ITSM on SaaS

Hear traditional IT service management companies tell it, and you’d think buying their software or application service is a budget-smart choice. You’d be wrong. Legacy ITSM solutions carry a hefty price tag from the get-go. Tally up spending on customizations, piece-part licensing and upgrades, and the cost of ownership can reach obscene proportions – an extra quarter of a million dollars here, a half a million there. ITSM often becomes the bitter pill no enterprise IT executives will do without despite the difficulties they have swallowing its associated costs.

 

But as an increasing number of IT executives are finding out ITSM costs don’t have to be gag-inducing. When delivered on demand in a software-as-a-service (SaaS) model, ITSM gets a whole lot more palatable from a total-cost-of-ownership (TCO) perspective. No need to invest big bucks up front, or choke down hidden charges, exorbitant maintenance fees that emerge over time or pricey consulting fees that crop up every time you want to do more than a little tweak. Rather, you pay only for what you need, when you need it, based on subscription pricing for flat-cost predictability.

The SaaS TCO Advantage

Whether you’re just getting started with an ITSM project or considering an upgrade to an existing implementation, now is the time to think about how ITSM delivered through a new model with modern technology could benefit the bottom line – not to mention tighten that all-important relationship between IT and the business.

 

Indeed, licensing, together with software maintenance and support fees, represents a big gotcha when it comes to costing out an on-premise ITSM tool. But a TCO analysis doesn’t stop and start at that. When conducting a TCO analysis, you’ve got to be sure your number-crunching includes spending on consulting, internal resources and infrastructure, too.  How each factor comes into play in your TCO will depend on what your organization is trying to achieve.  

• Are you weighing upgrading an existing tool against using SaaS ITSM?
• Have you reached a breaking point with a legacy tool and now want to shop around for another provider, on-premise or otherwise?
• Do you want to replace an outsourced ITSM service delivered in an application service provider (ASP) with a SaaS option?

 

Regardless, you might be surprised by just how much more sticking with tradition might cost you rather than going the new-age services route to ITSM. In a nutshell, SaaS implementation saves time and money on existing ITSM implementations. SaaS customers often replace annual maintenance fees with a single subscription to all applications, implementation time and cost savings of 75% compared to legacy ITSM tool upgrades, and 100% infrastructure and upgrade cost avoidance. SaaS substantially reduces ITSM tool TCO.

 

The same goes for old, rebranded ITSM technology delivered in an application service provider (ASP) model. This model falls into the same cost traps as on-premise implementations because ASPs rely on client/server software technology, too. Essentially, the ASP is simply providing residency for a legacy ITSM tool. The same application maintenance and support costs exist in the ASP model and often become more expensive through the introduction of a veritable software broker. Somebody still has to monitor, tune, deliver availability, track and fix bugs, and implement upgrades. You might shed this responsibility but not the cost.

 

In fact, when you start peeling away the layers, you’ll quickly see that the ASP model includes unpredictable hidden costs. Hosted client/server applications weren’t designed to be delivered as a hosted service. Not only do the same client/server limitations of on-premise solutions apply in an ASP model, they’re magnified. Here’s why:

 

Driven by service margins, an ASP requires standardization of the applications it provides. Once an individual system requires change, the ASP loses significant operating margin. For this very reason, hosted client/service applications are not meant to be changed – you get what you see. In the event you want to configure the application to meet your needs (which all IT organizations do) you may succumb to additional fees.

 

Next-generation ITSM SaaS alleviates those problems by enabling customers to leverage out-of-box ITIL process or completely customize the application or even build new applications to meet specific needs. Modern software empowers IT to do more on its own and eliminates the use of high-dollar consulting or service fees. For the price of a SaaS implementation, you get the full range of ITSM capabilities, including problem, change, release, configuration, request, IT cost, service portfolio, field service, knowledge, service-level, asset portfolio/contract, project and portfolio management, along with shared services applications that extend the services you can offer to include HR, facilities and sales force automation. All that, plus a service catalog and a configuration management database (CMDB) too. You also get automatic upgrades that preserve all customizations, continuous monitoring of instances, 24/7 support, full redundancy and more.

 

Understanding True TCO

Let’s take a closer look at what factors you’ll need to consider when conducting your TCO.

 

Licensing, software maintenance and support

Naturally, if you already have an ITSM application in use that you’d like to upgrade, then you have sunk costs and don’t have to account for an initial outlay. However, getting a solution from a tool vendor on a complete subscription basis will likely mean buying additional licenses or acquiring completely new application modules. Those will cost you.

 

If you can no longer abide by your ITSM tool and want to start from scratch with a new vendor, then you’ll need to compare the price of a new tool and the SaaS implementation fees. However, with the tool option you’ll also pay an annual software maintenance fee, which typically runs at about 15% (or higher) of the software’s list – not discounted – price. For that fee you’ll generally get rights to software upgrades, access to bug fixes and patches and basic support. You’ll pay extra should you want a little special attention, such as the ability to reach technical support 24/7. So, be sure to account for Platinum-type support should that be your tendency.

 

You will not need to factor an annual maintenance fee into a SaaS model. It’s nonexistent. The annual subscription includes access to all applications (including multiple instances), disaster recovery services, support, upgrades, application hosting, admin training and continuous maintenance and monitoring of your instance.

 

Consulting

ITSM tools can be tricky, making new implementations, re-implementations and ongoing maintenance and upgrades an ITSM consultant’s bread and butter. As many an ITSM tool user has learned, fine-tuning, maintaining or upgrading your deployment can mean repeatedly forking out ongoing, but oftentimes completely unpredictable, consultancy costs. Some SaaS implementation companies suggest a three-year upgrade model for helping to factor on-premise tool consulting costs into your TCO.

 

In year one you’ll spend on the implementation consulting

Year two on ongoing maintenance just to fine-tune the implementation, and

Year three, on an upgrade.

 

The cycle continues with consulting costs in the next two years focused on ongoing maintenance and, in year six, upgrade. Still, adhering to a three-year upgrade cycle puts most organizations two, maybe three, releases behind. This delay in continuous upgrades is the pinnacle of the upgrade conundrum. As legacy track records show, if an organization is behind two or three releases it may face a re-implementation. Given that the average ITSM tool implementation requires a consultant’s time for 47 weeks, on average, while an upgrade runs in the ballpark of 30 to 35 weeks, you can see how the consulting costs ramp up quickly.

 

Ideally, no ongoing consulting fees are required and implementation services are delivered in a flat-fee statement of work in a SaaS model. The result is complete cost predictability. An automated upgrade process delivers continuous innovation and new functionality three times per year – at no additional cost. During six years, in fact, it might so happen that an IT organization with 300 users will see as much as a 92% reduction in consulting costs when comparing an ITSM tool to a SaaS subscription.

 

Managing the system using internal staff

Given the complexity of a legacy, on-premise ITSM tool, you’ll need to account for a variety of associated staffing costs – for systems administrators who maintain and manage the tool (one or more for each module) and developers who customize the tool to your needs, for instance, as well as application and database server administrators on the backend.

 

In general, customers typically have at least three systems administrators, and one or so application and database server administrators as well as about two developers for legacy ITSM tool deployments. On the other hand, the ITSM-as-a-service model only requires an application administrator – and only for configuring the application and managing roles and responsibilities.

 

Infrastructure

Obviously, one of the glory points of SaaS is that no infrastructure is required. You’ve got no such luck with a legacy ITSM tool implementation, for which you must account for the server infrastructure on which the applications run as well as for the corresponding application and database server and RDBMS licenses. And don’t just count those costs once in your TCO. Remember to factor in each type of infrastructure scenario – development and testing, quality assurance and production, for example – as well as the hardware and licensing required for redundancy and failover. And, don’t forget about hardware refreshes. Over the six-year ITSM TCO lifecycle, you’ll want to account for at least one hardware refresh.

 

Conclusion

Once you’ve conducted a TCO that factors in these major costs plus myriad others, you’ll no doubt discover that ITSM as a service offers great opportunity to make a change, improve processes and, especially, reduce operating costs. 

From Where Should We Lead

I read this post http://blogs.hbr.org/hbr/nayar/2010/10/from-where-should-we-lead.html and my views are as follows:


It is a well written post by my current Vice Chairman and CEO. I have very high regards for him, however, I have my own views on this topic. I think that

• Leaders need to first understand the nature of the crisis. 
• Secondly, leaders need to be transparent to his / her organization to be able to know the exact nature of the crisis facing the organization.
• If the crisis is such that it might be a survival issue for the company, then most certainly the CEO should come out and lead from the front ensuring that the whole organization is behind him / her. Example, Lee Iacocca led from the front to save Chrysler in the early 80's from bankruptcy.
• However, if the crisis is such that it will affect business in a certain segment of the market, then the leader of that business segment might like to rally the "troops" beside him / her, not behind, to solve. Depending upon the personality of the leader, he / she might not be right up front, but might ask one of his / her trusted managers to be up front and call for the leader's help whenever required. The reason behind this suggestion is that if the leader does not allow his team members to rise up to the occasion and solve the crisis / problem, then the team members might not get a chance to rise up to be a leader in future. The leader should use such crises to develop his / her second line of command.
• The proposition that "The top of the pyramid is far from the realities on the ground and the organization's energy fields" might not be always true. This depends upon the leader and the organization design. My view is more the number of layers in the organization, the more fuzzy the reality becomes to the leader. Therefore, for the leader to be in the know of the ground realities necessitates a flatter and a real transparent organization. Ideally the CEO should not be more than 3 levels away from the front line. I have worked in organizations where the CEO is 7 or more levels away, and, obviously, has no clue of the ground realities because all the intermediate managers report up the ground realities in such a way that will save their back sides! And that is not what the leader / CEO needs or wants to hear. I know of several team leaders who are "afraid" to own up their own decisions and therefore bring their direct reports in front of them to own up such decisions; some others will use problem scenarios to their "political" advantage and improve their "image" to their superiors at the cost of their direct reports. In such cases, it does not make any sense to retain such managers. And consequently, ground realities do not get addressed the way they should have been addressed. 
• In short, it is a good idea to lead from the trenches provided the organization design allows such a position. Otherwise it does not make any sense to do that. In such cases is it a good idea to let employees lead the organization to solve the crisis in hand? Sure, provided the employees are fully empowered to take decisions which were so long beyond their jurisdictions. A case in point is one of the large accounts that one of my friends was involved in. When the account was acquired there were several press releases about such a novel arrangement being made for the first time industry, analysts being briefed for a new "outsourcing model being evolved", everybody around were gung-ho about its future potential, and so forth. However, unfortunately the people below the leader level were not in close touch with the ground. What followed after the acquisition was over was an organization design that removed the front end employee, who had the full confidence of the client's senior management and decision makers, not only far from the leader but was also not allowed to make decisions that would have helped the relationship flourish. Intermediate managers used the ground level problems for self promotion at the expense of people below them. At the end of the day, my friend moved on because she did not want to be the "post office". That engagement value is now on a sharp decline, and people still involved don't know how to get out of the graves they themselves dug into. The point being made here is that it requires a flatter and more transparent organization to drive employees to make the right decisions. Not only that, the leader also needs to have the willingness to listen to the employee rather than get reports about the engagement health from his / her direct reports, and herein lies the magic formula in my view. 

Management is an art, not a science. There is no right or wrong thing in management. As they say, "It all depends" upon the ground situation. The clearer the ground is to the leader, the better the management quality of the organization. It is the organization design that will help the leader get a clearer view of the ground, no matter how much is preached about the critical importance of the value zone.




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The views expressed above are solely that of the author's.

Measuring Software R&D Effectiveness

Introduction

Because of the economic roller-coaster rides over the last decade, and a number of reasons attributable to the market, a number of software services players are investing heavily into engineering research and development services, including HCL. All of these companies are developing a variety of measures of R&D, such as R&D intensity, R&D as a percentage of sales, and so forth.

My thesis

According to me, R&D outcomes – not spend – are the true measures of the value of innovation. You can't simply throw more money at R&D and expect a proportional return on the investment. But the problem is that there are no standardized metrics for innovation.

The three most commonly used means for measuring innovation impact are:

1.       Percent of sales

2.       R&D headcount, and

3.       Number of patents acquired

None of the above measures are owned by R&D. The percent of sales and headcount are cost-driven, and the number of patents does not give you an indication of future value.

According to me, a better way to track innovation impact on the business is to track the revenue and return on investment directly related to innovation. To do this, let us define R&D Index (RI) as the ratio of revenue generated from innovations over the last 12 months as compared with all other existing revenues. This is a revenue view of innovation verses a spend view. For example, assume HCL has four product lines that have a combined return of $100 million in total revenue. Three of these four products have been earning revenue for more than a year. And the fourth was released just under a year ago and contributed $5 million to annual revenues. In this case RI would be 5/100 or 5%. Healthy organizations should strive for RI to be 10-20%, which compounded over time, will result in 100% revenues from new products every five years.

The second and supporting metric called the Innovation ROI, or IROI, accounts for the money invested in developing an innovation. The IROI can be defined as (cumulative before tax profits over N years from innovation-driven products) / (cumulative product expenditures for that same period). This can be further enhanced by discounting both revenue and cost as a function of prevailing and forecasted interest rates. The IROI allows us to compare overall product values independent of their size.

Conclusion

Combining both the RI and the IROI provides a much clearer picture of a company's innovation health. Using these direct measures of innovation, companies can foresee the revenue implications of unfocused R&D years earlier than with traditional measures. To foresee is to be forewarned, a metaphor realized through the RI.

Views expressed above are solely of the author.

Andy Grove: How America Can Create Jobs

Read this article referred above (http://tinyurl.com/25dv423) and following are my observations on the subject.


I would like to take a step back and think about it. Since this phenomenon described in this article has not started yesterday, where was Andy Grove on this point when he was running Intel? Although what he suggests about scaling up on new ideas is noble, but methinks that this article is written out of some compulsion.

From another perspective, if one thinks of USA as an organization being run by the executive offices in the White House, the change in the nature of its "business" has not been recognized so far. The value zone has moved from the manufacturing economy of the early 1900's through the 1970's to a services based economy from the 1980's through to the present days. What USA should do now to regain its "competitive advantage" is to enable and promote this value zone, which is creativity, innovation, patents, etc, in different parts of the country and different countries in the world, the latter being the ecosystem in which it belongs. Trying to recreate the manufacturing base of the US economy - which it lost decades ago to China and other parts of Asia, and Mexico - would not be a very intelligent decision, according to me. Let bygone be bygone. 


So what should be done next to regain the market leadership? If the start up environment - as we have seen in the Silicon Valley Bay Area - is spread in this ecosystem, then the US Dollar will again become the strongest currency in the world, because people will start realizing that it is the USD that promotes innovation, and not the Yuans or Euros. Countries would then have to invest in USD to get any advantage of this creative talent. That is what the executive office of the USA Inc should do - sell the creativity / innovative capability and retain the IP and patents with itself, only letting the ecosystem use the IP on a right-to-use basis.

What Andy suggests is to promote this creativity and also take care of the scaling up to ensure that "manufacturing" of those creations also happen in the USA. By that he suggests that US jobs will be protected. This argument is something like - let us keep inventing the personal computers / notebooks / iPhones etc to keep the creative / innovative edge of the US economy in the ecosystem and also keep those creations within the US so that the jobs are not lost!! 


Is that the right way to look at / solve the current problem? 


I am not sure....any comments??

Is This The Future of Services Industry?

This is one of the shortest blogs I have written so far. Please click on this link and think about whether such in-cloud services will toll the knell of a parting day for services based on meetings / phone calls / cold calls / emails / proposals and the like!


http://aws.amazon.com/mturk/

Times are a'changing and I am proud to be a part of this technology-led revolution sweeping the world over!

The Power of Social Networking in Job Hunting

In today’s interconnected world the job of job hunting has changed dramatically. The old way of recruiters and recruiting firms has given way to social networking and a better chance of getting seen by hiring managers. As an example, how does one get noticed by, let us say, Accenture’s several hundred hiring managers in one shot? And why will Accenture pay 30% of the gross paycheck to recruiters when they can get the same people on social networks, such as LinkedIn, free of cost? Does it make business sense anyway to pay that 30% any more? I don’t think so. The game has changed. To get the attention of John Campagnino, Accenture's head of global recruiting, or Kaushik Nag, global head of recruiting at BMC Software, you'd better be on the web, and more specifically, on LinkedIn.

If you don't have a profile on LinkedIn, you're nowhere in the market. You can’t be seen. You are as good as a non-entity when it comes to the job market. Partly motivated by the cheaper, faster recruiting he can do online, Campagnino plans to make as many as 40% of his hires in the next few years through social media. Says he: “This is the future of recruiting for our company.” I am sure Kaushik will have a similar opinion! In today's job market an invitation to "join my professional network" has become more obligatory – and more useful –than swapping business cards and churning out résumés.

More than 60 million members have logged on LinkedIn to create profiles, upload their employment histories, and build connections with people they know. Visitors to the site have jumped 31% from last year to 17.6 million in February 2010. More than 25% of them are senior executives. Every Fortune 500 company is represented. That's why recruiters rely on the site to find even the highest-caliber executives. I read somewhere that Oracle found CFO Jeff Epstein via LinkedIn in 2008. I got my present job through LinkedIn 2 years ago!

The reason LinkedIn works so well for professional matchmaking is that most of its members already have jobs. And this is the population hiring managers want to poach on, the so-called “passive job seekers”. In this environment, job seekers can do their networking without looking as if they're shopping themselves around. The recruiting industry is built on the fact that they are hard to find. LinkedIn has changed the dynamics completely. It's the equivalent of a little black book -- highly detailed and exposed for everyone to see. A cadre of happily employed people uses it to research clients before sales calls, ask their connections for advice, and read up on where former colleagues are landing their new jobs.

The main difference between LinkedIn and other social networking sites such as Facebook and Twitter is that while Facebook is for fun, family and friends, and Twitter allows only 140 characters per post thereby severely limiting one to post their profile, LinkedIn not only is a professional networking site but also it does not have any character limits to the content. So posting a good professional profile is easy.

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The views expressed above are solely those of the author.

School Education in the New Interconnected World

Over the last weekend, I was talking to a close friend of mine who was looking around for a job. He was approached by a Tier 1 company for a position that needed him to relocate. Since he was comfortably settled in Plano, TX, where his wife worked in the schools there, he refused to consider the offer, although he confided in me that it was the ideal job for him. I asked him the reason for this. He said he would straight away lose the money that his wife is bringing home from her job because she got acquired the necessary teaching credentials for the state of Texas and if he relocates to another state, she has to take the required courses for that state, sit for the qualifying exams, get the certificates before she can even apply for a similar job. A no-brainer for him insofar as his job decision was concerned, but that set me thinking.

Imagine this – the subjects of Physics, Chemistry, Math, Biology etc do not change with the state. The syllabi might change. However, if a person knows the subject and has been a teacher all her life, and has been a credentialed teacher in one state of the USA, she is not qualified to teach in another state! Without getting into the political angle here, my thought was why not change the way students are taught using some technology. I had – at one point in my career – started my own company to do exactly that so why not use that experience? Also, over the last few decades, everything has changed in our lives with all-pervasive technology. However classrooms have remained untouched. The classrooms that our grandparents went to are almost exactly the kind of classrooms our children study in today. Chalk and blackboard might have given way to slide projectors in some schools and laptop projector in others, but a packed classroom, text books, regimented curriculum, a teacher painstakingly explaining abstract concepts with the limited tools at her disposal still remain the same.

Roar of the clouds

What is cloud computing in human language? And how can cloud change our education system? Cloud computing converts software, infrastructure and platforms into services. So we speak about SaaS, PaaS and IaaS these days for software, platforms and infrastructure respectively as services! It delivers common bu­siness applications online that can be accessed from a web browser. The data and software reside on remote servers. Cloud is a metaphor for the internet and it can have many avatars. It could provide raw computing power on demand as Amazon’s model does.

So how do we use this new metaphor in the case of school education?

It might sound simplistic but here are a few bullet points that are in my mind:

1.       Build content: Whenever a student enrolls the content needs to be created and entered into the servers in the cloud. This activity will become simpler if the regional school education boards collaborate to create and put up the content in their own local servers that can be accessed through a cloud.

2.       Build medium of instruction: The basic requirement is that the teacher needs to be able to write on a special whiteboard that would be connected to the PC in front of her. Remember digitizer tablets we had in the past? A little improved version of that interfaced to the PC / laptop will do. Then we need software that would be able to interpret the teachers’ writings and reproduce the same on the screens that would be seen by the students.

The rest of the steps would be “cloudy”, in the sense that the above service needs to be distributed to many students reading the same subject anywhere in the world. If the students’ PC / laptops have built-in webcams, then they can experience a virtual classroom from their homes. The service is charged on an hourly basis on a pay-as-you-use basis, which is one of the basic properties of cloud based service.

Benefits

With corporate support, such a service can easily pose serious challenges to the brick-and-mortar schools and colleges and universities. A select few schools today, such as MIT, have published their courses online and there are several educational institutes that offer online courses. However, this “industry” (if I am allowed to use this terminology here) is at best fragmented. There has been no effort to integrate using modern technology.  Once this integration is achieved, this will be a behemoth of an industry from where every section of the world population will benefit. With scale affordability will increase, which will mean that children of the poor nations will be able to afford this education with the help of some local entrepreneurs who will open such “educational centers”.  Problems due to lack of education will slowly go away.

Secondly, with technological advances, a number of offshoot industries will spring up. One could be content building; the second could be localization of the content in different languages; third could be course design; fourth could be those that improve the medium through which such classes are delivered, and so on and so forth. And to think that all of it is happening through the cloud is a modern day wonder. Some so-called elite institutions might build their own private clouds to cater to their own students.  In effect, this will be a big forward push to the economy.

Conclusions

In the present economic climate, education / school budgets are tight. Conditions are favorable for adoption of cloud. It promises to convert a capital expenditure into opex (operating expenditure). Subscriptions go up as the operations scale up and go down if business ramps down.

Further, cloud computing has raised concerns around security, privacy, costs, lock-in and reliability — all of which have to be addressed robustly.

Last but not the least, to quote one of my fellow bloggers here, for the disrupters and innovators of the world, the price of the entry to the game has just been slashed. There is a roar in the clouds while a new paradigm is born. Expect a burst of innovation and a challenge to the gods who have become complacent.