Implementing ITIL® and service management

Alan McCarthy, Pink Elephant

Demand and complexity of IT continues to rise while IT operations remain lean. No wonder, then, that executives are looking at ITIL® to help. Alan McCarthy, director at Pink Elephant, discusses how ITIL® process improvements provide an opportunity to better IT efficiency and customer service quality, reduce workload and control costs.

IT executives are constantly being asked to improve service quality, reduce the complexity of IT, reduce risk, lower the cost of operations, manage compliance, reduce the burden on an overworked IT workforce and manage the IT organization more like a business. But many do not have a cohesive strategy to achieve this.

ITIL® is not a strategy in itself, but can provide a sound framework for a strategy to simplify and make the work done by IT more efficient. However ITIL® can be viewed as a logical approach to address all the above issues.

Keeping the status quo - just keeping IT running at its current level - takes around 80 per cent of the total IT budget. Current research and IT process improvement case studies clearly show that organizations consistently achieve a 20-40 per cent reduction in the effort required for ongoing IT operations by applying ITIL®.

The same research and case studies also link ITIL® with strategic gains in customer service quality, accuracy and efficiency, while reducing IT risk and easing compliance management burdens.

Although IT executives are under increasing pressure to reduce costs and complexity of IT, whilst at the same time increasing productivity and implementing a growing number of strategic initiatives, many find it difficult to justify investment in an esoteric activity such as service improvement.

Using ITIL® for quality gains and cost reduction

ITIL® defines best practice for running IT more effectively at the enterprise level, and assists IT management in developing consistent processes and procedures across technical 'silos'. So it is no surprise that IT executives are looking at ITIL® to help relieve the overburdened IT staff, reduce costs, increase customer satisfaction and increase efficiencies.

Nevertheless at board level, senior management is unwilling to fund any initiative in today's competitive environment that cannot be reinforced with clear, documented value, a business case and a return on the investment (RoI).

The value of ITIL®

ITIL® essentially re-engineers (remember business process re-engineering!) the services provided by IT departments from the perspective of their customers, eliminating unnecessary duplication of effort and presents a consistent service offering to end-users.

Research conducted by IDC, an IT research organization, from different sectors and geographies points to the achievement of an overall efficiency gain of 30 per cent by the application of ITIL®. Specific[1] gains include:

  • incident management and desk support: 40.5%;
  • managing and supporting servers: 30.9%;
  • change management: 28.4%;
  • managing and maintaining network infrastructure: 23.1%;
  • maintaining configuration database: 22.8%;
  • managing applications: 10%;
  • problem management: 9.4%;
  • service level management: 8.5%;
  • average number of network devices controlled per FTE up 57%;
  • average reduction in headcount growth: 12.2%.

The IDC study documented significant gains that include:

  • three-year cost of investment: £1.1 million;
  • annual cost savings and increased revenue: £7.7 million;
  • net present value of three-year savings: £14.1 million;
  • payback period: 11.8 months;
  • ROI over a three-year project life cycle: 422%.

Other gains include:

  • Proctor and Gamble reported a saving of $500 million, as well as a 6-8% reduction in operating costs and a 15–20% reduction in technology personnel.
  • Hershey Foods[2], a multi-million dollar US food giant achieved a 97% success on changes it made - less than 3% requiring a rollback to their prior state.
  • Ontario Justice embraced ITIL® in 1999 and created a virtual help/service desk that cut support costs by 40%;
  • Since implementing service management in the late 1990s, in order to maintain service desk consistency, Zurich life has reduced the number of contracted IT staff from 30 down to 10.
  • Implementing key ITIL® processes in 2001 at Nationwide Insurance led to a 40% reduction of its systems outages. The company estimates a $4.3 million RoI over the next three years.
  • The Ontario Ministry of Transportation used ITIL® to resolve helpdesk incidents 98% of the time, up from 85%, reducing the unit cost of IT.
  • An ITIL® programme at Capital One that began in 2001 resulted in a 30% reduction in systems crashes and software-distribution errors, and a 92% reduction in 'business-critical' incidents by 2003.

Gartner research also surveyed 350 senior IT executives in 2005 and determined that, 'There was a strong positive correlation between those not using ITIL®, and the degree to which respondents felt their infrastructure was under-funded. We [Gartner] believe this reflects their focus on creating a service driven organization, the need to be competitive and greater maturity.'[3]

ITIL®'s business drivers

Discounting the recent frenetic imperative to meet compliance issues, such as Sarbanes-Oxley particularly in the US, without doubt service quality is the top business driver for organizations implementing service management.

However although organizations genuinely want to improve the service to their customers (reducing costs almost comes as a bi-product), there is still overwhelming resistance on the part of IT staff to the change required to adopt ITIL®. A massive 81 per cent of organizations adopting ITIL® gave 'the organization's resistance to change' as the biggest risk of failure.

While in a recent Forrester[4] survey for the itSMF, 60 per cent stated that their main 'challenge' when implementing service management was their staff's lack of knowledge and experience of processbased methodologies. ITIL® should not be viewed as a technology change but as an organizational transformation.

If demand and complexity of IT continues to rise, and it will, so will the workload. If IT operation is currently lean, and in most cases it is, then working harder is not the answer, and ultimately service quality will fall and good staff will leave.

ITIL® process improvements present senior IT management with an opportunity to improve efficiency and customer service quality, reduce IT workload and control costs by 20-40 per cent.

Developing an ITIL® roadmap

Once a company has determined that adopting a quality best practice approach is required, it is key to understand the nature of an ITIL® transformation, the logical steps for implementing service management and the business value it will drive.

The guidelines of ITIL® can be applied incrementally in a phased approach, but that approach must be guided by an overall strategy and plan that maps the 11 ITIL® disciplines that define the delivery of IT services enterprise-wide. The thinking should not be to implement ITIL® processes but to implement service management.

Organizational change

To be successful all of IT must adapt a common, synchronized way of delivering its services to simplify and accelerate the work. This can be challenging because many organizations are currently organized around technology silos and do not adapt well to driving common processes across these disciplines.

The thinking must change from 'technology silos' to 'services using different technologies'. This presents a key challenge in getting people to change the way they work.

Development of an ITIL® roadmap is not unlike the development of any organizational change, and a well-validated approach to this has been documented by Professor John Kotter.[5]

After studying more than 100 change programmes, Kotter identified eight reasons for failure; the solutions for these failure points now form the eight steps to successful transformation. His eight steps to successful change:

(i). Establish a sense of urgency.
(ii). Create the guiding coalition.
(iii). Develop a clear vision.
(iv). Communicate the vision.
(v). Empower people to act on the vision and clear obstacles.
(vi). Secure short-term wins.
(vii). Consolidate improvement.
(viii). Institutionalize the changes.

These changes all require executive support, long-term funding and an overall business plan. ITIL® programmes that do not have a clear strategy at the start are the most likely to show little or no business value, as their organizations will resist the necessary changes.

Most programmes begin by focusing on one or two projects that illustrate a clear need for process improvement, and then begin to apply ITIL® best practices while also improving a key part of the business, namely IT.

This is an excellent way to limit project risk and the duration of the initial phase, and maintain a reasonable scope. Success in this first, limited phase then gains support, builds consensus, gets executive buy-in and usually provides a logical set of activities - ready for the next phase.

For further information please visit www.pinkelephant.com

References

1. IDC (April 2006) Determining the return on investment from deploying Integrated IT Service Management.
2. Gartner Case Studies CS-18-4178, Change Management delivers uptime at Hershey Foods.
3. Gartner Research (9 June 2006) The Information Technology Infrastructure Library Improves Infrastructure Investment.
4. Forrester report, IT Service Management Best Practice in the UK - Applying Best Practice.
5. Kotter JP (1996) Leading Change 1st ed. Harvard Business School Press.

November 2006