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Looking at ITIL and ITSM From the Business Side

In today’s corporate world the phrase “IT is Business” is often used, but how many people ask how would IT really "do business," asks ISTMWatch guest columnist Mohammad Kashif of Noblestar.
Jun 1, 2006

Mohammad Kashif

All organizations expect their IT departments to look to the business for direction, which has led IT to start thinking and acting like a business. As a result, business concerns are fast becoming IT concerns.

IT is finally making the leap from being just a cost-center to an important business-value contributor. But there are hiccups and translation gaps along the way. Most IT methodologies and best practices are measured in terms of how much direction they can take from the business.

They are not benchmarked to enable key business drivers, but rather to support the derivatives of business objectives translated for IT. I am not arguing this is not working or it should be some other way, but IT should be aware of the market out there which the business is dealing with on a daily basis.

To do this you have to look at what drives business and ask how IT operations can help. The key drivers for any competitive business are:

  • To improve or maintain its position in the value chain by maximizing the value provided to its customers.
  • To maximize its market share and minimize the impact of adverse market forces.
  • Since we cannot detail the philosophies of these two business drivers or possibly analyze a lot of IT best practices in this short article, we will perform a small case study to make the point.

    ITIL and ITSM

    Considering IT Infrastructure Library (ITIL) as a de-facto standard for IT Service Management (ITSM), we will analyze ITIL to see how it delivers to these real market perspectives.

    To give more substance to these business drivers, I have picked two business strategy models from the original guru of strategy, Michael Porter. They are called the Value Chain Model and the Five Forces Model and they can be used to describe and analyze any business model from a strategic perspective.

    We will use these models to see how aspects of ITIL already address the key business drivers and if implemented correctly, can enable IT as a business catalyst:

    Value Chain Model

    Value chain is a model that helps to analyze specific activities a firm can do to create value and competitive advantage in the marketplace. Since it was originally written for business strategy we will simplify it for IT to make things easier.

    The essence of the value chain model is every organization benefiting from or contributing to other organizations is a link in a value chain. From this simplistic notion of value chain, every IT organization can be described by three basic functions—service-in (vendor focus), service-out (customer & user focus), and value-add (operations & infrastructure).

    When an IT organization adopts ITIL or any other ITSM best practice, the first business elements it needs to consider are the three above.

    The "service-in" part of the organization integrates it with it’s suppliers for provision of services and products. Although this integration is mostly at a technical level but can be filtered up to the business level through compliance, governance and key business objectives.

    This is covered by service level management (SLM) discipline of ITIL as underpinning contracts (I would add here there are better ways to provide comprehensive supplier integration than ITIL).

    The "service-out" part is well explained in ITIL by SLM and service desk disciplines with customer and user focus respectively. SLM addresses the customer relationship management aspect of customer integration through its service negotiation, service metrics and reporting best practices.

    Service desk provides a one-stop-shop for IT service provisioning and support for the end user. Availability and incident management ensure the agreed upon service levels are always provided without interruption.

    All these ITIL disciplines describe, in a way, the best practices for outbound logistics for an IT service organization. Most other ITIL disciplines would come under the umbrella of value-add piece of our simplistic value chain.

    ITIL focuses on operational efficiencies and meeting business goals as a contributor to value-add. For example the capacity management discipline aims to provide better and cheaper IT services to the business while release, change, and problem management aim to provide better quality of service (QoS) by reducing the chances of service failure and minimizing the impact of hardware and software transition.

    In addition change and configuration management also provide better control over IT infrastructure and operations. Asset and financial management provide better control over inventory and IT budget thus reducing operational and overhead costs.

    With ITIL, the value is not only added to the external delivered product but also to IT, the business and third-party-vendor operations thus realizing the true meaning of value-add.

    Five Forces Model

    While Value Chain model provides insight into where an organization stands in the marketplace, while Michael Porter’s five forces model help us understand what external forces shape its tactical strategies so it can maintain its place in the value chain.

    Porter defines these five market forces as:

  • Bargaining power of suppliers.
  • Bargaining power of customers.
  • Threat of substitutes.
  • Threat of new entrants.
  • Competitive rivalry within the industry.
  • If you take a closer look at how these market forces shape the operational strategy of an organization, they can be divided into two broad categories—collaborative and competitive. Even though Porter calls all these competitive forces, this further categorization helps us to analyze ITIL.

    Collaborative Forces

    Collaborative forces can be defined as the market forces pushing an organization to “collaborate with” other organizations for its survival. Although they do not work to put you out of business but, rather, demand you to provide better and cheaper services.

    From Porter’s market forces model collaborative forces are the bargaining power of suppliers and customers. These forces can be minimized by good customer relationship management and backward integration with the vendors. ITIL addresses these by providing the best practices for collaborative efforts with the vendor and the customer.

    Competitive Forces

    Competitive forces can be defined as the market forces pushing an organization to “compete against” other organizations.

    From Porter’s model the substitute services can come from industry rivals, new entrants, or market shift. But they all work towards outperforming an organization’s existing services and this qualify as competitive forces.

    According to Porter, these forces can be minimized through efficient operations, economies of scale, quality improvement, and cost reduction, etc. Various ITIL disciplines cover these aspects of increasing an organization’s abilities to minimize competition.

    So what does all this analysis tell us? The point is any well rounded IT methodology, like ITIL, should not only tackle the chief IT concerns, but also help address the key business drivers.

    The take away is that ITIL is better than all other ITSM methodologies or that it addresses all business concerns. It is to show that the beauty of implementing ITSM best practices is to make them relevant to the IT organization and tie them to the business goals.

    If good IT practice can address the holistic market strategy of the business, then there is no reason why they can’t help achieve business objectives. In fact, most business objectives cannot be achieved well without efficient IT operations backing them up. So any IT best practice we deploy in our organization should be benchmarked with the key business drivers.

    Like I said, ITSM best practices won’t make an organization successful when they are confined only in the IT space. They need to be aligned to the business needs and made practical for IT operations.

    Mohammad Kashif is a process strategist with background in software development, IT operations and process optimization. He currently works for Noblestar as a senior consultant and can be reached at mkashif@noblestar.com.

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