Cost optimization

When constructing a business case for any project, a common activity is to identify how the implementation will provide returns on your initial investment. If you have consulted this business case when preparing your value targets for cost optimization, you will have a head start in terms of the direction of your project’s documented objectives. Some of these objectives may not become part of the final value proposition for your project but they do set a direction for focus and a baseline for comparison.

Cost optimization opportunities in ServiceNow implementations often target one or both of the following major drivers of economic value:

• Process efficiency: Reduction of the time spent executing and waiting for common tasks to complete
• Asset optimization: Efficiency utilization and stewardship of company assets

We’ll address the opportunities in these drivers of value so that you can better understand the options to realize the financial ROI of your implementation.

Process efficiency

This is the classic ServiceNow business case metric, the reasoning being that if we spend thousands of hours handling thousands of tickets every month, then even a small improvement quickly pays for the cost of the implementation. Usually, some percentage ranging from 3 to 15% is selected as the target efficiency gain, but at the planning stage, it is rarely clear which specific activities are the targets of these gains. At the same time, some areas of value that are often overlooked in this analysis include the benefits that accrue to those customers whose wait time for a service is reduced or where reducing escalation and follow-ups can avoid taking time away from their daily work.

Understanding the current state

When embarking on a process optimization journey, you will be more well equipped if you can observe as many of the relevant processes as possible in their current form. A week of shadowing ServiceDesk or customer support agents, analyzing current ticketing data or inboxes, or other views into the current state will be time well spent, as you will gain insight into the way work is currently happening and both the benefits and drawbacks of the current processes. In many cases, even where tooling is not in place to support processes, the teams responsible for getting the work done will implement ingenious workarounds to make their daily lives more efficient but might not think to mention them in a formal requirements workshop. Even if the current processes are in no way better than the target state, you can still learn much about the degree of organizational change that will be required to shift to new ways of working.

Sequencing investment in processes

If there are specific processes that have been targeted for optimization in the charter of your project, then you can begin with those processes until clear reasons emerge to modify that scope. In most implementations, however, there is a general desire to introduce process efficiency and it falls to the project team and process owners to determine the sequence of implementation.

Again, in this domain, we risk spreading a thin layer of value rather than concentrating efforts to make an impact that justifies the further investment, so it is important to be intentional in your distribution of efforts. It is likely that simply by deploying a modern, fully integrated service management capability, your ability to serve customers will increase slightly across the board, but the opportunity for optimization doesn’t stop there. The highest returns come when you tackle specific high-value requests or workflows to automate delivery and minimize cycle times to the tune of days rather than minutes. We will now investigate how to identify those opportunities.

Opportunities to optimize processes can be identified using the following sequence of steps:

1. Start by generating or collecting a list of request types across the teams and services in the scope of your implementation. These may be requests for goods or services, inquiries, or any other interactions that consume the time of the operational teams.
2. Next, score each of these opportunities by the monthly effort invested (the count of requests multiplied by the effort per request) as well as the potential savings from automation. In this context, automation not only includes fully scripted process executions but also the routing and batching of work to ensure that tasks are distributed efficiently and do not get lost mid-workflow.
3. Now, assign priority to tasks that score highly in both categories. In this way, a focused effort on optimizing even a small number of high-impact processes can translate to an outsized impact on your organization’s total efficiency.
4. Finally, create value statements for the top priority items in order to ensure that there is a clear objective for each opportunity.

Again, processes specifically mandated in the charter of your project should be included on this list by default unless a strong argument is made to and accepted by your steering committee. In general, the approach we advocate is to preserve and meet commitments that have been made by the project when doing so does not risk loss of value. This establishes credibility that is useful down the road when a significant change is required in order to preserve value.

Leaving a process off the priority value list at this stage could mean that the process is no longer required and can be left out entirely – however, it is also possible that a basic form of that process can be implemented rapidly, allowing the team to focus efforts on the items that generate the most value. In the latter case, in the meantime, the basic implementations can capture volumetric data that will inform the next prioritization cycle.

Identifying improvement opportunities

A common approach in projects targeting process optimization is for a member of the team to sit down with a process SME and essentially generate a flowchart of the steps that must be executed in the delivery of that process or service. This activity is a useful information-gathering exercise, but an opportunity is missed if this flowchart is then handed to a development team who are instructed to build it into a workflow without engaging in process re-design. This is an intensive exercise that should be completed only for the processes identified on your prioritized list, specifically the processes your project has committed to improving and those that will generate the greatest savings for your organization.

When optimizing a process there are several tools ServiceNow provides:

• The ability to require information at earlier stages and present it later in a workflow: This is very important when you observe processes that frequently revert to earlier stages due to incomplete information.
• The ability to validate the information in real time in order to correct errors before they impact the process: This can be as simple as using a lookup to the CMDB to ensure an entered serial number corresponds to an actual device, or it can involve more complex validations referencing customer entitlements.
• The ability to look up related information for the user rather than requiring manual entry: This saves the user time when filling out the forms and prevents gaps in the user’s knowledge from impacting the process.
• Automation of routine actions: Activities that can be completed automatically, such as the provisioning of cloud resources according to a template or the allocation of an unused software license from a pool. Automation is particularly valuable in conjunction with automated lookups – this combination reduces effort of fulfillment and allows for reduced customer wait time, even allowing for near-instant fulfillment of some requests.
• Parallel execution of workflow: The ability to route parallel execution of activities while managing prerequisites is one of the useful features of SerivceNow’s Flow Designer and legacy Workflow tooling. This can prevent unnecessary wait times for the end customer, as parallelization allows processes to complete much earlier.
• Process monitoring controls: ServiceNow allows for due dates and SLAs to be configured so that overdue or stalled tasks can be identified quickly and attention can be given to completing them. Stalled or unattended tasks can often be identified in current state ticket data and are easy opportunities for optimization.

Taken together, a combination of these methods will help you drive down the effort and time taken to complete the high-volume processes identified earlier, which can represent a substantial saving in time and effort.

Here’s an example of a value statement for process optimization - Automate license allocation and software provisioning: A catalog of department-specific pre-approved software that is requested for immediate deployment using existing software licenses enables users to get right to work with the tools they need by reducing provisioning from 24 hours to 5 to 30 minutes depending on the application.

Note how this re-imagined process references a user’s department and looks up approved software to cut out unnecessary approvals by allowing managers to simply pre-approve certain software for all their employees. It also avoids inconvenient delegation processes when a manager is out of the office or effort for every new employee. It also refers to the automation of license checks, a key opportunity that is discussed in an upcoming section on asset optimization.

Process efficiency metrics

Process efficiency metrics are one of the areas ServiceNow is most optimized to collect data for due to the years of work in monitoring the execution of ITSM processes. Specifically, the Performance Analytics capability will allow you to collect detailed breakdowns of your process according to key dimensions and will allow you to monitor process performance to ensure it remains within specific bounds.

Common process efficiency metrics will include the following:

• Process cycle time: The end-to-end delivery time for a process
• Time to live: How long it takes from the request of equipment until that equipment is actively up and running
• Stale task counts: How many tasks have remained in a particular state without updating for longer than expected
• Process throughput: How many requests are being processed
• Effort per request: How many hours of hands-on work are required in order to serve a single request

Ideally, all these metrics would improve immediately at go-live, but it is often the case that the implementation of new processes and systems introduces a learning curve that initially offsets gains in efficiency. The effect of this is that things temporarily get more difficult as staff familiarize themselves with the new system before the benefits of the new processes start to provide a net benefit.

Figure 1.1 – An example of a process learning curve

Figure 1.1 shows a small but noticeable increase in the process cycle time at go-live, followed by a steady decrease that settles below the baseline cycle time as process participants become accustomed to the improved process.

Asset optimization

One of the most overlooked areas of value in ServiceNow is the ability to create a central register of company technology assets and define the processes and controls for their use. This can reduce the number of expensive compute devices purchased, extend the useful life of assets, and help you manage risks when decommissioning these assets.

Prerequisites

Asset optimization in ServiceNow is primarily achieved through the Hardware Asset Management (HAM) and Software Asset Management (SAM) modules, although supporting ITOM and ITSM capabilities often come into play. These are some of the modules with the greatest potential to optimize technology expenditure but are generally under-used in the ecosystem.

If your organization is focused on asset optimization as an outcome of your project, then ensuring you’re planning for the implementation of these capabilities is essential. Asset optimization processes are also very dependent on data quality and availability – often, interfaces with vendors, procurement systems, and financial systems are required, so you should be sure to include these in your project scope. SAM is also dependent on the collection of data from your in-scope devices in order to determine where various software is installed.

The definition of an asset

A common question during implementation in terms of an asset optimization component is the definition of an asset and while there may be any number of theoretically correct answers, rather than asking what an asset is, you may instead consider the more applicable question, “when should we create an asset record in ServiceNow?” The former question is theoretical – the latter is a question of system behavior and what capabilities you’ll have, so it’s more immediately useful.

An asset record should generally be created if any of the following three conditions are met:

• The item holds financial value or financial liability is associated with it
• The stock levels of the item must be maintained, either as an individual item or in bulk
• The process of procuring, deploying, and decommissioning the asset should be tracked across its life cycle

The focus of the asset record is to identify, classify, locate, and value the item it refers to while the associated CI record will address its operational characteristics.

Hardware Asset Management

When organizations purchase hardware, it can quickly become difficult to keep track of it. In fact, in many cases, items worth less than a couple of hundred dollars are considered consumables and distributed as needed but without a formal process to manage their whereabouts or life cycle. An extreme example of this would be printer paper. It’s not important to know who has which pages but it is important that we know when we’re running low and need to re-order. ServiceNow provides distinct processes and options for managing consumables relative to individual serialized assets such as servers and laptops.

Determining what assets should fall into each type requires you to consider the value of the assets, the rate at which they are used, and any relevant accounting or compliance requirements; furthermore, some organizations lease their assets and as a result, individual tracking is essential in order to ensure that assets are returned at the end of the lease period.

Software Asset Management

Software licenses come in many different types and ServiceNow has an extensive capability to manage these considerations. The basic operation of SAM is to ensure compliance by determining whether the company has enough licenses purchased or subscribed to for the actual usage. This is a pre-emptive self-audit and helps companies avoid expensive true-ups and penalties, which vendors can apply if their customers are found to violate their licenses.

When considering ServiceNow for SAM, you should also determine whether an existing SAM process or tool is in place and consider the incremental value ServiceNow brings. If another tool is deployed, is it efficiently handling the interfaces to service management (for example, reclaiming desktop software licenses when a laptop is returned)? If a manual process is involved, can time be saved in the execution of those processes that can be redeployed to support contract negotiations?

Scope for asset optimization

As with service quality, the starting point for asset-based cost optimization is understanding your scope. The broadest useful questions for scope are the following:

• Does your scope include both software license and hardware assets?
• Will you manage both serialized (individually numbered and tracked) as well as consumable assets?
• Are you targeting both data center and end user assets?

These questions determine your high-level scope and narrow down the discussions to follow. Once the high-level scope is defined, you will need to establish boundaries for the process, asset types, and organizational scope in order to focus your implementation. Naturally, you will want to consider an objective when setting the scope and prioritizing the scope that offers the greatest potential for cost optimization.

Useful scope groups include the following:

• Process: Are you trying to implement an end-to-end life cycle, just the procurement and provisioning, or just the assignment and tracking? ServiceNow provides tools to do any or all of these but it’s up to the customer to decide which of the processes should be prioritized.
• Asset types: The specific types of assets that should be included should be defined at a level more granular than the data center or end user. You should determine specific categories to target, such as rack-mounted switches, servers, laptops, printers, and wireless access points.
• Organizational scope: Will you just target your corporate offices, your field staff, or every employee across certain geographies? Another common question is whether to include new acquisitions either as a pilot group or for later rollout.

There are no wrong answers when it comes to the scope of assets to include, but if you choose to attempt everything at once, you are increasing the complexity of and therefore the risks associated with your implementation. We recommend choosing at most one of the aforementioned scope areas to cover broadly in your first release. The greater the skill and expertise of your implementation team, the larger the scope can be for a given release.

Sample of a focused asset scope

To establish procurement and provisioning processes for all desktops, laptops, and laptop docking stations in corporate offices worldwide.

Asset optimization metrics

Measuring asset optimization metrics can be more challenging than process optimization but is still well supported by ServiceNow.

Key metrics of asset optimization include the following:

• Spend per headcount on end user devices
• The annual asset loss rate
• Asset utilization rates
• Any software asset license penalties paid
• Software assets re-allocated
• An inventory of critical spares
• Embodied carbon of corporate devices
• Asset energy utilization and emissions

In addition to the actual value metrics, you should also consider data quality metrics such as the following:

• Stale asset records
• Duplicate asset counts
• Assets with invalid location, financial, or assignment data
• Missing asset aging

These metrics are just as important as your optimization objectives because they will inform the trust you can place in your other metrics. In many cases, organizations will require periodic audits of assets for operational or accounting reasons, which can give you an excellent opportunity to sample these metrics.