SaVard Solutions, LLC
Results that make a difference
I previously noted in my newsletter, Balancing Between a Focus on Innovation versus Sustainment , CIO's are challenged to balance a focus on innovation versus sustainment. This newsletter describes an approach to optimize baseline IT costs for potential reinvestment in innovation. I will talk about an approach to managing the demand-side, whereas many popular approaches are to manage the supply-side. This approach identifies activities with minimal value contribution and enables a reduction of resources dedicated to sustainment. That alone, however, may not be sufficient to reach the desired level of optimization if growing business demand perpetuates a disproportionate investment in enhancement / sustenance activities. The fact of the matter is that the cost of “keeping the lights on” can take up to 70% of your total IT budget.
To capitalize on the opportunity to shift investment to innovation, CIOs must evaluate the demand-side, specifically around maintenance and enhancement of existing applications that support specific business operations. A targeted reduction in sustainment and reallocation to support business growth and transformation initiatives not only makes financial sense, it also raises the perception of IT as a strategic partner rather than just a cost center.
IT organizations are faced with ongoing business demands for basic services which consume a majority of IT resources. In the environment of budget constraints that many CIOs face today, allocating resources to support innovation is a challenge.
Specific to application maintenance, small requests and unplanned projects, often coming through the “back door”, compete with major strategic business development initiatives. These requests are predominantly generated by middle to lower level management in order to meet their mandate to deliver a specific, and often narrow, business outcome. By definition, these changes meet the parochial interests of a business, but when aggregated with all business demand, become a major consumer of IT resources.
The value of IT is lessened in the eyes of business leadership when they observe a large majority of resources supporting baseline services rather than innovative, revenue-generating strategy. To illustrate this point, the chart below shows how a typical IT budget is allocated.
While illustrative, this graphically describes the reality that a vast majority of IT resources are supporting “business as usual”. Even more focal is that only 15% is allocated to new activities such as projects supporting business growth and innovation. The remaining 15%, which is assumed as new activity is, many times, enhancement activity targeting legacy systems that offer limited value to the business.
Establishing an effective demand management process provides management with high-level discretion over what maintenance work gets done based on the importance of the change to the functionality and performance of the application balanced against the derived value and strategic importance of the application itself. The keys to this success are:
Implementing the Solution
The following steps should be considered. These steps are an outline of activities required. Detailed plans will be necessary for each step, which is outside the scope of this newsletter.
Step 1: Complete a current state assessment of maintenance and enhancement request activity for applications within scope
Step 2: Develop a demand management model and governance framework that includes criteria for request categories and severities
Step 3: Assess existing tools and data sources and deploy a single ticketing tool
A current state tool assessment will be an outcome of the ticketing data capture in Step 1- Current State Assessment
Ideally a single automated tool should be deployed. If not, develop an aggregation tool, which could be an Excel spreadsheet. The number of data sources into an aggregated tool should be kept to a minimum
Consider the cost/benefit of the labor involved in maintaining multiple tools and databases vs. deploying a single tool
Configure the tool with the set of established categories and severities
Transition existing request records into the new tool, or if multiple tools, establish interfaces to the aggregated tool
Develop and communicate a policy that all application support requests be captured in the tool
Step 4: Establish ticket workflows for maintenance and enhancement requests
Approval workflows can be different by business unit, depending on who is assigned the oversight role in the business. It could be the PMO, or in some cases where cost management is a priority, within the CFO organization
Maintenance requests do not require business approval
For normal maintenance like patching and OS upgrades, a pre-determined plan should be established between IT and the business to manage overall maintenance activities and spending. A separate assessment can be done to determine the risk of not doing some maintenance, based on the risk to the business, as another optimization opportunity for cost savings
For emergency fixes required from a failed system or bug, the first priority is for IT to resolve the issue, then submit a ticket as a request for break/fix after the fact
All enhancements and service requests require business approval. This is critical to the success of managing enhancement requests, where decisions are made by the business, not IT
An opportunity to reduce the number of enhancements is to deploy a rigorous approval workflow, which discourages business requesters from submitting what might be considered of low value. Although, be cautious that a request of higher value is not submitted for that reason
Develop material and communicate workflows to all impacted parties, including IT and business staff
Step 5: Assess time tracking processes and tools and determine if resource data is available to align with ticketing data to determine resource utilization for break/fix and enhancement requests on an ongoing basis
A current state assessment will be an outcome of the resource data capture in Step 1- Current State Assessment
If no time tracking process and tool exists, develop and deploy one
Keep the configuration of the tool simple, as more complexity requires more administration and raises the risk of deployment success, especially if deployment is done in a short timeframe
Establish categorizations for time capture. For purposes of tracking maintenance request resource time, maintenance and enhancement categories are required
Develop reporting for time by categories and by application
Step 6: Develop and deploy a communications plan
Develop communication material and deliver to:
Executive and business leadership
IT and business management
IT and business staff
Develop and deliver training to IT and business staff
It is most effective to deliver training through live and recorded webinars, and online self help material
To gain immediate impact on the opportunities from demand management, implementation of the above recommendations can be made effective immediately with a policy that all work stops except truly break/fix and planned maintenance unless re-justified by the business and approved by business leadership. This is an effective way to reduce costs if the company has initiated an austerity program
Following is a suggested prioritization for application support requests and resultant resource requirements:
Break/fix and planned maintenance work receive top priority
Enhancements having direct revenue impact to receive next priority
Enhancements targeting to fix known problems based on root cause analysis (RCA)
All other approved enhancements to receive lower priority
When evaluating opportunities for resource/cost reduction, a line can be drawn below a priority rank and any enhancements below the line would be on hold
The requester often overstates ticket priorities. Even though the criteria are clear, understanding the actual situation sometimes requires judgment. Completing weekly/monthly reports will highlight trends if the categorization comes into question
It is important to bridge the gap of communication and understanding of request volume and effort between senior leadership and IT/business management. Demand Management reporting often has limited visibility at the senior executive level. Reporting should be shared with all lines of management within IT and the business. In addition, an oversight role should be established outside the business manager’s organization to produce the communications
This newsletter does not spend time on how to dollarize the opportunities from ticket and resource reductions. The savings will not be realized until there is an impact from lower ticket volume that reduces resource requirements and resultant costs. There are many methods to associate costs from resource estimates which are not within the scope of this newsletter
Lack of strong governance and compliance measures is a high risk for success
The demand management function should be constantly monitoring tickets in the queue. Aging reports should be produced to assess if work can drop off the list. If a ticket is aged at 6 months or more, it could be an easy decision to take the work out of the queue assuming there has been no impact of the change not being made
In situations that applications maintenance is highly outsourced, there is an opportunity to re-negotiate contract commitments with vendors and increase controls over vendor utilization for time and material contracts based on the results of your analysis. Your vendor management and finance leadership will appreciate the opportunity to do so
The business will be threatened when policies are established that potentially limit the changes they want. Offsetting, though, is establishing SLAs so the work that is done, is done timely and with quality
This assessment can also spawn other activities around application rationalization. If an application is deemed non-critical, yet drives a high volume of tickets, there should be a cost/benefit analysis completed to assess whether the application should be sun-setted, and/or replaced
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