Lowering Incident Management Costs

In today’s economy, IT is under pressure to reduce costs and "do more with less". As a result, IT managers are looking for ways to cut expenses wherever possible. Incidents and reactive work are being scrutinized for opportunities to cut costs and therein lies both challenges and opportunities for the groups that understand the type of costing benefit their work may bring.

Costing Overview

One of the concepts often promulgated by consultants, software vendors, and others with an agenda revolve around the costs associated with transactions. The basic premise is if you can remove costs from a transaction then there must be a savings. A common example is to cut the time it takes to do something and then extend it by a loaded labor rate and then display the difference as a “cost savings”. Those numbers then go into business cases and so forth only to make knowledgeable executives roll their eyes as another example of IT not understanding costing.

At the risk of oversimplifying, unless a change causes a reduction in payments, such as to a vendor, or a reduction in labor expenses, then there isn’t a true accounting cost savings. When improvements yield time savings to existing resources or enable less-constrained, lower cost resources to be used (which then free up more constrained higher level resources), then the improvements relate to opportunity cost savings.

Opportunity costs are an economic concept. The premise is if a resource is performing one task, then it comes at the expense of another. For example, if a senior engineer is doing break-fix incident work versus project work to get the organization closer to its goals, then the opportunity cost is that very loss—break/fix firefighting vs. true improvement. All things being equal, we’d prefer the engineer to be working on the meaningful project work.

The organization has opportunity costs as well. If an IT service is unavailable, can the business conduct operations? For example, if an order entry website is down and sales are not possible then revenue is lost and may not be recoverable. When looking at incident costs, as this example shows, it is important to look outside of IT for impacts as well.

What to Improve

With that said, there are typically many opportunities that can be pursued to reduce the costs of managing incidents. Each organization is different but the first step is to assess the current state, compare current practices to best practices and then identify which gaps will yield the greatest benefits to the organization given its stated direction, constraints, available time, budget, ability to change and so on.

The first step is to implement a formal Incident Management process. However, there are limits to the possible improvements within the Incident Management process itself. To generate significant result long-term requires the involvement of other process areas and their respective IT teams. The ITIL v3 lifecycle has five phases that contain opportunities to reduce the costs associated with incidents. The following are examples of phases that could impact the accounting and opportunity costs associated with incidents:

Service Design – If total requirements are understood, proper tools are used and personnel with the right skills are used to create and maintain services then the resulting releases will be of higher quality. The processes in this phase such as Service Level Management, Capacity, and Availability, can all be leveraged to understand and review service design requirements. All things being equal, if services are built correctly then incidents in production will go down.