A global appliance manufacturer found that every hour of downtime for its customers' in-store inventory reorder system cost $100,000 in lost orders. Its customers, most notably retail outlets, used the in-store inventory reorder system to add inventory as retail sales diminished in-store stock.
Despite this cost, and in light of a seemingly only occasional outage, the CIO found IT operations was too busy with the day-to-day challenges of IT -- just keeping the lights on -- to justify devoting resources to develop a strategic solution. However, when a 64-hour IT outage resulted in $6.4 million in lost sales drew ire from business managers, and threatened to jeopardize customer relationships, the CIO demanded that IT operations adjust priorities.
A mere six months later, IT operations had implemented a Business Service Management (BSM) project that improved overall operational availability by 25%, reduced costs in automating the service level calculation and reporting -- and in addition, they discovered and corrected a previously unknown problem where a quarter of their customer logins were failing.
Changing the IT Management Paradigm
Manufacturers are always looking for a smarter way to do things. With costs up and margins slimmer, working smarter, not harder, is the way forward. The benefits of this philosophy can be applied two ways: immediate cost reduction or maintaining cost levels but applying the same resources toward more strategic revenue generating projects.
As the appliance manufacturer example indicates, it's an understatement to say that the manufacturing sector has grown increasingly reliant on technology. In fact, the line between the business and technology has become so blurred in some cases IT feels like it is the business.
Despite this increasing technological reliance, IT operations teams find themselves in the conundrum of being asked to do more with less. For example, IT operations staff often report that as the size of the IT infrastructure -- the thousands of hardware and software components spread across the global enterprise -- has grown, IT budgets and headcount have simply not kept pace.
The consequences? CIOs struggle with the fact that IT shops tend to react to each new organizational demand rather than proactively anticipating needs. Managers question why it takes a 35-person conference call -- and almost three days as in the case above -- to resolve an IT outage. In the trenches, IT operations staff note they've got dozens of critical issues and have no way to logically prioritize fixes based on business impact.
Business Service Management or BSM is a smarter approach to IT management. Traditional approaches manage IT by individual components. Often, myriad tools produce multiple silos of information that cannot be readily shared -- either across the tools themselves or by the people using them. This is because tools see mere components, not the applications or the services they support -- services such as order processing, an ERP application such as SAP, or even e-mail.
By contrast, BSM dynamically links IT components according to the application or services they support. BSM integrates existing tools into a single common interface and view, which enables IT operations to see all the relationships and dependencies across IT components, applications and services. The result is better alignment of business with IT, and enables IT to reduce the frequency and duration of IT outages.
The global appliance manufacturer in the example above built an online portal that provided real-time service levels in only six months, from concept to production. The BSM portal automates the process of gathering and reporting data in real-time from a variety of management tools through a single front-end, overlaying the company's Configuration Management Database or (CMDB). The portal correlates this information and presents executives with a top-down view of service level compliance in terms that business users understand.
As is typical in manufacturing, process improvement and best practices such as ITIL strongly influence IT initiatives -- the BSM project in this case leveraged ITIL principles to establish business service levels, so "outages" now represent the customer's experience, as opposed to measures of IT component uptime or downtime. Since the risk of recasting the definition of an "outage" meant IT would initially look a lot worse before it looked better, the CIO appropriately set expectations so that the baseline year would begin only once the BSM project was put into production.
Keys to Success
This BSM project is exemplary because it offers three keys to success that can be applied to any IT organization.
- Identify the purpose of the project and set a baseline for measuring success. This manufacturer was focused exclusively on reducing the frequency and duration of downtime for its in-store inventory reorder system.
- Choose one or two critical services. The fact that the manufacturer focused on one critical application -- the in-store inventory reorder system -- allowed IT operations to gain experience, demonstrate quick success and establish a business case for rolling the project out to other applications and services across the enterprise.
- Integration is paramount. This manufacturer had a variety of existing IT management tools in place and selected a BSM technology noted for its integration capability. This enabled the organization to leverage, rather than sink, its existing investments in IT management software.
Managing the IT infrastructure may not be sexy, but as a $6.4 million outage suggests, it is essential. The servers, routers, applications and all the things that comprise the IT environment at an organization the size of a global manufacturer are as complex as they are critical. After all, if the supply chain management system goes down -- nothing will happen -- let alone happen "just-in-time." And so the solution seems to be work smarter, not harder and BSM provides that very opportunity for IT management.
Abbas Haider Ali is vice president of Product Strategy for BSM vendor Managed Objects. Managed Objects' manufacturing customers include GE, Volvo, and Becton, Dickinson and Company. www.wearebsm.com
Interested in information related to this topic? Subscribe to our Information Technology eNewsletter.