Monday, May 3, 2021

IT Service Benchmarking

There needs to be a strategic reason for benchmarking in the first place. Benchmarks can be great but can be really misleading as well.

Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies. There needs to be a strategic reason for benchmarking in the first place. Executive support of the initiative is critical so there is buy-in to change given the results. 

It takes lots of effort and time to do benchmarking, is this a good use of time, money and resources in the first place? Can Benchmarks be useful? Absolutely! Can Benchmarks be a waste of time? Absolutely! If an organization is not willing to change directions based on poor results from a benchmarking study then it should be cautioned.

Benchmarks can be a useful instrument in comparing services from one provider to another: Most of the buyers have made it a periodic exercise and built into the contracts signed with Service Providers. The question should be what benchmarks should be used. It sounds like this utility leveraged useful benchmarks that compared their service providers to industry peers which indicate they may have been useful. It really depends upon who you are benchmarking against. Industry, Relative Size, Technology Adoption Curve/Strategic Use of Technology. Before a benchmark or any other metric is applied, the proposer needs to specifically state what actions will be taken in response to variations in the value of that metric, set-up benchmark is to help management measure the work, not restrict or set up barriers to the work. Often the best way is to seek "peers" for each service tower. Put another way, the peers similar in scale and complexity for "desktop services," may not be the most suitable for comparing against "servers" or "application support."

A well defined analysis, supported by a current database of metrics and a robust methodology is best viewed as a diagnostic tool. It can be seen as "switching on the headlights when driving through rough uncertain terrain in the dark." The measurement and benchmarking studies have several triggers and objectives, and often a variety of outcomes and downstream initiatives, not only cost optimization and vendor re-negotiations. As opposed to comparisons against survey gathered data, which suffer from the anomalies of averaging, a detailed metrics analysis of variables, compared against carefully selected peers, for each service tower, can highlight issues and provide valuable insights to the enterprise and to the service providers involved.

Benchmarking is like a quick Health Check which highlights the areas where improvement or quick fix might be required: Benchmarking may get used as a stick but as a management tool remains popular for its value in providing insights and metrics to help chart a course. towards better governed, efficient and business aligned IT. Bench-marking often provides good data and highlights issues as IT leaders to use that information in a way that motivates and improves the organization. However, many organizations that use it as a hammer to drive out cost. It can become a demotivator to the workforce and cause organizations to lose competitiveness while achieving only a short term cost improvement. For example, Benchmarking a Leading Adopter of Technology who uses technology very strategically against a Laggard Adopter who is focused only on cost control, won't do you much good, because obviously the numbers are going to be very different. At this level, focus on a more complete picture. They need to be able to identify that for every dollar that they spend on IT, they generate x dollars in profit and that is contributing to the overall company's performance relative to its peers. "Time to market" is another performance indicator. Every organization is different with different requirements, technologies, and workforces, Benchmarking is a good measurement for tangible stuff. However, value added services are usually out of the standard benchmark scope.

The selection of suitable "peers" to benchmark against is best driven by comparable scale and complexity of the service towers under scrutiny: It is often not limited to industry vertical/mico-vertical. Peers from the same industry may not be suitable peers for IT benchmarking purposes for several reasons - size, spread, business model, service delivery models, legacy, and so on.

On a more micro level, benchmarks can help procurement understand what the appropriate cost of goods and services in the market should be able to stay on top of purchasing contracts. Cost of a component part is one amongst several elements that comprise a service tower. The analysis needs to consider the entire stack of "widgets." The cost variable is one of 7-8 inter-dependent and relevant variables that need consideration.

There needs to be a strategic reason for benchmarking in the first place. Benchmarks can be great but can be really misleading as well. Benchmarking can provide only a backwards-looking perspective because the data, necessarily, refers to how both the 'peer group' and your own organization has performed in the past.

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