Calculating the Value of IT Service Management


1
Calculating the Value ofIT Service Management
A Proposal for Inter-Entity ITSM

• Martin Erb Sr. ServitectCapital
  Onemartin.erb_at_capitalone.com
• Richmond Virginia USA

2
Agenda

• Capital One Overview and Business/IT Fusion
• Specific Benefits Calculation Examples
• Proposal for an Inter-Entity ITSM Process
  Communication Standard
• Q A
• Assumption Familiarity with ITIL and COBIT

3
The ITIL (and other) Processes

• Configuration Management
• Incident Management
• Event Management
• Problem Management
• Change Management
• Service Level Management

• Availability Management
• Capacity Management
• Service Desk (Function)
• IT Service Continuity Management
• Financial Management for IT Services
• Release Management
• Monitoring
• Security Management

Not explicitly ITIL
4
Availability Time Line Components(NOT TO SCALE!)
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SLA Components

• Performance (ex trans/sec sec./web page)
• Availability (ex performing x of specified
  hours)
• Volume (ex transactions / unit time storage of
  X records)
• Cost (ex /year /transaction /customer/month)

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Performance Calculation

• Service performance sum of component latencies
  (taking into account parallel resource queues)
• See books by Daniel Manascé for the queuing
  theory math formulae and Excel spreadsheets

7
Availability Calculations

• Component Availability
• (MTBF - MTTR)
• MTBF
• MTTR (Mean Time to Repair) detection triage
  notification repair restoration
• MTBF (mean time between failures)
• OR Component Availability
• (Total samples - failed samples)total
  samples
• Service Availability
• (Comp 1 avail comp 2 avail comp 3 avail
  comp N avail)

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Top 10 Keys to Making IT Service Management a
Reality

• 10. Learn continuously about best practices (ex
  ITIL EMM CMM)
• 9. Implement process ownership responsibility
  authority accountability
• 8. Know what the business objectives are and how
  they are measured (business metrics)
• 7. Know what IT metrics are related to the
  business metrics and how they are related

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Top 10 Keys to Making IT Service Management a
Reality

• 6. Make sure all metrics are measured collected
  and reported as required
• 5. Sell the concept inside and outside IT
• 4. Be ready to implement service management
  whenever and wherever you can
• 3. Get a commitment from IT and business
  management (like Y2K)
• 2. BE PATIENT!

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Top 10 Keys to Making IT Service Management a
Reality

• 1. IT Service Management is the definition and
  execution of Processes..not a team or a tool!!!

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Sources of Benefit Dollars

• Hard Savings
• Income Generated During Avoided Downtime
• Headcount Avoided with Automation
• Recovery Effort Not Expended
• Soft Savings
• Time Required to Generate Income Not Generated
  During Downtime

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Benefit Factors (1 of 4)

• Annual Incident Profile
• Non-Personal Space Incidents 28530
• Monitoring-Initiated Incident Ratio 70
• Monitoring-Initiated Incidents 19971
• Monitoring Warnings 41500
• Avoided-Incident/Warning Ratio 20
• Avoided Incidents 8300

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Benefit Factors (2 of 4)

• People
• Affected MTTR Total
• Incident Impact 3.65 6.4 Hours 23.36 PHrs
• Incident Called- Monitoring-
• Type in Initiated
• Sev 1 4000 2000
• Sev 2 40 20
• Sev 3 1 1
• Wtd Avg 4 3.5
• MTTR 9.6 Hrs. 5.0 Hrs.

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Benefits Factors (3 of 4)

• Capital One People
• People Working (FTE-all types) 18900
• PHrs/Yr (Person Hours/Year) 1920
• Company Person Hours/Year 36288000
• Capital One Financials (Sample)
• Net Income 899644000
• Per Person Hour 24.79
• Operating Cost 2987713450
• Per Person Hour 82.33
• Direct Cost of Monitoring and ITSM 7746862

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Benefits Factors (4 of 4)

• Assumptions
• Net Income Recoverable 75
• Net Income Catch-up Ratio 50
• Cost Avoidance
• Automated Incident Initiation and
  Notification 25/Incident
• Technician Cost 50/hr.
• Technician Effort 75

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Hard Value Benefit (1 of 2)

• Actual Baseline
• Non-Personal Space (NPS)
• Incidents / Yr. 28530 36830
• Outage Hours per
• NPS Incident (MTTR) x 6.38 x 9.60
• People Affected / Incident x 3.85 x
  4.00
• Person Hours Lost / Yr. 700323
  1414272
• Percent of Person Hours Lost 98.26
  96.49

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Hard Value Benefit (2 of 2)

• Net Person Hours Not Lost 713949
• Net Income Lost per Person Hr. x
  24.79
• Net Value PHrs Not Lost 17700064 (1.)
• Savings from Automation 499275
  (2.)
• Value of Technician Time Saved 3444998
  (3.)
• Total Savings 21644336
• Direct Cost (7746862)
• Net Hard Value 13897474
• already accounted for in Net Income

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Soft and Total Benefit

• Recovery Cost Avoidance
• Re-work Person Hours Avoided _at_ 50 356974
• Operating Cost per Rework Person Hr. x
  82.33
• Net Soft Value 29390914
• Net Hard Value 13897474
• Net Soft Value 29390914
• Total Value 43288388

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Questions on the Benefit







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A Proposal for Inter-Entity ITSM

• There is an increasing reliance on third parties
  to provide IT services
• ISPs
• Network Providers
• ASPs
• Hardware Maintenance Providers

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Process Mapping Assumes 1 Entity
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Incident Management

• Customer A
• Open an Incident Record
• Dispatch to Provider w/ CI and Incident
• Update w/ Provider Incident
• Accept Request
• Verify
• Close
• Link to Problem

• Provider B
• Accept and Open Incident
• Acknowledge with Incident
• Repair
• Request Verification
• Accept Verification
• Close w/ Incident
• Link to Problem

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Problem Management

• Customer A
• Raise Problem Request with Symptom CI or Incident
  
• Note Prov. Prob
• Request Status
• Update Problem Record
• Update Problem Record
• Verify
• Close Problem

• Provider B
• Accept Request
• Acknowledge and Provide Problem
• Return Status
• Status Change (Known Error)
• Resolve
• Request Solution Verification
• Update Problem Record
• Close Problem

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Change Management

• Customer A
• Acknowledge (or not) CI Maintenance
• Suppress Monitoring
• Update Service Desk

• Provider B
• Maintenance Advice for CI

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Challenges

• Transaction Definition
• Field Contents
• Qualifiers
• Edits
• Transmission Media and Protocols
• Formats
• XML

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Proposal

• itSMF-Sponsored Inter-Industry (Customers and
  Providers) International Working Group to Define
  for 9/2004
• ITSM Transaction Sets
• Media and Protocols
• Formats
• Incident Management Pilot(s)

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Thank You!Questions on Proposal