Demonstrating IT's Value As Internal Service Provider

by Mary Nugent

Internal IT organizations are frequently viewed as cost centers. While most business units assume that the cost of IT is too high, and that they can get better value by outsourcing, they should consider the undocumented services performed by IT. At the same time, IT must prove its business value by demonstrating its understanding of customer needs.

As the Internet enables enterprises to become "virtual," organizations must be able to share business systems with partners and customers. This trend is putting more pressure on IT departments. In fact, IT is no longer just focused on LAN or WAN; now it must deal with remotely dispersed servers, disconnected clients and public Internet connections. IT assets must be managed with guaranteed and reliable service levels. To cope with the new demands of service level management, many enterprises will look at outsourcing.

Is outsourcing less expensive than internal IT?

While many enterprises believe that using external service providers will automatically lower costs, analysts caution them to look closely at the breakdown of services offered by providers. According to M. Nicolett of Gartner, "Good business decisions can only be made with a clear understanding of current services and costs, the impact of change and the risk associated with IT services that do not meet business requirements."

Internal IT organizations must provide their business units with a complete list of services they offer. If this documentation is not provided, enterprises may pay more for outsourcing in the long run as they request services that were once standard with IT but were missing from the external service provider's initial quote.

What if outsourcing is not an option?

For some enterprises, outsourcing IT resources is not a viable option. For example, while security is a paramount concern, outsourcing IT may create rigid security precautions that do not allow for the same level of productivity. Also, some organizations may choose not to outsource because they do not want to give up control of their technology infrastructure, their applications or their information. If any of these concerns are present, the internal IT organization must adopt the practices of outsourcers to become a service provider to its own enterprise.

How is IT affected?

As a result of this new enterprise-internal service provider relationship, IT departments will be held responsible for providing business services in addition to IT services. For example, rather than monitoring just the performance and availability of each component (server, database, etc.), IT will need to ensure that the service levels meet the strategic goals and needs of individual business units and departments.

How does IT become a service provider?

Think like an external service provider

For starters, IT organizations must replace the term "end user" with "client." Referring to individuals as "users" is a thing of the past — now everyone is a "client" or "customer." This change in thinking leads to the biggest hurdle the IT organization faces — becoming an effective communicator. The entire IT staff must improve its communication skills and business acumen. Becoming a good communicator means learning how to sell the IT value proposition. "Selling" does not come naturally to a technical person so IT staff must be trained to understand their customers' businesses and to effectively communicate with the business units.

Define good service levels

The basics of "who, what, when and where" apply to any service levels that are agreed upon with the customer. Who is responsible for what, how often it will be reviewed (when) and where the review process will occur.

Also, IT must define services within the context of business strategy and customer needs. According to Kris Brittain and Richard Matlus of Gartner, "…defined services are an amalgamation of the internal and external elements from a business and IT perspective."

Clearly communicate the value proposition of IT services

IT organizations are used to focusing inward on technology. Now they need to focus outward on communications with the business units. According to D. Curtis of Garter, "To optimize its contribution to corporate profitability, [IT] must also focus outwardly on regularly communicating with business stakeholders."

IT must proactively demonstrate that it understands its customers' needs. If not, the business units may turn to outsourcers because they think external service providers — who use the same business terms as business units — are more familiar with business needs and have better processes than internal IT. However, Nicolett points out: "The internal IT operations group can solidify its position as the preferred service provider by defining current services, developing granular cost information and leveraging its potential for customer intimacy."

Also, according to Martin Rosenberg of META Group, "… IT executives and [business unit] managers should jointly assess IT investments by regularly running tactical and strategic services planning meetings." IT can achieve this by identifying business "gurus" who will agree to act as the IT organization liaison to the business group. Getting these experts to feel as if they are a part of the "team" is important. IT should work at this relationship through frequent, personal contact, such as lunch dates. Otherwise, as B. Gomolski and J. Grigg, of Gartner, write: "If personal contact is limited to the office, it will be difficult — if not impossible — for the [IT] outsider to become a management insider."

At the same time, Curtis says, "This communications path must be a two-way street, meaning that the [IT] organization is not the only stakeholder. The business units must also identify the parties responsible for their end of the negotiations."

Curtis goes on to say that communicating with business units about service levels on a continuous basis will help IT to better meet service levels. "A defined process to renegotiate SLAs because of changes in the business environment will ensure that the IT infrastructure continues to perform as needed by the business units."

Assigning a value to and charging for services

Rosenberg says that IT organizations should offer variable pricing linked to availability options, similar to those of external service providers. Different levels of services should be offered at different costs so the amounts charged back to business units are based on specific requirements. This "…enhances the enterprise's ability to better compare ‘apples to apples’ in services that are internally sourced to those offered by external service providers," say Matlus and Brittain.

Defining SLAs that govern services

Often when business units ask for SLAs, they receive raw data, which is not relevant to what they want to know. Business units require business-focused metrics. These metrics must be clearly defined and understood before SLAs can proceed. IT and business units must agree on key performance indicators, such as what is being measured, what form it will be in and the types of reports that will be provided.

According to Brittain and Matlus, the IT organization determines the terms and metrics of these SLAs, which are documented as service commitments and communicated to the business units. They go on to say that often times SLAs are not met because lack of communication and failure to set expectations. They suggest that IT and business units need to agree on service levels to be measured and on each other's roles. Internal IT must be willing to accept SLAs as performance to work against and define penalties for when SLAs are not met need to be defined. Also, IT should evaluate current service levels so that it is aware of what is realistic before guaranteeing SLAs to business units.

In addition, a well-defined SLA has a language common to both IT and business units, which reduces the cost of having to explain reports, according to B. Gassman of Gartner. Accuracy of metrics is important to their value, and the value should be determined by what the customer requires so that only relevant metrics are published.

Adopt new tools to address the unique requirements of a one-to-many model

IT needs a solution with a multi-tenancy architecture that enables it to deliver a highly scalable and reliable application with low administrative costs. Then IT can easily, reliably and seamlessly support large numbers of customers (business units).

Continually review practices and look for industry-adopted templates for IT service

IT should examine current operations to identify ways of improvement. Nicolett suggests that to be proactive in its marketing to business units, "the IT operations group should implement best practices independent of any outsourcing evaluation."

To better position themselves against external service providers, internal IT organizations should have both a detailed service description and well-defined process. A formalized approach to supporting business initiatives is best. To do this, IT needs to get formal acknowledgement from business units that certain levels of service are necessary.

Summary

IT organizations must continually communicate with their business unit customers to ensure a good working relationship and long-term success. Changing the language used and focusing on how service levels relate to business needs will help demonstrate IT's value to the business units.

Mary Nugent is VP at BMC Software.

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