SS - читать онлайн бесплатно полную версию книги . Страница 28
Does our
strategic approach to
service design result in services that can be offered at a competitive ‘market price’, substantially reduce
risk or offer superior value?
Where are our greatest service inefficiencies?
Which functional areas represent the highest priority opportunities for us to focus on as we generate a Continual Service Improvement strategy?
Without meaningful operational financial information, it is not possible to answer these questions correctly, and strategic decisions become little more than instinctive responses to flawed or limited observations and information, often from a single organizational unit. Such methods can often incorrectly steer strategy, service design, and tactical operational decisions.
Whereas Financial Management provides a common language in which to converse with the business, Service Valuation provides the storyline from which the business can comprehend what is actually delivered to them from IT. Combined with Service level management, Service Valuation is the means to a mutual agreement with the business regarding what a service is, what its components are, and its actual cost or worth.
Additionally, the application of Service Valuation discussed in this chapter transforms the discussion and interaction between IT and the business customer, and the way customers plan for and consume IT Services. The use of Financial Management to provide services with cost transparency (such as via a Service catalogue) that can then be clearly understood by the business and rolled into planning processes for demand modelling and funding, is a powerful benefit. Such maturity in an IT operation can generate enormous cost savings and Demand Management capabilities.
5.1.2 Concepts, inputs and outputs
Like its business equivalent, IT Financial Management responsibilities and activities do not exist solely within the IT finance and accounting domain. Rather, many parts of the enterprise interact to generate and consume IT financial information, including operations and support units, project management organizations, application development, infrastructure, Change Management, business units, end users etc. These entities aggregate, share and maintain the financial data they need. The Financial Management data used by an IT organization may reside in, and be owned by the accounting and finance domain, but responsibility for generating and utilizing it extends to other areas. Financial Management aggregates data inputs from across the enterprise and assists in generating and disseminating information as an output to feed critical decisions and activities such as those discussed below.
5.1.2.1 Service Valuation
Service Valuation quantifies, in financial terms, the funding sought by the business and IT for services delivered, based on the agreed value of those services. FM calculates and assigns a monetary value to a service or service component so that they may be disseminated across the enterprise once the business customer and IT identify what services are actually desired.
The pricing of a service is the cost-to-value translation necessary to achieve clarity and influence the demand and consumption of services. The activity involves identifying the costbaseline for services and then quantifying the perceived value added by a provider’s service assets in order to conclude a final service value. The primary goal of Service Valuation is to produce a value for services that the business perceives as fair, and fulfils the needs of the provider in terms of supporting it as an ongoing concern. A secondary objective is the improved management of demand and consumption behaviour. It is helpful to restate what constitutes service value so that the translation to price can be more easily dissected:
‘Value is created when service providers are able to deploy their capabilities and resources (i.e. service assets), and with a certain level of assurance, deliver to the customer a greater utility of their services. As established earlier, this utility is in the form of enhancing or enabling the performance of customer assets, and contributing to the realization of business outcomes.’
Within this definition, the service value elements of warranty and utility require translation of their value to an actual monetary figure. Therefore service valuation focuses primarily on two key valuation concepts:
Provisioning Value is the actual underlying cost to IT related to provisioning a service, including all fulfilment elements, both tangible and intangible. Input comes from financial systems, and consists of payment for actual resources consumed by IT in the provisioning of a service. These cost elements include items such as:
Hardware and software licence costs
Annual maintenance fees for hardware and software
Personnel resources used in the support or maintenance of a service
Utilities, data centre or other facilities charges
Taxes, capital or interest charges
Compliance costs.
The sum of these actual service costs typically represents the baseline from which the minimum value of a service is calculated since providers are seldom willing to offer a service where they are unable to recover the provisioning cost. Of course there are exceptions to this, especially related to Type I providers in situations where alternatives for provisioning of a specific service are limited or non-existent.
Service Value Potential is the value-added component based on the customer’s perception of value from the service or expected marginal utility and warranty from using the service, in comparison with what is possible using the customer’s own assets (Figure 5.2). Provisioning Value elements add up first to establish a baseline. The value-added components of the service are then monetized individually according to their perceived value to estimate the true value of the service package. All of these components would then be summed along with the baseline costs to determine the ultimate value of the service. The interrelated concepts of provisioning value and perceived service value potential are illustrated in Figure 5.2.
Figure 5.2 Customer assets are the basis for defining value
Provisioning Value elements are typically easier to quantify due to availability of purchasing and human resources (HR) information. However, a number of techniques are available to assist with the identification of service value potential, and are addressed elsewhere in this publication and the Service Design publication. The evolution of traditional accounting methods toward a service-oriented approach that supports the decomposition and valuation of value potential components is discussed later in this section.
5.1.2.2 Demand modelling
Poorly managed service demand is a source of cost and risk. The tight coupling of service demand and capacity (consumption and production) requires Financial Management to quantify funding variations resulting from changes in service demand. Financial demand modelling focuses on identifying the total cost of utilization (TCU) to the customer, and predicting the financial implications of future service demand. The Service Catalogue provides critical information on service demand for modelling, decision making, and control.
Demand modelling uses service-oriented financial information with factors of demand and supply in order to model anticipated usage by the business, and provisioning requirements by IT. This is for identifying funding requirements, variations and drivers of those variations, and to assist in the management of service demand. In this context, inputs for managing service demand include pricing and incentive adjustments that are intended to alter customer consumption patterns. Without critical demand data from Capacity Management and the Service Catalogue, translated into financial requirements, this is not possible.
Mature service organizations are able to apply the practice of Service valuation to their Service Catalogue to establish a value for each service, service component, and service level package. This enables the capability to generate demand plans and related financial requirements for expected service consumption. This service demand planning is translated to financial funding requirements for the entire enterprise at a business unit level or lower, and consumption of both services and budgets can be viewed in real time through an extension of the Service Catalogue.
Through the application of Financial Management, the Service Catalogue is able to provide customers with the capability to regulate their demand and prepare budgets. This partly addresses the problem of over-consumption by business and subsequent dissonance with the value of the service. Capacity Planning also provides important information related to service demand by providing usage data and trend reporting largely from a technical component perspective (think bandwidth, resources, processing capacity etc. that carry a financial impact), and by tracking significant expected variances in demand related to strategic events such as product launches, entry into new markets, and acquisitions or divestitures. Demand modelling can leverage data from capacity management because of the tight coupling.
5.1.2.3 Service Portfolio Management
Financial Management is a key input to Service portfolio management. By understanding cost structures applied in the provisioning of a service, a company can benchmark that service cost against other providers. In this way, companies can use IT financial information, together with service demand and internal capability information, discussed previously, to make beneficial decisions regarding whether a certain service should be provisioned internally. For instance, if a company identifies its internal cost of providing ‘Service A’ to be £50 per month per user, and then finds a provider with the economics of scale and the focused skill set required to offer the identical service for £33 per month, the company may decide that it would rather focus its resources on other services where it possesses a greater ability to offer lower cost and/or higher quality, and to outsource Service A to the other provider.
Case example 9: Service Portfolio optimization
One of the world’s largest financial companies invests in opening its own OEM-certified desktop repair centres. Due diligence reveals that its scale enables it to offer these services at a lower cost than the market.
The firm regularly benchmarks its internal costs of providing desktop support, desktop repair and desktop provisioning, and compares these with the prices of Type II and Type III providers. On discovering a service that can no longer be offered at a cost ‘below market’, or a new service that can be provisioned internally because of benefits from the scale advantage, the firm adjusts accordingly.
The recurring financial approach to Service Portfolio results in the continual improvement of service cost structures, and measurably enhances the competitive position of the company.
This concept is no different from that of traditional businesses aligning their market-facing service and product portfolios to their core capabilities. It is a prudent strategy to exit a business (service) line that is not as profitable or cost-effective, or does not deliver the requisite combination of quality and value relative to alternatives. Many IT organizations, however, refrain from identifying service-oriented costs and making them visible to the enterprise. The result over time is a portfolio of services with ineffective cost structures and decrease in the customer’s perception of value and satisfaction. Service portfolio management is further elaborated in Section 5.3.
5.1.2.4 Service provisioning optimization
Financial Management provides key inputs for Service Provisioning Optimization (SPO). SPO examines the financial inputs and constraints of service components or delivery models to determine if alternatives should be explored relating to how a service can be provisioned differently to make it more competitive in terms of cost or quality.
A typical candidate for this type of examination includes services that have been identified for removal from the Service Portfolio because they can no longer be provisioned efficiently relative to other providers or service alternatives, or because they experience declining usage due to factors such as obsolescence. In this example, Financial Management would provide critical input to the enterprise regarding existing service cost structures, and assist with the financial analysis of alternative delivery methods, service mix, financing structures and so on. It would also serve to determine or validate whether a service provisioning alternative would reduce an organization’s service cost structure or enhance service value. It is this financial analysis of service components, constraints and value that is at the heart of Financial Management’s interaction with Service Provisioning Optimization.
5.1.2.5 Planning confidence
One goal of Financial Management is to ensure proper funding for the delivery and consumption of services. Planning provides financial translation and qualification of expected future demand for IT Services. Financial Management Planning departs from historical IT planning by focusing on demand and supply variances resulting from business strategy, capacity inputs and forecasting, rather than traditional individual line item expenditures or business cost accounts. As with planning for any other business organization, input should be collected from all areas of the IT organization and the business.
Planning can be categorized into three main areas, each representing financial results that are required for continued visibility and service valuation:
Operating and Capital (general and fixed asset ledgers)
Demand (need and use of IT services – discussed earlier in this chapter)
Regulatory and Environmental (compliance).
Operating and Capital planning processes are common and fairly standardized, and involve the translation of IT expenditures into corporate financial systems as part of the corporate planning cycle. Beyond this, the importance of this process is in communicating expected changes in the funding of IT Services for consideration by other business domains. The impact of IT Services on capital planning is largely underestimated, but is of interest to tax and fixed asset departments if the status of an IT asset changes.
Regulatory and Environmental-related planning should get its triggers from within the business. However, FM should apply the proper financial inputs to the related services value, whether cost based or value based. For example:
Case example 10: Regulatory and Environmental planning impacts
At a consumer products corporation, it was determined that all servers older than three years should be replaced. Plans were properly communicated and, when the time came, a business case was prepared. Adequate justification was provided to substantiate the replacement need, and the related ROI based on the required expenditure barely fitted within acceptable corporate thresholds.
Towards the end of the implementation, it was realized that local governmental regulations and the company’s desired practice of environmental stewardship required special disposal of the old equipment since the casings contained measurable amounts of lead. The cost to remove and properly dispose of the equipment was substantial enough to negatively impact the ROI calculation of the project, and pushed it beyond acceptable tolerance. If the project team had correctly recognized the true costs of replacement, requisite funding would have been identified and included in the planning mechanism.
In this example, ignoring the impact of equipment disposal when building the business case resulted in an overstatement of the benefits of replacement and consequently required adjustments to the funding model.
Confidence is the notion that financial inputs and models for service demand and supply represent statistically significant measures of accuracy. Data confidence is important for two reasons: 1) the critical role data plays in achieving the objectives of Financial Management, and 2) the possibility of erroneous data undermining decision making.
Since Financial Management performs unique financial translation and qualificationfunctions, there is an obligation to ensure that the confidence level of planning data and information is high. Questions about its accuracy will undermine its perceived value. It is therefore important to follow good security practices for access and rights management so that information quality is not compromised. Planning confidence is ultimately a combination of service-oriented demand modelling translated into measurable financial requirements with a high degree of statistical accuracy. The financial requirements act as inputs to critical business decision making.
5.1.2.6 Service investment analysis
Financial Management provides the shared analytical models and knowledge used throughout an enterprise in order to assess the expected value and/or return of a given initiative, solution, programme or project in a standardized fashion. It sets the thresholds that guide the organization in determining what level of analytical sophistication is to be applied to various projects based on size, scope, resources, cost and related parameters.
The objective of service investment analysis is to derive a value indication for the total lifecycle of a service based on 1) the value received, and 2) costs incurred during the lifecycle of the service. Section 5.1.3, on ‘Methods, models, activities and techniques’, discusses a number of concepts and methods for exploiting IT investment analysis to improve capital expenditure and IT Operations processes.