Where to focus for maximum impact?
Abstract
In today’s cost-conscious IT landscape, over half of your ITSM budget may be quietly consumed by one thing: operational labor. But there’s another, often overlooked culprit draining your resources: your tools. This area is often under analyzed and can be a strategic source of cost improvements because of its integration with all areas of the operation. Focusing on this area can help improve costs all around.
Typical IT Service Management Costs
When looking at any cost improvement effort, it is important to understand how costs are distributed. With that in mind, I looked at what a typical IT Service Management organization spends for its day-to-day operations. No surprise, the biggest cost is labor. Here is a typical breakdown of ITSM costs:
What to focus on?
It is obvious from the above table that Operational Labor at 55% is the automatic focus – the “Big Mountain”. A number of tactics are used to reduce operational labor:
- Mature ITSM processes so that work becomes more repeatable and predictable
- Labor arbitrage by offshoring or near-shoring
- Optimize staffing models to right-size service management teams by shift demand
- Improve ITSM performance metrics so that lower-cost labor resolves higher-order problems
- Create self-serve portals and kiosks to allow end-users to resolve their own issues
- Improve knowledge bases so that resolution approaches are available to all agents
- Automate mundane/routine functions
- Agentic AI to automate consistently performed human-agent functions
This area is an obvious one to focus on and anyone who has worked in IT Service Management has worked on one or more of the above. Many companies stop here but that would be a mistake. There is another, more strategic way to look at ITSM costs.
What are we missing?
While the “Big Mountain” of labor is visible and well-trodden, the “Little Mountain” of tools costs hides in plain sight, less obvious, but equally worth the climb. Few teams scrutinize tool costs due to the complexity of contracts, licensing, and SLAs, but this oversight can be costly. They are an ongoing expense that will be incurred with no reduction over years due to the long-term contracts and licensing agreements. We advise our clients to build a strategy to reduce tools expense. Some of the approaches to reducing expense include the following:
- Ensure that your tools collect the right data. This means being involved in designing the data, the reports, the processes and the workflows to fit the work you do
- Make sure that your tools measure the SLAs that your service providers must perform to. This requires thought given to the right SLAs for your organization
- Understanding your licensing costs. This requires an understanding of the terms of the licensing, the discounts provided, the number and type of seats, and the term of the agreement
- Going forward AI is going to make it easier to manage your tools expenses and will also create self-service functions that reduce your dependence on enterprise tools and service providers
Interestingly, a focus on tools will push you to focus on the fundamentals such as your key data, optimal workflows, and service levels and will result in improvements in other cost areas as well. Explore more cost-saving insights on our QuantumVision-AI LinkedIn Page or visit quantumvision-ai.com to learn how AI can transform your ITSM strategy.
What’s Next?
What costs did I miss and what other approaches would you suggest? I’d love to hear your thoughts or experiences.
Sai Balakrishna
Managing Partner & CEO
📧 info@quantumvision-ai.com
🌐 www.quantumvision-ai.com
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