Posted: Wed Nov 15, 2006 3:31 am Post subject: ITIL - How long is the wait before ROI can be seen??
We all know whatthe cost implications of ITIL implementation but what is the ROI? ITIL has been around for quite a substantial time but I have been unable to find any financial analysis or case study that demonstrates its ROI. Everything is in terms of time reduction or potential. Of course reduction in cycle times has value but where is the crossover point?
If it takes "years" to fully implement ITIL as some practioners claim then the investment must be large but no-one seems to have completed a financial analysis. The real issue for me is the cost. What is the ROI? and when the cheering has subsided, how large are the financial savings
obviously this cannot be answered in general, as you're looking for numbers. However I think this can only be examined in relation to a specific project at a specific company, and I've seen some presentations where the author talked about ROI in connection of a well-defined project.
Sadly, I don't remeber where this was, but look around itSMF chapter sites, sites on major events like an itSMF conference, or HP software conferences, they usually upload the material.
One more point, I hope I'm not going to start a debate with this, but I don't think it's a valid term to use 'fully implement ITIL', for one it's a best practice, you have to customize it (probably heard this a 1000x), and the other is that unless you have very clearly defined measurement system for your project or go for ISO20k, you don't know whether you have 'fully implemented' it or not, and even then, you have the Continual Improvement Plan. In other words you have to have a benchmark. Would you agree?
I feel you are correct with the benchmark concept. And of course I was incorrect to state 'fully implement' which I know s not the case. The reason I asked this question is that I am currently doing a dissertation on whether ITIL genuinely instils best practice across an organisation. One objective is to find ot if there is an association between ITIL framework usage and ROI. If you find any case studies with regards to this I would be grateful.
I feel the information you have provided is the same as that found during my literature review. Most ITIL professionals comment that ITIL is not a framework that can implemented as full and the adaptation of ITIL is necessary in order to mould the processes around the current business working structure.
Joined: Sep 16, 2006 Posts: 3504 Location: London, UK
Posted: Fri Nov 17, 2006 3:51 am Post subject:
The ROI for implementing ITIL cant really be found directly but
if a company implements a sound IT Management process in their organization and uses ITIL Best Practice concepts like Incident, Change, Service Level Mgmt, then the IT department is able to provide a bang for buck service
So it works _________________ John Hardesty
ITSM Manager's Certificate (Red Badge)
Change Management is POWER & CONTROL. /....evil laughter
If you want to do a ROI analysis for ITIL, you have to do that analysis on those parts and aspects of ITIL that you are implementing in your organization, taking into account the maturity level of the processes and tools that you have in place when you start your ITIL implementation. In other words, it's a situational thing, not something generic.
Let me help you out with an example. Say you have a helpdesk in place and a reasonable incident management process, but no problem management. You also find that there is limited reuse of solutions and work-arounds, because they are not properly recorded and hard to locate when you need them.
Now you start a project to implement a new tool to support your incident management, which will allow for reuse of work-arounds and solutions. You are also going to implement problem management so that errors causing incidents can be eliminated.
This will likely result in the following benefits:
1) Many incidents that are currently assigned to Level 2 support, can now be solved by Level 1 support (helpdesk) by leveraging the available work-arounds and solutions. Say that Level 2 support on average spends 20 minutes on an incident assigned to them and you expect that the % of incidents assigned to Level 2 will drop by 10% (i.e. higher Level 1 resolution rate), you can now calculate your savings given your total volume of incidents and the cost of Level 2 staff per minute.
2) Thanks to problem management, you are hoping to see a reduction of your total incident volume by 5%. If you know your incident volume, the average time per incident and cost per minute for Level 1, the % of incidents assigned to Level 2, the average time per incident and cost per minute for Level 2, you can now figure out your savings here.
3) If your company can express the average costs to the business per incident, the benefits mentioned under 1) and 2) will also reflect in this area (fewer incidents and probably shorter duration). Not all companies will include this kind of savings in their ROI analysis (I know that the company that I work for does not).
With all this you may want to include a learning curve; you won't reach your maximum performance in the first year, but will slowly continue to get better. Also keep in mind that if you calculate savings of $50,000, this does not automatically imply that you can lay off one system administrator and cut your IT budget by $50K. What you will often see is that freed up resources are used for other parts of IT, usually more proactive (so again to improve better quality) or that offer more business value.
Hope this helped to get you started and to show that a ROI analysis can be done.
Joined: Aug 11, 2006 Posts: 262 Location: Netherlands
Posted: Sat Nov 25, 2006 9:03 am Post subject:
The concepts involved in the multiple benefits of the best practices of ITIL may be traslated in cost savings, but, how much?
I think that it´s imposible to know with figures, and the possible studies in that way are only little aproximations but nothing very serious. It depends of each company.
So benchmarking might not be easy. But still, when I succeed in diminishing one of my customers workload by say 40%, this can be translated in less hours spent by operation and therefor in money saved. This is why it is vital to start reporting asap, as it will give you a baseline (at least within your company) from which to compare when you get further in time.
There is also something that we should remember here. You do not implement ITIL processes strictly to reduce cost. You do to increase your service quality, to increase customer satisfaction (which turns into retention) etc.
In many aspects, your costs will be going up as you roll out your strategy for many reasons, not all related to capital investment.
For instance, as you roll out a Change Management process, you will likely increase bureaucracy to some extent, which will increase your costs. But you won't have as many failed changes, which is a cost avoidance, rather than cost reduction.
Down the road, your cost avoidance will mean that you will get room to grow out of your new processes; room that you didn't have before. So, as you grow, you will be able to do more with less, ... You are increasing your ROCE that way, but not cutting costs per say.
My personal feeling is that cutting costs is the wrong motivation for this. It is tempting and it may be an easy way to sell Senior Management, but it is not the end in ITIL.
Does it help? _________________ BR,
Technology Consulting | Service Excellence
Red Badge Certified
Posted: Tue Dec 05, 2006 5:02 pm Post subject: Return to the business on its investment
As a variant to what Fabian said:
ROI is not just about cutting costs: it is about the business being able to see that it got back what it - THE BUSINESS - wanted, and getting more of it than the investment put it.
So if the business needs to cut IT costs then cost cutting is what the ITIL project should return. if the business is on a quality drive then the ITIL project better be able to demonstrate some improved quality KPIs. if customer retention is required, then the Service Desk needs to show improved customer satisfaction. And so on: risk mitigation, avoidance of loss due to downtime, SOX compliance.... There are many potential returns on the investment. What does the business need?
ROI is about assigning some $ value to the business of the chosen KPI(s), then demonstrating they exceed the investment put in over some period.
everyone fixates on cutting costs because that is (supposedly) the easiest KPi to measure. Most cost-cutting metrics are rubbery anyway:
if you save 320 minutes of problem solving time per month what does that mean? Was the person effectively redeployed for that time or did they just sit around?
And spare me the old 10 minutes per week per user over 10,000 users equals umpteen dollars saved. Save someone 10 minutes per week and how is that time utilised?
Did we cut any real FTEs? i.e. did anyone get laid off? because if not, then in some organisations there was no cost cut.
As I said, look to whatever metrics the business needs at this time, use them to justify the ITIL project by showing how it is expected to deliver on them, and hope that (as in 90% of organisations) nobody ever actually checks for ROI realised afterwards
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