Booms and Busts

The current financial conditions are unlike any previously seen in the history of the world. A perusal of the last 15 years indicates that cyclical patterns of high growth and frenzied activity alternate with periods of decline and layoffs. This pattern does not seem to be abating in the near future and it seems that booms and busts will be part of a way of life for all of us for the next 15 years as well, whether we like it or not. This situation only reinforces the need for both individuals and organizations to position themselves strategically for the turbulent future advancing upon us. While it may not be possible to exactly predict the timings and nature of the booms and busts, certain basic steps can be taken to ensure a smoother ride.

Firstly, for individuals, training and certifications in their chosen area of expertise should be undertaken in order to separate themselves from the herd. Continuous learning and self-improvement are no longer the activities of a few “nerds” but a necessary part of survival for everyone nowadays. Individuals must also keep up with the latest in industry innovations and stay aware of the latest tools, techniques, methodologies and standards. Those who have kept themselves at the cutting edge will be in a superior position for advancement as companies scramble to make themselves more efficient and competitive.

Which brings us to organizations and what they can do during financial swings from a process standpoint. During the boom periods, companies have a tendency to focus entirely on taking advantage of the business available and not caring much about the way the growth and the new business is being handled. This, then, translates to a skewed and mismanaged growth that is inefficient and costly. Furthermore, the profit generated during good times is rarely saved and kept aside for the rainy day. Companies, like individuals, must save and set aside revenue for use during lean times. The tendency to operate only for the quarterly result is not a good strategy for the long term and senior management and the board should understand and support this way of doing business.

During the busts, the companies should then call upon the revenue saved from the good times and instead of laying off people, put them to work in making improvements and efficiencies for the future. A lean period is a good time for a company or organization to become CMMI certified or ISO certified utilizing staff that are freed up due to diminished business. That way, when the good times roll in again, the company is now more efficient and better positioned to take advantage of the new business.

Granted that this is very theoretical and a bit on the Pollyanna, “in a perfect world” perspective, but what are the alternatives? Haphazardly growing frantically during the boom period and then laying of people and losing market share during the bust? Clearly, both individuals and organizations must plan for the cyclical market conditions that are now a way of life in the most intelligent manner possible. Assuming that things will go smooth and steady in the future is hazardous and foolhardy at best.

The Need for Strategy

In a study, it was determined that the area of strategy within IT organizations and for that matter even non-IT organizations) is the most undeveloped and under-utilized with the greatest scope of improvement and realizing benefits. I have certainly found this to be true in my own career and dealings with various organizations.

The word strategy instantly brings to mind the concept of long-term planning. A highly reactive response to solving a customer’s immediate problem as quickly as possible is not a strategic activity. However, deciding what new products and service to introduce 3 years down the line is an example of strategic activity. What I have noticed too often in the past is that organizations get into a constant state of firefighting and reactive problem solving which results in adequate strategy never being realized. It is up to management to ensure that sufficient resources are dedicated to strategic activities and kept free of the day to day firefighting tasks.

Strategy is important because it provides the initial roadmap or path to the organizations long term goals and objectives. A wrong decision taken in the initial plan can have disastrous consequences in the long term. Furthermore, possible risks and downturns need to be evaluated and accounted for in the future planning. Over and above all this, the strategy team should evaluate the current products and services and the customer’s happiness with respect to them and make course corrections based on this as necessary. Therefore, it is apparent that the strategy step is crucially important and should not be neglected.

So now that we are convinced of the importance of strategy, how do we go about strategizing? The different areas of strategy, in my opinion, can be broken down to three main components. Understanding of your organization (which includes current products and services, resources and capabilities etc.), understanding the customer (demand patterns, market conditions etc.) and financial information (including Budgeting, Accounting and Charging). These are found in the ITIL body of knowledge as the Portfolio Management, Demand Management and financial Management processes within the Service Strategy Module.

Therefore, with the information needed to adopt strategy for IT services being readily available, there is really no excuse for the implementation of poor strategy. All the greatest generals in history, considered strategy the most important part of their military campaign, beyond even the number and strength of their armies and the technological sophistication of the weapons being used. Indeed, Napoleon Bonaparte won numerous battles simply because of his superior strategic planning. In the battlefield of business, the implementation of correct strategy will ensure economic victory.

IT Information Systems

It is important that IT organizations design and maintain adequate information systems to facilitate the flow of information necessary to achieve their goals. There exist certain guidelines for these information systems within the ITIL body of knowledge.

The overall information database that houses all the others is called the Service Knowledge Management System (SKMS). All the information systems mentioned below as well as any other custom systems are housed within this system. Some of the recommended information systems are:

The Configuration Management System (CMS) which contains the details of the Configuration Items that exist within the organization and their relationships with each other. This system is within the purview of the Configuration Management Process and the Configuration Manager.

The Service Desk System which contains logs of all service requests and customer incidents. This is managed by the Service Desk function and the Service desk manager.

The Capacity Management Information System (CMIS) which contains details of the capacity requirements for the business, service and components. The existing capacity specifications for the systems in place and the Capacity Plan for all the services also exist in the CMIS. This is managed by the Capacity Management process and the Capacity Manager.

The Availability Management Information System (AMIS) which contains details of the availability requirements at both the service and component level. The existing availability specifications and the availability plan for all the services also exist in the AMIS. This system is managed by the Availability Management process and the Availability Manager.

The Security Management Information System (SMIS) which contains the Security Policy for the organization and the various details of the security system in place. This system is managed by the Security Management Process and the Security Manager.

The Supplier and Contracts Database which contains information pertaining to the supplier and contractors of the organization. This system is maintained by the Supplier Management Process and the Supplier Manager.

These are the primary Information Systems that ITIL recommends that It organizations maintain. Of course, there could be other specific to the company systems as well that are beneficial if created and maintained by the organization.

The inter-communication between these systems is also crucial in making the whole communication flow work and must be undertaken by care by the organization. However, if implemented correctly these information systems provide a useful framework for communication and document control within the IT organization.

Excess Capacity

The characteristic feature about IT that makes it different from other types of industries is that there is very little potential for storing or maintaining an inventory of the services being provided. In manufacturing, for example, the manufactured product can be stored in a warehouse and sold later. However, in IT that is usually not possible. Of course, in the case of a manufactured application like say Windows Vista, the boxes of Vista could be stored in a warehouse but due to the short lifespan of software products, this could only be done for so long before the app is obsolete and incapable of being sold. Furthermore, as the software apps can’t be recycled (like steel pipes for example) the stored quantities that aren’t sold are a complete loss. And in the case of non-product services the resources (people, tools, apps, computers) are simply sitting idle if not used to full capacity. The loss in this case is instantaneous and unrecoverable.

Now a certain amount of buffer capacity is necessary so that in the event of some problem or spike in customer requirements, things are still under control and manageable. However, a disturbing trend that I have seen very often is that a lot of capacity is kept as a buffer to compensate for poor management of IT. The efficient and consequently competitive and profitable IT organizations manage their capacity so that they are only taking on the amount of resources and capabilities that deliver value and no more. How can this be accomplished?

To fine tune the resources so that just what is needed is being delivered requires a number of factors to be in place. The first and most important is the correct analysis and understanding of customer demand cycles. This is where the demand management process is of great value.

An ongoing formal relationship with the customer utilizing Service Level Management is also crucial to establish the correct point of contact with the customer in order to fully understand requirements and to implement continuous improvement measures.
Financial management is important in keeping track of the expenses with respect to the planned budget. This monetary bookkeeping can greatly assist with keeping track of customer demand patterns.

At the center of it all, of course, is the capacity management process which plans for and monitors service capacity. However, this process cannot function adequately without correct inputs from the aforementioned processes and other sources.

It is possible to fine-tune and optimize capacity delivery to the customer but only after a proper planned effort is made with other processes in place that provide the relevant information. Organizations seeking to be competitive must make the effort to optimize their delivery or else they will be overtaken by competitors that make this effort.

Product and Service

An observation from being an ITIL teacher is that a common challenge people learning ITIL face is the ability to differentiate between a product and a service. Typically these are folks from a software development and QA background and can only see the world through the actions taken to develop the application.

Let us consider a situation where the IT department develops and releases an application to the business. Now it is easy to consider that the application itself is all that is being provided to the customer. However, the application must also typically be maintained and supported for the customer. The factors involved in this are:

• help desk support


• incident and problem management


• regular contact with the customer


• evaluation and analysis of changes needed by the customer


• making the changes


• releasing the changed application to the live environment

Furthermore, proactive monitoring of availability, capacity, security and disaster recovery must also be performed to ensure that the agreed upon uptime of the application is maintained.

All these actions together provide the overall service for the application to the customer. The application as a product itself delivered to the customer is one thing. But the application functioning as it should at the agreed upon levels for the agreed upon period of time is quite another thing.

Therefore, we see the reason for processes like availability management, capacity management etc. Simply having a department of programmers is not enough as IT now requires the ability to handle all aspects of service provision to the customer. IT departments must evaluate the processes that are required for them to provide service to the customer and then set up and manage these processes within their department. Even programmers should at least be aware of the service aspects of the application being programmed by them.