How to Assess the Value of Service Management Investments

As I’m sure most of you would agree: if calculating costs is tough, calculating value is even harder. This is true even when the value of a management investment is directed at gains in efficiency, many of which result in operational cost savings.

Yet many vendors still seem to cherish the notion of a handy dandy calculator where, with a few clicks of a keystroke, you can figure out the exact value of their software. I know because our company routinely gets asked to provide these little magic wands that still seem to have enormous appeal to many CMOs. We usually dissuade them and try to redirect them to something that might look more like an actual case history consult (with meaningful points of reference to other IT adopters).

Fortunately, these calculators seem to be losing credibility among most of the IT professionals and executives I talk to. There are lots of reasons for this but chief among them is the fact that except for very specific types of investments, which are almost categorically not strategic in nature, these calculators don’t work.

For example, the solutions I cover most closely tend to be those associated with the move to a service-centric IT organization versus a domain-centric IT organization. These solutions are usually suites or portfolios and often require third-party toolset integration. So right away they are not one-to-one “you buy, you deploy, you get” investments. But I would argue that they are at the heart of the future of IT.

Here are just two use-case examples of more than ten that quickly come to mind:

  • Cross-domain asset management and what EMA calls “service-centric asset management” where disciplines of configuration and change, discovery and inventory, and core license management and asset utilization are brought together across IT silos. The value here can be extensive, in terms not only of more unified planning, but also more effective visibility into waste and underutilized assets, greater efficiency in managing assets through their lifecycles, and improved asset performance that in turn leads to improved service performance.
  • Another example might be more production-centric — with a forced march towards top-down service performance analytics, including user experience management. These solutions can help to better integrate application owners with the operations bridge and ideally even the service desk with reconciled insights into what went wrong, who’s impacted, who owns the problem, what the exact cause/fix is, how to most efficiently remediate the fix and, then, how to validate that the fix has been effective. Currently most IT organizations approach each of these problems with a plethora of “tribal tools” that result in enormous amounts of finger pointing and debate. But there are solution suites that provide cohesive context, analytics and process support for all of the above.

That sounds good and it can in fact be very good, but when you embark on these investments (and if you’re the CIO you better be involved when these initiatives are underway for reasons that I hope will soon become obvious) calculating value can become a treacherous pursuit if it’s pursued in too simplistic a fashion.

So here are a few pointers:

Make sure you have the right organizational foundation to direct the deployment and the initiative – No ROI calculator I’ve seen ever factored that in. Nor should it. EMA data does show, though, that IT organizations with well-formed cross-domain service management teams are consistently and dramatically (two to three times) more effective in taking on these types of initiatives. This usually includes a mix of technical, process and communications skills — never neglect that latter. Finally it usually means that you, as a CIO are involved.

One anecdote of how not to do it comes to mind. A mid-level manager once asked me to “talk to” the gentleman she had assigned to manage the beginnings of a strategic asset management rollout. The gentleman in question was a gifted engineer but had no in-depth experience in asset management or process issues beyond his one domain. The dilemma as he saw it was that the instruction manual for the software was incomplete. He had done exactly what it said and yet this “strategic asset management rollout” still seemed woefully inert. Nothing was really happening! When I told him he would have to look well beyond the instruction manual, he railed at the vendor who sold him the software.

Vendors are becoming smarter about these things—so do get their advice on what they recommend – But take it with a grain of salt. On the one hand many salesmen still over reach on telling you how simple it is. On the other hand, vendors are sometimes all too happy to sell you their services. But the packages and insights vendors provide for these initiatives are improving and some are in fact quite good.

Start to calculate “value” but have your core team reach out to stakeholders and get them to do the work – This is the big win in calculating value. I call it the “Tom Sawyer Effect” because of how Tom Sawyer got his friends to paint his fence for him. But it’s not just an excuse to become lazy. Once individual stakeholders get involved they begin to find specific improvements in process and workflow that will form the real nuts and bolts of your “ROI.” I put ROI in quotes because I don’t mean for you to pursue a total equation; partly because not all values can be calculated so you’ll always come up short of the real total. But these calculations also serve the dual purpose of getting the stakeholders more engaged and potentially more enthusiastic in supporting the initiative. Moreover, they have an “ownership” relationship to seeing that their proposed goals and the metrics around them become fulfilled.

To see how this stakeholder approach can snowball here’s a quote from the owner of a CMDB/CMS rollout I spoke to just this week:

“I would say that two-thirds of our IT organization is currently stakeholders of the larger CMDB/CMS system either directly or indirectly. And interest continues to grow as more and more people begin to realize value in accessing information that they didn’t know was there before.”

One of my favorite examples of stakeholder savings (and there were about 700 such examples in this one initiative) was operational savings from service desk phone time to find the owner of a problem. This EMA client estimated nearly $100K in operational costs reductions based on service desk staff salaries by significantly improving the “mean-time-to-find-someone” equation.

Needless to say, you will want your team to review and coordinate stakeholder objectives and provide an overall, cohesive view of what the initiative is and where it’s going. As I’m writing this literally 10 days before Christmas, the analogy of a Christmas tree comes to mind: There’s an overall shape to the value … say, in this case, the tree. But because the value is so transcendent and, as a result, hard to defend empirically, the way to lock in on specifics is through the stakeholders who light up the tree and give it visible shape even through a dark window on a moonless night.

Dennis Drogseth is VP of Boulder, Colo.-based Enterprise Management Associates, an industry research firm focused on IT management. Dennis can be reached at [email protected].