Asset management evolution

Movement towards best value for core IT-enabled business processes is a combination of people, process and technology. Meta Group research indicates a significant range between best and worse performers for the cost-efficiency of individual business processes.

As a response, large companies are considering building sound metrics that can be used to measure the cost and efficiency of the organisation`s most important IT-enabled business processes. An efficient IT asset management system forms the basis of sound management of the complete IT portfolio, which Meta Group identifies as a prerequisite for top-quartile performance.

There are four stages that companies pass through in their asset management evolution.

The alignment between corporate revenue/profitability and IT spending is at the top of the agenda for executives in most companies. If nothing else, the lesson learned from the recent economic downturn is that companies have to improve their ability to "sense and respond" to changing market conditions through a foundation of operations excellence and technical agility.

In its work with the largest corporations, Meta Group has noticed that many companies still do not even operate an efficient IT asset management system to collate and manage all the different types of IT investments. In this case, the organisations are not able to ensure the efficient use of all the IT resources available to them. Without an IT asset management system, they are:

* Unable to forecast and monitor the usage of their assets effectively.
* Unaware of IT assets that are under-utilised.
* Lacking a strong negotiation position to IT vendors for hardware systems and/or software licences.
* Not planning an effective "exit strategy" for obsolete (through technology refresh or through end of need) IT products or projects.
* Not able to provide a credible charge-back system to allocate IT costs to the business lines and thus ensure everyone is involved in avoiding redundant IT assets.

Without effective IT asset management and the associated financial metrics, it is unlikely that an organisation can attain best value for core IT-enabled business processes. During the last decade, most enterprises increased their investment in IT substantially. Meta Group projects the future demands on managing these IT investments will also continue to grow, even if few new IT investments are made. Data centre budgets grew by an average of 8% in 2003 and these operating budgets are reaching 75% of the IT budget in some companies. At the same time, Meta Group research indicates that many Unix or Windows server systems are used less than 25% of a 24-hour day due to poor IT asset management. In addition, the increased complexity of managing increasing numbers of IT infrastructure components is becoming a major challenge for any organisation without an IT asset management system. These IT assets come in many forms:

* Mainframes and other servers - few, large acquisitions
* PCs - many smaller acquisitions
* Storage - weekly upgrades
* Software - dependent on usage (ideally)

Companies traditionally pass through four stages or levels in their asset management evolution:

* Level one: Characterised as reactive in nature. The organisation is unsure of over- or under-spend for hardware and software; it cannot attribute expenses to relevant business units; it is unable to enforce standards across the organisation to ensure proper distribution to employees; and there is no effective contract management. Asset discovery and rudimentary process development are key attributes. Followed by asset optimisation, inventory management and invoice verification.

* Level two: Characterised as active in nature. Managing existing assets and leveraging knowledge in procurement are key attributes. Key disciplines here include the realisation of a centralised repository, the implementation of a discovery tool as well as an effective lifecycle management. The organisation`s manual, centralised request management is labour-intensive and costly; it cannot reconcile assets received with what was ordered or what department requested them; and it is unable to articulate the IT department`s value to the organisation.

* Level three: Characterised as proactive in nature. Leveraging planning and cross-organisational information are key attributes. IT asset utilisation is one of the main add-ons. The organisation has the ability to optimise asset purchasing and configurations; it can honour negotiated purchase agreements; and it can ensure accurate chargebacks against cost centres or lines of business.

* Level four: Asset centre of excellence: Characterised as transactive in nature. Using cross-organisational and cross-discipline techniques to maximise asset value and minimise IT organisation costs are key attributes. There is integrated involvement in line-of-business technology planning and architecture design and procurement; business decisions are supported by accurate asset lifecycle cost information.

Without effective IT asset management and the associated financial metrics, it is unlikely that an organisation can attain best value for core IT-enabled business processes.

Inana Nkanza, MD, iLayo Software Solutions

By 2006, according to Meta, best-practice asset management programmes will incorporate the additional responsibilities of budget, chargeback and procurement, culminating in an asset centre of excellence. During the same time frame, the current 45%/35%/15%/5% maturity distribution (level one through four) across asset management organisations will shift toward a 25%/20%/30%/25%, respectively, driven by scrutiny on IT spending patterns and increasing pressure to maximise return on asset investment. Asset management programmes will increasingly deploy forward-looking cost modelling to improve overall IT costs, while simultaneously improving IT customer value through advanced strategic procurement activities. Asset centre of excellence characteristics include cross-platform, cross-discipline approaches that facilitate increased support levels and overall vendor attentiveness.

Meta has identified that through 2006, disparate, inefficient asset management efforts will evolve into a cross-functional, cross-discipline enterprise asset centre of excellence, a key enabler of portfolio management. By taking ownership of asset procurement, optimisation and fiscal stewardship across all enterprise IT resources, the centre of excellence will enhance IT organisations` business credibility and drive best-of-breed cost advantages, resulting in savings of more than 25%.