Step #2: Determine Utilization and Performance Metrics of IT Products and Services
Looking at cost metrics is important, but utilization and performance of your IT services is just as essential. They provide the value side of the cost-value equation. For example, utilization measurements can assess how many users use a specific application, how "full" the data center is, what percent of CPU capacity is being used on a server and how much free space is in storage. This is no different than a manufacturing organization looking at utilization of their capacity and resources. Step #3: Develop a Demand Management ProcessStep #4: Eliminate Waste This principle preaches the elimination of activities or services that do not add significant value to the company. Once there is a system or process in place to track service cost, utilization and performance metrics, as well as end-user demand, the next logical step is to apply resources to the highest-value, lowest-cost areas and eliminate those that are low-value, but high-cost. This enables an optimal allocation of resources and a lean organization. For example, waste minimization in IT can mean analyzing and comparing a complex infrastructure element like servers and, by standardizing on fewer server types (low-cost and high-utilization), you can significantly drive down unit cost--including support, provisioning, patching and administration. Another option is to consolidate storage and eliminate old data that is no longer worth the cost to store it. If one data center is cheaper than another, then the more expensive site is a target for elimination. These are all well-known cost reduction activities being deployed around the world, but commonly implemented without the rigor, data and process of knowing where to target these efforts. By establishing a rigorous process, and looking at cost, revenue and utilization metrics, approximately 10-15 percent of costs can be driven out due to elimination of IT services, consolidation of infrastructure, better optimization of human resources and leveraging innovative vendor management approaches. Step #5: Improve Flexibility Flexibility means producing a mix or diversity of products quickly, without sacrificing quality or service levels--even at low volumes of productions. This requires foresight from management and a keen sense of the market trend. For IT, this suggests the ability to change services and output based on industry offerings and the needs of the business. You can often drive down costs by altering the service levels that the business expects. It's a commonly discussed theory, but often unrealized in practice.
The concept of demand management in Lean IT is akin to supply chain management in logistics companies or pull processing in Lean manufacturing. Lean manufacturers design their operations to respond to the ever-changing requirements of customers. IT organizations that are lean and flexible can adapt to changing business demands without incurring huge expense or time. This enables the business to be more nimble as well as IT-efficient.