Theview of IT has universally evolved from being just another cost center to an important business driver with mission-critical functions. Rapid changes in technology, compliance, and business have created a need to work smarter, more quickly, and with less resources. In the past decade, IT Asset Management (ITAM) has been on the forefront for IT executives and executive committee discussions—from cost cutting to increasing efficiencies to better management of the entire operations process. However, the following nagging question remains: what are we getting out of our IT investment?
ITAM must be approached as a key corporate activity that needs executive approval and support, along with planning from finance, human resources, and operations. The primary reasons for this relate to the need to control costs, the increasing importance and complexity of the enterprise's technological infrastructure, and the heightened risk associated with regulatory, cybersecurity, and contractual compliance issues.
As a strategic-level function, ITAM must be aligned with the strategic business plan. The approach must be strategic yet practical, with the recognition that all assets exist to support business services. Simply put, IT assets must be managed throughout their life cycles so as to support business strategy.
Success in ITAM requires development of road maps, business cases, practical metrics, time lines, and accountability. Control of IT hardware and software asset costs throughout their life cycles is essential to success.
There are nine key benefits that are derived from ITAM; you should expect all of these outcomes, depending on the scope of your ITAM goals:
- Accountability for assets, services, and their costs
- A road map to best practices
- Practical steps to reach all relevant compliance requirements
- Timely and accurate assessments of future asset needs to meet business and technology initiatives
- An improved position of strength for managing vendors and contracts
- Consistent and proactive software and license management
- Reduced support costs
- Ability to proactively manage service-level agreements (SLAs)
- Reduced security risk by highlighting vulnerabilities on unsupported software and noncompliant software instances
If your organization cannot easily answer this question, finding the answer should be a high priority. This is where the ITAM process can unlock the answer. ITAM directly affects the effective management of finances. It also brings with it the certainty that IT aligns with—and drives—existing business services. The key to success in ITAM lies in managing IT assets on an enterprise-wide basis and throughout all the respective life cycles. Doing this requires taking a holistic approach and perspective based on the reality that asset management is not just IT's responsibility; everyone shares in it.
The following are the Gartner statistics on benefits of asset management:
- More highly leveraged buys: Reduce asset acquisition costs by 5-8%
- Better matching of software licenses to organization needs: Reduce software costs by 6-10%
- Enhanced service and warranty coverage: Reduce warranty costs by 3-15%
- Increased component standardization: Rescue mean-time-to-repair and improve uptime by 3-7%
- Reduced IT component complexity: Improve help desk first call resolution rate by 5-12%
- Better contractor/vendor selection process: Improve contractor performance by 20%
- Better negotiation of terms and conditions safeguarding performance: Reduce risk of noncompliance by 50%
- Improved asset tracking, proven usage compliance, and ease of audit: Reduce noncompliance risks by 80-90%
Source: Jack Heine, Gartner, Gartner Fall Symposium
IT executives have numerous challenges, including the following top four:
- Managing IT as a business
- Aligning the IT infrastructure, projects, and goals to the business priorities
- Finding the budget to meet corporate objectives set by the C-suite
- Meeting compliance in all areas—from industry to financial to IT to cyber
Often, the biggest hurdle, which sums up all of the preceding challenges, is the "do more with less" mandate. Even when profits are up and there is a significant growth, IT budgets don't often grow at the same increased percentage that allows IT to pace with the projects and changes needed in the organization.
ITAM is pivotal to fusing IT with business users. IT assets are supplied and maintained in a manner that facilitates the execution of business goals. Financial accountability and savings through life cycle asset management become a shared success with the business team. ITAM becomes not only the central lynchpin holding together IT, project management, and corporate strategic direction but also the strategic solution that brings IT leaders to the C-level.
Functionally, IT as a business center translates into cost-efficiency while improving service delivery, mitigating risk, and demonstrating business value. As a business process, ITAM has been already working with all the groups enterprise-wide, assisting with or, in some cases, becoming the solution to manage financials, contracts, and business deliverables. The ability to manage targeted assets and tracking the overall inventory and relationships between the assets closes the loop to the operational aspects of IT.
Strategically, ITAM can become the executive dashboard that gives you a holistic view into your organization. ITAM can help identify efficiencies, inefficiencies, and gaps not only in the traditional world of IT, but also in HR, project management, service-oriented functions, and cyber threats.
Organizations spend millions of dollars on their IT and operations, sometimes without even knowing where their money is going. From software licensing issues to inefficiencies with the IT service management, the enterprise lose profits without realizing it. There are four culprits within an organization's IT that contribute to huge cost inefficiencies:
- Software
- Hardware
- Downtime
- Distractions of technology
The following are the hidden cost of technology.
Software controls the total cost of ownership spend. Software ownership is not just about licensing compliance, but it's also about the management of software. During the initial software procurement, there are licensing fees and usages models, contract negotiation fees (for example, lawyers), and implementation. Once you license the asset, there are other considerations, such as follows, and all of them have an associated cost: upgrade and maintenance, shelf-ware, software support, and IT training.
Added to software are the typical over- or under-licensed issues, which usually account for an increased 30%, on average, but can result in a potential loss of millions. Dependent on the size and scope of the software "gap," an organization could double its unnecessary software spend by the end of year three when annual maintenance fees are accounted for. While an initial discovery could uncover these cost savings, unless it is managed with a robust software asset management program and governed by a strict procurement policy, unexpected software costs soar and become excessive.
While hardware is an expected capital cost, the lifetime cost for repair and maintenance of a single PC is as high as $2,162.89*. There is also the additional $128.09 attributed to the loss of productivity incurred per user per PC due to unforeseen downtime, such as shutdowns, reboots, and hours. If you view the cost based on 5,000 PCs or 5,000 users, that's over 10 million spent on the average life of those PCs. Assuming 4 years as the average life cycle, those 5,000 machines cost 2.5 million every year. Add the loss productivity cost, and that's another $160,000 annually.
With many organizations, hardware asset management discussions also include servers, RACs, mobile devices, and the like. With on-premise servers, a number of areas need to be reviewed for those hidden costs, as follows:
- What license is required?
- What are the limitations of the licensing based on the server?
- How many cores does the server have?
- What is the server used for?
- What is on the server?
Cloud and hardware: We can't ignore cloud services, the elephant in the room, when talking about hardware. Ironically, with cloud services being sold as "not needing additional hardware," the reality is that cloud does need hardware—servers to be precise—in the backend. Cloud needs not only servers but also a physical space. While that doesn't seem to apply to your organization, it does because you still need software and then the questions start coming in. Who is licensing the software? Who is responsible? Does the licensing change? Where does the software license reside?
I could probably write a small book about the ironies of cloud, but, in all likelihood, you've heard it ad nauseam if cloud options were explored any given time in the past few years.
Large organizations, defined as those with more than 2,500 users, have increased their average downtime by 69% from 8.7 to 14.7 hours per month**. Downtime due to failed technology is one of the main culprits in cost inefficiency.
A total of 44% of organizations surveyed by Osterman Research and Electric Cloud estimated that the last significant software bug resulted in an average of $250,000 in lost revenue in 20 developer hours to correct it. The increase of an incorrect technology use or a failed technology exposes all organizations to risks such as downtime on critical applications.
With the Internet, it is easy to just check on one thing. The issue of social media and digital entertainment can truly become a crippling factor to productivity. In a recent survey of Britain's 34 million-person workforce, 6% spend more than 1 hour on social media while at work, translating to $22.16 billion in lost annual revenue**. The distractions of technology, such as Facebook, Twitter, and other social media networks, and iTunes, YouTube, and general digital entertainment kills productivity. Social and digital media at work causes countless interruptions during the day and results in operational inefficiencies and lost revenue.
Your answer may be to block certain apps and sites, but the truth is that technology distractions continue on with mobile phones and other mobile devices. At least if you allow the site on user terminals, your organization can monitor the amount of time spent on these sites and the best method to address this issue.
Cost control, also known as cost management or cost-containment, can, and should, be used as a method to improve business cost efficiencies, and it helps to reduce costs.
Understand that your organization is constantly and consistently seeking cost and operational efficiencies, regardless of economic conditions. View cost control in a holistic fashion—from the view of your executive team, the CFO, COO, and the CIO/CTO. Your team should comprise people with expertise in finance, IT, and operations from a variety of backgrounds. Regard cost control as the nexus for your entire organization.
A vast many organizations choose to either not manage their IT assets or only manage part of their assets. Many who attempt ITAM are usually only taking physical inventory or just doing a cursory software license discovery process in preparation for an audit. Although these processes are better than nothing, and they certainly have their place, they do not offer the insight and clarity required to determine the return on your organization's IT spend. Only an organizational commitment to manage IT resources in a holistic enterprise approach can help you achieve that. Also, again, ITAM can, and should, be used as a corporate strategy.
If you are looking for good reasons to start managing IT assets more effectively, consider these:
- Cost: In IT and business, change is a constant, and along with every change comes a cost. Typically, the upfront purchase or investment in technology accounts for roughly 4% to 20% of those costs. The remainder is spread over the entire life cycle of your IT assets. These costs include equipment (including software installation), managing changes, maintenance, upgrades, virtualization, service or help desk setup and maintenance, and disposal. Arriving at an accurate figure for the cost of your IT assets is a challenge. Additionally, getting the most out of your IT infrastructure investment is virtually impossible when there is no accurate record of the organization's IT assets and how they are supporting critical business services.
- Dependency: IT enables your business to operate globally on a 24x7 basis. Given this, your IT infrastructure is too important to be left unmanaged. ITAM should play an important role, adding value to your organization's growth strategies. However, uncovering this role requires a clear understanding of the relationships and dependencies involved with these mission-critical assets.
- Hardware replacement (technology refresh): Whether you like it or not, the pressure to stay competitive is going to drive you to replace IT hardware assets every 3 years. Given that today's hardware has a 3-year "life" before it becomes obsolete, this is a reasonable expectation. Also, if a major shift in technology develops, you may find yourself replacing your entire array of hardware assets.
When it comes to achieving cost savings and increased efficiencies and maintaining regulatory compliance of your IT assets, ITAM is essential, but as a strategic initiative, a sound ITAM strategy enables you to accomplish the following objectives:
- Accurate asset tracking
- Effective IT asset management
- Effective software asset management
- Efficient asset disposal
- Timely asset replacement
- Risk mitigation (for example, around software compliance, patch management, antivirus, and many more)
- Cost reduction
However, ITAM involves more than accomplishing these objectives. Your strategy must be broad enough and sound enough to include other necessary asset management objectives, such as contract management, license compliance, and IT financial management.
Historically, hardware assets were "written off" when they reached obsolescence. However, today's hardware assets hold considerably more value, even when replaced. Before an asset can be evaluated, it must first be located and assessed. When dealing with a leased equipment, it's wise to remember that the aim is to return the assets by the negotiated end of the lease agreement, thereby avoiding costly penalties. Here, the challenge is to quickly locate the equipment that has been in use for some time, but may have never been tracked. A fundamental aspect of ITAM is tracking the location of each hardware asset all the time. Therefore, no matter how the equipment is acquired—either through purchase or lease—effective ITAM practices enhance cost efficiencies.
Tracking the flow of software throughout your organization can also be a challenge. Best practices are all well and good, but the consistent application of those practices is the key. Remember, compliance is about meeting and maintaining audit-ready status all the time, not only when the audit time rolls around.
Most businesses succeed in logging the first user of their software or equipment, but fail to track the changes that occur during the normal course of business. These include routine items such as the installation or deinstallation of software, applying necessary patches, adding memory, installing a larger hard disk, or reassigning the asset to a different user.
The failure to track any of these changes frequently results in a lost, unlicensed asset, hacking and security breaches. An asset management solution that does not track these changes is not a solution at all.
Other information worth tracking includes contract information, such as leasing/replacement dates, insurance contracts, maintenance agreements, and software license agreements. These types of data are invaluable to ITAM because they provide insight and accuracy into the costs associated with these items. This in turn provides you with clarity when it comes down to deciding whether to purchase or lease a specific equipment. Although lease rates may look attractive initially, your total cost for that lease may actually end up exceeding the cost of purchasing the equipment outright. Remember that 3 years into the lease, you may be paying for obsolete equipment, and those rates lose some of their luster.
In a nutshell, building the discipline required to make ITAM work for your enterprise results in the following benefits:
- Ensuring compliance
- Maintaining audit readiness
- Effectively managing service costs
- Maintaining your competitive edge
- Enhancing operational productivity
- Ability for IT to respond to vulnerabilities in a timely manner
- Implementing consistent and repeatable processes
- Reducing the cost of change
- Managing asset utilization
- Releasing capital
- Improving bottom-line profitability
- Increasing organizational ability to meet service-level agreements
- Improving customer satisfaction
- Managing financial accountability for IT
- Collaboration with IT Security to discover possible and unknown cyber threats
Implementing ITAM within your organization leads to faster and greater success to existing and new initiatives. The following table provides a sample list of key CIO initiatives and shows how leveraging ITAM enables a more proactive approach:
CIO initiatives | IT Asset Management enablement | Executive team interest |
Cloud computing | Cost versus benefit analysis with accurate understanding of all assets required for a function that might be moved to the cloud |
|
Service-Oriented Architecture (SOA) | Usage data allows consolidation, reduced maintenance costs, and alignment with business |
|
Compliance | Managed software list, snapshots of current system configurations, and document management |
|
Service management | Continual updates of asset data, usage, costs, users, populating service management incident, problem, change, and asset management |
|
Vendor management | Manage approved vendor list, manage terms and conditions, reduce risk, and evaluate vendors |
|
Manage IT as part of the business | Align investment with business priorities, analyze financial opportunities for savings, and evaluate Provide a snapshot of current system configurations for compliance and capacity planning |
|
Legacy systems integration | Impact assessment, cost versus benefit, and data capture |
|
Security and risk management | Identify suspicious configurations, enforce standards, and highlight vulnerabilities on unsupported software and noncompliant software instances |
|
Misalignment between finance and IT is a common problem in many organizations, giving rise to a long-standing debate about just how involved finance executives need to be with the IT department. Both departments have the same goal, that is, operational efficiencies throughout the organization that will keep costs down.
So why is there so often a lack of alignment? Why do these two functions seem to be working against each other?
The reality is that IT and finance are two very different organisms. They work differently, talk differently, and think differently. In fact, they have very little in common, aside from their goals. They are apples and oranges.
A perfect example of this divide is the differing approaches to a very important aspect of an organization's IT function: ITAM. To the finance side of the house, ITAM means short-term cost savings. Period. Never mind even if that can lead to penny-wise/dollar-foolish decisions!
Finance executives most certainly should be paying attention to the ITAM program. Although they don't need to know the ins and outs of the actual program, financial executives will care about the bottom line: ITAM programs that can garner as much as 20% overall organizational savings annually.
There are countless reasons why ITAM is important or should be important to any organization. First and foremost, ITAM touches on all aspects of an organization—anywhere from small projects to corporate compliance and everything in-between. Anything that can touch upon all aspects of an organization has to be vitally important. With ITAM, we've only just begun our journey. ITAM is still a maturing practice, but the following are some common critical factors that make ITAM important:
- Compliance: Compliance, whether it's with software vendors or with government regulators, is a key issue for any organization. Noncompliance means one thing, huge costs—fines, fees, and, in some cases, even jail time, not to mention bad PR. All of these things cost an organization dearly. ITAM is an efficient way to keep track of all of your IT assets so that you always know what you have, where it is deployed, and who is using it. When the auditors come calling, you will be better prepared to answer their questions and have a better understanding of your levels of compliance. Being unprepared is never a good option.
- IT asset lifecycle: IT assets, be it software, hardware, or mobile assets, are the lifeblood of an organization in today's world. Managing their life cycle efficiently can bring cost savings to your organization. For example, if a piece of hardware is no longer performing as it should be, it could actually hinder productivity and cost you money every minute it's in use. Constant evaluation of your assets and their performance is a great way to keep everything running at its optimal level and keeping productivity up at all times.
- Expense management: IT assets and their maintenance come with a cost, typically as much as 20% of the IT budget annually. In order to keep that line item on the expense report to a minimum, properly managing your assets can help in many ways—from ensuring that assets are properly retired to reconciling your equipment against fees. For example, are you paying for assets that you aren't using? When employees come and go, is there a process in place to reassign their cellphone, laptop, and other equipment? In a large organization, with constant changes on a large scale, lack of a process can mean big expenses for idle assets.
- Security: When you think of ITAM, security isn't usually something that comes to mind, but it should. A successful ITAM program can mean increased security and decreased risk. How? For starters, consider that virtually every employee has a computer at home, some of them company-issued. How do you keep track of what they are downloading or sharing when they are outside of the office? If they don't vpn, how are you ensuring that they are getting the necessary patches? You may be pushing out to all assets connected to the network. A solid set of IT policies and procedures can control the level of security risk your organization is exposed to simply by setting limits. Another way to think of security is the collaboration between ITAM and the IT Security team. Your security team can leverage the data that ITAM has collected to proactively identify known software vulnerabilities. IT security will be able to assess the assets that pose a threat to your organization. They will know where the assets are located, view software, install data, and the business service it is tied to. This is all possible by having ITAM in place.
- Software contract management: With most organizations in a constant state of change, managing software contracts is often overlooked. The finance department needs to understand that there are significant cost savings to be had simply by paying close attention to terms and conditions and renegotiating when the time calls for it. Additionally, with vendors changing their rules as frequently as they do, not being on top of your terms and conditions can equal noncompliance, and we know what that means! Suppose that your organization has just opened an office in London, and your IT department ships them preloaded laptops to use, but nobody checked your software licensing agreement. Your terms and conditions don't include transferability. Software licenses generally limit transferability. Lack of transferability increases the cost of divestiture, requiring additional licensing for the divested company and creating a glut of additional licenses for the retained companies. Additional licensing terms, including pricing, may be less favorable for the divested company, further increasing the divestiture costs. If the divested company owns the contract and licenses without transferability, the divested company may be stuck with a glut of licenses and create a gap and licensing requirement for retained entities covered by the contracts licenses. This is just one example of how organizations can fall out of compliance, resulting in additional hefty fees and penalties.
- IT service management: IT isn't just something that affects employees; it affects everyone touched by your organization, from vendors to customers. Any finance executive worth their salt can see how a failure in IT can directly affect the bottom line. On the flip side, having a solid performing IT department will result in a better experience for everyone, including customers. The degree to which IT affects the customer service will vary according to industry, but it will have an effect.
Now you understand a little more about why ITAM is so important to both the bottom line and top line. However, the following question remains: how can finance get involved?
I have a few suggestions for how finance and IT can work better together; the first step is simply realizing just how much they need each other!:
- Schedule recurring meetings: Finance should always know what is going on with IT, and vice versa. Monthly or even quarterly update meetings will be mutually beneficial for both parties. Discuss new projects coming up, new initiatives being taken, and use each other to help accelerate your mutual goals. This should also be an opportunity for the finance team to check in on projects that they have previously approved. Most executives approve a budget and leave it at that. Both parties should always be in the know regarding ongoing and even completed projects.
- Always consult the tech guys: IT is usually brought in at the last minute when more software licenses or hardware are needed due to a large business change. This is a big mistake. When IT is given the chance to plan ahead, they have a greater leverage and potential to save money for the organization. Last minute decisions will end up costing more in the short and long term. Bring in the IT department from the beginning, and make it a collaborative process.
- Make ITAM a priority, for everyone: I have explained how ITAM can equal significant cost savings. The next step is getting buy in across the organization. An ongoing ITAM program needs to be on everyone's priority list in order for it to work. This includes the C-Suite. An alignment between the finance and IT departments is an important step, but in order to keep the project going, it's important that these two departments work together to keep the rest of the organization in the same mindset.
Implementing an effective ITAM program within your organization is a positive step toward lowering risk, increasing compliance, and creating optimal efficiency. The marriage between finance and IT is imperative to its success. Marriages are never perfect, so you can expect some bumps along the way. However, working in tandem, with open lines of communication, is in the best interests of the organization and, more importantly, the bottom line.
We will build the case for ITAM using the following ways.
Over 50% of senior executives feel that improving the overall quality of their organization's leadership is a critical challenge, and 46% believe they must do a better job of developing the next generation of leaders, increasing employee commitment, and retaining top talent.*
*Sources:
- Global CEO Study, Booze Allen Hamilton
- 2009 Duke University Executive Leadership Survey
"We live and work in a world where organizational failure is endemic, and where frank, comprehensive dissections of those failures are still woefully infrequent; where success is too easily celebrated and failures are too quickly forgotten; where short-term earnings and publicity concerns block us from confronting, much less learning from our stumbles and our blunders." – Jena McGregor, Fast Company Magazine, February 2005
The best companies, as measured by innovation, profitability, growth, reputation, and long-term track record, always seem to have the best leaders—not just at the top, but also at every management level throughout the enterprise. This is not an accident. These are companies with senior leaders who understand how to get the best from themselves and their people. They understand that their most valuable resource is not products, capital, or real estate, but people. They know that good people led by outstanding leaders is what separates great organizations from the rest.
Understand that good leadership doesn't have to be a question of luck, and it certainly isn't magic. Leadership is a business skill like any other, the most important business skill of all. Work with mentor individuals, management teams, and larger groups to increase their leadership skills. Help them understand the dynamics of individual and organizational leadership. This is a proven delivery system for better thinking, smarter decisions, effective communication, motivated employees, and ultimately, better top-line and bottom-line business results.
Great leadership enables the following:
- Attracting and retaining top talent
- Motivating your workforce
- Shaping the personality and reputation of your organization
- Generating value from outsourced relationships
- Organizational change
- Employee awareness and communications
You must be thinking, what does leadership have to do with ITAM and building the case for ITAM?
Virtually, every enterprise of any size talks about ITAM strategy, but how many have successfully integrated it into their IT culture? The evidence suggests only about a third: in 2009, only 32% of IT projects started were completed successfully; another 44 % were considered partial failures, and 24% were considered complete failures.* A batting average of 0.320 might be terrific in Major League Baseball, but no business enterprise should accept such a paltry success rate.
There were many reasons cited for this dismal record of IT failure, such as lack of user input, lack of technical competence, changing requirements or specifications, lack of C-suite support, the economy, lack of resources, obsolescence, poor communication, the list goes on. In fact, all of these factors and many more would become moot, or nearly so, with a comprehensive ITAM strategy in place supported and led by strong leaders/champions of the ITAM program.
A good ITAM strategy starts with expert analysis of organizational needs, followed by C-suite buy in, which likes the operational efficiencies and cost savings over time. A well-designed ITAM strategy also makes the most of available resources, identifies technology and software needs based on business objectives and existing IT portfolios, and makes allowances for company growth and evolving technology requirements.
*Source: 2009 CHAOS Report on IT project success rates, published by The Standish Group, Boston.
The approach starts by asking key questions; here, you will learn what questions to ask, where to go to find the answers you need to help you build the case, and the answer to the hard question of how will ITAM benefit the business:
- What are the corporate goals? Check the company newsletter, town halls, presentations by the CEO, or the information for shareholders on the company website.
- What objective is your competition for budget, and does that objective have a stronger link to the corporate goals? If the link is stronger, you can choose to rework your priorities to a stronger case yourself, or you may choose to dovetail your objectives to the other. For instance, if a health-care system is faced with allocating funds between new imaging equipment and improvements for managing assets, propose reducing the need for redundant portable equipment through improvements in your asset-tracking project request.
- Have you sought external validation? Researching analyst and vendor white papers, and extracting relevant statistics and comments, takes the personal aspects out from your project request. Check out trends by reviewing headlines over a few weeks in technology and industry websites.
- Have you sought internal validation? Talk to peers and managers in other end departments and listen to their ideas. If you don't have internal numbers to back up your project request, perform a survey or a random inventory and report the findings.
- Have you increased the visibility of the good work you and your team have done already (savings, customer satisfaction, and so on) and highlighted the failures to be corrected in the requested budgeted project?
Look for strategic IT opportunities that will help you to build your case and strengthen a positive outcome to bringing ITAM to your organization. The following are a few examples to help you get started:
- Software audits: Audits by software companies and by compliance agencies are on the rise. Waiting to receive a letter leaves no options for reducing the number of licenses or buying licenses at non-crisis pricing. Can you prove the right to use? Understanding what information you need to keep and what choices you have during negotiations all deliver to the bottom line and to feeding accurate data for strategic planning.
- Acquisition/mergers: IT executives have an important role in determining the cost of integrating a new acquisition into the organization. The level of detail necessary to do the job right requires ITAM. Take advantage of software consolidation rather than be trapped with unexpected expenses. Regulatory compliance is scrutinized intensely during and after an acquisition. Managethis risk with the proper information.
- Technology to drive innovation: Technology certainly enables the business of the organization, but it can also make a difference in market leadership. When executives make a critical choice, it can provide the information they need to assess the advantages and disadvantages accurately. The "devil" in the details is an ITAM program that cannot deliver this critical information when needed.
- Profitability: To be part of the business, IT assets must deliver the expected value and facilitate achievement of business goals. Executives are accountable to shareholders and to industry regulators. Tax requirements, depreciation, and the value of corporate assets can all be verified or their accuracy can be improved by comparison to the tactical ITAM data.
Tactical goals drive the achievement of strategic goals. Group tactical actions and processes into objectives and begin to relate upwards. Here, you will learn some key objectives and their related actions and processes:
Managing the life cycle |
|
Managing costs |
|
Improving service |
|
Supporting other initiatives |
|
Managing risk |
|
Providing decision support |
|
ITAM is rarely seen as a strategic initiative at the moment, but those few forward-thinking companies that have tied in ITAM as a strategic initiative have started to reap the benefits. Creating and implementing an ITAM initiative is daunting as the likelihood of seeing the benefits over time will bear significant results, but after the initial first big success, the successes over the first year to 18 months after that are more modest, as the ITAM initiative needs constant care and feeding.
Unfortunately, ITAM is often one of the first items to be shut down when an organization hits a rough patch. In these cases, the organizations see ITAM as a nonessential activity, which is in fact not the case. Organizations often end up making decisions that are often shortsighted with a big impact on the long-term health of the company or even industry. Take Microsoft as an example and consider its long wait to get into mobility. That's only one example, but there are so many others to draw upon. It is not the first time IT has teetered on the brink of this particular dilemma, and on more than one occasion, the crows have come home to roost.
In the course Converting Strategy into Action offered by Stanford University, they emphasize the importance of understanding the culture and the structure of a company as a critical input in moving ideas from a vision to a practical solution and indicate that these same aspects have a direct bearing on the adoption and success rates of the endeavors of a company.
The value from asset management comes from the following two areas:
- Reduced cost or improved asset utilization
- Reduced risk
There are many other measures, components, and processes that make up asset management, but only value and risk will be seen and understood by the executives paying the bills for these services.
Unless your ITAM program can automatically calculate certain KPAs, processes, or SLAs, you can compare reports on several topics, such as asset reallocation, budget savings, reducing gaps between purchased licenses and those installed, and the time it took to accomplish those tasks with or without your program; you can then evaluate approximately the return on investment and how much it brings to your company. It also depends on the number of employees and how segmented your asset management team is. Analyzing your workflow processes for each employee might shed some light on unnecessary tasks within your department, and that would represent an opportunity to improve productivity.
For some, the low hanging fruit is really more around the OPEX cost reduction aspects of ITAM; ROI becomes the logical result.
Some look at the ongoing cost centers—such as ITSM, ERP, procurement and disposal, Energy, and HRIS—and then specific intermittent projects—such as M and A activity, software compliance, OP systems upgrades, and datacenter consolidation and virtualization—for which the value of having a dynamic and up-to-date ITAM system in place is invaluable. An operating system upgrade project alone in a mid to large company may justify the cost of ITAM systems and personnel for many months or years to come.
In Murphy's law, knowing oneself is the ultimate form of aggression. Similarly, in ITAM, knowing where you are broken exposes the value in the ITAM process:
- Does your ITSM system work from live data?
- Is the ERP fixed asset reconciled with the ITAM repository?
- Do you manage software purchases and landscape to the extent that you know your license position (entitlements versus deployments). (Each copy out of compliance can represent $150,000 in fines).
- Do you know how much IT assets are deployed, where they are, their configuration, and the status of these assets?
- Are you aware of what's being disposed of, how it is recorded, and whether software is being harvested for reuse?
From a cost standpoint, if you cannot answer these questions, you might consider this one guiding fact: cost reduction could easily approach 12%-15% of the overall IT budget, no kidding. This alone justifies a good well-funded ITAM function year after year.
One of the main focuses needed for ITAM is to show that it can reduce cost and provide metrics. You can do this in the software management space by reducing renewal costs and standardizing software. Other significant areas of ITAM that can bear results are as follows:
- Reduction in cyber security risk by highlighting vulnerabilities on unsupported software and noncompliant software instances
- Tracking disposal of machines and providing verification of asset status in an automated method
Although all the points just mentioned are accurate, executive management will not move forward if presented with what can be versus what it is along with some type of data and reasons for making ITAM a top priority. Often, executive management will look at other priorities as the real priorities, especially in the face of a financial crisis, cyber attack, or an industry upset.
The top priority for companies is ensuring the relevancy of their offerings. The next priorities are fulfillment of those lines of business, increasing market share, and providing value to their customers. The underlying factor is the need companies have for mobility, social media, fostering an innovative culture, and leveraging their employees' entrepreneurial spirit in addition to finding talent that is knowledgeable and experienced with all the new technologies and nontraditional ways of engaging people to want a company over its competitors.
Why is this relevant to ITAM? How does it demonstrate the value of the ITAM program? Looking at the priorities of the company, an ITAM program can/may do the following things:
- Create funding for programs through its cost savings from the ITAM program or by leveraging the existing technology for new initiatives (without having to purchase).
- Time efficiency will increase employee productivity by creating an automated process that fosters employees to be innovative and agile with the ability to brainstorm creatively. ITAM eliminates the constant firefighting mode at work and creates a more proactive, preventive maintenance mode.
- It may align IT with business to create a collaborative environment, resulting in a profit center. How is this achieved? With ITAM, IT has a 360-degree view that creates transparency in all areas and stages of the business. ITAM helps manage the full life cycle. Although not everything on that cycle falls under IT, ITAM opens the door for communication. IT now has a clearer picture of what the company needs and its pain points. This strategy can lead companies to go to market faster in an accelerated execution phase.
These are some of the key points presented and may prove to be of value to executive management and lead them to move forward and provide the much needed support to their ITAM and SAM teams. With SAM, use these points, among others, plus some scary real-world events, for buy-in on the ITAM program.
During the 2008 financial crisis, enterprise IT groups worldwide had a dire warning and expectations of a great budget reduction. This is no surprise, as any bad year for a company or even an industry leads to decreased funding. During any crisis year, the business case for ITAM must be compelling and relevant.
The following are some steps that best demonstrate the value of that IT improvement business case:
First, avoid focusing solely on financial savings. In a squeezed budget year, it would seem natural for IT managers to promote the direct and indirect savings that are expected from the project. Although outlining the savings is absolutely expected, focusing on that one goal may reduce your chances for approval and funding. Ask yourself how this project relates to corporate and CIO-specific goals. How can you present the value of the project in relation to those goals? Unless you can answer this question and include it in your business case, it is unlikely that you will be funded.
Second, avoid stating benefits solely from an IT operational perspective. A business case that does not lay out the benefits to customers (internal and external) is unlikely to win the funding contest. Certainly, operational improvements will occur when the project is completed. Will the CIO be able to figure out the global value of risk reduction of loss or theft if you only explain the expected improvements in the life-cycle process?
Stepping back from the heads-down detailed view to analyze the global value can be the hardest part of preparing a business case. You cannot assume that the executives have done research on or can intuit how the project relates to their ultimate goals. You have to create those connections for the executive team in a crystal clear manner.
To assure that your project receives a proper review and is compared at full value with other possible budget items, consider taking the following steps before hitting send on that business case:
- Relate the project to how it will help the company grow: Companies acquire, merge, and divest often to increase profitability. While the deal on paper is good, the advantages gained can be lost in the execution of how assets are controlled and inventoried. Acquiring a company with inadequate software licenses, a pending audit, or software licenses that are not transferable is a nightmare. Can the business case relate how these improvements prepare the organization for a major change? Can the documentation developed during the project be added to the due diligence team's materials so that they can analyze a prospective acquisition accordingly?
- Understand the CIO's personal and corporate goals: If the CIO is a heads down IT-focused leader, then a business case built on savings from efficiency may still work. However, CIOs are less internally focused because operational goals do not lead to a seat on the executive team. The upwardly mobile CIO ties IT department activities to corporate goals such as increasing profitability or customer satisfaction. A business case that presents upgrading to maintain technology is more likely to be funded if it is related to a corporate goal such as solving a specific business issue.
- Always include service management: The service management approach to IT operations is popular and is frequently reported in the media read by executives. If an IT project will help improve the execution of a service or the adoption of service management principles, then ensure that you explicitly state how the change will lead to enhanced service management.
- Relate projects to impending technology changes: Sometimes, a major project that has been already underway is the most important aspect to mention in the business case. If the business case can be construed as competing against money already spent, you have already lost. However, if you can show how this project adds value to the ongoing project, you gain a perception advantage and champion those who are invested in the success of the other project. For example, the adoption of virtualized servers changes the relationship of the server to the cost center, eliminating one per application or department. What if an automation project business case lists that the configurations and inventory will be easily tracked in a virtual environment as a benefit? Surely, the business case is much more likely to snag attention than if it was focused on the goal of improving control of the asset inventory.
- Uncover "found money": A business case must always talk about the cost versus benefit to be considered at all. In many cases, IT projects can offer a reasonable expectation of savings based on expenditures that will not occur, enabling bulk purchasing or freeing up resources through automation. Ensure that the savings are real and measurable. Sampling is a reasonable method for gauging the potential savings. Other sources of information to back up predicted savings can come from research on the Internet, analysts, or even your vendors, who are eager to help you receive funding.
By stepping away from the details and relating the project to external influences, the project is more likely to be understood and weighed appropriately against other initiatives.
ITAM affects all aspects of the enterprise, from profits to legal obligations to operational effectiveness.
Just as a cutting-edge technology or services can drive a company's earnings, mismanagement of its assets and operations can erode profits, no matter how substantial. Managing IT assets is not just about managing hardware and software within the enterprise, but it's also about how it effects risk exposure, operational inefficiencies, legal obligations, compliance standards, and costs. Failure to manage IT assets effectively can result in legal liabilities and proceedings, financial reporting errors, hefty fines associated to industry legislation, and excess spending of financial and human capital. Companies can save up to 30% in management costs per asset in the first year, according to Gartner Inc., and an effective asset management program can reduce their total cost of ownership by 10% to 15%, on average.
In the end, and right here at the beginning, you must understand that managing an asset effectively requires understanding the total costs associated with the asset. Understanding how the asset supports business critical services throughout its life span is also crucial. It is vitally important to ensure that you have both an accurate analysis and understanding of the costs associated with budgeting, allocation, accounting, and service valuation for every asset. Determining IT's true return on investment without this information is not doable.
Answering the following five fundamental questions provides a snapshot of the effectiveness of your current asset management strategy, assuming that you have one:
- What IT assets are in your possession?
- Do these assets support the profitability of your business?
- How do these assets support your business?
- How much is it costing your business to maintain these assets?
- Is the return worth the cost?
Only a fraction of organizations have reached maturity in ITAM, the level where processes designed for best practices are in place and continually improve the strategic alignment, cost effectiveness, and integration of IT assets. You are now equipped to define the challenges you face and organize and build a consensus for change. In the next chapter, you will learn how to create your ITAM strategy and plan.
