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Next Practices in Business Service Management

 

 

Business Service Management Case Study: EnergyCorp, a Mid-Sized Utility
by Bill Keyworth

OBJECTIVES

The objective of this case study is to demonstrate how assumptions and recommendations of the BSM Maturity Model have been used to improve the value perception and deliverables of EnergyCorp's (the name of the entity has been changed for confidentiality) IT organization.

Specifically, we look at the following questions:

  • How can a maturity model for Business Service Management (BSM) help prioritize next steps in better aligning IT with business objectives?
  • How can understanding the relationship between the business maturity of the company and IT capabilities drive effective change within the IT organization?
  • How is an existing IT strategy enhanced through application of BSM maturity to demonstrate business value?

THE BLUEPRINT

EnergyCorp used BSMReview's BSM Maturity Model as a guide for this initiative. The diagram below is a summary of the five BSM Maturity Levels we defined at the start of the execrcise.

bsm levekls

THE CURRENT STATE

The mid-sized utility - EnergyCorp - has been experiencing rapid growth and considerable success in leveraging technology investments for the purpose of corporate expansion.  EnergyCorp is already operating at an “Aligned” level 3 of business maturity with growth plans in place for creating an “Optimized” level 4 business operations

energycorp

The historical challenge for the IT organization was to keep pace with the rapid growth and aggressive business goals of EnergyCorp, while expanding IT’s contribution to enhancing the competitive position of EnergyCorp through product and service leadership.  Expectations by the business entities of EnergyCorp were changing to reflect increased focus on many of the attributes of BSM Maturity Level 4, including:

  • use of leading edge technologies,
  • assuming calculated IT risks,
  • altering competitive landscape through technology innovation and leveraging collaborative and
  • social technologies for market expansion. 

While the business was forging ahead in prioritizing 2010 investments for increased penetration of energy (provider) markets for electrical and natural gas services, the challenges of this “growth by acquisition strategy” was placing enormous demands upon the human resources, tools and processes of the IT team.   While delivering an enviable level of IT service to EnergyCorp business customers, the IT organization was struggling to move their own IT maturity curve “rightward” from a desired “integrated” level of service management to the challenging “proactive” level of service management.  We examine the tactics that IT leveraged to better align with the technology expectations of EnergyCorp’s business units.

PAST ACHIEVEMENTS

Past IT investments within EnergyCorp were noteworthy in their ability to successfully accommodate 150% annual growth for the last three years.  When EnergyCorp needed to move from a predictive business model that required secure and reliable operations to an aligned business model where business value was determined and assessed by the customer, IT was effective in accommodating that kind of momentous change.  EnergyCorp's IT was not only stepping up to level 3 metrics associated with customer acquisition and retention, but was creating a foundation to move on to level 4 metrics associated with product and service leadership for competitive differentiation.

Given the high number of acquisitions (requiring complex software integration,) rapid customer expansion (with multiple CRM and accounting procedures and tools,) and high dependency upon data files for transmission and billing (with glaring inconsistencies and access methodologies,) the significance of achieving project transparency, ROI analysis, budget accuracy, on time project delivery and consistent system uptime as noted by IT management was definitely noteworthy. 

IT INITIATIVES for 2010

The analysis opportunity was to review progress of the top four IT initiatives identified by EnergyCorp for 2010 against the implications of the BSM Maturity Model.  Those initiatives included:  

  1. In-house development and extension: business demands a high level of system automation.  EnergyCorp had targeted a number of large system development initiatives, including the implementation of improved workflow, electronic billing and document management.
  2. Compliance and security: Monitoring and processes that maintained secure operations while greatly expanding network applications, business partners, and physical locations.
  3. IT operational support systems and IT process enhancement: including migration to production oriented IT help desk, and implementing a 24/7 live network operations center
  4. Private Cloud migration: initiation through hardware scaling and virtualization across all systems  

Initiative #1: In-house development and extension
EnergyCorp attributed much of their business growth to the decision to build all mission-critical systems from scratch rather than license from vendors.  Consequently, IT was able to handle the automation dictated by the incredible growth of EnergyCorp over the last three years.  Essentially, these custom-developed mission critical systems provided an essential technology base for EnergyCorp’s competitive differentiation (level 4) within the energy provider market. 

The challenge facing EnergyCorp was the increasing number of new applications that the business expansion was demanding.  While the defacto standard within EnergyCorp had become “build our own,” there were some software applications that were not deemed uniquely mission critical to EnergyCorp, including existing applications for Customer Relationship Management (CRM) and IT Service Management (ITSM).  The market’s ability to quickly tap into the required functionality and new seats of CRM and ITSM through on-demand software delivery as offered by Software-as-a-Service (SaaS) was an early illustration re: how these two software solutions were probably not mission critical applications and constituted potential opportunities for outside vendor purchases. 

Development resources required for EnergyCorp’s competitive “utility” had to be preserved and protected in order to respond to the product and service leadership that was setting EnergyCorp apart from most energy provider competitors.  However, the past “open checkbook” for in-house development was becoming increasingly restricted.  EnergyCorp identified that the number of IT staff as % of all staff was five times higher than the industry norm for utilities.  While good for in-house development, such internal staffing was a fatal flaw for responding to the skyrocketing demand for new applications.

For example, the document management project identified as a top 2010 initiative for in-house development was classified as a generic code (vendor supplied) opportunity. While it was clear how this application was essential to EnergyCorp’s business operations (BSM Level 2), it was unclear how it was considered competitively differentiating (BSM Level 4).   Vendor approaches to document management represent years of experience that have coalesced into current implementations. Rather than disregard the hard knocks that were behind the learning curve for managing multiple types and characteristics of hard copy and online documents within enterprises, EnergyCorp benefitted from buying these basics and adapting code to EnergyCorp’s unique requirements. 

Greater use of Agile or “lightweight” software development was investigated within EnergyCorp.  While there had been some explorations of Scrum and Extreme Programming within EnergyCorp, a healthy dependence upon a closely managed, waterfall model of development remained the norm.  Given the continued rapid expansion of EnergyCorp, there needed to be more consistency in adapting to changing circumstances. 

Working software that was delivered in weeks instead of months became a more recognized measure of progress.  Agile concepts of simplicity, self-organizing teams, technical excellence and motivated individuals proved beneficial to more rapid delivery and higher quality of code for EnergyCorp’s unique differentiating software solutions.  

Initiative #2: Compliance and security
The second 2010 IT initiative was articulated as the need to keep the bad guys out while empowering the rapidly expanding collection of networks, applications, business partners and physical locations.  EnergyCorp is in a utility energy business where compliance to regulatory requirements and internal security policies is critical, essential and mandatory to survival.  As a sole energy provider in many communities for electrical and natural gas services, the cost of downtime or sabotage is substantial.  EnergyCorp has consistently demonstrated proficiency in meeting these compliance and security issues and continues to emphasize the importance of such initiatives in delivering energy to its customers.  Investments and compliance conformance were no exceptions in 2010.

Initiative #3: IT operational support systems
The inclusion of a “Production Oriented Help Desk” in the list of top priorities was evidence that EnergyCorp was encumbered with a help desk that was struggling to provide the “scale” required for internal production support.  The emphasis on “help desk” versus the more functional and currently pervasive “service desk” was another indication of an IT operational disconnect.  Help desk descriptions normally refer to small IT shops that need to track problem resolution.  There is usually little integrated behavior enabled in help desk technology as the focus is on tracking reactive solutions to issues first identified by the user community.  Service desk solutions focus on an integrated approach to problem, change and asset management within an IT infrastructure, enabling proactive behaviors where there is joint emphasis on technology solutions and process optimization. 

By 2010, many larger enterprises had already moved to ITIL V2 or V3 predefined service, asset and change processes.  While avoiding the use of ITIL as methodology checklists, effective service desk implementations used ITIL as guidelines for moving from an integrated service management focus to a proactive service management, which would be required for alignment with an energy provider business working towards a level 4 competitive differentiation.  It was unclear how EnergyCorp had achieved an “integrated” level of IT management maturity without having previously implemented a “production oriented service desk” and it became imperative that this initiative be completed in 2010 in order to move IT closer to a “proactive” level of IT management maturity and subsequently to move EnergyCorp to their goal of an “Optimized” level 4 of business maturity.

Another curiosity that surfaced was the lack of a 24/7 live Network Operations Center (NOC).  Given the geographical disbursement of EnergyCorp’s customer base, the high vulnerability to any downtime in electrical and natural gas services, and massive degree of consolidation that was ongoing from the existing M&A strategy, the development of a 24/7 live Operating Center was obvious re: how these mission critical needs were to be met.  Such tasks are normally mandatory for achieving secure and reliable operations assumed by “Predictive” level 2 of business maturity.  The cost of human resources to staff a 24/7 NOC was considered insignificant to the risk of downtime that could surface when proactive behavior needed to be initiated on-site from alarms, reports and other notification mechanisms of potential issues.  Centralized control into one or more Operating Centers was declared essential for a $200M multi-state energy provider.  Given the expertise that was readily available through outsourcing to deliver a Network Operating Center, EnergyCorp decided this was a worthy alternative to building such capability in house, and focus was created on ensuring the right service level agreements, performance accountability and penalties were established.

Initiative #4: Private Cloud Migration
The virtualization initiative for purposes of scaling was critical to the goal of EnergyCorp doing more (management of IT) with less (IT resources) and of accommodating rapid growth (IT infrastructure & applications) with limited budgets.  Instead of a focus solely on the requirements and benefits of virtualization, EnergyCorp expanded the discussion to include outsourcing opportunities as defined by infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) …as frequently referenced in implementation of public and private clouds.  Mission critical “utility-oriented” applications were labeled the top priorities in 2010 for virtualization opportunities within a private cloud context.  Examination of non-mission critical resources, or outsourcing for improved infrastructure management were initialized during 2010.   

Summary

IT for EnergyCorp needed to determine how to invest and implement the burgeoning new technology requirements dictated by the aggressiveness of EnergyCorp business goals …given competing demands for IT funding.  Anything that increased the delivery of differentiating EnergyCorp’s energy products and services at reduced or existing levels of investment was the means whereby EnergyCorp could legitimately continue its aggressive revenue growth rate. 

In 2010 there was an immediate need to shore up the expected foundational elements of the “Predictive” level 2 of business maturity by investing quickly in core IT management capabilities.  Given the industry shift to outsourcing these types of non-mission-critical IT functions and the increasing availability of qualified outsourced IT management services was a primary alternative for EnergyCorp’s consideration.  Another was the purchase of basic IT service management solutions where expertise in process could be leveraged and sometimes purchased in the IT automation tools. 

EnergyCorp was in an enviable and desirable place within the Utility industry and in comparison with IT organizations serving cross industry markets …and that was evidenced by its success in delivering the IT components required for EnergyCorp’s business value and competitive differentiation.  The majority of today’s IT organizations are getting better and better at delivering predictable, secure, well managed IT environments, but remain disconnected from the real business needs of their respective companies.  The unfortunate consequence is the increased marginalization of IT shops with the propensity to outsource IT management and turn to cloud services with the expectation of better business support.  During 2010, EnergyCorp successfully addressed issues of shoring up IT deliverables needed for secure and reliable business operations through a combination of people, skills, tools, and best practices that were readily available within the IT industry.

 

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