ROI, CBA and how to analyze value

Thought: How is my business going to benefit from an ITSM program?

My answer to this would be that companies that take on a systematic evaluation of how to run their IT dept will see improvements in service, will be able to focus resources in the areas that the customers care about, will be able to really understand the quality of service that is being delivered.

Before we get into the question at hand, I would like to give a little context and definitions:

Investopedia:

Return On Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. The return on investment formula:

Wikipedia:

Cost-benefit analysis is a term that refers to a process that, whether explicitly or implicitly, weighs the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option. The formal process is often referred to as either CBA (Cost-Benefit Analysis) or BCA (Benefit-Cost Analysis).

So we have two similar and popular methods of determining if a project is worthwhile, or which of a variety of flavours of project are most worthwhile. Neither of these two methods in their basic form can help us determine the value of a ITSM program as defined above until we can actually assign a monetary value to the service improvements.

Typical methods.

The methods I have seen to "justify" an ITSM project are:

1) Reduction in outage time/number of outages (MTTR/MTBF)
This choice seems easy, implement good incident and problem management processes and we should reduce MTTR etc. the issue here is most organisations setting off on an ITSM journey don't have the cost of these outages, and the ITSM program is probably the solution to that. Catch-22.

2) Reduction in costs due to efficiencies.
This is really headcount reduction but could be software licencing due to CMDB implementation, again it's very hard to understand the real savings associated with good ITSM practices.

3) Service improvement/time to market
This is a true goal for most ITSM initiatives, but how do we quantify this let alone monetize it?


So there we have it, ITSM a great goal but hard to justify, and even if we "wing it" and make some numbers up we risk missing, or just faking the results.

So I am left with this question: how can we determine and demonstrate the benefit of an ITSM adoption, in terms that mean something to most businesses (IE cash).


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Service Management Scalability

An Introductory Overview of ITIL V3 says that "Change Manager" is not a defined role but rather:

"It is not anticipated that a typical organization would consider a separate group of people for this role, rather there is a flow of experience and skills meaning the same people may well be involved in multiple lifecycle stages."

Firstly I would question this statement, I believe that its very hard to manage the checks and balances of due diligence for changes without a strong change resource directing the traffic, answering questions and producing reports etc. In my experience I have not seen any organizations that have managed to forgo this role, in fact during ITSM conferences I have probably met more "Change Managers" than any other.

The tool vendors probably have a solution for this, I am sure there is some software that will "remove the need for a dedicated change manager", not to be a skeptic but I will believe it when I see it.

If we take this as a given, I think there is an issue of scalability of roles in ITIL, it's hard to wear multiple hats, change Manager/Problem lead/Unix sysadmin: probably not a fun job, and pretty difficult to hire for. Do you really want your expensive EMC expert approving RFCs?

A large IT organization has the benefit of resources but even then vacation and training etc. mean that consistency becomes an issue.

ITSM is not cheap, the "tools" cost a considerable amount of money, adoption is hard and time consuming, hiring for service management roles is not trivial, neither is the total person hours devoted to greasing the wheels of the service management organization.

The scalability of the roles defined in the ITIL framework is not helping small IT organizations adopt, or large organizations reap the "ROI" they believe are coming... I believe there are solutions to this THOUGHT of mine, but that's for a later post.
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