VRIO For IT Service Analysis

The recent positive news about certain economic indicators – decreases in the number of new unemployment benefit applications, home foreclosures, and personal bankruptcy applications with an increase in the number of pending sales of existing homes – combined with significant gains in the stock markets have prompted some experts to believe the economic crisis is starting to level off.

While this may be true, the reality is that the crisis is far from over. Most analysts see the economic downturn leveling off during the 2nd half of 2009, but they are quick to point out that this does not mean hard times are over. Unemployment rates will continue to increase, many businesses will continue to falter and revenue will remain stagnant or increase only slightly in many companies.

Financial departments will continue to carefully watch their budgets and control their costs. And as IT is by its nature a significant portion of many company budgets, technology managers will continue to find themselves justifying not only their budgets, but also the overall value of IT.

While specific justifications for IT will vary depending on the nature of the core business, the value of IT as a service provider is one that is common across the board. The value that IT brings in terms of servicing the employee, the company, and – in some cases – the revenue-generating customer base can help justify its existence.

But often IT management fails to leverage this value by focusing their justifications on areas that end-users do not find important. At one time “services” such as installing software, configuring laptops or even changing the paper in printers brought value, but today these are low value items that most end-users can do themselves. To truly justify itself, IT needs to focus its value proposition on unique services that bring value to the company.

A tool that can help IT managers identify those services is a modified VRIO analysis. VRIO (which is an acronym for Value, Rarity, Imitability and Organization) is a tool commonly used in merger and acquisition activities, market analysis, and – more recently – product development to identify potential competitive benefits. As IT needs to compete with other internal units for limited funds, the VRIO analysis is well suited to help identify the value of IT.

To begin a VRIO analysis, create a table (or spreadsheet) such as the one shown below:

Under the “Service Offered” column, start listing the various services that IT offers to internal employees, external customers and the overall company. Don’t limit the ideas to just those you think bring value; instead list any and all services that IT offers no matter how large or small.

After the services have been identified, analyze each one through a series of 5 “yes or no” questions.

The first question is whether or not the client sees any real value in this service. Questions such as “is it a unique service?”, “does it help the client do their job more effectively?” and “does it make the client’s job easier?” can help call out any real value. Getting actual customer input (through interviews, survey, etc.) is an even more effective way to identify the services that have true client value. If the service has value, enter Y in the “Client Value?” column, if not enter N.

The next question is whether the service is rare. Is it something that the user can only obtain through IT or is it a ready available service or function that clients can easily do on their own or easily obtain somewhere else? If the service is rare, enter a Y in the “Rare?” column. If it’s not rare, enter N.

The next question is whether the service can be easily imitated. Is the service one that is unique, company-specific or requires specialized company knowledge to perform, or is it basically a commodity service that can be obtained through an external vendor? If the service is difficult to imitate or unique, enter a Y in the “Difficult To Implement?” column. If the service is basically a commodity, enter N.

The next question focuses on the IT organization’s ability to effectively offer the service. Is this a service that IT offers – or can offer – effectively? Again, customer input can help identify those services that they feel are offered effectively and those services that IT fails to truly deliver on. This question is one that is often a bitter pill for IT to swallow, but it needs to be answered honestly and from the customer’s view so I highly recommend the use of actual client input to avoid any bias. If the service can be delivered effectively, enter a Y in the “Organized For?” column. If it can't or there appears to be user dissatisfaction with the service, enter N.

At this point, the table should look something like this:

The final step is to use the following VRIO criteria to identify the services that have a potential value proposition:

Applying the framework criteria to the sample table provides this overall analysis:

Managers can now better identify those services that have true client value. This doesn’t mean that IT stops installing software or servicing printers, rather it means that the focus of value justification is not on these services.

As with any tool the VRIO analysis is not an “end-all be-all”. The value it helps identify is “potential” value. Whether or not there is real justifiable value is something that needs to be decided by management and internal subject matter experts. But at a minimum, the VRIO analysis can help IT managers narrow in on those services that have potential value and can help justify the overall value of IT.

The Poetry of Departure

In the novel "From Russia with Love", author Ian Fleming describes the waiting platform for the Orient Express as throbbing with the "tragic poetry of departure". The phrase aptly describes the feelings we have when we separate from friends or family. Whether we are the ones boarding the train or the ones standing on the platform watching others depart, the act of departure often brings feelings of emptiness, loneliness and sadness.

Many of us in IT have probably experienced the tragic poetry of departure at least once during our careers. Those times when economic, organizational and political influences resulted in corporate consolidations, company closures and workforce reductions. We have not only watched our friends and colleagues depart, we were often the ones boarding the train. Unfortunately with the current market crisis, it is likely that some of us will once again encounter that tragic poetry.

With most major markets hovering at their lowest levels in almost five years, fears of a global recession are increasing. Large corporations and small companies alike are announcing plans for layoffs, putting projects on hold, and making preparations for significant budget cuts. The train is pulling into the station and the question for many is whether they will be boarding the train or watching others depart.

Yet, in the midst of the despair, we need to remind ourselves that we've been through this before and survived. For along with the tragic poetry of departure there is also the joyful prose of arrival. Those of us who previously experienced departure often found ourselves arriving at new destinations with more opportunities to use our experience and skills. And those of us who remained behind often found additional doors opening as we assumed more duties and responsibilities.

If we find ourselves boarding the train this time, we need to remember that we carry in our luggage the skills, talents and experience to not only survive, but possibly even thrive. Whether it was the dot-com crash of 2000, the impact of Sept. 11 or the economic crisis of today, the message in trade magazines, analyst reports, and government projections is the same – some jobs remain "hot" as there are certain skills that will always be in demand.

A review of the employment reports throughout the years show that the demand for IT skills such as network engineering, software development, information security and database administration remains constant. No matter what state the economy is in, businesses need these skills to (1) connect with their systems, their suppliers and their customers, (2) develop and enhance revenue-generating products and services, (3) protect company assets and ensure regulatory compliance and (4) manage enterprise data for financial analysis, sales campaigns and customer service.

Business is an adaptable entity that can morph as needed to meet market demands. Even with the current market volatility, the "business of business" will continue and as business continues, so will job opportunities continue for those of us in IT.

We may have to pack our bags and board the train. And our journey may not be as smooth as desired. But if we position ourselves appropriately and take advantage of opportunities to show our talents, the tragic poetry of departure can turn into the joyful prose of arrival.

The above is a reprint of my User View column in the November 13 issue of Network World.

We've Been Here Before

Here we go again. Stocks are falling worldwide, most major markets are hovering at their lowest levels in almost 5 years and fears of a global recession are increasing. Large corporations and small companies alike are announcing plans for layoffs, putting projects on hold and making preparations for significant budget cuts.

In the midst of all the gloom and despair, those of us in IT need to remember that we’ve been through this before. And if we position ourselves appropriately, we can not only survive, but maybe even thrive in the current economic situation.

In 2002, the dot-com crash was wreaking havoc with IT careers; however there were still opportunities for those with the right skills. In an article on the hot IT jobs in 2002, eWeek stated:

“Given the sagging economy, there aren't many enterprises hiring techies these days. But despite the gloom, some jobs remain hot. That’s because certain skill sets are must-haves in enterprises' arsenals.”

Those 2002 must-have skills included database, security, networking and development.

Fast forward to 2008 and Baseline magazine had a similar lead in an article on in-demand IT skills:

“Even in tough economic times, employees with the right skills will always be in demand in the IT industry…”

Those “right skills” included security professionals, wireless network engineers, and application developers.

And in an article on the most recession-proof IT jobs in 2008, Computerworld stated:

“If you want to stay employed in IT amid the economic uncertainty, look for jobs in software design and development, networking and systems administration, software implementation analysis, testing and quality assurance, database administration and general IT management with cutting edge mobile IT and Web 2.0 skills.”

If you compare the 2002 and 2008 articles, you see a common thread throughout the years: the demand for IT skills such as network engineering, application/software development, information security and database administration remains constant. No matter what state the economy is in, companies need these skills to (1) connect with their suppliers and customers, (2) develop and enhance revenue-generating products and services, (3) protect company assets and insure regulatory compliance and (4) manage enterprise data for cohesive financial analysis, productive sales campaigns, and effective customer service. As these are the lifeblood of business, IT skills are always in demand.

Granted you may need to relocate, enhance your skillsets, or join an IT services outsource company to keep up with the demand, but unlike some jobs, IT skills are crucial for the success of a business – no matter what market conditions exist.

Many economists see the current market volatility continuing for the foreseeable future, yet even with this volatility, business will continue as it is an adaptable entity that can morph as needed to meet market demands. And as business continues, so will job opportunities continue for those with the right skills.

Economic uncertainty can bring both threats and opportunities. A drop in the stock market can result in both lost savings and low-cost investment opportunities. Market downturns can result in both lost revenue and new marketing opportunities. The current economic situation will have an impact on some IT jobs; however it will also increase the demand for those skills that are essential for the survival of a business. By positioning ourselves appropriately, we in IT stand a chance to survive – and maybe even thrive – in these uncertain times.

It is indeed a Monday. While sitting in Interstate gridlock for over an hour due to a multi-car wreck, I hear the even more stifling news that the Dow is down over 500 points and the index is under 10,000 – the lowest it has been in over 4 years.

My own small portfolio has dwindled from a potential cruise fund for me and the wife to a long-term college investment for my newly-born granddaughter. If all goes well, in 18 years it will be back up to the levels of last November.

And yet in the midst of the gloom and despair, we in IT need to remember that we’ve been through this before. And if you position yourself appropriately, you can not only survive, but actually thrive even with today’s economic situation.

In 2002, the dot-com crash was wreaking havoc with IT careers; however there were still opportunities for those with the right skills. eWeek magazine noted this in the article on Hot IT Jobs for 2002:

“Given the sagging economy, there aren't many enterprises hiring techies these days. But despite the gloom, some jobs remain hot.

“That’s because certain skill sets are must-haves in enterprises' arsenals. For example, as companies continue their e-business expansions, they must have database experts who can handle the flood of data produced by new, enterprise-wide technologies.

“Security experts are also essential to help companies protect systems externally and internally. Networking experts who can build and support the infrastructure that runs any technology project are crucial. Also vital are Internet/ intranet developers, who create and integrate the customised applications that power digital infrastructures.

“Because they represent IT skill sets that are still in demand with businesses now and that will continue to be so as businesses rebound from the economic slump, eWeek chose these four titles, senior Internet/intranet developer, database administrator/database manager, network engineer and corporate security manager, to profile as hot IT jobs for 2002.”

Fast forward to 2008 and Baseline magazine had a similar lead in their article about IT careers in demand:

“Even in tough economic times, employees with the right skills will always be in demand in the IT industry…”

Baseline selected the following 10 titles as representative of what they saw as jobs in demand for 2008 based on current supply and business demand

· Senior Level Java/J2EE and .NET Developers
· Application Development Managers
· Security Professionals
· Architects of All Stripes
· Talented IT Managers
· Business Technology Professionals
· Infrastructure Pros with Strong Backgrounds in Virtualization
· Web 2.0 Developers
· Wireless Networking Experts

In another article, CIO Insight stated:

“If you want to stay employed in IT amid the economic uncertainty, look for jobs in software design and development, networking and systems administration, software implementation analysis, testing and quality assurance, database administration and general IT management with cutting edge mobile IT and Web 2.0 skills.

“Those are the hottest IT job fields today, according to a new report on the "Top 20 Most Recession-Proof Professions," released late last week by McLean, Va.-based online job placement firm JobFox.com.”

The fact is that economic uncertainty is a part of life anymore. From dot-com crashes to terrorist attacks to sub-prime mortgage scandals the economy is no longer a stable environment. As globalization continues and the economies of individual countries become more and more intertwined, the roller coaster ride will continue as the impact of economic issues in one country will reverberate throughout the globe.

Many analysts believe the current market volatility will continue for at least the next few years with economic upturns and downturns becoming a part of life. But even with this volatility, business will continue as it is an adaptable entity that can morph as needed to meet market demands. And as business continues, so will job opportunities continue for those with the skills that are in demand.

Looking at the 2002 eWeek article and the 2008 Baseline/CIO Insight articles a few common items stick out. The demand for specific technical skills such as network engineering, application/software development, information security and database administration remain constant. No matter what the economy, businesses need these skills to (1) connect their business both internally and externally with customers, (2) develop or enhance products and services, (3) protect their data and insure regulatory compliance and (4) manage their data for cohesive financial analysis, productive sales and marketing campaigns, and effective customer service – all of which are the lifeblood of a business.

A drop in the stock market can result in both lost savings and low-cost investment opportunities. Market downturns can result in both lost revenue for some companies and new marketing opportunities for others. The current economic situation will have an impact on some IT jobs; however it can also increase the demand for those skills that are essential for the survival of a business. By positioning themselves appropriately, IT professionals can survive – and even possibly thrive – in these uncertain times.

Is IT Still A Viable Career?

As I currently reside in Denver, I spent a lot of my free time hiking in the oxygen-thin air of Colorado’s mountains. Often I will reach a level spot where I have to stop and ask myself if this is a resting place where I can catch a quick breath to continue on or have I reached a plateau where I need to consider if I can go any higher.

Many people are asking that same question about careers in IT - have they reached a plateau or is the current market situation just a short resting place in preparation for the next climb?

The signals from the market are mixed. Almost weekly there is an article or commentary about the projected talent gap in IT due to the impending retirement of baby boomers. The number of college students enrolled in technology programs has decreased and employers fear the demand for IT talent will exceed the available supply.

Yet at the same time we are hearing about more and more companies cutting IT staff, outsourcing development to reduce costs and putting technology projects on hold. Due to the current economic crisis, I personally know very few baby boomers who are actively considering retirement. Most of my baby boomer associates are looking at ways to leverage their experience to keep their careers going.

Is IT still a viable career? When I’m asked that question, I relate the story of my friend Bob. Bob was a history buff. During grade school and high school he constantly read books about historical events. In college, he majored in History and studied it with a passion, eventually obtaining a Ph.D. Even though jobs for history majors are few, Bob devoted himself to the subject. And it paid off.

He worked hard and ultimately became one of the top experts in world history. He is a tenured college professor and has published several books on historical topics. He also conducts executive-level seminars on how to use the lessons of history to create effective business strategies and become more successful. The combination of teaching salary plus book royalties plus speaker's fees provides Bob a comfortable living. In a field with little apparent opportunity, Bob realized that there are always opportunities for those who strive to be the best.

And so it is with IT. The job outlook is debatable and the amount of future job opportunities is open to conjecture. But the same can be said for any number of career paths from marketing to sales to journalism to management. However, there will always be opportunities for those with a passion for technology and who strive to be the best. Granted, they may never become rich, but they will be doing what they love and providing for their families. And in the end, isn't that what a career is all about?

ITIL Version 3 - Enhancing The Value of IT

If you’re an IT manager with a focus on service improvement, ITIL – especially ITIL Version 3 – needs to be part of your process framework.

In the previous versions of ITIL, the focus was on enhancing IT performance through best practices in specific processes such as configuration management, change management, incident management, problem management and others. While enhancing IT operational performance is still a fundamental component of Version 3, the focus of the framework has shifted to how IT services the business.

An example of this difference can be shown with remote access - a service provided by IT that consists of a variety of hardware and software components, some of which can occasionally be “operationally available” but not providing the needed service. Monthly IT operational reports could show that all the components were 100% available while in fact the remote access service was down for 72 hours due to a corrupted routing table in a switch.

There's nothing that degrades the business value of IT more than reporting 100% operational uptime to a group of senior leaders who were unable to access the company intranet remotely. You can be sure one of them will say: “the IT group just doesn’t get it.” ITIL Version 3 attempts to resolve this situation by putting more focus on the actual service aspects of IT.

ITIL Version 3 also facilitates its adoption rate by providing more implementation guidance. Since it is a framework that was created to be modified, molded and shaped as needed to meet business requirements, ITIL does not provide specific steps on how to do a process. However, this has been a downside to its adoption as many IT departments want – or need – more concrete guidance on implementation.

ITIL Version 3 bridges the gap between a pure framework and an operations manual by providing more guidelines on how to implement the core components. For example, in ITIL Version 2, a service catalog was recommended for service-level management; however few guidelines were given on what should be in the catalog.

Having been previously tasked with creating a service catalog, I searched the Internet for information and found everything from a one-page summary sheet to a detailed spreadsheet. In ITIL Version 3, more guidance is provided on what a service catalog is, how it should be developed and what it should include.

ITIL is not a panacea and will not solve all service issues. What ITIL Version 3 brings to the table is the ability to implement a service and support framework that shifts the focus of IT from operational metrics to delivery of IT services, which will ultimately enhance the overall business value of IT.

The Zen of IT Planning

One of the main tenets of Buddhism is mindfulness – the ability to be totally aware of the moment. Adherents of all branches of Buddhism meditate daily to train their minds to have "clear comprehension" and see things objectively and impartially.

After 20 years of involvement in IT, I can safely say that mindfulness has not been an inherent trait of most IT organizations. Sadly, from many perspectives, it can be said that "mindlessness" has been a better description of IT.

Many costly strategic decisions have been made based totally on technology prejudices, zealous preferences or knee-jerk reactions, without analyzing the true business impact. Many companies have wasted a good deal of time, resources and money on the latest IT “project of the day”. Data warehouses sit idle with data that hasn't been updated in years. Expensive Asynchronous Transfer Mode campus networks have been implemented, only to be ripped out before they are fully depreciated and replaced with Gigabit Ethernet. Budget-breaking CRM systems have been implemented that are rarely used because of their complexity and high support costs.

Unfortunately, we haven't learned from these mistakes. Companies still make knee-jerk IT decisions without analyzing the overall finances, risks and business impact. With the current need for companies to focus on their returns on investment, it's even more crucial that IT decisions be made objectively and impartially.

Take virtual private networks (VPN) as an example. VPNs can generate substantial savings in many situations – especially in the areas of remote access, corporate office connectivity, Intranets and connectivity to lower-revenue generating locations; however they are not an across the board panacea for lower network costs. Being Internet-based, VPNs can't offer the same availability, redundancy and quality of service that dedicated connections provide. So while VPNs might be acceptable for small branch offices, they probably aren't the best choice for situations requiring mission-critical connectivity – yet many companies are doing wholesale replacement of their dedicated WAN links with lower-cost VPNs. Instead of being mindful of the business impact in terms of extended mean time to repair, degradation of network performance, lower user productivity and potential lost revenue, they are blinded by the lower cost and make a knee-jerk decision.

Along with avoiding knee-jerk cost-cutting decisions, IT personnel need to also guard against making zealous technology-based decisions. It's easy to be blinded by a technology's technical elegance. An open-source PC-based IP virtual call center solution with skills-based multi-location routing is very elegant. However its business value can be questionable if the skills needed to design, implement, support and manage the platform are not available. It may be easier, faster and more cost effective to utilize a third-party call center service – especially one that has proven skills in customer service.

LAMP-based Web architectures (Linux, Apache, My SQL, and PHP) are very elegant but may bring limited value if your developers are Microsoft-centric with experience in .NET, C+/C# , SQL Server and IIS.

IT departments need to be impartial in their analysis to understand where a technology will fit and where it won't. A technology's only value is in the need it will meet. If the need isn't there, the technology -- no matter how elegant -- has no value.

And to complicate matters, technology is rarely a question of “either/or”. More often than not, the most appropriate strategy is a hybrid mix of new technology and legacy infrastructure which requires even more objective and impartial analysis to insure optimal value.

IT managers need to be mindful of the all the benefits, risks, costs and business impacts of their decisions. IT planning needs to be objective and impartial to ensure the technology architecture is not the product of the latest vendor-driven fads, but rather is a cohesive, business-focused strategy that focuses on the overall goals of the business. Now excuse me as I go meditate.