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ITSM and Performance Based Contracting

May 24, 2004

ITSM Watch Staff

By Rick Leopoldi

The Role of ITSM in PBC
IT Service Management is the amalgamation of industry accepted best practices (ITIL®) that enable IT to be a service provider to the organization. The goal of ITSM is to provide the highest quality of service at the lowest possible cost.

The goal of ITSM is directly aligned with those of Performance Based Contracting, which is to ensure required performance quality levels are achieved and payment is related to the services performed. The employment of IT best practices (ITIL®) supports those goals.

From the perspective of achieving performance goals, it is clear that ITSM enables Performance Based Contracting. In fact, for all IT projects there is not a more effective and efficient manner method to be successful in a Performance Based Contract than by utilizing IT Service Management based on ITIL industry de facto best practices.

From the Service Provider perspective, the rigor and consistent ITSM best practices will enable the necessary systems to make PBC a reality. ITSM facilitates the realization of benefits by ensuring the appropriate qualification and quantification of IT infrastructure service delivery and service support processes are followed.

By adopting ITSM disciplines, not only will the solution architecture and design be understood, but the Business and organization based requirements will be defined and the Performance Based Contract in many cases will not only be met, but exceeded.

Although Capacity Management and Financial Management are directly relational to PBC there are inter-relations, inter-dependencies such as Service Level, Configuration, Change, and Availability management that have a direct impact on responding to, achieving, managing, and maintaining the PBC.

The Benefits of ITSM in PBC
Initially, there should be an ITSM assessment to better understand the maturity levels of all appropriate ITSM areas against industry accepted best practices. This assessment includes a GAP and a priority analysis that is based on the business objectives of the organization.

Once completed, a conceptual understanding of the desired state of IT infrastructure and the expertise to manage it from both service delivery and service support aspects is done within the scope of the maturity assessment and the priority areas. At this point a clear understanding of how the ITSM best practice areas integrate within the organization and provide value, begins to emerge.

Since ITIL/ITSM by nature has IT in an internal service provider role within the organization, a common business based focus and perspective is achieved and utilized in the tactical and strategic planning and day-to-day operations of managing IT. In essence, ITIL/ITSM is a business driven approach to managing and improving operational performance and thereby managing and reducing operational costs.

This by definition is what Performance Based Contracting is designed to achieve, using ITIL/ITSM enables that to happen.

References Materials The following is a list of references used in the development of this article:

  • "Performance Based Contracting and Outsourcing for IT Projects" a Presentation and Workshop - John J Keane, Jr., MELE Associates. The PBC principals presented in this paper were developed directly from this presentation.
  • ITIL Service Delivery and Service Support Guides (ITIL® is a registered trade mark of OGC)
  • "IT Service Management - A Practical Operational Approach Guide" - A Compilation of Best Practices for the IT Service Provider, Rick Leopoldi
Rick Leopoldi is a Managing Business Consultant having more than 30 years experience in IT. For the past 20 years he has developed and delivered process, methods, and technology infrastructure consulting solutions for major organizations worldwide and specializes in ITIL and ITSM best practices.

Prior to forming his own consulting firm, he has held senior consulting positions at various global consulting organizations developing effective solutions to meet specific customer business requirements.

Rick holds a Bachelor's degree in Mathematics from Lehman College in New York and a Master's degree in Business Administration from the University of Hartford in Connecticut.

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