IT service management has typically been seen as yet another cost inside of what is perceived to be a cost center known as “IT”. Why? Because many IT organizations still view service management as operating overhead…and nothing else. The potential business value of good ITSM is ignored.
Many IT organizations could start becoming a strategic organizational partner if they understood the ROI of their work. ROI, or Return on Investment, is an important financial metric that most value centers use to measure success. Unfortunately, 90% of all technical support organizations fail to measure ROI.
But, a simple shift in thinking about service management and ROI will create major opportunities for IT.
Why is ROI important to IT?
Why should IT leaders care about ROI? Simply put, ROI is the language of the business. Everyone in the C-Suite understands ROI and how important it is in making business decisions. When IT leaders start discussing ROI with peers, they are taking the “techno-speak” out of the discussion. As a result, ROI makes IT more relatable and understandable to the rest of the business.
Relating IT in terms of ROI within the organization can lead to bigger budgets, better staffing, and improved service relationships. Data shows that top performing IT support organizations produce a ROI of 500% or greater on an annual basis!
Understanding the ROI of Service Management
Measuring the ROI of service management starts with quantifying work. But not in the ways that many typically think, like counting closed tickets or tracking time to resolution. Rather, quantify service management in terms that truly demonstrate business value—measures like savings (or “costs avoided” as an early CFO of mine schooled me about) through better processes, improved productivity, or investments in innovation. These are the kinds of topics business colleagues care about – not IT operational measures.
Here are three examples where you can illustrate a business-relevant ROI of good service management.
ROI Area #1 — Time is Money
According to estimates, the global impact of unplanned downtime is 14.3 billion and employees lose an entire day of productivity due to unplanned downtime.
Many ITSM leaders measure IT productivity in terms of number of incidents resolved and time to incident resolution. This is a flawed approach. An incident is not a “value-add”. While there is (limited) value in resolving an incident, the real business value is not having incidents at all.
So how might good service management practices produce an ROI? Let’s take an example. Company XYZ implemented service management improvements during quarter two. These changes included improving change enablement practices and developing and publishing self-help knowledge articles regarding the most-frequently encountered issues.
Because of these changes, XYZ saw over 4,700 fewer tickets in Q3 & Q4 than they had in Q1 & Q2.
Now let’s apply money to the scenario. Let’s say every ticket costs the company $10 in productivity loss (of course, it’s much more than this!). By implementing these improvements, IT helped the organization avoid nearly $50,000 of lost productivity. That’s where the real value and the ROI of service management begins to show itself.
ROI Area #2 — Avoid unnecessary cost with self service
Another ROI-enhancing area for service management is the concept of “shift left.” Shift left means moving support and enablement activities closer to those doing the actual work. For example, moving incident resolution or request fulfillment from a desktop support team to the service desk or from the service desk to Level 0 (self-help), can help an organization avoid unnecessary escalation-related costs. Unnecessary escalations result in support costs that are not directly reflected in performance measures. Because these escalations appear to be just ‘business as usual’, the cost associated with those escalations go unnoticed.
How many tickets are unnecessarily escalated that could have been solved by Level 1 or by self-help? According to TechBeacon, a typical service desk ticket can cost around $22. But escalating a ticket can cost an additional $69, making the total cost of the ticket $91. If you are handling tens of thousands of tickets, these costs add up quickly.
But when self service offerings are provided for those repeatable and predictable support and enablement activities, your organization avoids the costs associated with ticket escalation.
ROI Area #3 — Spend on innovation, not support
This last area is perhaps the most important but often the most forgotten. It’s where poor IT service management practices drain resources from innovation.
To understand how good service management facilitates innovation, let’s start by understanding the basis of IT budgets. Generally speaking, IT budgets have three categories of costs:
- Fixed costs, like salaries, support contracts, and other operating expenses. These costs typically do not change dramatically year over year.
- Innovation, in the form of new projects and improvement initiatives. These costs represent outcomes that the organization would like to realize through investments in technology.
- Maintenance and support, which includes application and software updates, responding to incidents and requests, security monitoring and patching, and other day-to-day activities needed to maintain reliability and availability.
Again, let’s use some easy numbers for illustration. If an IT budget is $1000, then typically fixed costs make up $500. Innovation is budgeted at $300, and maintenance and support is budgeted at $200. The organization is optimistic about realizing new value through innovation. Support costs are acknowledged and seem reasonable.
Until the impact of poor IT service management practices become evident. Poor IT service management practices result in poor change implementations. Lots of fire-fighting. Too many meetings to discuss and decide what should be simple requests. Automation that just doesn’t work well. Confusion regarding how technology enables current organizational outcomes. Duplicative products and services.
And suddenly, the IT organization is spending more time in maintenance and support, and less time innovating. And what part of the IT budget absorbs that additional cost? The budget allocated for Innovation. Innovation is sacrificed to cover the (unnecessarily excessive) cost of simply keeping the lights on.
Good service management preserves that innovation budget, by doing the right things well when it comes to maintenance and support.
What is the simple shift in thinking that enables service management ROI?
How is it possible to realize ROI with service management, rather than looking at it as cost?
The answer is simple.
It starts with a shift in thinking. Rather than viewing service management as a means of control, begin viewing service management as a business enabler.
While the IT operational aspects of service management are important, it is not why organizations need to practice good service management.
Good service management enables organizations to achieve business outcomes. Good service management enables organizations to realize value from its investments in and use of technology. And one of the key ways to enable this shift in thinking is to talk about service management in terms of ROI.
Tedder’s Takeaway – Why It Matters
Shifting how the organization views service management is a critical enabler for discussing the ROI of service management. Moving the conversation from cost to results, then attaching ROI to those results. Having the ability to discuss ROI with organizational peers not only makes IT more relatable, it also repositions IT as a strategic enabler, with a tangible way to understand the impact of good service management.
Is it time to shift your thinking about service management? Are you reporting operational measures instead of business outcomes? What would be possible for your organization if you could illustrate the ROI of service management? Let Tedder Consulting help! For more information, contact Tedder Consulting today.Share