IT Business Management Comes of Age

Transcription

1 IT Business Management Comes of Age An ENTERPRISE MANAGEMENT ASSOCIATES (EMA ) White Paper Prepared for BMC Software June 2011 IT & DATA MANAGEMENT RESEARCH, INDUSTRY ANALYSIS & CONSULTING

2 Table of Contents Introduction...1 Discussion of Market Need and Trends Related to ITBM...1 IT Financial Transparency...1 IT Demand and Resource Management...2 Supplier Management...3 IT Portfolio Management and Optimization...3 IT Governance...4 BMC Product Highlights...4 Use Case Examples From Interviews...5 EMA Perspective...6 About BMC...7 References...7

3 Introduction Enterprise IT tends IT organizations consume large amounts of both capital and operating to be one of the least expense, ranging up to 7% or more of enterprise budgets. They also automated capabilities in represent substantial operational risk and human resource commitment, the modern corporation. and are increasingly a direct customer channel. A long-standing paradox in enterprise IT, however, is the barefoot cobbler s child syndrome. Enterprise IT tends to be one of the least automated capabilities in the modern corporation, in terms of having comprehensive systems to meet its own needs. This is especially true for higher order concerns such as IT financial management, IT human resource management, and IT governance. A number of products have been developed over the years to address this market need, but in general this remains an under-automated area in many enterprises, managed more with spreadsheets and s. Data is collected episodically (the fire-drill syndrome), rather than pulled seamlessly from authoritative systems of record (which may not exist). Many of the business of IT products offered over the past ten years have suffered from this lack of available data. Extensive integration work is required at best, and if the data is not reliable or even there, products with solid concepts simply cannot be put into operation. A logical solution for this is for the vendors of IT management suites to move up the food chain and start to provide such higher order services as a seamlessly integrated add-on to their existing monitoring, asset, and IT Service Management solutions. BMC acquired ITM Software in 2008, a vendor of an integrated business of IT suite, and has renamed it to IT Business Management. Over the past two years, BMC has worked to integrate this acquisition with its Remedy Action Request System based platform towards the objectives of better cost and risk transparency, demand and portfolio management, vendor management, and IT governance. Discussion of Market Need and Trends Related to ITBM There are a number of overlapping concerns often encountered in business of IT management: IT financial management, especially in terms of transparency IT demand and resource management Supplier management IT portfolio management, including asset optimization IT governance IT Financial Transparency At its most basic, IT financial management may be simply a restatement of large grained GL categories such as hardware, software, and staff within the IT chart of accounts. Such highly aggregated data is almost useless in understanding actual IT activity or contribution to enterprise value, especially since IT services may support other IT services and therefore are indirect in their contribution to business value. Crude allocation mechanisms (peanut butter spread costing) only highlight how expensive IT is, and imply that the only effective cost control strategy is simply broad based cutting (e.g., 10% off the top of every IT account). Page 1 Page 1

4 Understanding IT financial activity in terms of IT services is essential. In fact, service costing has been practiced for decades, for example, with mainframe MIPS costs allocated by application IDs (Quinlan 2003). Modern service-based costing has various implementation options simply allocating GL costs remains an option, but sub-service chargeback, asset-based charging, and activity based approaches also are seen. As noted in the introduction, lack of available data has been a constraint to implementing more advanced IT financial approaches, especially since the advent of distributed computing. The establishment of the Configuration Management Database (CMDB) has provided a common repository concept, and support for IT service cost transparency has been part of this vision. This is no longer theory; EMA is aware of large enterprise IT organizations increasingly basing IT cost recovery on CMDB data (e.g., assigning server depreciation via application to server dependencies). However, Cloud and virtualization are moving the industry away from asset-based costing. As compute and storage become more fungible, utilization-based costing is already extending from its mainframe roots to the distributed architectures seen in both external and internal Clouds. Advanced service arrangements may charge by business transaction, as opposed to lower level metrics like CPU cycle (this is more likely for internal IT providers). In all cases, there is a clear need for clean and reliable IT management data. Figure 1 IT Demand and Resource Management IT organizations can be demanding employment settings. Stories of excessive working hours are frequently heard. While this may be positively viewed by some executives, the simple reality is that people have lives. The best staff will leave environments that make unreasonable demands for 60+ hour weeks. It is also often not clear that such excess hours actually contribute to enterprise value or were truly required at the time in terms of enterprise performance. Page 2 Page 2

5 IT demand management is at the highest level the translation of demand management and forecasting from its industrial roots to the IT service problem domain. IT demand is often seen as just demand for new functionality, but IT operational expenditures are typically the majority of IT spend. Therefore, true IT demand management must also consider ongoing lights-on activities. IT organizations continue to experience substantial difficulty in managing resources and execution across the capex/opex or project/service divides. This has been compounded by development trends away from large, risky projects and towards smaller-grained, agile iterations of new functionality (Anderson 2010). Such incremental development may actually be seen as a lights-on activity in terms of traditional IT accounting methods, if not captured and correctly categorized via an IT demand management pipeline. IT organizations continue to experience substantial difficulty in managing resources and execution across the capex/opex or project/service divides. There is often contention for certain classes of resources (e.g., systems administrators), leading to prioritization, scheduling, execution, and delivery problems (Goldratt 1997). Current time tracking solutions are crude. When they attempt to deliver high cost transparency, they impose excessive transaction costs on burdened individuals (the timesheet of a thousand buckets problem). EMA believes it is high time that this problem be tackled analytically and in band with value-adding processes, rather than continuing to rely on unsustainable heroics and overly burdensome time-tracking approaches. Fully solving it will lead to further reinforcement of activity-based costing approaches, based on integrating service request and project execution management. Supplier Management Cloud and other forms of outsourcing are highlighting vendor management as a key competency for the modern IT organization it is often badly fragmented. Vendor and contract information is not consolidated, leading to duplication and rationalization opportunities. In larger organizations, supplier performance management becomes a critical concern, especially as input into competitive sourcing decisions. IT Portfolio Management and Optimization Asset and even service inventories may be similarly fragmented. While some envision a coherent, top-down design of completely rationalized IT services, the reality is different. Even in large organizations, people behave entrepreneurially, and while this may result in organizational innovation, it also results in service and asset redundancy. Often, rationalization and optimization are achieved as part of an ongoing process of improvement, and EMA sees the concept of IT portfolio management by definition as the expression of such a process. People behave entrepreneurially, and while this may result in organizational innovation, it also results in service and asset redundancy. IT portfolios can be also seen as lifecycles, and full lifecycle management of services, vendor products, and assets is an increasingly important theme in IT management. Page 3 Page 3

6 IT Governance In some ways, IT governance encompasses all of the previous concerns and more. In a more narrow sense, however, the term IT governance has become closely associated with compliance and risk management. A deficiency of some risk management approaches is that they operate in a vacuum. Risks, compliance objectives, and mitigating controls should, if possible, be understood with respect to some managed thing in the environment, such as a configuration item, project, or business process. In terms of IT operations, governance-identified risks should start to inform the operational Change Management processes and ideally upstream processes such as demand and project management. BMC Product Highlights BMC has addressed a number of the above market trends with their latest release of IT Business Management. This product has for some years provided an integrated view into higher order IT portfolio and IT finance concerns, including modules for: Demand and Resource Management Supplier Management Financial Planning and Analysis Service Cost Management Controls and Compliance These core modules in turn leverage supporting modules such as: Service Request Management Change and Release Management Service Catalog Atrium CMDB The modules also leverage other core functionality in the overall BMC ARS/Atrium suite. The solution enables the production of a Bill of IT, showing detailed costs by service for IT consumers. It also supports benchmarking of internal IT against data provided by Rubin Worldwide. A demand/project/portfolio management module provides a high level system for capturing, prioritizing, and tracking project-based work. (However, this is not a detailed project management tool or execution system.) It integrates with the BMC Service Request Management tool and handles project demand as a specialized form of service request. This approach enables an integrated view of project versus operational work and prioritizing across them. Similarly, the Financial Planning and Analysis module spans both project and operational expense drivers. Supplier Management in the ITBM core integrates with Asset Management from the ARS/Atrium platform, providing an authoritative system of record for IT vendors and supporting vendor performance management activities. Governance and Controls management allows for the integration of compliance endeavors with other data in the BMC system, clearly advantageous over stand-alone governance approaches. Page 4 Page 4

7 The current release s most significant enhancement is the new integration between the Demand and Resource application (in its guise as a high level Project Portfolio Management system) and the Remedy Change Management module: Project Managers can now request or link to operational changes directly from the project environment and track the progress and status of these changes directly from the project schedule Project Managers can quickly create and manage maintenance projects directly linked [to] operational changes required for a release. This enables centralized prioritization, governance, and staff planning, and costing of capital projects and operational work side-by-side. (emphasis added) EMA finds the bidirectional nature of BMC s Project/Change integration innovative. A project manager can initiate a Change request from inside the project application. And, even more innovative, Changes that are bundled into Maintenance releases can result in the creation of Projects, supporting greater integration of enterprise demand. Additionally, the product release includes an installer and international support in terms of both language and multi-currency. Use Case Examples From Interviews BMC customer interviews indicated a strong interest in IT project portfolio and human capital management. This is a frequent industry pain point. A basic project registry and record of resource assignments to those projects is often lacking in companies, especially those that have not instituted a formal PMO (Project Management Office). The reporting of project and financial status into one overall view was well received. Comments included: The dashboard is great! Wonderful front page. Clean, quick visibility into the value and status. Before we brought in BMC, we didn t know what our resources were doing information was fragmented across Sharepoint, Excel, and Microsoft Project. We didn t know where the projects were, what the status might be Prior to implementing ITBM I couldn t apply people to projects and expect them to run well if those people were busy doing production support. They ve created a CMDB for business management. Product allowed me to decide on what level I wanted to do business management. EMA finds the bidirectional nature of BMC s Project/Change integration innovative. One user described how IT resource demand was segmented across operations, maintenance, and investment projects (the classic run/grow/change the business categories). They are using the tool s abilities to treat system maintenance programming requests as requests for change, providing a clear linkage across the software development and IT service management worlds. The integrated view of the resources then flows into service costing. These comments indicate sound user experience design. The flexibility and ease of customization was also particularly noted. Page 5 Page 5

8 Showing the bill of IT cost including the project expenditures was new feature/functionality for one interviewee. The seamless linking of the IT service view to the projects that had established and improved it was well received by business partners. Everything is done by service. All our incidents, changes, problems, and project time is assigned to a service. The basis on a shared data architecture received kudos. The tool is enabling us with that underlying foundational structure of that database and how it shares the information across all these different solutions. I can put something in the demand and resource management module and see it in my budgeting and planning and my service costing EMA Perspective Managing the business of IT is a long-standing theme in discussions of IT management, dating back forty years. Ditri and Shaw noted as early as 1971 that Definite parallels can be drawn between the medium-to-large-sized EDP organization and an overall company a business-in-miniature (Ditri, Shaw et al. 1971). This theme recurs in many discussions of IT management, and yet the industry still lacks comprehensive, integrated solutions for seeing the IT business as an holistic entity. All of the IT business areas identified need data from a wide variety of systems, the well-known CMDB being only one (see Figure 1). Often, business of IT solutions assume that clean data is available for integration. This is not always true. Vendor and product data are frequently fragmented. IT asset and fixed asset systems are often not in synch. Execution and performance data is scattered. Redundancy in the service portfolio is frequent and hard to detect. Data must be collected as part of operational process, not as after-the-fact fire drill efforts, and integration of core data is essential. Projects, Releases, Changes, Incidents, and Service Requests should all inter-relate, and also tie to Configuration Items (CIs). Consider project issues, risks, and action items as well for a unified view. All of the IT business areas identified need data from a wide variety of systems, the well-known CMDB being only one BMC is well positioned organically for these requirements, as much of this data originates from the core ITSM processes managed in the Remedy suite. Moving this data up the food chain into more of a business management view is a logical evolution. The most important integration bridges the long-standing wall between development and operations. Service lifecycle versus service delivery and capex versus opex are parallel distinctions. Practically speaking, bridging this divide requires integrating traditional PMO concerns with IT operational processes such as incident, problem, change, and service request. This is especially important in areas where IT resources tend to be shared across many projects and are also responsible for operational efforts. Effective operating models have yet to be devised in IT to address such integration, and such solutions will start to highlight need for integrated execution management. Algorithms for optimizing resource Page 6 Page 6

9 constrained scheduling will become more important, and in order to support IT use cases will need to handle dynamic uncertainties (such as a project assigned DBA receiving unexpected incident tickets). EMA predicts cross-pollination from true Manufacturing Resource Planning domains, especially those tackling the job shop problem, Critical Chain project management, and cross-queue prioritization (such as the Concerto offering from Realization, not traditionally seen as an IT vendor). Some IT vendors are already selling universal queue solutions bridging the project and operations domains from the individual contributor perspective. The increasing concern over multitasking also contributes to this trend. Expect to see more sophisticated algorithms to help manage such universal queues; this will in turn require a level of analytical sophistication in those administering these tools. All such advanced applications, however, require first the basic integration of the project and operational worlds, and BMC is taking important steps in this regard. Service costing is another area that is immature not only in tooling, but in the basic industry approaches. A service Bill of IT is quickly becoming table stakes for IT optimization, and EMA predicts interesting further developments as concepts like Lean and Throughput Accounting are applied to traditional IT financial management. These approaches are averse to certain forms of cost allocation traditionally seen in IT finance. The move towards pay-for-use Cloud services will certainly enable more fluid forms of cost management BMC is constructing the necessary foundation for a variety of costing approaches. About BMC Business runs on IT. IT runs on BMC Software. as well. BMC is constructing the necessary foundation for a variety of costing approaches, all based on ongoing operational data from the Remedy suite as opposed to episodic collection. Finally, internationalization is important and often overlooked by US centric markets. BMC s investment on these fronts shows BMC s ongoing full commitment to this platform. Business thrives when IT runs smarter, faster and stronger. That s why the most demanding IT organizations in the world rely on BMC Software across distributed, mainframe, virtual and cloud environments. Recognized as the leader in Business Service Management, BMC offers a comprehensive approach and unified platform that helps IT organizations cut cost, reduce risk and drive business profit. For the four fiscal quarters ended March 31, 2011, BMC revenue was approximately $2.1 billion. Visit for more information. References Anderson, David J. (2010). Kanban: Successful Evolutionary Change for your Technology Business. Sequim, WA, Blue Hole Press. Ditri, A. E., John C. Shaw, et al. (1971). Managing the EDP function, The Touche Ross Management Series. N.Y., McGraw-Hill. Goldratt, Eliyahu M. (1997). Critical chain. Great Barrington, Ma., North River. Quinlan, Terence A. (2003). Chargeback and IT Cost Accounting. Santa Barbara, CA, IT Financial Management Association. Page 7 Page 7

10 About Enterprise Management Associates, Inc. Founded in 1996, Enterprise Management Associates (EMA) is a leading industry analyst firm that provides deep insight across the full spectrum of IT and data management technologies. EMA analysts leverage a unique combination of practical experience, insight into industry best practices, and in-depth knowledge of current and planned vendor solutions to help its clients achieve their goals. Learn more about EMA research, analysis, and consulting services for enterprise IT professionals, lines of business users, and IT vendors at or follow EMA on Twitter. This report in whole or in part may not be duplicated, reproduced, stored in a retrieval system or retransmitted without prior written permission of Enterprise Management Associates, Inc. All opinions and estimates herein constitute our judgement as of this date and are subject to change without notice. Product names mentioned herein may be trademarks and/or registered trademarks of their respective companies. EMA and Enterprise Management Associates are trademarks of Enterprise Management Associates, Inc. in the United States and other countries Enterprise Management Associates, Inc. All Rights Reserved. EMA, ENTERPRISE MANAGEMENT ASSOCIATES, and the mobius symbol are registered trademarks or common-law trademarks of Enterprise Management Associates, Inc. Corporate Headquarters: 5777 Central Avenue, Suite 105 Boulder, CO Phone: Fax: