In the last post, we have discussed the first two of five phases in business value computation of IT Services. To recap, the five phases are:
- Phase-I: Business-IT Alignment
- Phase-II: IT Service Impact Planning
- Phase-III: Planning the Effectiveness & Availability of IT Services
- Phase-IV: Measuring the Value of IT
- Phase-V: Outcomes
Let us see the specifics on Phases III to V below.
Phase-III: Planning the Effectiveness & Availability of IT Services
In this phase, business and IT service owners sit together to review and plan on improving the IT Services for enhanced business value. Both teams come prepared with data points on current effectiveness and availability values of each service offering. For matured organizations using ITIL (V3) approach and automated Service Request Planning, the federated CMDB infrastructure provides these data points. Past SLAs, unit costs of service, consumption metrics, benchmark service costs, CSAT scores, current perceived business value are some of the attributes that form the basis for finalizing how effective the specific IT service should be for the planned period and what should it be its availability. A standardized 0 to 10 scale is recommended for all services so that the business value can be rationalized. IT should be prepared to show the unit cost and projected budgets for implementing the revised values. Impact of these revisions on ongoing projects, staff, assets needs to be understood along with the rationale for these changes in the context of IT Risks.
Completion of this phase gives base line service level expectations for the IT Service owners. The business owners will get a clear view of what to expect and the projected IT Service Bill for the agreed services. Benchmark comparisons with best in class and comparative companies are made and a finance and service plan is clearly defined leading the way to a consistent and rational way to measure the IT value on business.
Phase-IV: Measuring the Value of IT
Once the process outlined from Phase-I to Phase-III is complete, the measurement process is purely empirical. One or more metrics can be defined and the dependencies can be tuned to arrive at a measurement framework for business value. A simple linear business value computation is shown below.
Let us take an example of Sales LOB in a consumer products organization. In this example, the Sales LOB manages direct and indirect sales and bulk of its revenues comes from online and mobile platforms. The Sales LOB uses four IT Services for its service delivery: Network Operations, Mobile Delivery and BI Reporting. Let us call these IT Services: ITS1, ITS2, & ITS3. The business value of each of these IT Services for Sales LOB are then defined as:
Business Value of IT = (ITS1_EFF + ITS1_AVL) * ITS1_IMP
Where ITS_IMP is the impact of the given IT Service for the LOB, ITS_EFF is the effectiveness of the provisioned IT Service and ITS_AVL is the availability of the IT Service for the LOB.
Phase-V: Outcome
In the outcome phase, prescriptive reports on business value of IT Services for each line of business function are generated along with predictive cost of service. For a given business unit, both IT and Business owners will be able to verify the variances of plan vs actual of each IT Service and can perform fine tuning as needed. In matured organizations, these outcome reports are integrated to internal Service Request Management, CSAT Surveys, Service Costing, Strategy Planning and other systems.