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ITIL 3 leads way in helping IT transform into mature business units amid the 'reset economy'

|Includes: ACN, HP Inc. (HPQ), IBM, ORCL
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. View a full transcript, or download the transcript. Learn more. Sponsor: Hewlett Packard.

Free Offer: Get a complimentary copy of the new book Cloud Computing For Dummies courtesy of Hewlett-Packard (a $30 value) at www.hp.com/go/cloudpodcastoffer.

Running IT departments as mature business units has clearly become more pressing. Recessionary budget pressures and the need to compare existing IT costs to newer options and investments means IT and business leaders need to understand how IT operates from an IT services management (ITSM) perspective.

The "reset economy" has moved the business and operations maturity process of IT from "nice to have" to "must have," if costs are going to be cut without undermining operational integrity. IT financial management (ITFM) must be pervasive and transparent if true costs are to be compared to alternative sourcing options like data center modernization, SaaS, virtualization, and cloud computing models.

Fortunately, there is a template and tried-and-true advise on moving IT operations to such business unit maturity. The standards and methods around ITIL Version 3 provide a pattern for better IT efficiency, operational accountability and ITSM. Yet there are some common misunderstandings about ITIL and how it can be best used.

To help unlock the secrets behind ITIL 3, and to debunk some confusion about ITIL v3, I recently gathered three experts on ITIL for a sponsored podcast discussion on how IT leaders can best leverage ITSM.

Please welcome David Cannon, co-author of the Service Operation Book for the latest version of ITIL, and an ITSM practice principal at HP; Stuart Rance, service management expert at HP, as well as co-author of ITIL Version 3 Glossary; and Ashley Hanna, business development manager at HP and also a co-author of ITIL Version 3 Glossary.

Here are some excerpts of our discussion:

Cannon: IT needs to save costs. In fact, the business puts a lot of pressure on IT to bring their costs down. But, in this economy, what we're seeing is that IT plays a way more important role than simply saving money.

Business has to change the way in which it works. It has to come up with different services. The business has to reduce its cost. It has to find better ways of doing business. It has to consolidate services. In every single one of those decisions, IT is going to play an instrumental role. The way in which the business moves itself toward the current economy has to be supported by the way in which IT works.

Now, if there is no linkage between the business and the way in which IT is managed, then it's going to be really, really difficult for the business to get that kind of value out of IT. So, ITSM provides a way in which IT and the business can communicate and design new ways of doing business in the current economy.

IT is going to drive these changes to the business. What we're seeing in the reset is that businesses have to change their operating models.

Part of an operating model within any business is their IT environments and the way in which IT works and is integrated into the business processes and services. So, when we talk about a reset, what we're really talking about is just a re-gearing of the operating models in the business -- and that includes IT.

Rance: A lot of people don't really get what we're talking about, when we talk about service management.

The point is that there are lots of different service providers out there offering services. Everybody has some kind of competition, whether it's internal, a sort of outsourcing, or alternate ways of providing service.

All of those service providers have access to the same sorts of resources. They can all buy the same servers, network components, and software licenses, and they can all build data centers of the same standards. So, the difference between service providers isn't in what those resources they bring to bear. They are all the same.

Service management is the capabilities a service provider brings in order to deploy, control, and manage those resources to create some value for their customers. It includes things about all of your processes for managing changes, incidents, or the organizational designs and their roles and responsibilities, and lots of different things that you develop over time as an organization, it's how you create value from your resources and distinguish yourself from alternate service providers.

... What I've seen recently is that organizations that have already achieved a level of ITSM maturity are really building on that now to improve their efficiency, their effectiveness, and their cost-effectiveness.

Maybe a year or two years ago, other organizations that were less mature and a bit less effective were managing to keep up, because things weren't so tight and there was plenty of fat left. What I'm seeing now is that those organizations that implemented ITSM are getting further and further ahead of their competition.

For organizations that are not managing their IT services effectively toward the end of the slump, it's going to be really difficult. Some organizations will start to grow fast and pick up business, and they are going to carry on shrinking.

Hanna: If ITIL has been implemented correctly, then it is not an overhead. As times get tough, it's not something you turn off. It becomes part of what you do day-to-day, and you gain those improvements and efficiencies over time. You don't need to stop doing it. In fact, it's just part of what you do.

... We've gone from managing technology processes, which was certainly an improvement, to managing end-to-end IT service and its lifecycle and focusing on the business outcome. It's not just which technology we are supporting and what silos we might be in. We need to worry about what the outcome is on the business. The starting point should be the outcome, and everything we do should be designed to achieve what's wanted.

Cannon: In terms of trends like cloud, what you're seeing is a focus on exactly what it is that I get out of IT, as opposed to a focus from the business on the internal workings of IT.

... What things like cloud tend to do is to provide business with a way of relating to IT as a set of services, without needing to worry about what's going on underneath the surface. So, business is going to look for clear solutions that meet their needs and can change with their needs in very short times.

They still have to worry about managing the technology. These issues don't go away. It really is just a different way of dealing with the sourcing and resourcing of how you provide services.

... Businesses need to be able to react quickly and ... to be very flexible within a rapidly changing, volatile economy. So, business is going to look for clear solutions that meet their needs and can change with their needs in very short times.

Hanna: An issue that comes up quite a lot is that ITIL Version 3 appears to have gotten much bigger and more complex. Some people look at it and wonder where the old service delivery and service support areas have gone, and they've taken surprise by the size of V3 and the number of core books.

When Version 3 came out, it launched with a much bigger perspective right from the beginning. Instead of having just two things to focus on, there are five core books. I think that has made it look much bigger and more complex than Version 2.

It is true that if you go through education, you do need to get your head around the new service life-cycle concept and the concept called "business outcomes," as we've already mentioned. And, you need to have an appreciation of what's unique to the five core books. But, these changes are long awaited and they're very useful additions to ITIL, and complementary to what we've already learned before.

Rance: If you look at financial management in ITIL Version 3, it says you really have to understand the cost of supplying each service that you supply and you have to understand the value that each of those services delivers to your customers.

Now, that's a very simple concept. If you think of it in a broader context, you can't imagine, say, a car manufacturer who didn't know the cost of producing a car or the value of that car in the market. But, huge numbers of IT service providers really don't understand the cost of using its service and the value of that service in the market.

ITIL V3 very much focuses on that sort of idea -- really understanding what we are doing in terms of value and in terms of cost-effectiveness of that level, rather than that procedural level.

Cannon: Financial management really hasn't changed in the essence of what it is. Financial management is a set of very well defined disciplines. Within Version 3, the financial management questions become more strategic. How do we calculate value? How do we align the cost of a service with the actual outcome that the business is trying to achieve? How do we account for changing finances over time?

Rance: A lot of businesses are in the service business themselves. It might not be IT service, but many of the customers we're dealing with are in some kind of service business, whether it's a logistics business or a transport business. Even a retailer is in the service businesses, and they provide goods as well.

In order to run any kind of a service you need to have service management. You need to manage your incidents, problems, changes, finances, and all those other things. What I'm starting to see is that things that started within the IT organization -- incident management, problem management and change management -- some of my better customers are now starting to pick up within their business operations.

They're doing something very much like ITIL incident management, ITIL change management, or ITIL problem management within the business of delivering the service to their customers.

Hanna: If you're running yourself as a business, you need to understand the business or businesses you serve, and you need to behave in the same way.
Free Offer: Get a complimentary copy of the new book Cloud Computing For Dummies courtesy of Hewlett-Packard (a $30 value) at www.hp.com/go/cloudpodcastoffer.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. View a full transcript, or download the transcript. Learn more. Sponsor: Hewlett Packard.