Business-Aligned Metrics for IT Services in Cloud: Returns on Agility, Elasticity, Continuity and Consistency
Well-balanced metrics definition is key for mature IT service management practices. For cloud-based IT services, financial and cost measures only tell a lopsided story. Use the sample metrics in this research to factor in the other aspects related to business outcomes.
Infrastructure and operations (I&O) organizations need mature IT service management (ITSM) practices to leverage the cloud effectively. A key determinant of mature ITSM is the availability of business-relevant metrics. This research suggests sample metrics that link IT services to business outcomes.
- Cloud computing requires a balanced ITSM approach that may capture both financial and nonfinancial aspects of IT services, in terms of business benefits.
- Metrics are least mature in the case of most I&O organizations.
- With inadequate metrics definitions, I&O organizations in their current state are not in the right position to be able to manage and leverage cloud effectively.
- Complement the financial measures for cloud with business-aligned, service-value-based metrics.
- Factor in considerations regarding the process- and service-oriented culture of I&O, while defining metrics for cloud-based IT services.
- Leverage the business-aligned metrics samples provided in this research, along with your own organizational IT priorities, to define ITSM metrics for IT services in the cloud.
Defining business-aligned metrics is a key requirement for successful ITSM. For example, relating ITSM and metrics to automobiles and dashboards, in an internal combustion engine, all the cylinders have to fire in a synchronized manner to produce consistent power and speed, further complemented by the smooth functioning of gears and subsequent transmission mechanisms. However, a typical user of the car is more interested in monitoring dashboard parameters on functionalities and outcomes (such as response time, speed and power), rather than the internal, technical workings of engine and transmission components.
Similarly, in an I&O organization, all the ITSM processes need to work in sync, cutting across various technical domains (e.g., servers, networks, storage and applications), to make I&O agile and responsive in near real time. However, the internal details are of little practical relevance for business users. For them, ITSM metrics must show the impact that the IT services are having on organizational objectives. Cloud brings a transformational opportunity for I&O to effectively execute the vision of IT as a service; however, to turn this opportunity into reality, ITSM metrics must reflect business outcomes.
I&O teams that are typically focused only on technical or cost metrics (such as server uptime, network availability and service levels, or data storage costs and full-time employee [FTE] costs), often fail to control the IT service value chain across the process and technology silos. Hence, cloud decisions cannot be justified by financials and cost savings alone:
- The cash-flow advantages of IT as operational expenses, which are one of the main financial promises of the cloud, could be flattened out in the long run, when plotted against typically fast-depreciating capital expenses that would have been incurred during the procurement of on-premises or internally owned infrastructure components.
- The traditional financial measurements of depreciation and ROI do not comprehensively capture all the cloud realities. For example, cloud computing typically reduces capital investments; therefore, the depreciation formulas, along with their assumptions, do not hold true in a cloud-based sourcing model, be it infrastructure as a service (IaaS), platform as a service (PaaS) or software as a service (SaaS).
- Financial measures often tell an incomplete story, because they focus more on the cost aspects than the value aspect (i.e., the business value and impact of IT services). IT service value realization needs to be considered in the context of specific business outcomes supported by the IT services, along with other organizational factors (such as service orientation and process culture).
Inadequate metrics definitions lead to I&O snapshots in pockets, and, therefore, fragmented management and localized improvements. "ITScore for Infrastructure and Operations," Gartner's maturity model, shows that I&O process metrics have the lowest maturity (1.68) across all the attributes of all the dimensions (n = 277, through October 2011, on a scale of 1 to 5). ITIL 2011 puts significant emphasis on defining business-relevant ITSM metrics.
Cloud impacts the IT service value chain from generation to consumption and realization of service value. The influence of the cloud is visible, starting from service production costs to supporting key business outcomes (such as faster time to market, quicker response to rapidly changing demand and supply situations, profitability, productivity, revenue growth, etc.), due to the improved agility and elasticity of I&O.
Consequently, any business case for cloud-based IT services needs to reflect a balanced view that complements the financial aspects with business-outcome-based metrics that make the IT service value clearly visible to the entire organization. Definitions of metrics for intangible, nonfinancial parameters (such as agility) need to cut across the synchronized, seamlessly integrated ITSM processes (such as capacity, demand, change, release, transition planning and support, and service asset and configuration management [SACM]).
In various scenarios (e.g., if an organization decides to try out or set up a private cloud, decides to source various computing and service utilities from a public cloud, or decides to adopt a hybrid cloud), the I&O team has to evaluate multiple dimensions for these decisions, with financial considerations being among them, although not the only ones. For example, there are:
- Organization structure, culture and service orientation issues
- Process integration issues
- Issues with service asset integration, portability and dependencies between assets, which may be multisourced, with different service management metrics and monitoring mechanisms in place
- Supplier and sourcing management process maturity (standard metrics, pricing, offerings and subsequent reporting practices, and relationship approaches)
In terms of the availability of standard metrics definitions, cloud-based IT services are still in the formative stage.
Effective communication on the strategic value of cloud-based IT services to the businesses is fundamental in building business cases for cloud adoption or the evaluation of cloud options. A balanced approach can enable the I&O team to evaluate cloud options from the business users' perspectives, such as end-user, customer and employee experiences with IT services and I&O processes, coupled more tightly with various business processes. This way, the IT service value becomes more transparent, visible and manageable.
Effective business cases for cloud will be less technical and more business-oriented. For example, cloud has the potential for bringing in IT operations process agility and resilience, improving service continuity, and providing inexpensive and on-demand solutions for archiving and backup provisioning. These are strategic, long-term, business-relevant aspects.
The examples of metrics that link cloud-based IT services to business outcomes that are provided below are indicative, rather than exhaustive. I&O organizations may use similar ways to define additional metrics, such as return on availability and return on predictability, to build business cases that address their specific organizational priorities more appropriately:
- Agility how quickly an IT service, capacity allocation scheme, workload distribution plan, etc., can adapt to changing demand situations and business environments, or technology scenarios, with varying performance and service levels, in near real time.
- Elasticity how much the compute/storage/network capacity, and their combinations, can be stretched. This, when added to agility, gives one of the strongest value-based metric definitions for any cloud decision, be it private, public or hybrid.
- Continuity how long an IT service can go without any interruptions (planned or unplanned), depending on its revenue criticality.
- Consistency how much variations are reduced in service levels, and how long the IT services can go without significant variations in the service levels, in conjunction with continuity.
When these sample metrics for cloud-based IT operations and services are linked to the business outcomes they support, the following metrics can be defined and used to build business cases for cloud-based IT services that would be more business-relevant, realistic, comprehensive and inclusive than ROI.
In terms of ITSM process agility, this relates to the speed of change to business outcomes. For example:
- Due to the faster execution of change, if the time taken to upload new sales promotion schemes has shortened from three days to five hours, what, if any, impact is there on sales? What additional sales (by volume and transactions), if any, have taken place due to the quicker launching of promotions, compared with previous launches?
- If the capacity management process has become faster, what additional business outcomes are being supported if extra capacity provisioning is quicker by X%?
Sample scenario: The product engineering team in an organization plans to leverage hybrid cloud for new product design simulation and testing. In the current state, the team typically must wait for lean business hours, at times stretched into as long as a few days, to run resource-intensive simulation and testing programs on new product designs. Whenever the team requests a few virtual machines to be allocated for running simulation and testing, its requests almost always take a back seat, due to other revenue-critical, hence emergency, requests. This happens regularly.
Suppose the team could source the extra compute capacity, when needed, from a public/community cloud, resulting in a drastic reduction in the average waiting time:
- What are the productivity gains for the product engineering team? (Given that there are highly paid specialist design engineers involved, productivity improvement may lead to significant business outcomes.)
- What is the impact on time to market?
- What are the strategic imperatives (e.g., first-mover advantage)? Are the new product launching cycles shortened? Are the innovation cycles faster?
What additional support for business outcomes is available due to elastic compute/storage/network capacity being available from a private, public or hybrid cloud?
Sample scenario: For any organization, how many more simultaneous transactions/users can be accommodated, due to elastic capacity?:
- What additional business outcomes (such as sales or productivity) are being supported?
- How many probable incidents (analysis of pattern data from past incident records may reveal these), due to capacity outage or disruptions in servers/storage/networks, have been thwarted by the elastic capacity of these resources? How much revenue/how many sales have been protected by minimizing these outages?
Improved continuity of revenue-critical services will have a direct impact on business outcomes, such as sales.
Sample scenario: If the IT service continuity improved by 30% for all revenue/mission-critical services, on average:
- What additional sales, profit and revenue realizations have occurred, if any?
- Are the opportunity costs due to lost sales coming down?
Consistent service levels will have a positive influence on customer satisfaction.
Sample scenario: For every 10% improvement in service-level consistency for mission-critical services (i.e., reduced service-level fluctuations, reduced variances in end-user experiences):
- What is the percentage improvement in customer satisfaction?
- Are the improved satisfaction levels for end users translating into better business results?
These are more business-oriented than technical. Technical metrics (like server utilization, network availability, application uptime and data read/write operations) do not convey the overall IT service value. Cloud is more of a viable business and service innovation than a technical one, as the concepts and technologies (such as application service providers [ASPs], grid computing and remote clusters) have been around for a long time. The real value of cloud lies in the I&O organizational capabilities that can leverage available IT service assets in a more efficient, transparent and ubiquitous manner. IT as a service to the business can be measured in the applied form only in the context of the business, not in technical terms.
Metrics for standard offerings can be customized to reflect specific organizational priorities, when they are linked to business outcomes. In the case of hybrid or public cloud offerings, the standard metrics from various service providers can be enhanced by the internal I&O organizations that are buying or managing cloud services as scale-out or capacity-bursting or specific functional support options (e.g., development and testing).
Business-relevant metrics definitions are critical for I&O organizations to effectively leverage cloud-based IT services and options. Business cases for IT services in the cloud need to reflect a balanced view of the IT service value chain across various I&O processes and technology silos in different I&O environments.Source: Gartner Research, G00218589, T. Bandopadhyay, 10 January 2012