IT Business Value

Welcome to the IT Business Value Blog. Our team, known internally at Microsoft as the "War on Cost" team, explores a variety of cost and value factors that our customers care about around virtualization, datacenter management, and application por

The Service-Oriented Business: Part 1

The Service-Oriented Business: Part 1

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It’s 2005

Imagine you’re Sara, the CIO of your retail company with 10,000 employees. You have 500 employees within IT reporting to you. Your manager, Fred, the CFO, calls you into your office and asks: “Sara, how many applications does IT support?” My first thoughts (as Sara) are: “why is he asking? Is there a problem?”. My next thought is: “Does Fred want me to change the way I run my end of the business?” 

Regardless of your initial thoughts, if you’re a typical CIO, the simplest and most straightforward answer is “I don’t know”. The truth could be anywhere from hundreds to thousands for a medium/large size organization that Sara supports. A more nuanced answer would be something like:

“Well Fred, we have 8 mission critical applications supporting the store systems side of the business, another 3 supporting merchandising, 5 supporting our supply chain, 3 for customer service, and of course, our e-commerce site. They all have SLAs that we defined and track on behalf of the various business stakeholders. There are approximately 250 other applications throughout IT that support the organization, but we don’t track them very closely. Finally, there are as many as 500 applications that we host in our datacenter but we provide no support for them.”

Sound familiar? It should. This is a classic problem of limited application portfolio visibility. Most IT shops support a vast array of applications, but only the ones that are either considered mission critical or directly support the business are managed closely by datacenter operations. This typical scenario presents the following challenges for you:

  1. “Rogue” applications deployed into the datacenter could cause quality of service issues for the mission critical and/or tier 2 applications
  2. Changes to any application in the environment could cause sudden, unpredictable resource spikes (network, data access, server CPU/memory) affecting any of the mission critical applications (and impacting the SLA)
  3. Lack of visibility into which datacenter resources are associated with what application, such that, if a server goes down, IT operations may not know how many applications would be affected by the components on those servers becoming unavailable
  4. Higher costs of deploying 3rd party applications on dedicated hardware
  5. Higher costs of duplicate functionality from similar applications
  6. Lower agility and higher costs due to not being able to optimize the server and storage resources for the application portfolio

Do you care? Absolutely! But, what can you do? Neither application development teams nor their IT support staff typically don’t define a production IT topology specifying where various components of the app will reside.

I’d like to hear from you about your experience with this dilemma. Does it ring true for you? Are there other pitfalls you see with this lack of visibility.

In my next post, I’ll discuss the “costs” of the problem in money, time, lack of agility, poor service quality, and risk.

All the best,

Erik Svenson, Strategist, War on Cost

Comments
  • Hi Erik

    I am not sure I agree with you 100%, but there are definitely elements of what you are saying that ring true to me. I am a PFE - Operations in the EMEA region and what I am finding is the following.

    Customers today are well equipped with the latest and greatest IT management software that is more than capable of track and understanding what is in their environment today from a technical perspective. However I am still finding that customers see IT as just a cost and nothing more than a cost. This is not true of partners or organisations whose primary core business is IT related, but for the other 98% of the customers I interact with this sure rings a bell.

    Now with the Economic change and the subsequent IT climate change, more and more organisations are pushing hard for more value from IT with less cost. The problem is that IT has never really been required to justify itself at a Service level back to business and therefore they are finding it difficult to do this. They understand what is there, but making the association between a Service and Value is very difficult for them. I still find that customers are thinking in terms of technology (Which is a tool), people, (Which are also tools) and process (Which is also a tool) as individual elements, rather than part of a larger end - to - end Service to the organisation.

    This lack of understanding or visibility of the end - to end Service leaves IT in a very dangerous position where it is not able to explain to business, in business terms the value it provides. In order to overcome this obstacle they need to visibly (Not literally) break up the IT organisation into their Services they supply (Either directly to the business or to other internal IT departments) so that they can analyse each component individually. In this way they can balance the cost of the Service with the end value it provides, as well as the unavailability cost of the Service to business.

    In saying this I understand and agree that even in a medium size business there could be hundreds, if not thousands of Services. So it's not an easy task

    For those interested I am looking at the difficulties and advantages to IT and the business of being able to do this exercise at the following address;  http://msops.wordpress.com.

    Please feel free to jump on and give your comments as well as ask questions.

    Thanks for the forum and will definitely stay tuned for the next instalment…

  • Hi Erik,

    What you have described above is the definition of traditional IT approach which requires too many resources in order to meet all the expectations and requirements coming from business. It definitely looks like an open buffet dinner with unlimited options. If the primary focus of CIOs is on technological solutions and unconditional internal customer satisfaction, this is the normal and expected outcome.

    Today, the business environment is very tough in all industries and one of the major challenges is global competition. The major differentiator for the businesses in a competitive market is always delivering the best value to customers with a competitive price.

    I believe "lean" approach in manufacturing industry is one of the best models we can easily implement within IT organizations. Lean approach has five major principles; (1) identify value, (2) map the value stream, (3) create flow, (4) establish pull and (5) seek perfection. While implementing those principles, we can easily realize that smaller and more agile IT teams and organizations with correct outsourcing models are able to provide a higher value in a shorter time with a higher quality and lower cost.

    Lean IT approach is definitely compliant also with ITIL and COBIT. It is just another perspective in order to simplify the processes and increase the agility of IT. I think, the most critical point we should emphasize is, a real "Lean IT" is no longer a cost center, it is a value creation center.

    Tunc Noyan - CIO

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