Part 3 in our global study of gaps in IT transformation
If you read my last two blogs, you know that EMC and VMware have been doing workshops on IT transformation with CIOs for several years now and that we recently analyzed the data collected during these workshops in our State of IT Transformation analysis. 80% of the participants indicated they want to standardize services in a business-focused catalog and to increase automation to improve IT service delivery including:
- Resource Provisioning – 77% of participants expressed the desire to provision infrastructure resources in less than a day by 2016-2017, or dynamically as needed; over half reported they currently take one to four weeks to do so
- Financial Management – 87% said they rely on a yearly allocation-based recovery, or a project-by-project recovery of IT costs; only 5% said they are able to bill the business for services consumed at an advertised price
How do you get to a state where you can dynamically provision infrastructure resources? Automation of course. The CIOs in our analysis view cloud technologies as a key enabler for them to provide the automation and self-service that will reduce operating costs. 70% want to standardize on a hybrid cloud architecture across the organization in the 2016-2017 timeframe with over 90% of companies currently in the evaluation or proof of concept stage. Once you have the platform in place, you can easily provision infrastructure, and then it’s relatively straightforward to add new internal or external services such as PaaS or SaaS. Ever thought about jump-starting these things with a pre-engineered solution? According to Principled Technologies, it’s 92% faster, about 1½ months vs. 1½ years, to buy vs. build.
This leads us to another key area where CIOs want to improve – charging a fair price for the services in their catalog. So, how do you determine the total cost of your service so that you can create a fair price for it? Total cost of a service is based on its component costs and projected utilization.
A service’s component costs are computed by aligning physical assets with IT financial data. To determine the physical assets, start with your service catalog. The catalog contains the service reference architecture, which identifies all the physical assets needed to deliver the service. This includes hardware, software, networking, facilities, personnel, external services, and overhead assets. Then collect the IT financial data such as cost, depreciation, end of life, etc., for the physical assets.
To determine projected utilization, put the performance data of your existing monitoring systems in a database. Use reporting tools to analyze historical trends and determine projected service utilization as well actual utilization.
Once component costs and projected utilization are determined, that information can be input into a cost model to determine service total cost of ownership (TCO). Read more about how EMC does IT financial management.
Once you know your costs, you can determine what price you want to charge the business. Service pricing involves evaluating the service TCO against specific IT financial objectives and funding policies. For example, services can be priced to recover IT costs, or to make internal services cost-competitive with external services. They can be priced to provide funding for internal projects or capital improvements. Or they could be priced to make a profit.