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Q2 2005
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"Today's CIOs view IT as the start of the race, not the finish," said
Jonathan Poe, senior vice president of Executive Directions, META Group's
CIO advisory and coaching service. "They have a broader perspective of the
enterprise and a more creative point of view on the value of IT within that
organization. Perhaps more important, they have the market perspective that
past generations of CIOs lacked. This perspective and focus on breakthrough
business performance, as evidenced by the list of their priorities, will
enable new-breed CIOs to assume their rightful place in the organization
next to fellow C-suite peers."
– META Group, February 2005 |
The Business Value of
Information Lifecycle Management (ILM)
Information Lifecycle Management (ILM) is a growing set of recommended practices
and technologies to manage data more efficiently and effectively. Organizations
process, manage, move, protect and archive various business data according to
unique characteristics such as age, usage patterns, compliance and archiving
policies, security and disaster protection rules, and value.
With consolidation to storage area networks and advances in storage management
solutions, the concept of hierarchies and intelligent management like ILM is
again at the forefront of storage architecture planning.
ILM has its roots in hierarchical storage management (HSM), which was popularized
with mainframe storage management strategies in the early 1980s. Driven by the
high cost of mainframe disk subsystems and exploding compound annual storage
growth of 50 percent or more, mainframe managers sought HSM to reduce storage
costs by migrating rarely accessed data from expensive online hard drives to
near-line optical jukebox storage (at the time about 1/4th the cost of disk
storage), and eventually to off-line tape library storage (about 1/10th the
cost of disks). By correctly establishing migration rules, the organization
would see little to no delay in information access (keeping frequently accessed
information or data requiring instant access regardless of age near-line), but
would save significantly by conserving precious disk subsystem space and eliminating
disk subsystem purchases to support growth.
The savings could be significant beyond storage costs. As research by Strategic
Research and other luminaries shows, more than $7 was spent for storage management,
administration and utilities costs for every $1 of disk capital cost. Because
more than 90 percent of data stored on hard disks was not actively accessed
by users or applications, it was ripe for more intelligent management and migration
to less expensive storage.
Although HSM remained popular as a mainframe process, early attempts at HSM
for distributed computing in the late 1980s / early 1990s never gained mainstream
adoption. Obstacles included heterogeneous network complexity, distributed storage
arrays and falling hard disk prices.
Fast forward to 2003, and the concept of managing storage for lower costs
is all the rage with storage vendors seeking to re-energize the storage marketplace
and with CIO?s. Organizations still desire to get a handle on storage growth
(remaining at more than 50 percent annually, too), escalating capital and operating
costs (the 7:1 administration to storage cost ratio holds), increased security
and disaster risks, and growing compliance regulations and mandates.
According to Gartner, in late 2004 fewer than 6 percent of organizations
had purchased and implemented ILM solutions, but more than 50 percent are planning
on purchasing them in 2005 and 2006.
ILM as a concept is not new, it was introduced by records and information
librarians in the early 1990s as a way to track the lifecycle of data from creation
or acquisition, editing and refinement, publication and evolution, through retention
and data disposal. Similar to HSM, ILM seeks to minimize storage costs by providing
various storage mediums such as disk, optical and tape, and various rules to
manage migration, archiving and disaster recovery. And as with mainframe HSM,
the economics are similar. Most data older than 90 days are seldom (if ever)
accessed, and online storage remains expensive to procure and manage, making
migration to increasingly cost-efficient technologies attractive. All data is
not created equal, and taking advantage of this fact helps save costs.
ILM outdoes HSM by taking a more holistic view, incorporating data?s business
value into the equation. Implementing ILM identifies not only the right storage
medium to minimize storage costs while meeting access speed, but the right process
and path to manage the data to meet business requirements such as information
security, disaster recovery, data retention rules, compliance regulations and
retirement. It?s the right storage at the right time and at the right price,
helping the IT department manage larger amounts of information, while simultaneously
lowering costs and improving storage operations? efficiency.
The business value of ILM for all storage includes:
- Reduced need to add hard disk storage for growth.
- Reduced storage administration tasks such as moves, adds and changes to
support growth, performance optimization, and backup and restore tasks.
- Reduced backup window overruns and resultant performance degradations.
- Reduced disaster recovery time by minimizing the necessary online storage
restoration.
- Reduced compliance costs and risks of compliance issues.
For application or e-mail databases in particular, archiving older data from
the production database organizations can:
- Improve application and database performance by minimizing the size of
production databases.
- Reduce database upgrade or maintenance downtime.
- Reducing risk of batch job window overruns.
- Reduce development / test workloads and storage requirements.
Most organizations which can migrate 50 percent or more of their data to
less expensive media can easily justify the investment in hardware, software,
training, systems administration, and support to implement and maintain ILM
solutions. With 50 percent or higher storage growth, an organization's reduced
costs and storage administration productivity improvements alone generate paybacks
of fewer than 12 months and typical ROIs of 250 percent or higher.
ILM ROI success is at risk if the solution and processes overwhelm the capability
and maturity of the IT team; poor results can lead to incorrect migration rules,
delay in information access for users, lost data, compliance issues, application
performance or availability issues. Prior to implementing ILM technology, the
team should thoroughly understand and document the processes by which data is
to be managed: analyzing and categorizing all data by age and usage characteristics,
value, retention and compliance rules, and other important management criteria.
Profiling all management rules and lifecycle paths comes first and drives the
selection of systems and solutions to meet the needs, rather than selecting
an ILM solution first.
ILM can minimize the total costs and maximize the business value of storage
through proper analysis and planning combined with thorough documentation, valuation
technology selection, integration and implementation.
Advance
in IT Value Management: Capability and Maturity
The concept of aligning IT investments with business goals is as old as the
IT function itself. Tangible examples of IT alignment, however, have been rare
over the last 40 years, despite respected IT thought leaders widely promoting
the concept.
The reason why is simple. Until a few years ago there was simply no need.
Through IT's infancy and adolescent stages, budgets and functionality dutifully
followed the growth curves associated with Moore's law for more than 40 years.
(Moore's law says, "The number of transistors on a chip doubles every 18 months.")
While Dr. Moore's views are likely to continue with regard to technological
advances and cost reductions, its correlation with aggregate IT spending no
longer applies.
Emergence of the ?Need? for IT Value Management (ITVM)
Once upon a time, IT budgets were entirely dedicated to innovation. But
the dotcom destruction of three trillion dollars of shareholder value, coupled
with high-profile examples of corporate mis-governance, has created a permanent
shift in IT budget priorities and spending behavior.
Following that shift, the pendulum continued to swing the other way over
the last few years with a 20 percent reduction in total IT spending. Alinean's
research shows that the typical company today spends 90 percent of its IT budget
on ?lights-on? operations, leaving a scarce 10 percent for innovation. As market
conditions require greater innovation to maintain competitiveness, the sunset
of the IT budget growth era has resulted in a bona fide need to prove and improve
returns from IT investments.
ITVM Capability and Maturity Defined
As such, almost all companies have adopted some level of ROI analysis on
their technology investments, ranging from elementary to sophisticated. Alinean
has identified 5 phases of ITVM development to help companies do a thorough
technology ROI approach, starting from the ground up.
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Figure 1: 95% of today's Companies
Perform Level 1 or Level 2 Analysis
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Alinean ITVM Capability and Maturity Model
Level 1 - When in Doubt, Use Spreadsheets
According to a 2003 IT Governance Institute survey, 80 percent of CIOs acknowledge
the need for ITVM. Reminiscent of the mid 80?s trend to use PCs to solve every
business process problem, IT and business professionals have responded with
spreadsheet models that attempt to identify and quantify the business value
of IT investments. Currently, more than 75 percent of companies use spreadsheets
for ad hoc analysis of IT projects.
While better than not measuring IT value, spreadsheets inherently limit scalability
and multi-user integrity. More importantly, most companies lack the subject
matter expertise to ensure completeness (i.e. they have considered all dimensions
of the project) and relevance (i.e. realistic real-world assumptions).
Alinean's research indicates that there is enormous payback to companies
of all sizes that have adopted ITVM best practices. These top performers produce
three times more shareholder value per IT dollar spent (a factor of 3.28 for
companies over $1 billion revenue and a factor of 3.08 for companies with less
than $1 billion revenue).
Interestingly, smaller companies (less than $1 billion in revenue) tend to
achieve on average 70 percent greater shareholder value per IT dollar spend
than their large company counterparts (greater than $1 billion revenue) due
to cost advantages in the areas of security, compliance, and other diseconomies
of scale associated with managing and staffing larger IT infrastructures.
However, as the correlation between shareholder value and IT spending is
much better among larger companies (1.5 times better among leading companies
and 3.2 times better among profitable companies) due to their ability to develop
robust processes and value measurement discipline, it is unclear where the optimal
balance between governance and agility will occur and whether smaller or larger
organizations will be the first to achieve it.
Realizing the competitive importance of ITVM, both large and small companies
are shifting from the ubiquitous use of home-grown spreadsheet solutions to
third-party tools and research.
Level 2 - Leverage Third-Party Analysis
The fundamental challenge with Level 1 ITVM maturity is that resources are
finite and perspectives are limited to organizational experience. Given the
constantly changing technology landscape and lessons learned from each deployment,
articulating the theoretical value of IT investments is an enormous undertaking
attainable only through a team of dedicated analysts with perspectives that
span multiple organizations and industries. As these skills are rare, most organizations
can?t assemble the staff to produce accurate models reflecting the current technology
landscape.
By leveraging credible third party skills and assets, companies can tailor
models to produce meaningful pre-implementation analysis and prioritization
of proposed projects, and post-implementation assessment of results.
According to Alinean's research, 20 percent of companies doing ITVM analysis
are deploying or exploring the deployment of third-party solutions. Almost all
of these are doing so on a ?phased deployment? basis that validates ITVM for
their organizations with a group of pilot ?super users? and more extensive analysis
of major projects.
Level 3 - Corporate Governance through Enterprise-Wide Deployment
Enterprise-wide propagation of Level 2 capability is being championed and
institutionalized through IT governance or Value Management Offices with joint
accountability to the finance and IT function, giving way to a third level of
ITVM maturity.
While the rate of enterprise-wide deployment varies, the ability to validate
ITVM benefits in phases as a precursor to broader adoption is common. Acceptance
tends to be most closely correlated with change management and business performance
measurement capabilities.
Level 4 - Post-Implementation Measurement
Consistent and meaningful pre-implementation ITVM assessment serves as the
basis for post-implementation comparison to actual results. Companies have begun
to automate this with a closed-loop system that integrates business intelligence
analytics to both measure and recapture unrealized results, and provide input
improvements to subsequent predictive models.
Level 4 has given rise to additional opportunities and complexities: integration
with complementary technologies such as Project Portfolio Management (PPM) and
Business Intelligence (BI) / Business Performance Management (BPM) solutions.
These IT governance technologies combine into a ?total lifecycle? integrated
approach to IT investments that span project selection and approval (ITVM),
deployment (PPM) and automated post-implementation value measurement (ITVM/BPM/BI).
Level 5 - ITVM Service Level Agreements
Once a mutually agreed upon standard measurement framework is demonstrated,
buyers, sellers, and consultants are empowered to pursue new levels of fact-based
engagement and collaboration.
Level 5 allows companies to put their money where their mouths are ? with
confidence. Through the consistent measurement of expected project value, buyers
and sellers identify value opportunity, assign responsibility, and share the
fruits of success or costs of failure with objective service level agreements
(SLAs).
Years ago, companies? desire to focus on core competency were constrained
by their inability to measure performance in areas such as supply chain efficiency,
call center operation, and IT support. These limitations have been superseded
by SLAs that measure anything and everything. Metrics for cases per hour, cost
per call, average handle time and other performance indicators allow companies
to confidently provide outsourcers with objective standards.
As ITVM capability and maturity evolves, IT performance measurement will
focus on business value, rather than operational metrics, as the basis for attracting
capital investment and rewarding team members for their contribution to business
goals.
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About Alinean
Alinean helps CIOs, consultants and vendors align IT spending and business
performance through research methodologies and customized software tools,
which quantify the value of technology investments. Its new certification
courses help IT executives measure and communicate the ROI of IT, and equip
vendors with the ROI-driven selling skills and tools to close deals faster.
For more information on Alinean, its tools and its new certification courses,
please call 407.382.0005 or visit www.alinean.com.
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Tel:
407.382.0005 
866.693.6271 
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