Running IT as a business with ITIL v3

ITIL v3 is providing a proven roadmap to enable companies to run their IT operations the same way they run their business. One reason this methodology is valuable to the financial services market is because IT has become a core function of financial institutions. Financial services companies rely heavily on IT to offer a wide array of services and meet customer demands. Because IT is so central to the way financial services companies do business, the way a company runs IT can have a major impact on how the company performs and on the quality of service. Trading, transaction processing and currency exchange are just a few of the processes that depend entirely on IT today, and better performance in each of these areas is a competitive advantage in the market.

Another reason financial services companies should consider ITIL v3 is that this sector spends a large portion of their budget on IT services, compared with other industries. Managing this significant budget as a business enables financial services companies to drive costs down, and to make sure they are getting the expected business results in accordance with this substantial investment.

An additional reason financial companies should adopt ITIL v3 best practices is to achieve compliance with regulatory requirements, such as Basel II, Sarbanes Oxley (SOX) and MiFID, which require financial institutions to follow a service management methodology. The leading proven methodology today is ITIL.

Many financial organizations already know about the advantages of ITIL, but they probably are more familiar with ITIL v2. The main change between ITIL v2 and v3 is the evolution from a set of internally focused IT processes to a set of customer-facing service management guidelines to support a service-driven life cycle. ITIL v3 represents a fundamental shift in IT operations, from a focus on technology to a focus on business and customer needs, realizing the true intention behind business service management (BSM). With this new direction, ITIL empowers the IT organisation to demonstrate business value, and align IT services with business objectives such as reducing expenses and improving customer service.

Taking the next step – focusing on business and customer needs

The number one challenge of ITIL is deciding where to start, or where to go next if you are already implementing. Look to progressive financial services companies who are making the customer and business elements of ITIL v3 a high priority. It is important for financial services companies to understand that no matter where they are in the ITIL implementation – even if they are still working on the process improvements to the “factory floor” of IT operations, or still in the middle of implementing ITIL v2 – they can gain dramatic advantages from leveraging key elements of ITIL v3 right away. Aligning IT operations with the needs of the business and the customers who are consuming the IT services, using ITIL v3 as a guide, is an essential advantage that should be pursued without delay.

Many aspects of ITIL v3 enable financial services companies to run IT operations the way they would run a business. This is a fundamental shift in how the services are perceived both by the service providers and the service consumers – the business units who are the internal customers of the IT department.

Three key processes in ITIL v3, which support the strategy of running IT as a business, offer practical next steps for financial services companies: Service Catalogue Management, Service Level Management and Service Financial Management.

- Service Catalogue Management is a methodical process of building a portfolio of available services, based on customer needs, and outlining multiple options for the customers in an easy to understand format. Management of the service portfolio also includes strategic decision making regarding factors such as feasibility, cost and service quality, as well as customer demand and usage levels. These decisions steer investment in IT resources to make the greatest impact on the business.

- Service Level Management helps companies establish an agreement detailing the service levels the customer can expect, and monitor those service levels to ensure delivery of expected performance. Processes automated with software are available to put in place now such as predictive alerting to pinpoint service issues in advance, root cause analysis to uncover the source of a problem, escalation processes to ensure timely problem resolution, and trending and forecasting to understand future demands and challenges. IT groups can also use these processes and applications to continuously improve service quality, increase customer satisfaction, and reduce service delivery costs.

- Service Financial Management involves determining accurate costs of delivering services and charging those costs back to customers based on actual use. This is revolutionary, especially for the financial services sector. Traditionally there has been minimal customer accountability for IT spending, which has caused a significant amount of waste. By making the spending of IT transparent across the organization, all business units become involved in driving down IT costs even if the organization is not yet ready to actually charge the business unit P&Ls.

All three of these vital components of ITIL v3 require specialized applications to automate these processes, such as Digital Fuel’s ServiceFlow, a complete suite of tools to handle management of service catalogues, service level performance and financial management of IT services.

Gaining bottom-line results

When implementing these elements of ITIL v3, and transforming IT operations into a business, a company should not lose sight of the ultimate goal: to gain solid bottom-line results such as reducing IT spend and improving service to the customers.

Running IT as a business is one of the strongest initiatives a financial services company can embark on to drive down the cost of IT. By providing the service consumers with visibility into their IT spend, the IT department motivates and empowers the business units to find innovative ways to reduce costs, especially by reducing waste and eliminating IT expenditures that do not provide any business value to the company.

Nationwide, a Digital Fuel customer, is an excellent example of a financial services company that has made a very real impact on the business by implementing components of ITIL v3. By deploying programs such as Service Catalogue Management and Service Financial Management, Nationwide is able to cut 5% of their IT spending. First, Nationwide is able to reduce the unit cost of specific services by providing those services in a more efficient and cost-effective way, so the actual cost of delivering the services is lowered. Simply managing the catalogue of services more effectively and making smart decisions about what services will be offered and how they will be offered can have a dramatic effect on service delivery cost.

Second, since IT services are billed to each business unit based on usage, those business units are able to understand the real cost of services and make intelligent informed choices to reduce consumption to achieve their business objectives. For instance, email is just one of the ways Nationwide was able to drive down costs by reducing consumption. Prior to the ITIL v3 and Digital Fuel implementation, Nationwide did not have any practical way to serve its customers with limitations on the sizes of email boxes offered to users throughout the company, and consequently everyone had large email boxes that were expensive to maintain. When Nationwide’s IT group created the service catalogue, they divided email boxes into a tiered service offering – small, medium and large – and charged prices in accordance with the size of the email box. The business units now had a way to drive lower chargeback costs to their P&L by carefully evaluating the needs of all the users in their group, and make economical decisions about email for the first time. Consequently, the number of large mailboxes declined significantly, most users were given small email boxes, and the overall cost of email was reduced.

Developing a service catalogue, applying cost management and charging back IT services enabled the company to drive IT spend down by well over ten million dollars per year. And that is ongoing, every year. We see that same level of savings across all customers in the financial services community that deploy Digital Fuel solutions to meet ITIL v3 specifications.

Capital One is another example. The company uses ITIL v3 processes to manage service levels around transaction processing. The level of visibility afforded by the implementation and the supporting Digital Fuel application allows the company to conduct an ongoing and automated evaluation to identify inaccuracies that would cost Capital One between one and five million dollars, and fix the problems before they happen. Capital One is saving millions of dollars a year avoiding transaction errors by applying service levels on top of the process and managing it from a business perspective according to ITIL.

Although these are impressive bottom-line results, however, it is important to note that ITIL v3 is not only about saving money. By aligning IT with the business goals of the company, running IT as a business can also help improve quality of service performance to customers within the company, which translates downstream to better service to end customers.

Digital Fuel is a leader in IT service management software solutions. Its solutions have helped leading financial services companies provide better services at a lower cost by tightly integrating an ITIL based Service Catalog with Service Level Management and Service Financial Management. Companies benefiting include Nationwide, Deutsche Bank, and many others.