Every vendor trumpets cost savings from ITIL. They are
often quite nebulous in describing where the money came from. I am going to
be specific; here is how a real client used a CMDB service management
product to save over $180,000 a month and avoid a $600,000 purchase – as
they took on significant new IT service requirements.
times I hear practitioners lamenting that “doing ITIL costs money” and they
cannot justify the budget required to get going. Vendors all trumpet how
they are going to save money, but this is often quite hard to pin down.
Where there is hype there is fire, and today CMDB is
hot. Watch for vendors with amazing claims from their product. A CMDB does nothing by itself. The benefits come not
from having a CMDB, but from using the knowledge a CMDB organizes. And using
this knowledge in a structured way. In other words, it takes a plan to
realize an ROI.
Fear not! I'm not going to join the ranks of the
obfuscators blowing smoke! I am going to share with you the results of a real
client that purchased and justified IT Service Management software. They
identified millions of dollars of savings in about 30 days by using the knowledge contained in
their CMDB solution – at the same time they were rolling out an ERP system
with Service Level Agreements (SLAs).
It wasn't sexy, it was basic infrastructure
optimization. It wasn't "feel good" productivity increases and other
hard-to-measure soft improvements. While this solution didn't have all the bells and
whistles, it did what any good CMDB system is supposed to do: let the user
make really good decisions and highlight opportunities – decisions they
otherwise would probably not make and opportunities they would not see.
The following is 100% real and based on my
personal involvement. It is an honest recital of specifically where,
when, and how a large city government identified over $180,000 per month
cold hard cash savings, and found out how to avoid a $600,000 hardware
purchase by using ITIL guidance.
The Tool, The Plan
The tool shall remain nameless to retain objectivity.
Suffice it to say it was a modern IT Service Management tool that focused
creating and maintaining a CMDB. It incorporated federation, reconciliation,
synchronization and modeling. It was foremost a CMDB, but it specifically
supported metrics around Capacity and Availability management as well.
The City went into the CMDB project as an IT
Service Management project. Their goal was to underpin Capacity and
Availability Management activities that could identify cost reductions. They
had a plan, commitment to the plan, and maturity.
The maturity was required in order to stand up and say
“hey, this infrastructure is too complicated to keep in our head. We need a
tool to help us see what we can't see by ourselves.”
The City chose to use the tool for decision support. They choose to examine: vendor performance, network bandwidth and
asset utilization. They also developed data on user productivity, and IT
labor efficiency, but the hard savings came from Capacity and Availability
management, so that's all I'm going to talk about here (but there were
dramatic improvements in quality as well. And their roll out of the ERP
application was very well received.)
A good CMDB tool will federate
and reconcile performance data from many systems to show you how well your
vendors and their products are performing. This data lets you:
what you have by knowing which of your vendors are delivering
the cost of service delivery by eliminating your non-performing vendors
negotiating power and manage your vendors before they manage you
Vendor management savings
refund and credit discovery
avoidance through identification of correct services
discounts through consolidation and management of vendors
Rebate, Refund and Credit Discovery
The tool included the ability to acquire
statistics from router ports. These ports connected to their Wide Area Network (WAN) providers of Frame Relay,
and Leased Line services. Since most services (WAN, managed services, hardware
support, etc.) come with service level guarantees that include refunds,
rebates or credits when service does not meet certain defined tolerances,
this was a logical place to start.
Cost Avoidance Through Identification of Correct Services
The tool showed you which services contribute to, and
which detract from, overall service availability. They determined which
services they should maintain or expand, and which they should eliminate.
The result was higher availability and performance resulting in higher
productivity, and savings from eliminating or choosing services based on their
contribution. It is important to note that just because a service costs more
does not mean it actually contributes positively to the bottom line.
Higher Discounts Through Consolidation of Vendors
Some vendors try harder than others. Use these vendors
as your primary suppliers, replacing the poor performers. Eliminated vendors
represent savings. Consolidating vendors leads to greater savings by being
able to negotiate better terms for more business with the remaining vendors.
Within 30 days they found
vendors exceeding delivery quality, those at or near commitments, and those
far below – vendor consolidation possible, refunds, rebates and credits for
sure! They made several changes, and obtained vendor rebates and pricing
breaks of about $10,000 per month.
Bandwidth Management Savings
Tracking CI utilization
shows past, current and future capacities and allows you to spot inefficiencies.
While this customer focused on transmission, the same model applies to any
CI utilization – compute, storage, firewall, routing/switching etc. A focus on
utilization lets you:
Engineers design most
systems to handle peak load traffic. Often there are some systems (links
or circuits in this case) that are either overloaded, underutilized, unbalanced or nearing
saturation. One of the benefits of federating this data is categorizing
capacity utilization this way. Each category represents an opportunity for savings:
Cost Reduction Through Identification of Excess Capacity
Some links no longer carry traffic, yet get paid for
each month. Others carry little traffic. It is often easy to maintain
redundancy while re-routing traffic over other links. Dropping the unused
non-redundant links results in immediate and substantial cost reductions.
This is equivalent to today's popular “server consolidation” efforts, and
works for any type of CI.
They established utilization
thresholds, then monitored for under utilized circuits. Within 10 days they
found both saturated and underutilized transmission circuits. They also
discovered an entire T3 (44.536 Mbps) totally unused! Jackpot!! The City
identified savings of $170,000 per month in reduced transmission costs by consolidating and
eliminating unused transmission capacity.
When you know what you have
(LAN, WAN, server, software, etc.), where it is located and how much it is
used, you are positioned to consolidate; but you can also get some pretty
nice cost avoidance benefits that you might not have thought of, consider
Most CI's can be managed as
contributors to service quality, but idle CI's can also can be used to develop
cost avoidance savings through:
Maintenance Contract Cost Reductions
Most IT operations have fully equipped chassis and
racks which are not fully used. However, most vendors charge maintenance
fees based on what they sold you, not how much of what they sold you is
actually used. The difference between maintenance on all CI versus just the
CI actually in use may be substantial and result in a dramatic cost
Redundant/idle Element Reallocation
You can avoid purchasing new CI's by leveraging
existing (but idle) CI's. Significant idle or redundant capacity is often
available in the enterprise; finding out where your idle/redundant assets
are may result in a significant cost avoidance opportunity.
This customer was undertaking a new application that
they thought would require some $600,000 in new routing and switching
equipment. However, a careful analysis of existing capacity showed they
didn't need to purchase anything. They found that about 30% of their router,
switch, and hub ports were unused. They canceled the budgeted $600,000
The end result? With a
focused plan and a purpose for implementing this tool, within 30 days the
City identified the following:
/month (bandwidth savings)
/ month (rebates from suppliers)
(purchase stopped, money returned to City)
The CMDB did
not do this for them. It was their use of Service
Level Management to establish thresholds and targets; Capacity Management to
monitor resource utilization, and Availability Management to monitor vendors
performance. However, without a CMDB they could not have pulled everything
together as they did. And they didn't have “mature” Availability, Capacity
or Service Level Management either. They implemented only as much as they needed
to obtain their ROI per their plan.
Sexy? Nope. Real?
Absolutely. This is not some obtuse hard-to-grasp marketing hype, but rather
specific, real, and repeatable cost savings available to everyone and achieved by following the common
sense guidance in the ITIL. Could you have done it without the ITIL? Sure.
Was it easier with the ITIL? I think it was.
So next time
someone asks you how ITIL will pay for itself, now you have a specific, rock
solid example (if you are mature enough to admit you need some help!)
Where to go from here:
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