IT service and support organisations can represent up to 10 percent of an IT organisation's operating budget. Such costs will continue to rise in organisations that do not deploy cost management practices. ITSSOs and potentially ITOs that do not manage operating costs efficiently will likely find themselves outsourced. True cost reductions are attained only if staff is decreased (especially in more mature process areas like the service desk). Thus, organisations must "manage" operating costs to remain flat over time.
Meta Trend: Although 80 percent of IT service desks will reach maturity as full-service centres in 2004, adoption of multiple interaction channels will continue to evolve slowly, with the implementation of important alternative service and support channels occurring in less than 10 percent of desks. Through 2005 to 2006, however, support demands will continue to grow (20 percent annually), driven by common infrastructure and application support, embracing larger business process support requirements. Sustained growth and requirements for low-cost resources (best-shore outsourcing) will drive IT service and support centres to embrace and evolve delivery processes and methods, leveraging automation and service-enabled infrastructures by 2007.
Most organisations are under pressure to reduce and manage operating costs down or flat, while growing the business (help desk spend as a percentage of IT spend has decreased from about 8 percent to 4 percent to 5 percent in 2004). IT organisations have leveraged technology to automate business processes efficiently. However, they have not done as good a job at leveraging technology to automate the processes of the technology organisation (e.g., self-service, integration between the help desk, asset and change). When considering outsourcing, IT organisations have always balanced in-house technology costs against a market of similar services.
Offshore labour resources have increased the pressure to consider an alternative cheaper labour resource for mature technology processes. Market comparisons are becoming more difficult to evaluate, as help desks evolve into full-service organisations managing service requests and business application service and support.
As processes mature in all industries, technology is applied to produce products and service customers more efficiently by reducing and managing costly labour resources. IT organisations present the interesting paradigm of applying technology to operate more efficiently by reducing their own staffs. Through 2006, they must manage costly labour resources appropriately in line with the market competition of the outsourcers. Although offshore labour costs of 10 percent less than those of domestic-based IT labour rates are touted, they are highly exaggerated. However, it is undeniable that offshore labour costs are significantly less than current in-house IT organisations competing for the work (see Figure 1 below).
IT service and support organisations are highly labour-intensive in its current state in most organisations. Service and support must become embedded within infrastructures creating a service-enabled infrastructure at the time of deployment, and labour must be managed more effectively. There are three underlying issues in managing IT service and support organisations' driving labour costs:
The mismanagement of these three key areas leads their operating costs to exceed those of the profit-driven market of service providers. Outsourcers are often brought into an organisation to address the mismanagement issues of the organisation where significant restructuring and transformation need to occur. Through 2006, IT service and support organisations must assess operating costs and processes to get in line with the market and manage them more efficiently over time.
Meta Group defines service and support enablement as the embedded automation of routine workflow and the presentation of in-context knowledge, with the objective of reducing operational costs through process efficiencies and end-user productivity, organisational compliance, and increased revenue generation. IT organisations must begin embedding service and support functionality at the time of design and implementation of new infrastructure, both in supporting the technical infrastructure and in enabling business process knowledge. Meta Group research indicates that fewer than 10 percent of Global 2000 organisations have deployed service-enablement technologies to date, but greater than 40 percent will deploy various forms of service enablement through 2006.
Short term, the costs of instrumenting the infrastructure and the development of in-context knowledge will be significant, but such costs will be far outweighed by long-term cost management and the reduction of costly service and support (e.g., reduction of phone-based transactions, increased productivity, availability, customer satisfaction).
Adoption and utilisation of service-enabling infrastructures
Organisations are pressured to reduce costs and are evaluating quick-hit labour-resource cost reductions via outsourcing domestically as well as offshore options. However, organisations are not addressing the root of the issues driving operating costs. Highly manual and labour-intensive processes, high-touch service and support, and high service-level requirements surrounding the technology infrastructure all contribute to high labour fees and operating costs. Personalised service requirements are contradictory to cost management/reduction efforts.
Organisations must adopt and increase utilisation of automated service and support to drive down and manage labour costs. Although this may be viewed as -pushing" service and support to the end user, it is a transaction that involves the end user regardless of whether a portal or person is the method of interaction. In most cases, the time spent and the quality of interaction are improved, while also complying with governing policies (e.g., security, industry regulations). The method of interaction must be targeted to the category of service and support. However, it is critical that the organisation adopt at rates of 90 percent or greater when service-enabling methods are deployed and supported by deep levels of deployed knowledge.
Labour resource career pathing
The final area that IT service and support organisations must address proactively in managing labour costs is the career rotation of service and support analysts. They should be the entry into the IT organisation, and its staff should have a targeted maximum duration of 36 months, with the exception of those who promote into management. A high target is 36 months, with most rotating at 18- to 24-month marks. Those that remain slightly longer are specialists involved in deploying maturing processes or technologies.
Many organisations have increased their cost structures by staffing entry-level positions with highly skilled resources or evolving the IT service and support organisation into a career position. In both of these situations, the IT service and support organisation outprices itself in the market in comparison to services offered by the outsourcers and most definitely in contrast to low-cost offshore resources.
During tight economic times, organisations are evaluating short-term labour-cost reduction options without addressing the underlying causes. Transactions and resources must be proactively managed, leveraging the appropriate method of service and support based on transaction. It is also highly incumbent on the organisation to adopt and utilise the appropriate method for service and support. organisations that cannot manage resources and transaction costs efficiently will be outsourced, with the outsourcer bringing change to the environment.
Bottom line: IT organisations must become committed to deploying and instrumenting infrastructures to manage labour-intensive, reactive, and routine maintenance activities as they mature, leveraging automation versus costly labour resources.
Business impact: Organisations committed to managing labour costs and reducing operating expenditures must become committed to deploying and adopting the use of service-enabling infrastructures as well as managing career paths of entry-level service and support professionals.
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