ITIL 3 Leads Way in Helping IT Transform Via the 'Reset Economy' into Mature Business Units

Transcript of a sponsored BriefingsDirect podcast on the latest version of ITIL, and how it helps IT organizations transform how they operate as business units.

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Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to BriefingsDirect.

Today, we present a sponsored podcast discussion on how to better understand the standards and methods around ITIL Version 3, Prescriptions and Guidelines. We'll unlock the secrets behind ITIL Version 3, and debunk some common misunderstandings about ITIL and how it can be best used.

We're joined by three experts on ITIL, and they are folks who have been instrumental in ITIL development. They'll help us look into ways that IT leaders can leverage IT Service Management (ITSM) for better efficiency, operational accountability and how to keep the IT trains running on time and also at the lowest possible total costs.

Please join me in welcoming David Cannon. He's the co-author of the Service Operation Book for the latest version of ITIL, and an ITSM practice principal at Hewlett-Packard (HP). Welcome David.

David Cannon: Hi, Dana. Thanks very much.

Gardner: We’re also joined by Stuart Rance, service management expert at HP, as well as co-author of ITIL Version 3 Glossary, and of numerous other service management pocket guides. Welcome, Stuart.

Stuart Rance: Hello. Thank you.

Gardner: Also joining us is, Ashley Hanna, business development manager at HP and a co-author of ITIL Version 3 Glossary, and other industry best practices. Welcome, Ashley.

Ashley Hanna: Hello. Thank you.

Gardner: Let me direct my first question to David Cannon. Tell us a little bit about why the need for ITSM is a bit more acute nowadays. What do a tough economy and lean budgets mean in terms of how ITIL can be of benefit?

Cannon: That's a very interesting question. The first thing that comes to mind, whenever we think about that, is that IT needs to save costs. In fact, the business puts a lot of pressure on IT to bring their costs down. But, in this economy, what we're seeing is that IT plays a way more important role than simply saving money.

Business has to change the way in which it works. It has to come up with different services. The business has to reduce its cost. It has to find better ways of doing business. It has to consolidate services. In every single one of those decisions, IT is going to play an instrumental role. The way in which the business moves itself towards the current economy has to be supported by the way in which IT works.

Now, if there is no linkage between the business and the way in which IT is managed, then it's going to be really, really difficult for the business to get that kind of value out of IT. So, ITSM provides a way in which IT and the business can communicate and design new ways of doing business in the current economy.

Gardner: Some of the popular business press released here in the United States has been calling the recession a "reset" and saying that "business as usual" is really not going to fly. Is ITIL something that can help with that, both at the IT level and the business level with this notion of a reset, David?

Changing operating models

Cannon: Yes, it is. That's not to say that, in every single case, IT is going to drive these changes to the business. What we're seeing in the reset is that businesses have to change their operating models.

Part of an operating model within any business is their IT environments and the way in which IT works and is integrated into the business processes and services. So, when we talk about a reset, what we're really talking about is just a re-gearing of the operating models in the business, and that includes IT.

The way in which IT works and the processes that you read about in ITIL Version 3, for example,

What I've seen recently is that organizations that have already achieved a level of ITSM maturity are really building on that now to improve their efficiency, their effectiveness, and their cost-effectiveness.

are increasingly being used in the business environment to create new services or different ways to manage their existing operational environments.

Gardner: I wonder if any of our speakers thinks that the economy has, in fact, provided an impetus or catalyst to embrace ITIL, whether it's in its versions, 1, 2 or 3. Is it possible that there has been a silver lining to this dark economic cloud?

Rance: That's a really interesting question. What I've seen recently is that organizations that have already achieved a level of ITSM maturity are really building on that now to improve their efficiency, their effectiveness, and their cost-effectiveness.

Maybe a year or two years ago, other organizations that were less mature and a bit less effective were managing to keep up, because things weren't so tight and there was plenty of fat left. What I'm seeing now is that those organizations that implemented ITSM are getting further and further ahead of their competition.

For organizations that are not managing their IT services effectively towards the end of the slump it's going to be really difficult. Some organizations will start to grow fast and pick up business, and they are going to carry on shrinking.

Gardner: Thank you, Stuart. Ashley, do you have anything further to offer?

Hanna: I think, as well, that if ITIL has been implemented correctly, then it is not an overhead. As times get tough, it's not something you turn off. It becomes part of what you do day-to-day, and you gain those improvements and efficiencies over time. You don't need to stop doing it. In fact, it's just part of what you do.

Gardner: For those of our listeners who might not be too deeply aware and have the background for ITIL, let's give them a quick primer. David, help me understand a little bit about the context of ITIL and where it fits in now.

Helping operations managers

Cannon: ITIL was initially created within the UK government to help operations managers within IT manage that environment a lot better. As the industry progressed, and as we became more mature about the way in which we managed IT, it became very clear that what we were really doing was not simply managing a set of infrastructure components and applications. What we were really doing was delivering a set of services to the business.

As that matured, we began to realize that we're not simply providing a set of outputs to the business and then forgetting about what the business does with them, and, as long as we produce the outputs, we've done our job. We began to realize that this approach wasn't good enough. What we had to do was focus on not only what we delivered to the business, but also what the business did with those services. So, we are focused more on the business outcomes.

In the current environment and in the current version of ITIL, we're looking at not only how IT manages itself, but how IT provides service to the business, and also how the business generates value based on the services that they use from IT. That's where the industry is right now.

And, just to stress, ITIL didn't invent the stuff. ITIL is not a theoretical approach that came out of the minds of a few academic individuals. It really is based on what companies have been doing over the past 20 years. So, when you read ITIL, everything you see in those books is something that has been done by a company somewhere, and it has worked.

What you have there is a set of recipes, which really talk about how I, as an IT professional, can play a strategic role within the business, and how I can help to measure my contribution of value within the business organization. That's really where we are within ITIL right now.

Gardner: Stuart or Ashley, do you have anything further to offer on a level set on ITIL nowadays?

Rance: I've got a lot that I'd like to say about value, but I'll hold off on that for now. I'd like to talk about what service management is from a more operational viewpoint, because a lot of people don't really get what we're talking about, when we talk about service management.

The point is that there are lots of different service providers out there offering services. Everybody has some kind of competition, whether it's internal, a sort of outsourcing, or alternate ways of providing service.

All of those service providers have access to the same sorts of resources. They can all buy the same servers, network components, and software licenses, and they can all build data centers of the same standards. So, the difference between service providers isn't in those resources they bring to bear. They are all the same.

Service management is the capabilities a service provider brings in order to deploy, control, and manage those resources to create some value for their customers. It includes things about all of your processes for managing changes, incidents, or the organizational designs and their roles and responsibilities, and lots of different things that you develop over time as an organization, it's how you create value from your resources and distinguish yourself from alternate service providers.

Gardner: Is there anything from you, Ashley?

Focusing on outcomes

Hanna: I'm just reflecting on what both have said. We've gone from managing technology processes, which was certainly an improvement, to managing end-to-end IT service and its lifecycle and focusing on the business outcome.

It's not just which technology we are supporting and what silos we might be in. We need to worry about what the outcome is on the business? The starting point should be the outcome and everything we do should be designed to achieve what's wanted.

Gardner: David, it certainly seems to me that the progression of IT is toward the delivery of processes, rather than technology sets. The feature function abstraction is perhaps elevated, particularly now, when we think about cloud services and a variety of different sourcing options. That seems to me to dovetail very well with the fact that we're changing the way that IT operates at precisely the same time as the way that IT is consumed is changing. Does that sound fair?

Cannon: Yes, it does sound fair. I think in terms of initiatives or movements like cloud, or should I say trends, what you're seeing is a focus on exactly what it is that I get out of IT, as opposed to a focus from the business on the internal workings of IT.

What you've seen historically is that the business has traditionally been very concerned about the internal workings of IT. They're very concerned about mitigating risk and very concerned about making sure that we're running in a cost-optimal way. What things like cloud tend to do is to provide business with a way of relating to IT as a set of services, without needing to worry about what's going on underneath the surface.

However, I need to point out that, even within a cloud environment, where you have a cloud-service provider, that service provider still has to worry about the processes.

So, business is going to look for clear solutions that meet their needs and can change with their needs in very short times.

They have to worry about managing the technology. These issues don't go away. It really is just a different way of dealing with the sourcing and resourcing of how you provide services.

Gardner: So, I suppose the point is that ITSM, how you run your IT department and how you provide for your users and their perceptions of IT as a business partner, is being elevated by some of these other trends in the sourcing environment?

Cannon: Yes, and what we're seeing is just the need for business to be able to react quickly and the need for them to be able to be very flexible within a rapidly changing volatile economy. So, business is going to look for clear solutions that meet their needs and can change with their needs in very short times.

Gardner: Ashley, let's go to you now about some of the myths or misunderstandings around ITIL -- what needs to be debunked or what lets people stray in understanding ITIL and how they could avail themselves of it?

Responding to change

Hanna: A lot of the issues are based on the fact that something has changed. We all know and love ITIL Version 2, and have a certain image of that in our minds -- and we all respond differently to change.

An issue that comes up quite a lot is that ITIL Version 3 appears to have gotten much bigger and more complex. Some people look at it and wonder where the old service delivery and service support areas have gone, and they've taken surprise by the size of V3 and the number of core books.

There is new content in Version 3, but actually Version 2 was pretty big, if you looked at the complete set of publications that came out. This view of it being small and self-contained was reinforced by what we were taught, when we studied Version 2.

The highest level of certification then was the Managers certificate and exam.

. . . these changes are long awaited and they're very useful additions to ITIL . .

This concentrated just on service delivery and service support. Yet, there were at least five other significant areas. Publications that came out from those other areas, such as business perspective and planning to implement, didn't get the same kind of attention.

When Version 3 came out, it launched with a much bigger perspective right from the beginning. Instead of having just two things to focus on, there are five core books. I think that has made it look much bigger and more complex than Version 2.

It is true that if you go through education, you do need to get your head around the new service life-cycle concept and the concept called "business outcomes", as we've already mentioned. And, you need to have an appreciation of what's unique to the five core books. But, these changes are long awaited and they're very useful additions to ITIL, and complementary to what we've already learned before.

Gardner: Stuart, just for the edification of our audience, what general characteristics would you apply to Version 2 and then Version 3, and what generally distinguishes them?

Better and cheaper

Rance: Version 2 was very much about how the IT service provider could do what it does effectively, efficiently, and cost effectively. All of the Version 2 processes led to ways that the service provider could deliver what they did better and cheaper. What it didn't really look to was the value of what they were doing, and were they doing the right things?

I'll give you a simple example. Version 2, in financial management, talked very much about what sort of cost units you should be looking at, how you should be calculating things, how you should be doing your accounting.

Version 3 includes that, but it includes it in quite a small part of the book in a couple of sentences that basically say your accountants will tell you how to do that. If you look at financial management in ITIL Version 3, it says you really have to understand the cost of supplying each service that you supply and you have to understand the value that each of those services delivers to your customers.

Now, that's a very simple concept. If you think of it in a broader context, you can't imagine, say, a car manufacturer who didn't know the cost of producing a car or the value of that car in the market. But, huge numbers of IT service providers really don't understand the cost of using its service and the value of that service in the market.

ITIL V3 very much focuses on that sort of idea -- really understanding what we are doing in terms of value and in terms of cost-effectiveness of that level, rather than that procedural level.

Gardner: Going to you David, is there something about ITIL and the confusion that might exist in some quarters around this notion of financial management? Where do you see this financial management aspect of ITIL and is that something that people need to better get their heads around?

Cannon: Financial management really hasn't changed in the essence of what it is. Financial management is a set of very well defined disciplines.

ITIL V3 very much focuses on that sort of idea -- really understanding what we are doing in terms of value and in terms of cost-effectiveness of that level, rather than that procedural level.

There are well-established procedures and practices. When applied within IT, financial management really starts to answer some very specific questions.

In Version 3, the nature of those questions changes. For example, in Version 2, we talk about how to account for the cost of providing IT services and how to track your assets, for example. It's very much a cost-based model of financial management.

Within Version 3, the financial management questions become more strategic. How do we calculate value? How do we align the cost of a service with the actual outcome that the business is trying to achieve? How do we account for changing finances over time?

For example, if we invest a certain amount of money this year, what is the relative value of that investment going to be in 5 or 10 years time? How do I align financial decisions that I make with the portfolio of services that I deliver? How can I track the investment in IT throughout the life-cycle of the services that I am providing?

Questions have changed

So, the questions that we ask in financial management within ITIL have changed significantly, but the underlying core procedures and practices are still the standard financial practices that exist within any organization.

Gardner: As we progress from applying financial management to systems, and then now to processes, it sounds as if we're starting to talk more the talk of the business side of the house. Business probably wants to understand the true cost of processes.

My question then is, do the folks on the business side of the house need to know anything about ITIL, or do they simply need to know what the fruits of ITIL are? Let me throw that out to Stuart.

Rance: Something that David said earlier, which I have also come across, is that a lot of businesses are in the service business themselves. It might not be IT service, but many of the customers we're dealing with are in some kind of service business, whether it's a logistics business or a transport business. Even a retailer is in the service businesses, and they provide goods as well.

In order to run any kind of a service you need to have service management. You need to manage your incidents, problems, changes, finances, and all those other things. What I'm starting to see is that things that started within the IT organization -- incident management, problem management and change management -- some of my better customers are now starting to pick up within their business operations.

They're doing something very much like ITIL incident management, ITIL change management, or ITIL problem management within the business of delivering the service to their customers.

. . . if you're running yourself as a business, you need to understand the business or businesses you serve, and you need to behave in the same way.

That completely gives you an end-to-end value chain, where the incident management, problem management, and change management you're doing within IT is simply a subset of your overall business incident management, problem management and change management. And, I could have listed all the other processes as well.

Gardner: It sounds as if we're moving toward some sort of a unifying theory of how to run both your business and your IT department. Essentially, they're both providing service management, provisioning, delivery, and measurement function. Why shouldn't they have a similar framework?

Hanna: I absolutely agree. Some of the shock that some people have when they pick up the service strategy book in ITIL V3 is they see it reads as a business book -- where is the IT, where is the data, where has my memory chip gone from this book? That's deliberate. It sets out that if you're running yourself as a business, you need to understand the business or businesses you serve, and you need to behave in the same way.

There's a great deal of new thinking that has gone into the service strategy side of things around providing a service of any kind. And as Stuart said, businesses can start adopting some of the IT process practice, but also the other way around. The IT people, when they start thinking about it, start to realize that it's not just them who have change management and incident management. Their business has to implement these aspects when they talk to their customers and the products that they sell. It is very much coming together in the industry.

Gardner: Is this a two-way street? Do the lessons learned on the business side apply to IT, and then vice versa? Does anyone want to offer an insight into the transfer of best practices?

Two-way communication

Rance: It's a very important question, but I'd like to go even further than that and say that, as a business unit, IT is already participating in a lot of this two-way communication. In many cases, IT doesn't think of itself as a business unit, but if you think about it, they really are. Today, the average IT department is delivering services to external customers and those services are revenue producing.

When that starts to happen, the IT unit starts becoming both an internal service provider, as well as a strategic business unit within the organization. And so, not only is it communicating with the business, it, in fact, is the business in many cases. That's a very important realization to come to within most IT organizations.

Gardner: I suppose we're all parochial and that we are involved with IT, but it sounds as if IT is not just a peer business unit, but perhaps a special business unit in a modern cooperation or enterprise. David, do you have any sense of whether we can claim special status in IT, or whether that gets us in trouble?

Cannon: We certainly could claim a special status, but I wouldn't try that. I think that the most important thing about ITIL and about ITSM is to ensure that IT is viewed as part of the business, that it is contributing to the value generated from the business, and that it is able to achieve its objectives.

I wouldn't try to create any special case for it. I would simply say that the management

I never heard an organization saying it needed to get the legal department aligned with the business or the finance department aligned with the business

challenges within IT tend to be more unique, and it's important to use approaches like ITIL, which are specifically designed around these challenges.

Rance: Can I speak up on that just for a moment? In the days of ITIL Version 2, a lot of organizations used to talk about business-IT alignment, and how important it was to align IT and its goals and strategies with the business and its goals and strategies.

I always found it very strange that you never heard a similar conversation about other business units. I never heard an organization saying it needed to get the legal department aligned with the business or the finance department aligned with the business.

I think that used to be a fundamental failing of IT organizations -- that they were trying to align with the business instead of trying to be a part of the business. That was one of the big changes in ITIL V3. I don't think an IT department should consider itself special or different. It should consider itself part of the business in exactly the same way as other core, shared services are.

Gardner: Perhaps another way to phrase the question is rather than to ask about whether it should be special, ask why it should not be special, and should be peer.

Rance: Exactly.

What do they want?

Hanna: Absolutely. One customer I work with felt they were getting a beating from industry best-practices consultants. The consultants were saying, "Look, you need to understand and align with your business. If only you did that, everything would be okay." What the IT organization found when they tried to do that was that, when they communicated with the business and got the right discussion around availability, performance, or whatever it was, the business didn't know what it wanted either.

So there's this idea that the magic is just a little bit further away, if you can get there. Once that organization engaged with the business, and they both realized they had challenges in this space, and it wasn't just one or the other's fault, they were able to start working together to get things done in a better way.

Gardner: I wonder if we could take a moment to understand better the relationship between HP and its approach to IT data centers, IT shared services and ITIL. Several of you here are instrumental, but also working with HP, what's the relationship?

Cannon: Dana, are you talking about the relationship between data-center management and ITSM?

Also I'm using it myself personally. I'm using ITIL guidance to help define and manage a service portfolio, which is a new concept within ITIL.

Gardner: No, I was asking about HP, as a vendor supplier, a partner and ITIL as a progression. How do they relate?

Hanna: I'm a business development manager within HP, within our Mission Critical Services organization, and I'm using ITIL as part of our assessment and continual improvement methodologies and tool set. So, I'm either helping to sell those kinds of ideas as a product or I am using it to improve what I do when I do that.

Also I'm using it myself personally. I'm using ITIL guidance to help define and manage a service portfolio, which is a new concept within ITIL. Within that, I have a pipeline of services that I offer to my customers, and new services or significant changes I'm bringing along. I've also got a service catalog of things that I sell to my clients today.

So, I am very much personally using ITIL, and I know many of my other colleagues are. But, it's not just how we go to market -- it's also within our own infrastructure.

Gardner: Does anyone else want to offer a way in which the philosophy of HP aligns with ITIL?

Everything is ISTM

Cannon: Absolutely. The point is that there is nothing in HP that we do that is not service management. Everything that we do -- from manufacturing and delivering computers to installing those computers, to making sure that they are operating effectively, to working with our customers to make sure that they are able to use IT and support their businesses -- are essential components of ITSM.

So, our whole approach to ITSM is not only that we help our customers do ITSM, but, as Ashley pointed out, we use ITSM internally to make sure that we are doing things in a quality manner and in a way that creates an added value for your customers.

For example, when I got into the data center services side of things, a lot of people said to me, “Oh, so you are leaving service management?” And the point is, no, absolutely not. How can you deliver IT services, how can you manage those services, if you have no control of your data center? Everything we do is tied into service management and how our customers are able to achieve value within their organizations.

Gardner: I would think that also end-to-end visibility, control management, and integration are essential to providing that end service in a timely and efficient manner. Is there a

Within our service management profession, it's incredible how many different things people are doing with service management.

comprehensive aspect to what HP involves in working with a number of partners and what you can then attain with ITIL guidelines?

Rance: We have within HP something we call a service management profession, which is part of our overall knowledge management. Interestingly, knowledge management, a relatively new process for ITIL was something we have been doing for a long time, as with many other organizations of course.

Within our service management profession, it's incredible how many different things people are doing with service management. They're all engaged with service management and they're all sharing knowledge and capabilities with each other, but it ranges from people who are developing, planning and delivering ITIL training courses. People are developing, delivering, configuring, installing, and managing our complete range of software products.

Our internal IT organization, our outsourcing organization, many different people doing different source of consulting, anything you can think of in the service management space, there is somewhere in HP a team doing it. Usually, those teams are doing it in every country around the world. We all talk to each other and learn from each other, and it's a lot of fun. I don't think there is any other organization in the world that comes close to that.

Gardner: So, in a sense, it's a whole greater than the sum of the parts.

Rance: Absolutely.

Concrete examples

Gardner: We've talked about this ITIL set of benefits and we debunked some of the misunderstandings. We've kept it at a fairly theoretical level, but I wonder if we had some concrete examples. As you pointed out earlier, ITIL has come from practices and not academics. Where are people applying these guidelines and the increased role of ITSM to a benefit? What are some of the metrics of success? Let's start with you, David.

Cannon: It all depends what each company is trying to achieve with their implementation. For some organizations it's about simply trying to solve a very specific problem. For example, how do I become more responsive to my customers when my IT services break, or how do I control changes within the organization?

If that's all that you are trying to achieve right now, then your metrics are going to reflect what it is that you've been working on. So, am I getting quicker at resolving these incidents? Am I getting fewer incidents? Are changes being more controlled, and are there fewer incidents as a result of rolling out changes? Some of the metrics that you are going to focus on are going to be very operational and very much focused on the problem that you're trying to solve.

In other organizations, which are trying to go for a more holistic implementation and are trying to really get into a growth mode for their organization, they are going to approach this in a very different way. They are going to look at things like, "What kind of services am I delivering? Are those services achieving the desired outcomes?"

The metrics are going to be a combination of what their businesses are using to measure their

So, the discussion changed very, very quickly from, "How much does ITSM cost us?" to, "Hey, can we have some more of this kind of thing?"

success, as well as how IT is measuring the consistency, the reliability, and the availability of their services. It's going to be a combination of that.

We've seen a number of organizations, which have really been using ITSM extensively, coming up with some very interesting ways of measuring the success of the program. What's interesting is that they may start out with looking at, "What is the cost of ITSM and how can I demonstrate the return on investment (ROI)?" But, where they end up is very interesting. Where they end up is, "How does IT support our business?"

I was sitting in one customer organization and they were talking about the cost of IT. We switched the discussion around and took a very specific example of a service that was used commonly within the business. We said to them, "Let's not focus on the cost of IT for now. Let's focus on what you get out of the service."

The managers in the business sat around and talked about the things that they do with the service. It turns out that by using the service, the business was able to save something like $20 million a year in certain testing procedures that they were running.

So, the discussion changed very, very quickly from, "How much does ITSM cost us?" to, "Hey, can we have some more of this kind of thing?" Again, it really depends on the kind of initiative that you have going within your organization and how you're going to measure the success of your ITSM program.

Gardner: Stuart, how about you? Do you have any examples of ITIL in practice and perhaps any metrics on its impact?

Service management journey

Rance: I'll tell you about one of my customers. I don't think it was a metric when they stopped, but it was certainly an outcome. This was an organization that started on their service management journey about four years ago. It was a big mobile phone company somewhere in Eastern Europe.

They started on an ITIL implementation program at the time of ITIL Version 2, and their goals and metrics were largely around quality of service and cost of delivering service, the sorts of things that we think of when we think about ITIL Version 2. It was a really good program and it went really well.

They got the cost reductions they were looking for. They got the improvements in services they were looking for. The other thing that wasn't originally on their goals was that was they got a massive improvement in the relationship with the business. As a direct result of the improvements that they made with their ITIL program, the IT manager became the IT director. In other words, he got himself a seat on the board.

He was quite happy to come back to us afterward and say, "Thank you for your help. Implementing that program directly led to me getting a seat on the board."

The outsourcer couldn't complete the deal, and the IT organization is still in house today. So, that's a great success story from that IT organization.

It's a really nice piece of feedback, because the next thing he said to me was, "Now, what does ITIL V3 mean for me, and how can I capitalize on that and get even better?

I've run quite a few strategy and planning workshops to look at the best way of implementing ITIL V3 in different organizations. We did one of those here and came up with a number of ideas for his next four- or five- year program to improve the relationship even better and to improve the outcomes he's delivering in the business.

Gardner: Ashley, similar question to you.

Hanna: I have a very interesting example as well. I've worked with one of our customers on the Mission Critical Partnership and we helped them implement continual improvement over a number of years. We benchmarked them as to where they were against best practice and against peers in the industry. Then, we helped them identify key risks to address and the improvements that they could make. We helped them measure their progress on an annual basis.

What's very interesting is that they were so successful that, when the decision was made to outsource the IT organization, the outsourcer found that they were already so efficient and effective, they couldn't make the required saving to make the deal worthwhile. The outsourcer couldn't complete the deal, and the IT organization is still in house today. So, that's a great success story from that IT organization.

Looking into the crystal ball

Gardner: Before we wrap up, I'd like to take a peek into the crystal ball, looking into the future a bit. As I mentioned earlier, it strikes me that the emphasis on process over systems and on services from a variety of sources, over monolithic and tightly controlled centralized delivery, is probably going to be growing in importance over the coming years. That perhaps augurs well for ITIL and particularly ITIL V3. So I'd like to go one last time through our panelists on this crystal ball notion. David, what's your prediction for how ITIL Version 3 progresses?

Cannon: What we're going to start seeing is the market will continue to mature, as it has been over the last 20 years. More and more organizations will get in control of their IT environments. They will be articulating value to the business more and more.

But, two additional things are going to start happening as we move forward. The first thing is

In addition, we're going to see ITSM moving more-and-more inward into the IT organization.

that service management is going to move outward. We are already seeing how organizations are starting to use the procedures, the practices, and the principles of ITIL within the business. For example, a lot of businesses are using simple IT event management to drive some of their business operations. So we are going to see ITSM moving out and being applied into business environments.

In addition, we're going to see ITSM moving more-and-more inward into the IT organization. We're going to start seeing ITSM being applied to the actual infrastructure, applications and networks within the IT organization, and we are going to see more and more technical applications of ITSM as well.

Gardner: Stuart, your view on the future?

Rance: I'm not sure if I agree with David on this. Rather than more organizations getting good at service management, what's going to happen is a massive consolidation. There will be fewer really good organizations that understand service management, do it well, Increasingly, they're going to be dominating the market, and the small, ineffective IT organizations aren't going to suddenly learn how to do service management. They're just going to go out of business.

The other thing that I see happening is that those organizations that are currently running their services using good service management practices and developing the capabilities and managing end-to-end services are in a really great position to take on new technologies, paradigms, and ideas to invest in things like virtualization, clouds, blades, and other technologies which provide a more complex infrastructure environment.

Because they're already managing these things from the viewpoint of the service, they're going to find adoption of new and interesting architectures much easier. So again, those organizations that do service management well are the ones who are going to be able to take advantage of all of the flexibility and cost savings of new technologies.

Gardner: Last point to you, Ashley.

Much easier to do

Hanna: Speaking to that idea around the new technologies, some organizations have used some of the new blade infrastructures in virtualization as being easier to deploy than some of the old style mainframe heavy-duty things, but are finding that actually a lot of it is absolutely much easier to do. There is more automation and things work better and smoother.

But, with many more devices and new concepts, they still need to apply these traditional service management approaches. So, I think, we'll see a lot of these organizations that have branched out recently into new technologies realizing that they need to equally invest in new service management guidance.

And I think, best practice today is relatively high level, and I think we'll see the actual sources of best practice like ITIL will get deeper down, and we will get more day-to-day operational advice and templates made available that also adhere to this best practice.

Gardner: Very good. We have been discussing how to better understand the standards and methods around ITIL Version 3, Prescriptions and Guidelines. And we have been better understanding how that can impact the modern enterprise.

I want to thank our panel for today's discussion. We have been joined by David Cannon, an ITSM practice principal at HP, thank you David.

Cannon: Thanks for having me.

Gardner: We have also been joined by Stuart Rance, an ITSM expert at HP and author of the ITIL V3 Glossary. Thank you Stuart.

Rance: Thank you. It's been fun.

Gardner: And Ashley Hanna, an author of Version 2 and Senior Examiner for ITIL V3 as well as a business development manager at HP. Thank you so much, Ashley.

Hanna: Thank you.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You have been listening to a sponsored BriefingsDirect podcast. Thank you for listening and joining us and come back next time.

Free Offer: Get a complimentary copy of the new book Cloud Computing For Dummies courtesy of Hewlett-Packard at www.hp.com/go/cloudpodcastoffer.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: Hewlett Packard.

Transcript of a sponsored BriefingsDirect podcast on the latest version of ITIL, and how it helps IT organizations transform how they operate as business units. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Implementing ITIL Requires Log Management and Analytics to Help IT Operations Gain Efficiency and Accountability

Transcript of BriefingsDirect podcast on the role of log management and systems analytics within the Information Technology Infrastructure Library (ITIL) framework.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Sponsor: LogLogic.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a sponsored podcast discussion on how to run your IT department well by implementing proven standards and methods, and particularly leveraging the Information Technology Infrastructure Library (ITIL) prescriptions and guidelines.

We’ll talk with an expert on ITIL and why it’s making sense for more IT departments and operations around the world. We’ll also look into ways that IT leaders can gain visibility into systems and operations to produce the audit and performance data trail that helps implement and refine such frameworks as ITIL.

We’ll examine the use of systems log management and analytics in the context of ITIL and of managing IT operations with an eye to process efficiency, operational accountability, and systems behaviors, in the sense of knowing a lot about the trains, in order to help keep them running on time and at the lowest possible cost.

To help us understand these trends and findings we are joined by Sudha Iyer. She is the director of product management at LogLogic. Welcome to the show, Sudha.

Sudha Iyer: Thank you.

Gardner: We’re also joined by Sean McClean. He is a principal at KatalystNow in Orlando, Florida. It's a firm that handles mentoring, learning, and training around ITIL and tools used to implement ITIL. Welcome to the show, Sean.

Sean McCLean: Thank you very much.

Gardner: Let's start by looking at ITIL in general for those folks who might not be familiar with it. Sean, how are people actually using it and implementing it nowadays?

McCLean: ITIL has a long and interesting history. It's a series of concepts that have been around since the 1980, although lot of people will dispute exactly when it got started and how. Essentially, it started with the Central Computer and Telecommunications Agency (CCTA) of the British government.

What they were looking to do was create a set of frameworks that could be followed for IT. Throughout ITIL's history, it has been driven by a couple of key concepts. If you look at almost any other business or industry, accounting for example, it’s been around for years. There are certain common practices and principles that everyone agrees upon.

IT, as a business, a practice, or an industry is relatively new. The ITIL framework has been one that's always been focused on how we can create a common thread or a common language, so that all businesses can follow and do certain things consistently with regard to IT.

In recent times, there has been a lot more focus on that, particularly in two general areas. One, ITIL has had multiple revisions. Initially, it was a drive to handle support and delivery. Now, we are looking to do even more with tying the IT structure into the business, the function of getting the business done, and how IT can better support that, so that IT becomes a part of the business. That has kind of been the constant focus of ITIL.

Gardner: So, it's really about maturity of IT as a function that becomes more akin to other major business types of functions or management functions.

McCLean: Absolutely. I think it's interesting, because anyone in the IT field needs to remember that we are in a really exciting time and place. Number one, because technology revises itself on what seems like a daily basis. Number two, because the business of IT supporting a business is relatively new, we are still trying to grow and mature those frameworks of what we all agree upon is the best way to handle things.

As I said, in areas like accounting or sales, those things are consistent. They stay that way for eons, but this one is a new and changing environment for us.

Gardner: Are there any particular stumbling blocks that organizations have as they decide to implement ITIL? When you are doing training and mentoring, what are the speed bumps in their adoption pattern?

McCLean: A couple of pieces are always a little confusing when people look at ITIL. Organizations assume that it’s something you can simply purchase and plug into your organization. It doesn't quite work that way. As with any kind of framework, it’s there to provide guidance and an overall common thread or a common language. But, the practicality of taking that common thread or common language and then incorporating it or interpreting it in your business is sometimes hard to get your head around.

It's interesting that we have the same kind of confusion when we just talk. I could say the word “chair,” and the picture in your head of what a chair is and the picture in my head of what a chair is are slightly different.

It's the same when we talk about adopting a framework such as ITIL that's fairly broad. When you apply it within the business, things like “that business is governance,” “that business is auditing compliance rules” and things like that have to be considered and interpreted within that framework for ITIL. A lot of times, people who are trying to adopt ITIL struggle with that.

If we are a healthcare industry, we understand that we are talking about incidents or we understand that we are talking about the problems. We understand they we are talking about certain things that are identified in the ITIL framework, but we have to align ourselves with rules within the Health Insurance Portability and Accountability Act (HIPAA). Or, if we are an accounting organization, we have to comply to a different set of rules. So it's that element that's interesting.

Gardner: Now, what's interesting to me about the relationship between ITIL and log and systems analytics is that ITIL is really coming from the top-down, and it’s organizational and methodological in nature, but you need information, you need hard data to understand what's going on and how things are working and operating and how to improve. That's where the log analytics comes in from the bottom-up.

Let's go to Sudha. Tell us how a company like LogLogic uses ITIL, and how these two come together -- the top-down and the bottom-up?

Iyer: Sure. That's actually where the rubber meets the road, so to speak. As we have already discussed, ITIL is generally a guidance -- best practices -- for service delivery, incident management, or what have you. Then, there are these sets of policies with these guidelines. What organizations can do is set up their data retention policy, firewall access policy, or any other policy.

But, how do they really know whether these policies are being actually enforced and/or violated, or what is the gap? How do they constantly improve upon their security posture? That's where it's important to collect activity in your enterprise on what's going on.

There is a tight fit there in what we provide as our log-management platform. LogLogic has been around for a number of years and is the leader in this log management industry. It allows organizations to collect information from a wide variety of sources, assimilate it, and analyze it. An auditor or an information security professional can look deep down into what's actually going on, on their storage capacity or planning for the future, on how many more firewalls are required, or what's the usage pattern in the organization of a particular server.

All these different metrics feed back into what ITIL is trying to help IT organizations do. Actually, the bottom line is how do you do more with less, and that's where log management fits in.

Gardner: Back to you, Sean. When companies are trying to move beyond baseline implementation and really start getting some economic benefits, which of course are quite important these days from their ITIL activities, what sort of tools have you seen companies using? To what degree do you need to dovetail your methodological and ITIL activities with the proper tools down in the actual systems?

McCLean: When you’re starting to talk about applying the actual process to the tools, that's the space that's the most interesting to me. It's that element you need some common thread that you can pull through all of those.

Today, in the industry, we have countless different tools that we use, and we need common threads that can pull across all of those different tools and say, “Well, these things are consistent and these things will apply as we move forward into these processes.” As Sudha pointed out, having an underlying log system is a great way to get that started.

The common thread in many cases across those pieces is maintaining the focus on the business. That's always where IT needs to be more conscious and to be constantly driving forward. Ultimately, where do these tools fit to follow business, and how did these tools provide the services that ultimately support the business to do the thing that we are trying to get done?

Does that address the question?

Gardner: I think so. Sudha, tell us about some instances where LogLogic has been used and ITIL has been the focus or the context of its use. Are there some findings general use case findings? What have been some of the outcomes when these two bottom-up, top-down approaches come together?

Iyer: That's a great question. The bottom line is the customers, and we have a very large customer base. It turns out, according to some surveys we have done in our customer base, that the biggest driver for a framework such as ITIL is compliance. The importance of ITIL for compliance has been recognized, and that is the biggest impact.

As Sean mentioned earlier, it's not a package that you buy and plug into your network and there you go, you are compliant. It's a continues process.

What some of our customers have figured out is that adopting our log management solutions allows them to create better control and visibility into what actually is going on on their network and their systems. From many angles, whether it's a security professional or an auditor, they’re all looking at whether you know what's going on, whether you were able to mitigate anything untoward that's happening, and whether there is accountability. So, we get feedback in our surveys that control, and visibility has been the top driver for implementing such solutions.

Another item that Sean touched on, reducing IT cost and improving the service quality, was the other driver. When they look at a log-management console and see this is how many admin accesses that were denied. It happened between 10 p.m. and midnight. They quickly alert, get on the job. and try to mitigate the risk. This is where they have seen the biggest value return on investment (ROI) on implementations of LogLogic.

Gardner: Sean, the most recent version of ITIL, Version 3 focuses, as you were alluding to, on IT service management, of IT behaving like a service bureau, where it is responsible on almost a market forces basis to their users, their constituents, in the enterprise. This involves increasingly service-level agreements (SLAs) and contracts, either explicit or implicit.

At the same time, it seems as if we’re engaging with the higher level of complexity in our data center's increased use of virtualization and the increased use of software-as-a-service (SaaS) type services.

What's the tension here between the need to provide services with high expectations and a contract agreement and, at the same time, this built-in complexity? Is there a role for tools like LogLogic to come into play there?

McCLean: Absolutely. There is a great opportunity with regard to tools such as LogLogic from that direction. ITIL Version 2 focused on simply support and delivery, those two key areas. We are going to support the IT services and we are going to deliver along the lines of these services.

The ITIL Version 2 has started to talk a lot about alignment of IT with the business, because a lot of times IT continues and drives and does things without necessarily realizing what the business is and the business is doing. An IT department focuses on email, but they are not necessarily looking at the fact that email is supporting whatever it is the business is trying to accomplish or how that service does.

As we moved into ITIL Version 3, they started trying to go beyond simply saying it's an element of alignment and move the concept of IT into an area where its a part of the business. Therefore it’s offering services within and outside of the business.

One of the key elements in the new manuals in ITIL V3 is talk to service strategy, and its a hot topic amongst the ITIL community, this push towards a strategic look at IT, and developing services as if you were your own business.

IT is looking and saying, “Well, we need to develop our IT services as a service that we would sell to the business, just as any other organization would.” With that in mind, it's all driving toward how we can turn our assets into strategic assets? If we have a service and its made up of an Exchange server, or we have a service and it’s made up three virtual machines, what can we do with those things to make them even more valuable to the business?

If I have an Exchange server, is there someway that I can parcel it out or farm it to do something else that will also be valuable?

Now, with LogLogic's suite of tools we’re able to pull that log information about those assets. That's when you start being able to investigate how you can make the assets that exist more value driven for the organization's business.

Gardner: Back to you, Sudha. Have you had customer engagements where you have seen that this notion of being a contract service provider puts a great deal of responsibility on them, that they need greater insight and, as Sean was saying, need to find even more ways to exploit their resources, provide higher level services, and increase utilization, even as complexity increases?

Iyer: I was just going to add to what Sean was describing. You want to figure out how much of your current investment is being utilized. If there is a lot of unspent capacity, that's where understanding what's going on helps in assessing, “Okay, here is so much disk space that is unutilized. Or, it's the end of the quarter, we need to bring in more virtualization of these servers to get our accounting to close on time, etc. That's where the open API, the open platform that LogLogic is comes into play.

Today, IT is heavily into the services-oriented architecture (SOA) methodology. So, we say, “Do you have to actually have a console login to understand what's going on in your enterprise?” No. You are probably a storage administrator or located in a very different location than the data center where a LogLogic solution is deployed, but you still want to analyze and predict how the storage capacity is going to be used over the next six months or a year.

The open API, the open LogLogic platform, is a great way for these other entities in an organization to leverage the LogLogic solution in place.

Gardner: Another thing that has impressed me with ITIL over the years is that it allows for sharing of information on best practices, not only inside of a single enterprise but across multiple ones and even across industries and wide global geographies.

In order to better learn from the industries' hard lessons or mistakes, you need to be able to share across common denominators, whether its APIs, measurements, or standards. I wonder if the community-based aspect to log behaviors, system behaviors, and sharing them also plays into that larger ITIL method of general industry best practices. Any thoughts along those line, Sean?

McCLean: It's really interesting that you hit on that piece, because globalization is one of the biggest drivers I think for getting ITIL moving and going on. More and more businesses have started reaching outside of the national borders, whether we call them offshore resources, outshore resources, or however you want to refer to them.

As we become more global, businesses are looking to leverage other areas. The more you do that, the larger you grow your business in trying to make it global, the more critical it is that you have a common ground.

Back to that illustration of the chair, when we communicate and we think we are talking about the same thing, we need some common point, and without it we can't really go forward at all. ITIL becomes more and more valuable the more and more we see this push towards globalization.

It’s the same with a common thread or shared log information for the same purposes. The more you can share that information and bring it across in a consistent manner, then the better you can start leveraging it. The more we are all talking about the same thing or the same chair, when we are referring to something, the better we can leverage it, share information, and start to generate new ideas around it.

Gardner: Sudha, anything to add to that in terms of community and the fact that many of these systems are outputting the same logs. I’s making that information available on a proper context that becomes the value add.

Iyer: That's right. Let's say you are Organization A and you have vendor relationships and customer relationships outside your enterprise. So, you’ve got federated services. You’ve got different kinds of applications that you share between these two different constituents -- vendors and customers.

You probably already have an SLA with these entities, and you want to make sure you are delivering on these operations. You will want to make sure there is enough uptime. You want to grow towards a common future where your technologies are not far behind, and sharing this information and making sure that what you have today is very critical. That's where there is actual value.

Gardner: Let's get into some examples. I know it's difficult to get companies to talk about sensitive systems in their IT practices. So perhaps we could keep it at the level of use-case scenarios.

Let's go to Sean first. Do you have any examples of companies that have taken ITIL to the level of implementation with tools like log analytics, and do you have some anecdotes or metrics of what some of the experiences have been?

McCLean: I wish I had metrics. Metrics is the one thing that seems to be very hard to come up with in this area. I can think of a couple of instances where organizations were rolling out ITIL implementations. In implementations where I am engaged, specifically in mentoring, one of the things I try to get them to do is to dial into the community and talk to other people who are also implementing the same types of processes and practices.

There’s one particular organization out in the Dallas-Fort Worth, Texas area. When they started getting into the community, even though they were using different tools, the underlying principles that they were trying to get to were the same.

In that case they were able to start sharing information across two companies in a manner that was saying, “We do these same things with regard to handling incidents or problems and share information, regardless of the tool being set up.”

Now, in that case I don't have specific examples of them using LogLogic, but what invariably came out in this set of discussions was what we need underneath is the ability to get proactive and start preventing these incidents before they happen. Then, we need metrics and some kind of reporting system where we can start doing the checking issues before they occur and getting the team on board to fix it before it happen. That's where they started getting into log-like tools and looking at using log data for that purpose.

Iyer: That corroborates with one of the surveys we developed and conducted in the last quarter. Organizations reported that the biggest challenge for implementing ITIL was twofold.

The first was the process of implementation, the skill set that they needed. They wanted to make sure there was a baseline, and measuring the quality of improvement was the biggest impediment.

The second one was the result of this process improvement. You get your implementation of the ITIL process itself, and where did you get it? Where were you before and where did you end up after the implementation?

I guess when you were asking for metrics, you were looking for those concrete numbers, and that's been a challenge, because you need to know what you need to measure, but you don't know that because you are not skilled enough in the ITIL practices. Then, you learn from the community, from the best-of-breed case studies on the Web sites and so forth, and you go your merry way, and then the baseline numbers for the very first time get collected from the log tools.

Gardner: I imagine that it's much better to get early and rapid insights from the systems than to wait for the SLAs to be broken, for user surveys to come back, and say, “We really don't think the IT department is carrying its weight.” Or, even worse, to get outside customers or partners coming back with complaints about performance or other issues. It really is about early insights and getting intervention that seems to really dovetail well with what ITIL is all about.

McCLean: I absolutely agree with that. Early on in my career within ITIL I had a debate with a practitioner on the other side of the pond. One thing we had a debate about was about SLAs. I had indicated that it's critical to get the business engaged in the SLA immediately.

His first answer was no, it doesn't have to happen that way. I was flabbergasted. You provide a service to an organization without an SLA first? I thought “This can't be. This doesn't make sense. You have to get the business involved.”

When we talked through it and got down to real cases, it turned out that what he was saying is that it’s not that he didn't feel that the SLA didn’t need to be negotiated with the business. What he meant was that we need to get data and reports about the services that we are delivering before we go to the customer, the customer, in this case, being internal.

His point was that we need to get data and information about the service we are delivering, so that when we have the discussion with a business about the service levels we provide, they have a baseline to offer. I think that's to Sudha's point as well.

Iyer: That's right. Actually, it goes back to one of the opening discussions we had here about aligning IT to the business goals. ITIL helps organizations make the business owners think about what they need. They do not assume that the IT services are going to be there or its not an afterthought. It’s a part of that collective, working toward the common success.

Gardner: Let's wrap up our discussion with some predictions or look into the future of ITIL. Sean, do you have any sense of where the next directions for ITIL will be, and how important is it for enterprises that might not be involved with it now to get involved, so that they can be in a better position to take advantage of the next chapters?

McCLean: The last is the most critical. People who are not engaged or involved in ITIL yet will find they are starting to drop out of a common language. That enables you to do just about everything else you do with regard to IT in your business.

If you don't speak the language and the vendors that provide the services do, then you have a hard time getting the vendors to understand what it is the vendors are offering. If you don't speak the language and you are trying to get information shared, then you have a hard time getting forward in that sense.

It’s absolutely critical for businesses and enterprises to start understanding the need for adopting. I don't want to paint it as if everybody needs to get on board ITIL, but you need to get into that and aware of that, so that you can help drive its future directions.

As you pointed out earlier, Dana, it's a common framework but it's also commonly contributed to. It's very much an open framework, so if a new way to do things comes up and is shared, that makes sense. That would be probably the next thing that's adopted. It’s just like our English language, where new terms and phrases are developed all the time. It's very important for people to get on board.

In terms of what's the next big front, when you have this broad framework like this that says, “Here are common practices, best practices, and IT practices.” If the industry matures, I think we will see a lot of steps in the near future, where people are looking and talking more about, “How do I quantify maturity as an individual within ITIL? How much do you know with regard to ITIL? And, how do I quantify a business with regard to adhering to that framework?”

There has been a little bit of that and certainly we have ITIL certification processes in all of those, but I think we are going to see more drive to understand that and to formalize that in upcoming years.

Gardner: Sudha, it certainly seems like a very auspicious pairing, the values that LogLogic provides and the type of organizations that would be embracing ITIL. Do you see ITIL as an important go-to market or a channel for you, and is there in fact a natural pairing between ITIL-minded organizations and some of the value that you provide?

Iyer: Actually, LogLogic believes that ITIL is one of those strong frameworks that IT organizations should be adopting. To that effect, we have been delivering ITIL-related reporting, since we first launched the Compliance Suite. It has been an important component of our support for the IT organization to improve their productivity.

In today’s climate, it's very hard to predict how the IT spending will be affected. The more we can do to get visibility into their existing infrastructure networks and so on, the better off it is for the customer and for ourselves as a company.

Gardner: We’ve been discussing how enterprises have been embracing ITIL and improving the way that they produce services for their users. We’ve been learning more about visibility and the role that log analytics and systems information plays in that process.

Helping us have been our panelists, Sudha Iyer. She is the director of product management at LogLogic. Thanks very much, Sudha.

Iyer: Thank you, it's a pleasure, to be sure.

Gardner: Sean McClean, principal at KatalystNow, which mentors and helps organizations train and prepare for ITIL and its benefits. It’s based in Orlando, Florida. Thanks very much, Sean.

McCLean: Thank you. It’s been a pleasure.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Sponsor: LogLogic.

Transcript of BriefingsDirect podcast on the role of log management and systems analytics within the Information Technology Infrastructure Library (ITIL) framework. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

HP Information Management Maven Rod Walker Describes How BI Helps Business Leaders Innovate

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada the week of June 16, 2008.

Listen to the podcast here. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to a special BriefingsDirect podcast recorded live at the Hewlett-Packard Software Universe Conference in Las Vegas. We are here in the week of June 16, 2008. This sponsored HP Software Universe live podcast is distributed by BriefingsDirect Network.

We now welcome to the show Rod Walker, the vice president for Information Management in Hewlett Packard's Consulting and Integration (C&I) group. Welcome to the show, Rod.

Rod Walker: Thank you very much, Dana. It's a pleasure to be here.

Gardner: We are going to talk about some of the high-level business values that are being derived in the field from business intelligence (BI), data warehousing, data integration and generating quality data from the vast storm of information content data that's available to companies. This is, I suppose, a real competitive issue. This is what companies use to develop strategy, and to help them figure out where to take their businesses.

First off, let's tell our listeners a little about the information management practice, and a little bit about your background.

Walker: Thank you. I have been in the IT business, consulting business, for 37 years at this point. I came to Hewlett-Packard a year-and-a-half ago with the acquisition of Knightsbridge Solutions. They are one of the pre-eminent consulting firms in the BI and data warehousing space, and I was the CEO at Knightsbridge.

Gardner: All right. First, help us understand the problem out there. What's the issue? Is it that there is just too much data, that it's not good data, there is redundant data, all the above?

Walker: It's all the above and more. What we have is Global 2000, Fortune 500 companies that are struggling with all kinds of different issues, whether it's increasing market share, increasing the wallet share with their customers, dealing with compliance issues, competitive issues, or growing their business on a global basis, instead of regional basis.

They've all got different kinds of things that they are doing, and where we come in is we help them optimize different parts of their business. More and more, companies are becoming more fact based, data driven, and analytically focused, in terms of how they are running their businesses? So, they are using that to competitive advantage, to solve all these different types of business problems.

Gardner: So, no more just calling it from the gut?

Walker: Yeah, this is not shoot from the hip. This is, "How do we use the numbers to get ahead?"

Gardner: And, just having numbers isn't enough. It really is about distilling the numbers and finding the gems of information in there.

Walker: Yeah, and actually what we're seeing is that this type of work has evolved from where it's been a small group of analysts sitting in the back room, running models and making recommendations to management, to the point where you now have tiers of people throughout the organization -- from the CEO down to the individuals who interact with the customers -- and what they all need is better information.

Some of them need it in real time, and all this information needs to be provided from a consistent multi-tiered data infrastructure for the enterprise, so that they all are, in effect, operating off at the same facts, at different levels of details, and different levels of aggregation. But it all needs to be consistent, and the data that is used internally needs to be consistent with the data that's provided externally at the same time.

Gardner: Okay, let's unpack that a little bit in looking at some use-case scenarios. Why don't you tell us a little bit about how certain companies are out there are deriving a high business value from these activities? Can you perhaps give us an example from the health-care sector.

Walker: From the health care sector, one of the hot topics in health care these days -- and it's good for all of us -- is how do you improve patient outcomes? How do you improve the quality of patient care and ultimately the degrees of success in treatment? What we are seeing is that more and more of the providers of health-care services are trying to use their clinical data that they are gathering on a systematic basis -- what was this patient' problem, how did we treat him, and what was the end result?

We have both individual, if you will, hospital chains, trying to gather this information and doing it on their own, as well as various consortiums, who have the advantage of bringing in the clinical data literally from hundreds, if not thousands of hospitals, putting it into a consistent database. Then, what you can do is hunt through that data for best practices.

I can go into one hospital and say, "For this disease, for this treatment regime, what are my patient outcomes? And how do they compare, to the patient outcomes of hundreds of other hospitals?" If I am near the bottom, I've got a problem, and I better go fix it, for the sake of the quality of the care that I am providing and to avoid lawsuits and so forth. On the other hand, if I am in the top three percent, that is a marketing opportunity.

I can turn that back around and go out in the marketplace and say that for cardiac care or diabetes care, whatever the case may be, I am one of the top 10 best in the country. You hear that as consumers. You hear the stuff out there now where people are actually advertising, that they are really good in some aspect of health care.

Gardner: It's more of a marketplace?

Walker: It's absolutely a marketplace and the good news is that it's becoming competitive on the dimensions that we care about. First and foremost, what's the success in treating your illness. This is a hallelujah for all of us, and it's all because the data is becoming collectible, presentable and analyzable -- and people are doing it.

Gardner: And you can analyze that data with a certain a level of anonymity for the patients?

Walker: It has to be.

Gardner: Right.

Walker: It has to be. It's required. So the data is anonymized, and that's fine. For the kind of analysis they need to do, you don't need to know who the patient was, and you don't need any identifying information that would allow you to figure out who the patient is. It's readily anonymized.

Gardner: Right, and the fact that we are here in Las Vegas in a casino, raises a question about analytics. Do you do any analytics for the gaming industry?

Walker: Not yet, although, if you want an example of that, go see the movie "21" or read the book, "Bringing Down the House." There are your analytics for the gaming industry. Of course, it's not the one they want to talk about.

Gardner: All right. Well, speaking of markets, companies are looking for ways of exploiting their IT resources, getting return on their investment from their IT spend, and being able to up-sell and cross-sell the customers that they do have data on is becoming a great way to do that.

Walker: A lot of the work we do with our customers tends to be how they deal with their customers. And there's a lot of different aspects to this. It starts with, and it's kind of basic, just understanding your customer. Many of the big, complex organizations we deal with are still operating as collections of silos. They are typically, product based and geographically based, and both of those things make it difficult for them to really understand all the interactions they have with an individual customer.

They do not know when a customer walks in the door, calls, or goes on their Website, or whatever the case may be, if this is one of my best customers. Just because this person doesn't have a lot of money in a bank account doesn't mean, they don't have big mortgages, run a big company, and have huge certificates of deposit (CDs) or something else. If you just look at what they are doing on this one transaction in that one account, you completely misread who this customer is. So, trying to really understand your customer and who they are is a piece of the puzzle.

Then, the next piece of the puzzle is how do you increase your wallet share with that customer from the standpoint of how do you make sure they are loyal, particularly the ones that you highly value and are very profitable for you? Then, how do you interact with them and say, "Hey, you've got these services. How about this one?"

And, if they are big enough customer, you may make them a special offer or give them a better deal, and maybe you add a little bit to that CD rate that you are going to offer them. Then, the next trick that they run into is, when and how and under what circumstances do you make that offer?

It's one thing to send out a mailing based on some batch review of your customer files overnight, once a month, or once a week, but we are really finding that our customers want to do more and more is, when they are there visiting that Website, when they are in the branch, when they are doing that transaction, you want to really hit them at the point of sale with the offer right then. So, if somebody's made that big deposit, maybe that's the time you want to talk to him about a CD, or market basket question. They are buying a lot of something, well, how about this accessory or this other thing that tends to go with it? Hit him with it right now.

Gardner: And today, I suppose, more and more companies are interfacing with their customers and prospects, through the Web and through applications. We see self-help portals. We see people actually wanting to do business through the Web, but to have the analytics to then offer them the right path throughout that sales process becomes critical.

Walker: And, not only are the paths multiplying, but what we need to do in terms of how we architect these kinds of solutions and systems, is make sure that you can make that specific offer to that customer, no matter which channel he is contacting you through. It could be the call center. It could be the Web. It could be that kiosk. It could be physically walking into a store or a branch.

Gardner: It could be increasingly your cell phone.

Walker: It could be a cell phone, absolutely. So the answer is that it doesn't matter how they have contacted you. You want to have the same analytics, the same class of offer to be presentable through any channel, anytime, anywhere.

Gardner: So, it's so much more than a single view of the customer. It's really an amalgamated view of what that customer probably would want next?

Walker: Absolutely, and this is all based upon analytics. I don't doubt that there are some businesses who will use this not just to up-sell and cross-sell some customers, but maybe in some cases they drive a few of them away at the same time.

Gardner: If not done properly.

Walker: Well, maybe on purpose. Maybe, I don't want to you as a customer.

Gardner: I see. Weed them out.

Walker: Weed them out at the same time.

Gardner: Interesting. Let's move on to another use case. Energy is a big topic these days. People are wondering when the price of oil will start coming down, instead of going up. What can analytics and business intelligence bring to those, who are now out there looking for the increase in the oil supply?

Walker: Well, there are a lot of different kinds of things, as you might imagine, that the energy companies are applying analytics to. We have been involved with them in both the retail sales side in terms of the analytics there -- the energy trading business, in terms of how do you swap and trade crude as well as finished products on a worldwide basis? And we have got involved in some other things, like centralizing well information.

If you look at how an exploration or production company deals with well information, they may go out and sign up for leases, and so they gather a whole bunch of lease information. They've got an exploration unit, that goes out and actually drills the well and collects a lot of information about that well. They've got a production company that collects information around the well as it produces. These are all different functional silos. You've got a legal department that does the negotiations and does the deals. They've got their file cabinets full of paper and information around those wells.

Then, of course, you've got the finance organization that has to take the money that's obtained from selling the products that come out of that well, and then redistribute it back to the owners of the well, and the royalty owners, and to some degree, each of these different business units keeps their own information around the wells, as opposed to there being one master of repository, the data of record, certified data for that well. So, there is an opportunity for them to be much more efficient, and make that data available on a consistent accurate basis to everybody who needs it.

Gardner: A single view of the petroleum.

Walker: A single view of the well, at least.

Gardner: How about one more used case scenario, risk management? How does an organization reduces exposure to risk, perhaps shore up its security, and maybe even be mindful of compliance and regulatory issues, vis-à-vis BI.

Walker: If you take the banking industry, for example, banking is slowly going global. You've got these huge banks operating around the world. They've got all kinds of regulatory compliance issues to deal with, both on an international basis with Basel II, as well as on a country-by-country basis. So, of course, you have to feed accurate information, consistent information to all of the different regulatory bodies.

At the same time, part of that is also managing your operational risk on an worldwide basis, and that could be anything from your currency risk to your interest rate exposure or your customer credit risk. It's one thing to look at your customer credit risk in terms of this subsidiary of that company, but what about the rest of the company, or what about their risk in this country, versus the risk on a global basis?

Do you have that information collected in a way that you can assess all those risks and apply your judgments and make your operational decisions appropriately. That's just one aspect of risk management that we have been involved with, in that case numerous banks, but it can also be things like a credit card fraud, ultimately, in real time, analyzing the transactions as they come in. There are just lots of other risk factors out there on an industry-by-industry basis.

Gardner: You raised the issue about real time. Many times we think about analytics as having data that's been sitting around for a while. It will stay, and we can take some time to go in and look it over, but, I think, increasingly, we are finding enterprises seeking to analyze things a bit more on the fly. How does that relate to what you are doing?

Walker: Well, there are some relatively easy examples of that kind of thing. A couple we just alluded here. One I just mentioned was the credit card fraud aspects of this. There are other people who look at trading opportunities and trading analytics. Whether it's equity markets, energy markets, or whatever kind of markets they trade in, if you can do your analytics just a little bit faster than the next guy, and get your trades in a little bit quicker, that can mean serious money, and we have run into some of those kinds of issues as well.

Then, one of the big emerging areas for real time gets back to this business of customer interaction on a real time basis, if the customer calls the call centers, shows up in the branch, and then goes on the website. You don't want to be looking at yesterday's data, if he's doing all of those things today.

So, you want to see his transactions he has done all at the same time. You want that complete view of the customer. There's another less real-time aspect to this. When you're talking about a complete view of the customer, the other thing we are seeing is, it's not just the transaction information. It's not just the structured information that we gather from all these systems.

There are studies out there that say, 60 percent of the data you have in your organization is actually not structured data at all. It's in documents, e-mails, and other forms of images, audio, and video, whatever the case may be. One of our challenges first is to get people to have a 360-degree view of the customer.

The next thing is to have them have a complete view of the customer. What is everything we have in our organization that we have about that customer? Can I get at it, when I need to get at it, either when I am dealing with the customer real time, or even if it's not real time? The point is that I've got to be able to get all the relevant data, not just the stuff that's easy, because it's in the systems.

Gardner: Very interesting, I think this certainly shows how IT investment has many new and additional forms of payback. We're really just getting into the icing on the cake, right?

Walker: Absolutely, and as the technology continues to evolve, and we get better and better at this, and as our customers go through the maturity process and mature with the technologies and the business issues, they are getting smarter and smarter about what they can accomplish with this. You actually see them progress from using data, to using information, to streamlining the business, and then getting to the point where they really try to innovate, compete, and alter their strategies based on the information they are now able to bring to the table.

Gardner: It really shows how IT can be an competitive advantage in a very significant way.

Walker: Absolutely, and all the trends and demographics in business come back to kind of where we started, which is that it's all about business becoming more analytic data driven, and really trying to optimize, not just their operations, but their market share, and how they compete against their competition. At the same time, how can I just do a better job serving my customers?

Gardner: Great, we have been talking with Rod Walker, he's the vice president for Information Management in Hewlett-Packard's Consulting and Integration Group. I really appreciate your time.

Walker: Delighted to be here, and happy to talk anytime.

Gardner: This comes to you as a sponsored HP Software Universe live podcast recorded at the Venetian Resort in Las Vegas. Look for other podcast from this HP event at hp.com website, under "Software Universe Live Podcasts," as well as, through the BriefingsDirect Network. I would like to thank our producers on today’s show, Fred Bals and Kate Whalen, and also our sponsor Hewlett-Packard.

I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts on enterprise software infrastructure and strategies. Bye for now.

Listen to the podcast. Sponsor: Hewlett-Packard.

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.