5 components of an IT economic model

One of the steps identified in Real Time Enterprise Blog "9 Steps to a Virtual Oriented Utility" was the requirement to create an economic model. As we have been working with many CIO’s, we are finding that the discipline of creating and managing an economic model does not exist or is not understood.

The Economic Model for IT can be thought of as the Business & IT linkage of demand and supply. In particular, it is the interactive dynamics of consumption of IT resources by the business and the fulfillment behavior of processing by IT.


We coach CIO’s and their organizations to relate their service delivery (people, process and technology) as a digital supply chain. This supply chain must adhere and be managed against the IT economic model. Our experience in building a real time infrastructure led us to standardize 5 key components of our operational model to ensure we adhere to our economic model similar to how our business has to. Below outlines the 5 key components:

Demand Management – the continuous identification, documentation, tracking and measuring of day in the life of the business, what they expect, where there are problems today, and understand sensitivities to cost, bottlenecks, and timing constraints. In particular, service contracts defined in natural language that identify users, entitlement, expectations, geography, critical time windows, special business calendar events, and performance defined in terms of user experience.

Supply Management – the continuous identification, documentation and tracking through instrumentation to capture “objective” factual data of which users, using what applications, consume what app, server, network bandwidth, network QoS and storage resources for how long. Ensure you trend this over a period of time to accurately identify peaks, valleys and nominal growth.

Fit for Purpose Policies – It is essential that organizations trying to build a real time infrastructure or at least a more responsive IT platform and operation, incorporate an operating level of policy management of how the IT platform matches supply and demand at runtime. This should include factors of wall clock, trends, and service contract requirements matched optimally against runtime supply management trends. It is this operating level discipline that can radically reduce waste, unnecessary costs, lower capital investment WHILE improving service levels. It is here that most organizations fail to implement, execute or adopt such a granular discipline, instead firms standardize infrastructure from bottom up, use rule of thumb sizing and define service levels in terms of recovery time objectives or availability only.

Role of ITIL/ITSMF – ITIL 3.0 and the IT Service Management Framework are excellent guides for creating consistent end to end processes related to delivery IT as a service. They are not in themselves the sole answer to resolving IT service problems or quality of delivery. Firms must still resolve issues of alignment and strategy, define sound architectures, implement dynamic infrastructures BEFORE ITIL can have its ultimate impact on end to end process delivery.

Sustaining Transparency - Many IT organizations miss the mark when it comes to meeting and exceeding business expectations due to lack of transparency. The key components outlined above can contribute significantly to creating transparency with the business related to IT delivery of service on their behalf. It is critical that IT organizations institute a discipline of tooling, data capture and reporting procedures that consistently and accurately communicate to the business a complete transparent view of what, how, who related to the consumption of IT by the business and the delivery of service by IT.

We can’t emphasize how important this kind of playbook is instituted by the CIO’s office and executed by the leaders of the IT organization – if they want to enhance the collaboration with the business and become a more strategic and integral part of building the business.