Six Sigma for IT Service Management

 

IT organizations have traditionally been managed based on the technical capabilities of underlying infrastructure such as networks, systems, storage, and applications. The “so-called” silo-based approach to management where each of these technologies is managed separately evolved over time as various technologies were developed. Today, most organizations have recognized that this approach is no longer viable. It fails to take into account the interrelated nature of individual components and most importantly does not adequately address the business priorities of the firm. In response, business executives and IT leaders have begun to demand a more holistic approach for managing IT resources.

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The economy has presented further challenges that did not previously exist where IT expenditures and associated results are heavily scrutinized. Businesses are grappling with the pressures created by a weak economic climate. For IT, justification of expenditures and accountability is now a given and customer satisfaction—both internal and external—is more important than ever. Service level management (SLM) has emerged as a requirement for nearly all IT organizations. SLM is the process of managing IT resources from a business perspective. Priorities aligned with business goals are defined and commitments are made to achieve particular service levels using an instrument called the service level agreement (SLA). Specific service commitments can be many in any given SLA and are called service level objectives (SLOs). That said, SLM has become a way to justify and account for IT expenditures by re-architecting IT functions as IT-services across all technologies. The service is a continuum that achieves a business goal or priority and has a positive customer experience at its center.

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SLM is still a new concept for most IT professionals. Most IT leaders are looking for guidance in the form of best practices, implementation assistance, toolset selection and reporting. One good place to start is to learn about and consider following the guidance of a best practice technique such as Six Sigma. Six Sigma is a process quality methodology that was established in the early 1980s by Motorola. It is designed to look at the root cause of process problems and continuously improve process operation until optimal performance is achieved. Customer satisfaction is key for both Six Sigma and SLM, making them a complementary duo in managing IT- based services.

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Enterprise Management Associates (EMA) recently conducted research to understand how widespread the acceptance of Six Sigma is for managing IT service quality. This research, which was targeted primarily at enterprises, showed that 65% of those surveyed acknowledge the relevance of Six Sigma for IT-based service management. While many IT organizations have yet to adopt Six Sigma for service management, most all of them have stated that they have plans to do so. Clearly, there is a growing interest in Six Sigma.

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The SLM market is flooded with vendors working to take advantage of the shift
towards service management. Of all the vendors involved in SLM, few have had the
foresight to see the connection between Six Sigma and IT service management. Proxima
Technology, with its Centauri solution, is the only vendor that took an early stand to support the integration of SLM with Six Sigma. It was the first company to incorporate “real” functionality into its SLM solution that supports an organization adopting Six Sigma for IT-based service management over two years ago. Centauri provides views, reports, and mathematical calculations that help enterprises with the Six Sigma continuous process improvement cycle.

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While many IT organizations have yet to adopt Six Sigma for service management, 80% stated that they have plans to do so.

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Background - Service Level Management and Best Practices

 

Service Level Management (SLM) is the process of managing services according to the goals and objectives of the organization. When applied to IT, SLM becomes the process of defining and managing IT-based services according to business goals. It moves away from the traditional IT management paradigm that is extremely technical in focus and works to map the technological infrastructure to business needs.

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IT service management is a big topic where much time can be spent looking at terminology and concepts. For the purposes of this paper, simply understand that SLM is an ongoing process where specific objectives are established to measure the performance of a given service. For example, there may be a commitment to response time for a mission-critical application for both internal and external users. The response time in this case becomes the SLO and is generally committed to using an agreement that can take many forms. This agreement is referred to as the SLA.

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Interest in SLM has been growing. This growth is largely attributable to the need for IT groups to justify expenses for capital and operational investments. Accountability has become the major theme where business leaders are often driving the initiative. The economic downturn has fueled interest in SLM as a means to justify expenses and at the same time cut costs because of the increased visibility into technology usage.

The single largest challenge for implementing SLM is lack of know-ledge. It is difficult for most IT professionals and leaders to make a shift from their traditionally technical role to a service orientation. IT and business line managers everywhere are looking for guidance and best practices that can assist in making this transition. Six Sigma—a comprehensive approach to quality management—is one of the models being used by many large enterprises today.

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Six Sigma Concepts

Six Sigma is a statistical, customer-oriented approach to measuring and improving quality by continuous evaluation, striving to reduce waste, and improving the time and financial performance of organizations. It was originated by Motorola in the early 1980s and has been successfully applied in many large corporations since that time. Initially, Six Sigma was used largely in manufacturing operations as a methodology for defining and improving processes in a very precise way. Its broad applicability has been acknowledged over time resulting in adoption across the enterprise. Six Sigma is well established with many large and well-known business enterprises such as GE, Dow Chemical, and Ford Motor Co.

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Six Sigma is a continuous improvement methodology—success in improving processes and meeting quality standards is done using mathematical measurements. The goal of Six Sigma qualified processes is to perform tasks better, faster, and at reduced cost. Sigma is nothing more than a unit of measure based on a letter in the Greek alphabet. It is used to measure how successful the process is in delivering defect- free work. While the measurement is done in “defects per unit,” a unit can represent virtually anything. For example, it might represent a component, availability of a service, or the rate of assembly.

Six Sigma translates a customer’s needs into separate tasks and defines the optimal specification for each, depending on how the tasks interact. Companies adopting Six Sigma spend time defining the process, measuring its performance against a valid “ideal” and then figure out how to eliminate any variation in the process. In The single largest challenge for implementing SLM is lack of know- ledge.

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The goal of Six Sigma qualified processes is to perform tasks better, faster, and at reduced cost, the higher the number of Sigmas, the more consistent the process of delivering a good product or customer service. For most important processes, six is the target; though clearly, organizations cannot expect to achieve this level of quality for all processes nor would it be desirable to do so because of the costs to the organization. The Six Sigma quality management method rates quality on a numerical scale that corresponds to the amount of variation that exists in the execution of a process (such as online bill payment). This measure of variation is called standard deviation. Clearly, the greater the variation, the more effort (and money) is spent dealing with the process. In Six Sigma terms, 1 indicates high variation and 6 (or more) is very low.

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Six Sigma is full of terminology that must be understood by any organization pursuing implementation. For those just learning about Six Sigma, a few basic definitions will ease the burden when reading about Six Sigma including:

• Criticaltoquality(CTQ)–Processes that have been identified to be the most likely to impact customers.  In terms of Six Sigma, these processes represent areas that have the greatest potential return on investment and should receive priority for improvement.

• Costofpoorquality(COPQ)–the cost to the organization when processes are not operating efficiently.  Early on in the quality improvement initiative, firms must embark in an effort to identify processes that are most important, as well as the associated costs to the organization when there are quality issues in those processes. Reduction and eventual elimination is the goal with respect to COPQ. These costs can be visible or invisible; where visible costs may represent things like IT staff expenditures and invisible costs are lost sales due to customer dissatisfaction.

• Defects per million opportunities (DPMO) – DPMO is essentially the number of problems that have occurred for every million opportunities to get it right. For IT-based service management, defects can be thought of as sources of customer irritation.

• Failure modes and effect analysis (FMEA) – risk identification is another dominant aspect of Six Sigma. FMEA is used to first identify what those risks are and then eliminate them through the quality improvement process. For IT service management, each IT-based service can be analyzed using this technique. Once complete, each failure mode is prioritized according to its effect on the business.

• Pareto charts – the Pareto chart is used to show problems that are most likely to have potential for improvement. It contains relative frequency and/or size in a descending bar graph and is based upon the Pareto principle that 20% of the issues cause 80% of all problems for any given area

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Six Sigma also has defined a Marketing process improvement methodology. It is called DMAIC representing the steps to define, measure, analyze, improve, and control. It is useful to understand how this methodology is applied in practice within Six Sigma organizations. The various steps are described below:

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• Define–during the definition stage, staff members identify, evaluate, and select projects to be usedin conjunction with Six Sigma. The mission for these projects is also written along with selection and launch of the project team.

• Measure–measuring is all about determining the scope of the problem. In this phase, documentation of the process occurs, identifying requirements definition tailored to customer needs, product features and process variables. Most importantly, the failure modes and effects are determined along with theoretical determinants of process performance.

• Analyze – analysis of actual results begins during this part of the process. Real data is collected and analyzed against the expected outcomes.

   • Improve – process optimization is handled in the improvement phase, using a mathematical cause-effect approach.

   • Control–controlrepresentsanongoingefforttoimproveandmonitordefined processes.

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In summary, Six Sigma is based on the principle that organizations need ever increasing levels of quality with lower associated costs. It is a disciplined, organized approach to eliminate quality variations, waste, and errors that plague operations. The methodology uses a root cause approach to problem resolution rather than looking at process flaws at a superficial level. Understanding of the underlying cause of any given issue enables organizations to make meaningful adjustments to improve operating costs and overall customer satisfaction.

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Relevance of Six Sigma for Marketing

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Successful implementations for Marketing  are a challenge. Six Sigma can help to overcome many of these challenges and provide an approach to implementing IT-based service management. Since most IT professionals struggle to understand the practical aspects of implementing IT-based services that connect Marketing  to business goals and objectives, best practices like Six Sigma offer a framework to help get started and make a real difference for the company and the IT group’s financial picture. It provides a toolkit that can be applied to IT-based service management and drives  Marketing activities around process development that complement the parallel effort that must be undertaken to develop Marketing and instrument management software for Marketing .

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There are clear similarities between the goals of Six Sigma, SLA and Marketing . IT-based service management is employed to ensure a positive customer experience.

 

Likewise, Six Sigma is focused on improvements in customer satisfaction. The types of benefits achieved beyond improvements in the customer experience using either SLM or Six Sigma include better alignment with business goals, reduction in response time and improved availability of IT-based services, greater control over IT expenses including improvements in IT’s ability to justify necessary expenses, and reduction in operational errors. When both are used together, proof points are achieved more rapidly and precisely enabling executives to understand where money is wasted on process inefficiencies and where improvements can be made to reduce the impact of quality issues on revenue growth.

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SLM Vendors and Best Practices Adoption

There are two primary best practices related to SLM—Six Sigma and the Information Technology Infrastructure Library (ITIL). We’ve spent a good deal of time understanding Six Sigma in this paper. For arguments sake, ITIL is a best practice that originated in Europe. It is not competitive with Six Sigma, but complementary, essentially providing a very IT-specific framework for managing IT functionality. It is also oriented around providing superior customer service, but does not attempt to measure and modify processes related to IT.

As with many standards and best practices, vendors very often take a “wait and see” approach. Standards tend to evolve at a very slow pace and the same generally applies to best practices as well. Most SLM vendors have taken this approach with respect to Six Sigma and ITIL. Now that ITIL is gaining traction in the United States and Six Sigma is migrating to the IT department, vendors are paying more and more attention and looking at how to retrofit their applications to support one or both models. ITIL is receiving the majority of the attention by vendors—though clearly not by users.

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In terms of ITIL, the majority of leading vendors in the SLM space are supporting the ITIL model. This includes vendors like Hewlett-Packard, Computer Associates among others. Most, if not all, have added this support into its products after product release. There are many other companies that have also adopted ITIL in one way or another.   prior to building its product and are using ITIL as a complementary framework to Six Sigma. It views ITIL as a structure or definition for IT service delivery with Six Sigma providing more tangible measurement and refinement of service processes.

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Six Sigma is entirely another story. Many SLM vendors have steered clear of Six Sigma, as it requires some investment to understand and support. Proxima Technology most definitely stands alone in designing its product around Six Sigma practices and procedures very early on. Two to three years ago, Proxima took a stand that Six Sigma would become important for IT service management and moved forward to build products with Six Sigma functionality. Other vendors have been slow to jump on the bandwagon. Still, there are a few vendors that have added in some support for Six Sigma recently. These organizations include Mercury Interactive, Digital Fuel, and Managed Objects. Some of these solutions require customization to realize this capability. Proxima comes with out-of-the-box features that can be used immediately. Service providers are also beginning to recognize the value of Six Sigma. One dominant example of this is Sun Microsystems. Sun has created a service offering called Sun Sigma and made the necessary investments in certification and service development to assist enterprises in adoption of Six Sigma processes.

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One word of caution is that many vendors claim support for both standards. It is important to look closely at the functionality in order to understand whether or not these are possible customizations or existing functionality.

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Integrating Six Sigma and ITIL methods to Marketing and into critical processes with adequate rigor applied to meet deliverable requirements at phase -gate reviews will lead to more predictble outcomes: strategically, tactically, and operationally:

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Measuring Marketing Performance and Risk Accrual using Scorecards, introduce a system of scorecards that build on Six Sigma principels to measure marketing ´s use tools completion of tasks, and the resulting deliverables across the strategic, tactical and operational process.

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Six Sigma enable project management in Marketing process to address the importance of project management body of knowledge  PMBOK to better manage a project and its associted risk.

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