Let's go Lean IT

Lean management has proven extremely successful in managing manufacturing operations. So much so, that people are now applying Lean to managing whole enterprises. Going forward this blog will focus specifically on applying he principles of lean management on Information Technology: Lean IT. Lean IT is not new, successes were documented already back in 2007 (Learning to Love Lean IT, Eliminating waste doesn't just apply to scrap metal; CIO Magazine April 30, 2007), but it's popularity is suddenly rising explosively.

For me personally it feels like coming full circle. In 1987 I was one of the first to complete then new curriculum "Business and IT Management" at the economic faculty of the University of Tilburg. After having graduated on the topic of organizing just in time production processes at Philips Medical equipment, I started working at Akzo on implementing a production planning system in their Dutch and Belgian pharmaceutical plants operations. A few years later I moved over to the vendor side, marketing process manufacturing (ERP) solutions. After 10 years of visiting the largest process factories (chocolate, meat, beer, pharmaceuticals) in Europe I abandoned the manufacturing area and started working in a more pure IT technology areas. First marketing XML based solutions for enterprise integration and content management, later at CA marketing IT management software (a market that by that time had surpassed the ERP and application market in size).

And now, 30 years (yes, that long) after graduating on Just in Time, Total Quality and other techniques now known as Lean Manufacturing, Lean reappears to manage IT.

What can I say: Welcome Home!

CMDB, the “Bill of Material” of the IT factory

The full version of this article was co-developed with CA communications

For years manufacturing has relied upon a central document called a Bill of Material, which describes, in minute detail, each component of the product. It serves as the foundation for design, procurement, manufacturing and distribution, and therefore as the foundation for companywide planning, costing and communication. The Configuration Management Database (CMDB) is developing into a similarly foundational repository for IT, describing the configuration items (CIs) comprising each IT service as well as their interrelationships. The CMDB helps IT organizations develop new services more easily, provide current services more efficiently and promptly correct any errors that may occur.


CMDB as the foundation
Service management is a discipline based on the ITIL philosophy. Using a Configuration Management Database (CMDB) service management can provide an integrated view of IT services and facilitate the required cost control. This is crucial as in today’s information based society IT cost becomes an ever more significant part of the total cost. And stringent rationalization and automation as part of industrialized service provisioning can reduce IT costs by at least 10% to 15% annually, contributing significantly to a company’s competitiveness.

Fixing problems faster
The CMDB makes it also easier to find, correct and even prevent errors, because staff can immediately see which IT services will be affected when an IT resource goes down. Moreover, the CMDB reveals which business processes are impacted by an interruption in a given IT service. This helps staff set the right priorities during troubleshooting.

Implementing changes safely
Even today the majority of service outages occur as the undesired and unexpected result of introduced changes. This often results in a common attitude of “if it ain’t broke, don’t fix it”. A CMDB enables evaluating the impact of changes before they are made and as a result enables a proactive continual improvement attitude.

Providing new IT services faster
Better IT service availability and performance are not the only economic benefits of a CMDB. Just as industrial designers, manufacturing engineers and sales personnel can develop new products based on existing Bill of Materials, management, departments, software engineers and IT teams can customize existing IT services to meet new demands or derive new IT services from existing ones based on CMDB information.

Providing existing IT services easier
The CMDB also simplifies the process of establishing and provisioning a front-end service catalog for users in order to show them which services are available, what they cost (depending on the requested service qualities such as response times) and how quickly they can be available. If the CMDB is the Bill of Material of the IT factory, then the service catalog is its online store.

The IT factory can now follow the laws of economics more closely. IT experts become the production planners and finance engineers of the IT factory. They become partners with management and other departments in the delivery and continuous optimization of business services.

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IT services at the push of a button—simple to consume but hard to deliver?

The full version of this article was co-developed with CA communications

In modern companies, IT and business processes are practically inseparable. A business transaction such as a an online banking transaction or making a mobile phone call are business services provided almost entirely through IT services. But also insurance companies, hospitals and government organizations have completely automated certain business processes, with increasingly serious consequences for IT.

As a result companies have a continuing obligation to ensure that IT expenditures and risk, don’t make their business services prohibitively expensive or unreliable. Service management, which has been promoted in the IT industry since the 1980s—primarily through the standards of ITIL, offers a possible way out. Unfortunately, the various tools developed by the IT industry to implement ITIL standards for service management are insufficient. Today’s companies have no use for tools that support individual ITIL disciplines such as service support or service level management. Instead they need an integrated approach to service management that manages business services, keeps track of the cost of these services and provides complete, uniform support.
This includes automating and warranting supply from the “IT factory” as well as advanced support functions such as support automation for a seamless user experience, knowledge management for easy access to know answers and corrective actions and a service desk for uniform collecting and reporting of information. Other key components are portfolio view of the offered services, a catalog to give users easy access to the available services, integrated IT asset management, IT governance, and complete change and release management.

Integration is key
Ideally the heart of such a suite is a Configuration Management Database (CMDB), which serves as a central repository for all IT assets, users, roles, rights and authorizations. For the most part, the CMDB is the main source of information for populating the service catalog to describe the available services in detail, explain what constitute these services from the functional perspective. It can also indicate who can access them and how much they cost.

Automation is growing in importanceThe automation of service operation and support requires that the service management suite can manage and control the corresponding functions in the IT factory, and that it do so by closely working with modern data center automation tools and with traditional system and network management systems.

Today’s requirements ask for a suite concept similar to the idea of Office and ERP suites, simplifying the expansion of functionalities as well as the implementation of the best practices and allows for continually improving processes. All this becomes possible when solutions suites allow for uniform usage, simplified licensing and take a departure from the typical heterogenous patchwork solutions of the past.

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Selling Services by the Pound, a re-birth of economic thinking in IT

Any Genesis fans will immediatly realise the title of this blog dates me. In fact I finished my formal education more than three decades ago. And although I realised at the time that the study I did was quit innovatif, as it tried to combine economics and informatics theory into something we nowadays would call "Economics of IT", I truly did not expect that it would take twentysomewhat years for it to become as relevant as it is today.

Time to start collecting some thoughts?

"Laws of IT" explores Service Portfolio Management

Laws of IT is a new initiative that discusses serious IT matters in a entertaining way, using a variety of media such as web, video, blogs and discussion groups.

In the first episode you meet Mr. Demand and Mr. Supply, exploring Service Portfolio Management and you will see Peter Hinssen, in a special appearance as CIO therapist extraordinaire.

The media:
Laws of IT on Youtube

Lessons from a decade of Clinger-Cohen

This article was first published in AutomatiseringGids on February 22, 2008 and is available in both the original Dutch and in English.

All across Europe government spending on information technology is being scrutinized. For example the Dutch Government Accounting Office ’s suggested the introduction of a law comparable to the American Clinger-Cohen Act. The Clinger-Cohen Act has been in force in the United States for about 11 years. So now is a good time to take the US experiences and review them against our European (political and administrative) context and culture.

Achievements under Clinger-Cohen
According t the annual Chief Information Officer (CIO) survey by the Information Technology Association of America (ITAA) among current and former US Federal Government CIO’s, Clinger-Cohen has:
· Shifted the focus of government IT from acquisition to management
· Led to a common management framework for all government IT
· Improved investment planning
· Provided the necessary foundation for better project management
· Improved the alignment of IT with the agency’s mission
· Given CIO’s a seat at the boardroom table

Alignment
The central theme of Clinger-Cohen is the business-based implementation of IT. It’s remarkable that, in contrast with earlier regulations or with a regulation like Sarbanes-Oxley, that not a certain level of compliance was made mandatory. Instead realizing an annual, demonstrable improvement was the ‘only’ obligation. In other words, the journey was seen as more important than the destination.

At first, many IT organizations (sometimes jokingly referred to as Cylinders of Excellence) took a ‘wait and see’ approach to Clinger-Cohen, and the first years showed little progress. Real improvement started when additional regulation set out both the what and how of such a “business-based approach to IT”. With as main characteristics a portfolio management approach (see sidebar) and mandatory public reporting using standards such as Earned Value Management (EVM) to objectively measure project progress.
Government Projects

A recent report by the Netherlands Government Accounting Office observes that government IT projects often become too ambitious and complex due to a combination of political, organizational and technological factors. In the initial phases of government IT projects the different players (minister, House of Representatives and suppliers) typically accelerate rather than slow down the spiral towards too large, too complex projects. Resulting in a higher risk of failure and a generally bad track record of government IT projects.
The portfolio approach set out by Clinger-Cohen forces government agencies to explicitly state risks, costs and possible yields in relation to core government tasks. The basis for such a dialogue preferably is a continuous improvement plan for government IT spending. In past years, many of the points set out by Clinger-Cohen have been tried or even implemented in some form in Europe, but not under the umbrella of one single program supported and enforced by countries highest authorities.

SIDEBAR: Clinger-Cohen Act
The Clinger-Cohen Act was passed by US Congress in 1996 and gave the American Office of Management and Budget (OMB) final responsibility for improving the acquisition and use of IT within the federal government. The law centers on a more business-driven approach to IT. Therefore the OMB mandates that all federal government IT budget holders use a portfolio approach (see sidebar) as the standard process for analyzing, tracking and evaluating the risks and results of all IT investments.

SIDEBAR: A Portfolio Management approach
IT Portfolio Management offers an approach for IT investment decisions that’s similar to the approach commonly used for investment decisions in financial markets. IT Portfolio Management started out as Project Portfolio Management (PPM), focused on control of (IT) development projects. When the number of parallel projects increases and multiple branches, departments and divisions or even countries have to work together, one central source of truth regarding the availability of resources and about project progress becomes essential. Today, IT Portfolio Management is increasingly deployed to substantiate and monitor all IT investments, including recurring costs for maintenance, support, and service. A report European government report gives a striking description of the impact: “IT administrators suddenly turn into asset investment managers.

Full Dutch and English text.

The IT-dustrial revolution

This "Lean IT - avant la lettre" article first appeared in January 2004 in the Dutch edition of Chief Financial Officer.

For years the IT industry reacted to any question of customers and users with the introduction of yet another generation of new technology. But investing in ever more and ever faster technology is not the answer. The solution lies in better and more effective management of the existing technology investments.


Driven by the endless, vendor driven technology push of the last 20 years many of today’s managers seem clueless about what to do with (the problem called) IT. They are trying to postpone IT investments as long as possible (maybe hoping that if the ignore IT’s requests long enough they might actually go away) or are seriously considering outsourcing their complete IT all together. The IT suppliers respond as usual by laying out yet another array of new hype with catchy names like Utility and on-demand.

In industrial manufacturing year on year cost reductions of substantial size are quite normal and expected. The plasma or LCD screen that was produced at the time of introduction for 400 Euro’s each, two years later has a fully loaded manufacturing cost of 100-150 euro’s. And rightfully so, because in the third year these TVs are likely to do less than 200 Euro’s in retail. The same pattern we see with food, air travel and thousands of other products and services.
There is only one sector where this kind of productivity increase seems to be largely elusive. An industry segment that costs more money every year, despite enormous progress in technology. We are talking about the steam engine of today’s business processes: Information Technology or for short IT. Although you get a ever more computer power for less money, the cost of an average company desktop still is the same (or more) than in previous years and the total cost of ownership (TCO) of ERP and other business applications keeps increasing.

DIVISION OF LABOR
A set of very clear principles underpins the constant cost reductions found in industrial production. It makes sense to examine the history of these industrial developments and to try and draw some conclusions that can help to better manage IT going forward.
In 1911 the American engineer Frederick Winslow Taylor published the ground rules of industrial division of labor in a book called the Principles of Scientific Management. The wide acceptance and implementation of Tailor’s theories led to drastic increases in productivity and pushed the world economy in an unprecedented spiral of increasing wealth and prosperity.
Until that time products were made by individual craftsman. A gunsmith for example made one gun per day. To do so, a gunsmith did require an education (from apprentice to master) that often took up to five years. Through the division of labor proposed by Taylor’s theory the job was done by multiple people. Someone made the barrel, someone else the trigger and a third person specialized in making powder chambers. Tasks were divided and simplified further and further, ideally until they were so simple they could be automated away. This approach also turned out to be very beneficial to leverage the biggest invention of those days, the steam machine. Something that had been impossible for the individual craftsmen. And instead of 10 riffles a day, 10 people now produced a hundred or more riffles per day. The average training time of five years for a gunsmith went down to five weeks for a barrel maker. And as a result the average pay also decreased significantly, often to the level of so called unskilled labor. The productivity increase of Taylor’s ideas proved enormous.
Early factories were laid out and managed solely based on optimizing the utilization of the (often expensive) machines. In front of every machine there was a queue of products waiting to be processed. This enabled the machine to carry on processing continuously, resulting in utilization rates of up to 99%. Unfinished products were transported from machine to machine and put in a long queue every time. For the owner of the machine this was perfect, for the customer waiting for the product it was less so. Often products had up to six weeks lead-time, while the actual processing time only was one hour. Also the customer had very little choice as the machines could only plough ahead productively if the number of variations was kept to the absolute minimum and everything was produced in vast quantities.

ASSEMBLYLINE
Shortly after a new way of organizing production was introduced: the assembly line. The whole layout of the factory now was optimized to get the product as fast a s possible through the factory. Main advantage was that in half a day a car, in one hour a laptop and in 10 minutes a complete phone could be assembled. Drawback was that I seemed slightly more costly (as the machines were slightly less utilized, a press that could press 4 times per minute now only pressed once per 5 minutes (when a car happen to come by)) and it was relatively inflexible, because it was not easy or even impossible to produce many different products on one line. Just remember Henry Ford that said: “You can have any color you like, as long as it is black”.
But pretty soon (from a historic perspective) consumers no longer wanted only black cars, today they even want to pick their preferred TV model and individualized telephone. All this for prices lower than the going rate for last year’s standard black model. In part influenced by the ideas and work of W. Edward Deming a new way of managing industrial production was pioneered in Japan: Just in Time. Nowadays Toyota manufactures on one assembly line a multitude of different models and variants. Even small trucks and regular family cars can be produced on the same line, one after each other. Something not made possible by new technology, but merely by refining the management of the existing technology.

Most important difference between this Just in Time management and the traditional approach was that products were no longer PUSHed through the factory, they were PULLed. In other words production only starts when there is specific demand (PULL) not when the machine happens to be available (PUSH). To only produce when there is demand there are however two prerequisites: specific logistical and infrastructural processes. In the Japanese car factories a refined combination of KanBan cards, standard bins and MRP-type systems was used for this. In addition factories nowadays need real-time insight into what the effects of a certain action or decision on the work floor are on the end product and therefore what the impact is on the actual customer (who created the PULL). Modern production environments use supply chain optimization software to do so. With this software one can see directly the impact of a certain delay, problem or change in planning on the end customer and (more importantly) corrective action can be taken.

PROFESSIONAL CONSPIRACY
So far our (relatively) short excursion into Industrial history. What have we learned? That the computer and information technology industry seems stuck in a pre-taylorian era, with IT staff resembling pre-industrial gun-smiths. In IT the subject matter still is too complex and specialist knowledge too important for any sensible division of labor, to some extend also due to the persistent use of IT’s own language, a language called acronyms. As a result only members of the gild (IT people) can participate in meaningful discussions about the trade and the profession. As a result of this “professional conspiracy” division of labor is, unlike in every other industry, still far from standard in IT. This resulted in the well known silo’s of automation, where gunsmiths looked over their own individual well guarded areas. As a result many of Taylor’s productivity benefits have passed the IT industry by. Or did you recently hear someone complain about the now very low salaries in IT or claim that 3 months experiences are more than enough for a senior Java developer.

Also the degree of standardization and interoperability in IT is less than to be desired or expected. There is much to do about XML standards for information exchange. But there is a plethora of emerging standards. Just like the French gunsmiths back in the 18th century, the IT industry (IT People) seem to understand too well that the lucrative integration industry does not benefit from widely accepted common standards.

Meanwhile, with a bit of good faith, the factories from the pre-industrial revolution could be recognized in something like Batch/Mainframe. Here the user was secondary to the utilization and cost of the mainframe and whether he liked it or not, he had to wait till the next day for his output, as this was the only way the use of the machine could be optimized. Similarly the successor of the job shop organization, the assembly line, as first introduced by Henry Ford, has his equivalent in IT. The process orientation of ITIL, reinforced by the speed obsession of the internet bubble caused suppliers to push “one app per server”. As Sun’s CEO admitted in a 2004 visit to Holland, the common industry advice was: “buy CRM, get a CRM server”, “buy a web shop, get a web shop server”. As a result dedicated servers were assigned to specific single tasks, regard­less of utilization. Many customers still have hundreds of servers (a.k.a space heaters) all used only a fraction of the time and using their own proprietary storage, print and security subsystems. A far from optimal situa­tion.

ON DEMAND
So how do the ideas of PULL driven Just in Time production equate to IT. Some of the principles we see back in so called “Computing on Demand” (or now Cloud computing). This assumes that only IT services, for which true demand exists, are being delivered (and paid for). And just like in other industries, these principles seem to resonate well. Computing on Demand (or Utility Computing) to a large extends borrows from Taylors principles. Today’s complex integrated IT application environment is divided into smaller, simpler specialized tasks that can be processed cheaper and more efficiently. Completely automating the complete running of an enterprise wide SAP system may be a step to far today (2004) but completely automating supporting tasks like backup and printing is very well possible (and not just for the SAP servers, but for all servers) and likely a lot more cost efficient then having the SAP gun smiths do this at their daily rates.

The industry agrees that this “on demand” or Utility computing is going to be delivered over the network in the form off services (most likely web-services). This network off course has been there for years, but the popular term to refer to this infrastructure for IT people now is “Service Oriented Architecture” (SOA). Next step is the automatic allocation and set-up of new elements in this environment. For example, every time a new employee starts working for the company, he requires a USER ID, a (preferably unique) email address , access to SAP, some disk space on the server and maybe one or two specific applications for his job function on his laptop. The popular term for this is provisioning. User provisioning makes sure that new employees automatically get the all the earlier described access and applications. A typical routine task, that lends itself very well for automating it away.

By now we are also “provisioning applications”. If by the end of the month the month end closing application is brought life, it automatically gets CPU capacity on one or more servers, the required storage space and access to the appropriate databases , bandwidth and financial system access allocated. If there is no server available, it could even decide automatically to reduce the allocated number of servers for Exchange or SAP in order to optimally use the current investments “on demand”.

MANAGEMENT MATTERS
“On Demand” computing is as dependent on real time insight into the consequences of decisions, issues and changes as production in the real physical world is. We need to understand what business processes are impacted if the router on the first floor gives up or worse if the printer at the expedition dock runs out of ink. And we, off course, need to see the alternatives that we have to continue critical processes like invoicing or month end close despite the fact that a specific router or printer is temporarily down. Most modern management systems indeed allow specifying which components are involved with which business process (like invoicing or month-end closing). But often this has to be manually entered and maintained, which is hard if this changes frequently. It will be clear that defining and maintaining this manually is no option anymore when the systems through automatic provisioning starts to dynamically (on Demand) allocated resources to certain business processes. Some kind of monitoring function that analyze running processes, determines the correlation and interdependencies and presents these to the administrator (in terms of service levels) so he can take action or approve the suggested remedial actions.

When all this is “in place”, and for many organizations this may still take a fair bit of work, one can start to manage the IT processes in an “Industrial way” (cost effective and on demand). This is not a question of technology or nicer shinier boxes. Today’s technology is sufficient for supporting the current business processes. What is needed is better management of these processes. If we now start to truly focus on managing and integrating what we have, instead of thinking about replacing everything we have with something nicer and shinier, then maybe the contribution of IT to increased labor productivity does not have to be illusive or un-measurable any longer.