RIO Application Operations - Financial and Business Relationship Management (PDF)

RiO - Application Operations Module 2: Service Strategy Capsule 3: Financial and Business Relationship Management Audio Script Slide 1: Background music. Slide 2: Welcome to this video course on Application Operations. Slide 3: You are now watching module 2 on service strategy. Capsule 3 discusses a...

RiO - Application Operations Module 2: Service Strategy Capsule 3: Financial and Business Relationship Management Audio Script Slide 1: Background music. Slide 2: Welcome to this video course on Application Operations. Slide 3: You are now watching module 2 on service strategy. Capsule 3 discusses about financial and business relationship management. Slide 4: Hi, welcome back! In the previous capsules, we learned about Strategy Management for I T services, Service Portfolio Management and Demand Management. In this capsule, we shall learn about Financial Management for I T Services and Business Relationship Management. Let’s begin! Slide 5: At the end of this video you will be able to explain.   Key concepts of Financial Management for I T Services. And, key concepts of Business Relationship Management. Slide 6: Background music Slide 7: What would you describe as successful financial management? In I T services, successful financial management means getting the deal right. The Financial Management process involves managing the finances, where, the I T secures the budget and understands where the money actually went and bills the customer if needed. Slide 8: Financial Management provides a common language by providing the business and I T with the quantification, in financial terms, of the value of I T services. If you ask the Business, how much does it cost to send email, they might probably reply that it is free because, no money goes from their paycheck to send an email. But if you ask a tech person, he will reply that they need to pay for the infrastructure, data and so on. If you are going to say the business team that their team used 1000 M B P S of bandwidth, they will not understand what it means. However, if you inform the business team, that 1 million dollar worth of bandwidth has been consumed, then they will understand easily. Not everyone understands tech speak and not everyone understands business speak. Everyone understands money and value. Slide 9: Let’s try to understand the difference between Price and Cost.    Price is the amount at which one sells the I T Services. Cost is the actual Expenditure for providing I T Services. Thus, profit is nothing but, Price minus Cost. Slide 10: The aim of Financial Management is to give accurate and cost effective stewardship of I T assets and resources used while providing I T Services. This process ensures that the I T infrastructure is obtained at the most effective price. It also involves, calculating the cost of providing I T services so that the organization can understand the costs of its I T services. These incurred costs may then be recovered from the customer of the service. Slide 11: Key activities of Financial Management for I T Services in I T I L 2011 include.    Accounting. Budgeting. Charging. Slide 12: Before we view different types of costs, let’s understand what is accounting. Accounting is the process of enabling the I T organization to account fully for the way the money is spent. An efficient accounting process increases I T service provision and defines areas where cost savings can be made. It comprises several cost elements. Slide 13: We shall now go through different types of cost elements to control the accounting.    Capital Costs versus Operational Costs. Direct Costs versus Indirect Costs. And, Fixed Costs versus Variable Costs. Slide 14: Capital Costs or Capital Expenditure is the cost of purchasing something that will become a financial asset. For example, a server. Operational Costs or Operational Expenditure is the cost incurred from running the services. For example, salary or electricity invoice. CAPEX and OPEX can be governed, depending on an organization’s financial strategy. Providing cloud services is an ideal example of this strategy. Organizations can shift their capital expenditure, that is, investing in own data centre infrastructure to operational expenditure, that is, a monthly fee for resources required by using cloud services instead of its own. Slide 15: Next type of cost is Direct Costs that can be directly applied to a certain service or a customer. For example, purchasing a server that will cater to only one particular service, like maintaining security footage of the campus. Indirect Costs are costs that cannot be directly allocated to a particular service or customer. For example, Software license for server which runs several applications or serves several customers. Slide 16: Fixed Costs are the costs that are not affected by the I T service usage or by the short-term changes. For example, Annual lease contract. And last but not the least, Variable Costs are the costs that vary in the short-term run depending how much service is used. For example, Energy consumed to run servers. Slide 17: Budgeting is the process of predicting and controlling expenditures within the organization. To carry out this process effectively, organizations use periodic negotiation cycle to set budgets, usually once in a year, apart from day-to-day monitoring of current budgets. This helps keep the budget on track. Slide 18: Charging is the process of billing the customer for the rendered services. Unlike budgeting and I T accounting, which are required during the implementation of financial management for I T services, charging is optional. For example, the type of support rendered to a customer can be categorized as Gold, Silver and Bronze. The services that fall under gold category have high business impact services and hence Service Provider would charge higher for gold. Services that fall under silver category will have moderate business impact and will charge medium amount for service. Similarly, services that fall under Bronze category will have low business impact and hence Service Provider will charge a lower amount for the service. Slide 19: Background music Slide 20: Let’s proceed and learn about Business Relationship Management. Business Relationship Management or B R M is a new process in the Service Strategy lifecycle. The purpose of BRM is to establish a relationship between the I T and Business around understanding and meeting business requirements. Its primary concern is to ensure customer satisfaction. By enabling the communication and mutual understanding between I T and business, BRM underpins most other I T I L processes and functions. Slide 21: If there is going to be a change in Business, to whom does the Business go to? To whom do they communicate the change to? Business Relationship Management process introduces a role called Business Relationship Manager, who will be the face of I T for Business to communicate their changes. Business relationship managers are responsible for maintaining a positive relationship with customers. They identify customer needs and ensure that I T department is able to meet these needs with an appropriate service catalogue. The Business Relationship Manager ensures that customer expectation do not exceed what they are willing to pay for, and that the service provider is able to meet the customers’ expectations before agreeing to deliver the service. If the Business has the budget, only for Bronze category of support and they expect the Gold category of support, the B R M should be able to tell the Business, based on the budget you have, we can provide only bronze support. We need to work out to lower your expectation. Slide 22: If the Business tells the sales person, “I have this new application coming up for support next month. I will award this project to you and I need the availability of the application to be 99.99 percent.” The sales person immediately agrees to it and comes to the IT department and says, “We need to support this application starting next month and the SLA is 99.99 percent availability. As an I T, you say, “Hold on. It is a new application and we don’t have the baseline yet”. Here the salesperson has agreed to deliver the service without knowing whether I T can meet the expectation. Slide 23: In an organization, you get a positive remark for every appreciation you receive, like, from a customer for your good work. Let us call this a deposit. Just like positive remarks, you might also get negative remarks, like for example, if you miss your targets. Let us call this withdrawal. The Business Relationship Manager, along with the Service Level Manager, helps you understand what is a deposit or a withdrawal in business. Slide 24: As a part of an organization, you could be doing all the right things, but if you’re not communicating properly then something might go wrong. Here, B R M acts as an outlet and a place to raise concerns or to just ‘talk.’ To develop a strong relationship with the business, we need to adhere to a Policy of Joint Agreement, also, instituting a BRM process will help us achieve these objectives. Slide 25: After learning about B R M, let’s go through the list of the sub-processes.       Maintaining Customer Relationships. Identifying Service Requirements. Signing up Customers to Standard Services. Conducting Customer Satisfaction Survey. Handling Customer Complaints. And, Monitoring Customer Complaints. Slide 26: Maintain Customer Relationships. Its process objective is to ensure that the service provider continues to understand the needs of existing customers and establishes relationships with potential new customers. This process is also responsible for maintaining the Customer Portfolio. Slide 27: Identify Service Requirements. Its process objective is to understand and document the desired outcome of a service, and to decide if the customer's need can be fulfilled using an existing service offering or if a new or changed service must be created. Slide 28: Sign up Customers to Standard Services. Its process objective is to capture customer requirements and agree service level targets with customers who request the provision of existing standard services. Do note that no modifications to existing Supporting Services are necessary in order to fulfil the customer's needs. Slide 29: Customer Satisfaction Survey. Its process objective is to plan, carry out and evaluate regular customer satisfaction surveys. The principal aim of this process is to learn about areas where customer expectations are not being met before customers are lost to alternative service providers. Slide 30: Handle Customer Complaints. Its process objective is to record customer complaints and compliments, to assess the complaints and to instigate corrective. Slide 31: Monitor Customer Complaints. Its process objective is to continuously monitor the processing status of outstanding customer complaints and to take corrective action. Slide 32: Now that you have understood what is B R M and S L M, let’s take a look at the difference between the two.    While B R M focuses on Strategic and tactical aspects, S L M works both on tactical and operational layers. The main purpose of B R M is to maintain overall relationship with the customer and identify Utility and Warranty terms. Whereas, S L M negotiates specific targets for individual services and manages operation to meet the service level targets. The B R M process is measured on customer satisfaction whereas S L M success is measured on the achievement of agreed service performance targets. Slide 33: We have come to an end of this module. Thank you for watching this capsule on Financial and Business Relationship Management. Good bye! Slide 34: Let’s take a look at key learning points in this video.    Financial Management is the method of ensuring that the I T infrastructure is obtained at the most effective price. Key activities include, Accounting, Budgeting and Charging. The purpose of B R M is to establish a relationship between the service provider and customer around understanding and meeting business requirements. Sub-process include.  Maintaining Customer Relationships.  Identifying Service Requirements.  Signing up Customers to Standard Services.  Conducting Customer Satisfaction Survey.  Handling Customer Complaints.  And, Monitoring Customer Complaints. Slide 35: Thank you for watching this video on Financial and Business Relationship Management.