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The material impact of advanced operating models in IT Service Management

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Advanced IT Service operating models are a significantly untapped weapon in the arsenal of operational transformation. Lower cost, efficiency gains, internal customer satisfaction, and better control over overall IT spend are just some of the significant benefits that mature enterprises can reap with an advanced IT service managed environment. However, the transformation and operation of these organizational and technological constructs are not easy to achieve with internal resources and are best tackled with the help of expert partners who have traveled through the “experience curves”, crystallized the learning of over a decade of “industrialized” operations, and understood how to make them not just lower in cost but also more intelligent and hence effective and adaptable.

Why IT Services operating models matter

IT service management is an untapped lever for effectiveness and financial impact in many organizations. Immediate cost reductions of 30% in Total Cost of Ownership (TCO) are often obtainable by centralizing operations and adopting a standard operating model. An additional 10% per annum is achievable by leveraging process efficiencies. A schematic of the interventions possible and their impact on cost structures are depicted in the chart below (Figure 1).

However, this is just one side of the equation, as inefficient IT service management can impact system availability – which in turn generates low end user satisfaction and ultimately employee disengagement, thus directly impacting core businesses’ operational effectiveness. Another key outcome of improved IT Service Management is increased visibility across the global IT spend base which allows the IT decision-makers the ability to make the best operational and tactical investment decisions thus enabling further process efficiencies within the existing IT environment. These results are facilitated by advanced operating models’ standard operating processes and governance models that underpin strategic business initiatives.

Indeed, we typically observe the maturation journey of IT service management’s advanced operations, spanning four distinct stages.

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What is required to successfully design, transform, and run an advanced IT services model?

While the impact can be substantial, many organizations struggle to achieve it. The charts below (Figure 3) provide an illustration of the cost structure that exist within a typical environment and the benefits that can be achieved when compared with organizations who have realized the benefits of an advanced IT services model.

The primary reasons behind the inability to achieve these benefits is the complexity of the environment, which becomes clear by considering three key sets of questions:

  1. Internal client management and strategic benefit realization dilemma: How do we balance cost reduction targets with end user satisfaction?
  2. Scope and process design: Will we move F&A and HRO to Global Business Services1 (GBS) at the same time or later than IT Service Management? Should we support the customer base multilingually or in a single language? How do we design the new processes (including applications and infrastructure enablement) for Configuration Management Databases, Customer Relationship Management, monitoring and end user contact, knowledge management, L1/2/3 handoffs, and workflow?
  3. Organizational models: Should we formalize a GBS framework for Service Management rather than allowing sub-businesses and regions to manage their components separately? Should we choose the Captive, Hybrid, or Outsourced support model? Should we deliver onshore, near-shore, offshore, or a combination of all? Should we use a partner such as a Multisource Service Integrator who coordinates with all support teams and then hands the resulting operational environment over to the organization’s operational business units, or an External Service Provider who implements the new framework and then manages the Service Management Operations execution long term driving further consolidation and optimization?

These are transformative issues and their respective execution is often a delicate undertaking, which few companies are equipped or able to fully address with in-house resources. Ultimately, making the decision to move into an Integrated IT Service Management structure involves the consolidation of the global end-user and infrastructure environments creating an optimized service management environment – schematically depicted in the chart below (Figure 4). These are multi-pronged, complex efforts requiring specialized knowledge.

A practical approach to transformation

Many enterprises struggle to achieve this transformation without experiencing significant complications and cost. Hence the first strategic decision to consider is choosing a partner – and specifically, deciding between a Multisource Services Integrator (MSI) and that of an External Service Provider (ESP).

A Multisource Services Integrator is a neutral orchestrator who analyzes providers existing in the environment, tools, processes, and service levels. It then implements a framework and directs the activities of multiple internal and external service providers to reach the goal of End-to-End Service Management and Delivery Integrated Framework. The MSI then hands the results to the client for their continued operational management. At this point, the client can choose to use the MSI provider as a long-term partner of Service Management.

An ESP choice entrusts the transformation and running of operations to the partner who has better scale, skills, and access to a talent pool, and will typically be the result of a tender to multiple ESPs. The ESP partner will then take a bottom-up approach to implement the optimized IT Service Management – along with all the associated components – and own the operational delivery and management after transition.

Whichever the conditions and situational preferences, in our experience, six criteria best explain the variance in success rates and should be considered when choosing the right partner:

  1. A strong quality management framework
  2. A demonstrated ability to reduce the cost of support, as well as an industrial strength service desk
  3. Experience in managing multiple vendors across multiple domains and geographies
  4. Strong analytical capability, often resident in proprietary frameworks to improve the “intelligence” of the process and improve effectiveness and cost over time
  5. Strong synergies between ITO and BPO, as much of the cost structure and effectiveness levers of industrialized IT service management operations can be tapped by those two models
  6. Strong governance framework aimed at bringing innovation and alignment with the client’s strategy

Advanced operations can significantly help a company’s transformation. Ultimately, the related choices deserve senior executives’ attention as well as expert advice.

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  1. Global Business Services are organizational structures that build on some core aspects of more traditional Shared Service Centers but enable the delivery of multiple types of process operations across functions, and often utilize a global delivery model from a mix of locations.