ITIL Training - Part 5

IT Infrastructure Library (ITIL)
Part 5 Service Level Management IT Financial

CONNECTING BUSINESS & TECHNOLOGY
11/25/2013
Agenda
Service Delivery Model Service Level management IT Financial Management
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BUSINESS & TECHNOLOGY
Service delivery process model
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Agenda
The process of defining, agreeing, documenting and managing the levels of customer IT service, that are required and cost justified.
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SLM Overview
Goal The goal for SLM is to maintain and improve IT Service quality, through a constant cycle of agreeing, monitoring and reporting upon IT Service achievements and instigation of actions to eradicate poor service - in line with business or Cost justification. Scope All IT services And
Contacts with Suppliers Operationnal Level Agreements What is an SLA ?
A written agreement between an IT Service provider and the IT Customer(s), defining the key service targets and responsibilities of both parties
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Service Level Management - process

Establish requirements Define Services: Internal & external
Service Level Requirements
Contract negotiations
Monitor: Service Levels

Service Level Achievements
Report/ evaluate
Servicecatalogue
Service Improvement Program
Service Spec sheets
Service Level Agreements
Service Quality Plan
Operational Level Agreements
Underpinning contracts
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Service Level Management - Benefits

Benefits
IT Services are designed to meet Service Level Requirements improved relationships with satisfied Customers both parties to the agreement have a clearer view of roles and responsibilities there are specific targets to aim for and against which service quality can be measured, monitored and reported IT effort is focused on those areas that the business thinks are key IT and Customers have a clear and consistent expectation of the level of service required (i.e. everyone understands and agrees what constitutes a Priority One Incident, and everyone has a consistent understanding of what response and fix times are associated with something called 'Priority One') service monitoring allows weak areas to be identified, so that remedial action can be taken (if there is a justifiable business case), thus improving future service quality service monitoring also shows where Customer or User actions are causing the fault and so identify where working efficiency and/or training can be improved SLM underpins supplier management (and vice versa) -
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SLM : implementing the process (1)

Produce a service catalogue
A service is one or more IT systems wich enable a business process Define a hierarchy Separate services seen by the customer (business service) and services not seen by the customer (infrastructure, system, network application services) A service could be defined as a CI (Configuration Item)
Customer Service Payroll System Accounts System Invoicing Customer D/Base Sales D/Base Stock Control Legal System Factory Production Suppliers D/Base Ordering Logistics Postal Addresses CAD/CAM Intranet Internet Routemaster Office Suite E-mail
Accounts
Sales
Marketing
Legal
Production
Retail
Warehous e
Transport
Design

Expectation Management Satisfactin = Expectation Perception SLA are just documents and themselves doesnt improve the quality level Support of business managers to to manager excessive or unrealistic demands (costs) SLA Structure Service based : mailing service Customer based : finance department Multi-levels SLA : coprporate level + customer level + service level Establish Service Level Requirements and Draft SLA Iteractive process based on a first outline draft (as a starting point) Negociate requirements vs charging Wording of SLAs Clear and concise without ambiguity
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Seek agreement With customer representatives Care about the current issues. Establish long term requirements. Start with a pilot SLA if no previous experience Identify customer requirements at all levels (cost, responsivenss, availability) Consult IT provider representatives to be sure that targets are realistic and achievable Take into account suppliers contractual implications
Establish monitoring capabilities

All targets in the SLA must be monitored and measured. Monitoring must match the customer perception Links to the service desk
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SLM : implementing the process (4) Review underpinning contracts and operationnal level agreements
Contracts with external suppliers are mandatory Establish simple agreement with internal groups Contracts with external suppliers are mandatory OLAs need to be simple but must include equivalent targets than SLA (response time, open hours)
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Define reporting and review procedures

SLA reporting mechanisms must be defined and agreed with the customers Frequency and format must be agreed Define period to review SLAs (annually for example) Publicise the existence of SLAs Service Desk Support groups Suppliers Customers
=> Extract key targets
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SLM : ongoing process (1)

Monitoring and reporting Launch monitoring when SLA is agreed Produce Service achievement reports (with exception reports if SLA is broken)
Example of SLAM chart (front report)
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SLM : ongoing process (2) Service review meetings

Periodic review meeting with customer representatives to
analyse the last period Preview any issues for the coming period
Actions must be minuted Service Improvement Program To resolve issues impacting service quality In relation with problem management and availability management Driven by service review meetings Maintenance of SLAs, contracts and OLAs Keep up to date To be reviewed annualy Align to business needs and strategy Verify services and targets
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SLM : SLA contents (1)

Introduction
parties to the agreement title and brief description of the agreement signatories dates: start, end, review scope of the agreement; what is covered and what is excluded responsibilities of both the Service Provider and the Customer a description of the Services covered.
Service hours
the hours that each service is normally required (e.g. 24x7, Monday to Friday 08:00 - 18:00) arrangement for requesting service extensions, including required notice periods (e.g. request must be made to the Service Desk by 12 noon for an evening extension, by 12 noon on Thursday for a week-end extension) special Hours (e.g. public holidays) service calendar.
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Availability
Availability targets within agreed hours, normally expressed as percentages measurement period and method must be stipulated. This may be expressed for the overall service, underpinning services and critical components or all three. However, it is difficult to relate such simplistic percentage Availability figures to service quality, or to Customer business activities. It is therefore often better to try to measure service UnAvailability in terms of the Customer's inability to carry out its business activities. For example, 'sales are immediately affected by a failure of IT to provide an adequate POS support service'. This strong link between the IT Service and the Customer's Business processes is a sign of maturity in both the SLM and the Availability Management processes.
Reliability
usually expressed as the number of service breaks, or the Mean Time Between Failures (MTBF) or Mean Time Between System Incidents (MTBSI).
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Support
support hours (where these are not the same as Service hours) arrangement for requesting support extensions, including required notice periods special hours (e.g. public holidays) target time to respond, either physically or by other method (e.g. telephone contact, e-mail), to Incidents target time to resolve Incidents, within each Incident Priority - targets varies depending upon Incident priorities.
Throughput
Indication of likely traffic volumes and throughput activity (e.g. the number of transactions to be processed, number of concurrent Users, amount of data to be transmitted over the network). This is important so that performance issues which have been caused by excessive throughput outside the terms of the agreement may be identified.
target times for average, or maximum workstation response times (sometimes expressed as a percentile - e.g. 95% within 2 seconds).
Transaction response times
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Batch turnaround times
times for delivery of input and the time and place for delivery of output.
Change
targets for approving, handling and implementing RFCs, usually based upon the Category or Urgency/priority of the Change.
IT Service Continuity and Security

a brief mention of IT Service Continuity Plans and how to invoke them, and coverage of any security issues, particularly any responsibilities of the Customer (e.g. back-up of free-standing PCs, password Changes) details of any diminished or amended service targets should a disaster situation occur (if no separate SLA exists for such a situation).
Charging
details of the charging formula and periods (if charges are being made). If the SLA covers an Ouitsourcing relationship, charges should be detailed in an Annex as they are often covered by commercial in confidence provisions.
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Service reporting and reviewing
the content, frequency and distribution of service reports, and the frequency of service review meetings.
Performance incentives/penalties
Details of any agreement regarding financial incentives or penalties based upon performance against service levels. These are more likely to be included if the services are being provided by a third-party organisation. It should be noted that penalty clauses can create their own difficulties. They can prove a barrier to partnership if unfairly invoked on a technicality and can also make service provider staff unwilling to admit to mistakes for fear of penalties being imposed. This can, unless used properly, be a barrier to effective Problem solving.
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SLM : Key Performance Indicators and metrics
What number or percentage of Services are covered by SLAs? Are Underpinning contracts and OLAs in place for all SLAs and for what percentage? Are SLAs being monitored and are regular reports being produced? Are review meetings being held on time and correctly minuted? What number or percentage of Services targets are being met and what is the number and severity of service breaches? Are service level achievements improving ? Are Customer perception statistics improving? Are IT costs decreasing for services with stable (acceptable but not improving) service level achievements?
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Agenda
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21
Introduction (1)
Introduce formal finacial Management for IT Services, because IT costs grow faster than other costs : Increases in Users numbers New technologies, more complex New needs Three main processes Budgeting (predicted costs) IT accounting (costs of resources usage) Charging (costs back to Business Unit)
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Introduction (2)
Relationship with other IT Service Management processes Service Level Management : SLA = customers expectations and IT services obligations Capacity Management : estimate the costs of the desired capacity and availability of the system Configuration Management : asset informations
Business vs IT
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Financial Management - process

Business IT Requirements IT Operational plan (Budgeting) Cost analysis (Accounting) Charges (Charging)
Costing models
Charging policies
Feedback of proposed charges to business (Report)

Service Level Management Financial Management
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Financial Management - Financial model

Budgeting/cost accounting
Purchase And depreciation Lease Equipment Cost (HW/SW) Rates
Products/charging
Licences/ maintenance
Number of sales
Product A
Salaries
Product B
Training Expenses (travel, meals ..) Housing cost Charges from departments Management/ administration
Organisation cost
Product cost
Product C
Invoice/ charging
Product D
Product E
Overhead
+
Revenue
BM 5-3-2002
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Budgeting (1)
Budgeting process has a key influence on strategic and tactical plans Periodic (e.g. annual) round of negotiations between the business departments and the IT organisation covering expenditure plans and agreed investment programmes Example
Budget Item Hardware UNIX Server NT Server Yes Yes 80,000 10,000 8,000 1,000 Capital Purchase Cost Annual Maintenance Spend This Year 8,000 1,000 Budget Next Year 8,000 1,000 Notes Annualised Cost
No changes No changes
34,667 4,333
ORACLE Marketing and Sales appl. MS Windows (50-User)
No No No
7,000 3,000 2,500
7,000 3,000 2,500
8,400 3,600 3,000 Staff increase
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Budgeting (2)
Estimating the cost of budget items Arbitrage Expenditure trends Depreciation Estimating the cost of workload dependent budget items Workload estimations Targets Forecasts
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IT Accounting (1)
Business Perspective Charge for IT services or not ? Different organisations Accounting Centre (costing inputs) Recovery Centre (costing outputs / services) Profit Centre (separate business entity)
Sufficient autonomy Outsourcing Risk : the Customer becoming aware that the IT organisation is 'making a profit' from them
Building the cost models To calculate the costs of IT Service provision, it is necessary to design a framework in which all known costs can be recorded and allocated to specific Customers, activities or other Category. This is called a Cost Model
IT Accounting (2) Costs types

hardware costs software costs people costs accommodation costs External Service costs Transfer costs
Major type Cost Elements
Hardware
Central processing units, LANS, disk storage, peripherals, wide area network, PCs, portables, local servers Operating systems, scheduling tools, applications, databases, personal productivity tools, monitoring tools, analysis packages Payroll costs, benefit cars, re-location costs, expenses, overtime, consultancy Offices, storage, secure areas, utilities
Software
People
Accommodation
External Service
Direct or indirect costs

Transfer
Security services, Disaster Recovery services, Outsourcing services, HR overhead
Internal charges from other cost centres within the organisation
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IT Accounting (3) Cost Model
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IT Accounting (4)
Classification of Cost Elements Capital
computer equipment building and plant software packages
Operational
staff costs maintenance of computer hardware and software consultancy services, rental fees for equipment software licence fees accommodation costs administration expenditures electricity, water, gas, rates disaster recovery Consumables
Direct or Indirect Cost Centre Fixed or variable
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IT Accounting (5)
Depreciation pre-determined, as in the case of a lease dependent on its physical deterioration through use or passage of time reduced by economic or technological obsolescence
Apportioning the IT Services costs

Capit al Annual Cost Direct Apportionment Method Customer Marketing and Sales Manufacturing Finance
Hardware UNIX Server

NT Server Netware Server PCs (50) Routers (5)
Yes Yes Yes Yes Yes
34,667 4,333 1,300 26,000 1,300
No Yes No No No
50/50 split Infrastructure By PC Infrastructure
17,333 4,333
17,333
5,200
19,240
1,560
LAN Cabling
Software General Ledgers ORACLE
Yes
17,333
No
Infrastructure
No No
20,000 7,000
Yes Yes
20,000 7,000
IT Accounting (6) Calculating the Cost-by-service
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IT Accounting (7)
Calculating the costs of Cost Units
PC, Operator hour
Changes affecting costs

Disks
Investment appraisal
being clear about objectives thinking about different ways of meeting them estimating and presenting the costs and benefits of each potentially worthwhile option ROI (Return on Investment )= average increase in profits(average taken over an agreed number of years) / Investment
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IT Accounting (8)
Total Cost of Ownership The Gartner Group pioneered a method of calculating the costs of a product or service with the title of 'Total Cost of Ownership' (TCO). The most widely known example was that for Personal Computers. In an era where the price of a PC on a desk had fallen to $2,000, Gartner demonstrated that the 5-year cost of a PC, when taking into account purchasing overheads, upgrades, maintenance, a proportion of support staff and Service Desk costs, disposal etc. was closer to $35,000 Budgeting, IT Accounting and Charging cycles
Budgeting
Planning (annual) Agree overall expenditures Take actions to manage budget exceptions or changed costs
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IT Accounting
Establish standard Unit costs for each IT resource Monitor expenditure by costcentre
Charging
Establish pricing policy Publish price list Compile and issue bills
Operational (monthly)
Charging (1)
Goals forcing the business divisions to control their own Users' demands reducing overall costs and highlighting areas of service provision which are not Cost effective allowing the organisation to match service to justifiable business need, through direct funding
Chargeable items Chargeable Items should be understandable and controllable by the Customer Relate to the organisation's business Variable costs and charges estimate of the likely charges and possible upper and lower limits variable costs do not decrease with decreasing usage
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Charging (2)
Pricing the determination of a pricing objective understanding the true (not perceived) demand for the service accurate determination of Direct and Indirect costs the level of control of the internal market understanding the services available externally if Customers have a choice legal, regulatory and tax issues Internal market Tied customers / Untied customers Differential charging For example, during peak daytime Pricing flexibility Billing Bills Charging information is passed to Customers to make them aware of the cost of the resources used by their business to manage cash flow => Billing cycle
Charging (3)
Case Study : Discouraging use of services
A company provided its Users with a dedicated, outsourced Service Desk facility. The vendor charged the company on a per-call basis. The charging policy was to recharge all IT spending to the business on the basis of true cost. Once the Service Desk was in place, Customers realised that they could reduce their costs by not placing Service Desk calls. Some business managers instructed their Users not to use the Service Desk, or to route all issues through a single, local support person. Decreasing the total number of calls decreased the calculated charges to the Customer but did not reduce overall price of the service by the same amount. It also resulted in:
increased wasted time for Users reduced effectiveness of IT systems poor perception of the IT Services and the IT organisation additional work for the IT organisation to discover problems reduced leverage in negotiating service costs with the outsourcing vendor.
Resolution
The charging method was changed to one in which a fixed fee per User was negotiated, based upon an estimated call rate taken from previous years' volumes and business predictions. This charge was reviewed quarterly to check that call levels were within agreed thresholds.
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Agenda
Annexes
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39
Acronyms (1)
AMDB : Availability Management Database AST: Agreed Service Time ATM: Auto Teller Machine BCM: Business Continuity Management BIA: Business Impact Analysis BRM: Business Relationship Management CAB: Change Advisory Board CDB: Capacity Database CFIA: Component Failure Impact Analysis CI: Configuration Item CIA: Confidentiality, Integrity and Availability CMDB : Configuration Management Database CSBC : Computer Services Business Code CSS : Customer Satisfaction Survey DT : Down Time EFQM : European Foundation for Quality Management EUA : End User Availability
Acronyms (2)
EUDT : End User Down Time EUPT : End User Processing Time FTA : Fault Tree Analysis ICT : Information and Communication Technology(ies) ISP : Internet Service Provider ITAMM : IT Availability Metrics Model ITIL: Information Technology Infrastructure Library ITSC : IT Service Continuity ITSCM : IT Service Continuity Management ItSMF : IT Service Management Forum IVR : Interactive Voice Response KPI : Key Performance Indicator LAN : Local Area Network MBNQA : Malcolm Baldrige National Quality Award MIM : Major Incident Management MTBF : Mean Time Between Failures MTBSI : Mean Time Between System Incidents
Acronyms (3)
MTTR : Mean Time To Repair OGC : Office of Governnment Commerce OLA : Operational Level Agreement OLTP : On-line Transaction Processing PAD : Package Assembly/Disassembly device PKI : Public Key Infrastructure PRINCE : Projects IN Controlled Environments QA : Quality Assurance RAG : Red-Amber-Green RAID : Redundant Array of Inexpensive Disks RFC : Request For Charge ROCE : Return On Capital Employed ROI : Return On Investment RWO : Real World Object SIP : Service Improvement Programme
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Acronyms (4)
SLA : Service Level Agreement SLAM :SLA Monitoring SLM : Service Level Management SLR : Service Level Requirement SMO : Service Maintenance Objectives SOA : System Outage Analysis SPOF : Single Point of Failure TCO : Total Cost of Ownership TOP : Technical Observation Post TOR : Terms Of Reference TQM : Total Quality Management UPS : Uninterruptible Power Supply VBF : Vital Business Function VSI : Virtual Storage Interrupt WAN : Wide Area Network
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Contact
ContactDevoteam Jean-Marc Chevereau Phone +33 1 41 48 48 48 / +33 6 64 48 96 99 Email jchevereau@devoteam.com Country France
Algeria Austria
Poland Russia
Belgium
Czech Republic Denmark France Germany Italy Jordan Luxembourg Morocco
Saudi Arabia
Spain Sweden Switzerland Tunisia Turkey United Arab Emirates United Kingdom
www.devoteam.com
Author Date Further Information
Jean-Marc Chevereau Janvier 2010
Netherlands
Norway
Devoteam Group This document is not to be copied or reproduced in any way without Devoteam express permission. Copies of this document must be accompanied by title, date and this copyright notice.
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IT Infrastructure Library (ITIL)

Part 5 Service Level Management IT Financial

BUSINESS & TECHNOLOGY

Service delivery process model

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

Service Level Management - process

Monitor: Service Levels

Service Improvement Program

Service Spec sheets

Service Level Agreements

Service Quality Plan

Operational Level Agreements

BUSINESS & TECHNOLOGY

Service Level Management - Benefits

BUSINESS & TECHNOLOGY

SLM : implementing the process (1)

SLM : implementing the process (2)

BUSINESS & TECHNOLOGY

SLM : implementing the process (3)

Establish monitoring capabilities

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

SLM : implementing the process (5)

Define reporting and review procedures

BUSINESS & TECHNOLOGY

SLM : ongoing process (1)

Example of SLAM chart (front report)

BUSINESS & TECHNOLOGY

SLM : ongoing process (2) Service review meetings

BUSINESS & TECHNOLOGY

SLM : SLA contents (1)

BUSINESS & TECHNOLOGY

SLM : SLA contents (2)

BUSINESS & TECHNOLOGY

SLM : SLA contents (3)

Transaction response times

BUSINESS & TECHNOLOGY

SLM : SLA contents (4)

IT Service Continuity and Security

BUSINESS & TECHNOLOGY

SLM : SLA contents (5)

BUSINESS & TECHNOLOGY

SLM : Key Performance Indicators and metrics

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

Financial Management - process

Feedback of proposed charges to business (Report)

BUSINESS & TECHNOLOGY

Financial Management - Financial model

BUSINESS & TECHNOLOGY

ORACLE Marketing and Sales appl. MS Windows (50-User)

7,000 3,000 2,500

7,000 3,000 2,500

8,400 3,600 3,000 Staff increase

BUSINESS & TECHNOLOGY

BUSINESS & TECHNOLOGY

IT Accounting (2) Costs types

Direct or indirect costs

Security services, Disaster Recovery services, Outsourcing services, HR overhead