How can we encapsulate this rather complex set of concepts in a phrase?

Perhaps, instead of TCO (Total Costs of Ownership), we should be talking about CCO (Complete Consequences of Operation). Implied by that shift from Costs to Consequences is a truly important idea: that as IT becomes more and more pervasive, so too the consequences of problematic IT service management become more and more significant.

It is no exaggeration to say that IT services can literally be a matter of life and death. Today, information managed and delivered via IT services helps determine patient medication in hospitals all around the world. IT services play a part in traffic flow in every major city—at the very least, through basic traffic monitoring and traffic light control. IT, in fact, is the underlying mechanism for delivering every basic utility from power to foodstuffs.

If these services perform poorly, there will be a significant human impact; in some cases, lives will be lost. Imagine that traffic control services fail, and ambulances can’t get from point A to point B as rapidly as possible. This service outage will prevent life-saving skills and technology from reaching those who desperately need it, when they need it.

If these ideas sound familiar, it may be because IBM’s Smarter Planet initiative was developed specifically with such scenarios in mind. IBM’s outlook is that, in a world where more information is generated in more ways than ever, and is made available in more ways than ever, we need new strategies to collect and utilise that information more effectively.

And IT services designed to do that will help make the planet smarter—quite simply, a better, safer, more suitable place to live for every one of us, everywhere we go.

With this perspective in mind, the idea that we all need better IT service management—as soon as we can get it—doesn’t sound like hyperbole at all.

It sounds instead like a fair assessment of the world we live in. And it is an assessment that becomes more accurate with every passing year.

IT service management should address costs, consequences, and benefits of all kinds

Organisations interested in taking these ideas and implementing them in a practical fashion will, of course, need to do so in a tailored way. They should take into account their particular business contexts, risks, infrastructures, and goals, and then develop and execute a service management optimisation strategy on that basis.

That said, there are, broadly speaking, a number of common factors to consider that will apply in almost every case.

Some of them fall completely outside the rubric of what’s traditionally considered IT. Yet all typically play a part in answering the question of just how effective IT service management really is.

Among other such factors to consider:

The bottom line: If the goal is to improve service management in a holistic, realistic way—and that should be the goal—it will be important to consider the complete range of costs, consequences, and benefits that IT services can generate and incur.

About Ivor

  • Ivor Macfarlane's photo.

    After 23 years working for the UK government, moving from forestry to IT Service Management via prisons, stores and training, Ivor now works for IBM’s Tivoli organization helping customers understand and improve their Service Management. Ivor was an ITIL author (versions 1, 2 and 3), part of the panel that wrote BS15000 (fast-tracked to ISO/IEC 20000), an ITIL trainer and examiner since 1991 and active in itSMF since 1995, having spoken for them in 33 countries.

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