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"Compuware Acquires Proxima Technology. In January 2007, Compuware acquired Proxima Technology. Compuware's Service Level Management (SLM) solution delivers metrics for both IT and business audiences. Tying our SLM capability with our Business Service Management solution supplies the critical aspects needed to manage service levels more proactively and deliver the value the business demands."
Source : Compuware
Six Sigma for IT Service Level Management
Service Level Agreement (SLA) is also known as :
SLA Guide,
Service Level Agreement Toolkit,
Service Level Agreement Audit,
Service Performance Metrics ,
ITIL Integrated Software,
ITSM Software,
Manage SLA Compliance,
Service Level Management Implementation,
ITIL Assessment Tool,
Service Level Management ,
Service Level,
Data Service Level Objectives,
SLA Performance Metrics,
Performance Measurement Metrics,
Performance Mgmt Tools,
Table of Contents
- Executive Summary
- Background
- Service Level Management and Best Practices
- Six Sigma Concepts
- Relevance of Six Sigma for SLM
- Six Sigma Research
- Research Methodology
- Research Findings
- SLM Market Dynamics and Six Sigma
- SLM Competitive Landscape
- SLM Vendors and Best Practices Adoption
- EMA Perspective
Executive Summary
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.
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.
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.
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, 80% stated that
they have plans to do so. Clearly, there is a growing interest in Six Sigma.
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.
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.
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.
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.
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.
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
general, 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.
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:
- Critical to quality (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.
- Cost of poor quality (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.
Six Sigma also has defined a 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:
- Define - during the definition stage, staff members identify, evaluate, and select projects to be used in
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 - control represents an ongoing effort to improve and monitor defined
processes.
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.
Relevance of Six Sigma for SLM
Successful implementations for SLM 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 IT
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 activities around process development that complement the
parallel effort that must be undertaken to develop SLAs and instrument management software for SLM.
There are clear similarities between the goals of Six Sigma and SLM. 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.
Six Sigma Research
Research Methodology
EMA conducted research to understand the value of Six Sigma in managing the quality of IT-based
service delivery. Part of this research was primarily done using an open web-based survey to gather end-user
perspectives. Open and closed questions were used to properly assess interest and usage of Six Sigma and
SLM.
In addition to the Web-based survey, EMA also conducted primary research in the form of personal
interviews. Interviewees were managers in organizations that had been involved directly in the implementation
of Six Sigma for IT. These interviews served to broaden the perspective of this research with real-world
experiences.
Participant Demographics
A number of different demographics were collected in this research. Specific questions were asked to
ascertain the number of employees, vertical market representation, and IT budget size. The majority (or
44%) of organizations participating in this research were large enterprises employing more than 5,000 people.
Another 30% had between 501 and 5,000 employees, leaving 26% in the smaller company range of 250 or
fewer.
Vertical market representation was diverse. Not surprisingly, the top four vertical markets represented
were xSP (24%), Finance/Accounting (18%), Technology/Hardware/Software (15%), and Manufacturing
(12%). Government was also represented significantly in this research. These vertical markets represent those
that have most commonly adopted Six Sigma for purposes outside of IT.
Finally, participants were asked for their annual IT budgets. Fifty percent reported that budgets for IT
were in excess of $10 million. Another 12% of participants stated that IT budgets were in the range of $1
million to $10 million.
Research Findings
The survey was publicized to the Network World Fusion readership as well as to EMA's database of
known SLM users. The survey consisted of fifteen very targeted questions crafted to gauge the level of
interest in Six Sigma for IT professionals.
Organizational Acceptance of Six Sigma
A number of questions were asked to ascertain the perceived benefits of Six Sigma for the organization.
Since Six Sigma has its roots outside of IT, it was important to understand the value of Six Sigma organizationally
as well as within the IT organization.
Respondents were first asked about the status of SLM implementation within their respective organizations.
Two questions were asked in this particular subject area. The first was whether or not SLAs had been
implemented within the organization. Responses reflected a majority (65%) of participants have implemented
SLAs within their companies. The champion for these initiatives most frequently is at the CxO level within the
organization. In our respondent pool, this was true 48% of the time. Other leaders for this campaign were IT
directors (26%) or business line managers (9%). This makes sense as SLM and Six Sigma are both a cultural
shift for companies and need to be driven largely from the top down.
Survey participants were asked whether or not Six Sigma had been adopted in other parts of the organization.
While 44% of the participants said that Six Sigma had not yet been adopted, 24% indicated organization-
wide adoption, 9% said there was regional adoption, and 24% were in the midst of planning for Six Sigma.
Results of this question are reflected in Figure 3.
As a follow-up to this question, respondents were asked about the timing of Six Sigma adoption. There
were a few organizations that had implemented Six Sigma prior to the year 2000 and even as far back as the
1980s. However, the majority have implemented Six Sigma in the past few years.
Since Six Sigma did not begin as an IT-centric methodology, it is quite common for the origination to have
occurred outside of IT. In fact, it would be most uncommon for an IT organization to have been first in the
implementation of Six Sigma processes. Our research supports this assumption with 74% of the organizations
originating Six Sigma implementation outside of IT. This is changing and will continue to change over time as
more and more firms see the connection between IT service quality and Six Sigma. The outcome of this
question is reflected in Figure 4 below.
Training and certification is a big part of Six Sigma. In fact, this is where some of the value is derived in
using it as a best practice for SLM. The methods and practices that are part of Six Sigma are very structured
and require a level of expertise. Certification programs are available for both casual participants as well as
those that are primarily responsible for the effort. Participants were asked if they had taken any steps to be
formally trained. As can be seen in the Figure 5, the vast majority have done so.
Six Sigma Adoption for IT
EMA's research then shifted gears to assess more directly the activity surrounding Six Sigma for IT. Several
questions were asked in this area. EMA asked participants if they perceived any growth in the awareness level
of Six Sigma for IT. Sixty-five percent of all interviewees felt that it has grown while only 21% felt that it had
not. Figure 6 reflects the outcome graphically.
Adoption of Six Sigma for IT has been increasing over the past few years. However,
EMA did not expect to see such a large percentage of participants that have adopted
Six Sigma for service management. An overwhelming 79% of those participants who
are using Six Sigma practices said that they either have or plan to adopt the Six Sigma
best practice for IT service management. Only 5% said that had no plans to adopt Six
Sigma with the remaining 16% unsure (see Figure 7). Barriers for adopting Six Sigma
in IT are often related to company size or lack of awareness of the benefits of
employing Six Sigma.
Those spearheading the effort to use Six Sigma for IT service management characterized a group very
similar to those leading the effort across the organization. Again, CxO level personnel represented the majority
(67%) as shown in Figure 8. Business line managers and IT directors were also significant players for companies
participating in this survey at 13% and 20% respectively.
There are very definite factors that determine the success or lack thereof of any Six Sigma and SLM
implementation. Executive support and/or mandate are at the top of the list in both cases. In this research,
executive management support was felt by 76% of the participants to be the most important factor (see
Figure 9). Other important issues are the level of certification achieved by the firm and how widespread Six
Sigma is in the organization. Anecdotally, respondent's added awareness of Six Sigma's potential by senior
management, client requirements, and investment dollars as also being pertinent to success.
In addition to the quantitative research done by EMA, a number of qualitative interviews were also
conducted. One interviewee worked in an outsourced services organization and had built a practice around
offering Six Sigma guidance to its customers. This individual definitely had seen increased demand in using
Six Sigma for IT management. She felt that there would be exponential growth of Six Sigma for IT largely
due to the emergence of tools, like Proxima's Centauri, that could automate many of the activities. This
interviewee identified very specific success factors in implementing Six Sigma as well. They included executive
commitment and sponsorship, commitment to maintaining the methodology and process across the whole
organization, and creation of formal checkpoints to ensure that individuals are truly accountable for their
part of the Six Sigma process. Outside of the organization, both competition and the economic downturn
were identified as drivers for increased interest in Six Sigma.
Another interviewee was from a hardware/software company that has implemented Six Sigma internally.
This individual also discussed the growth of Six Sigma for IT and agreed that there has been growing interest
as reflected in increased coverage by market analysts, trade press, and customers. This individual felt that
dashboards were critical to the success of any Six Sigma organization. She felt there should be different types
of dashboards geared for both the management team and the technical staff based on their respective roles.
Her closing remarks were that Six Sigma is helpful because it enables her to produce measurable results.
EMA interviewed other IT professionals, as well, who expressed similar sentiments to those above.
SLM Market Dynamics and Six Sigma
SLM Competitive Landscape
The competitive landscape for SLM is complex and very crowded. There have been SLM solutions on the
market for over five years. Yet, the increased number of vendors and product offerings in this space has
expanded exponentially in the past two to three years. In EMA's SLM Buyer's Guide from 2002, there were
70 vendors included that offered products covering some or all aspects of SLM.
Vendors are typically broken down into various categories. The largest group of vendors is the group that
started out offering performance management for networks, systems, applications, or storage. As the market
has shifted increasingly towards service management for IT, those products represented a natural migration
since they were already collecting the performance statistics necessary to evaluate SLA results. Another group
includes companies that have created a solution that sits on top of existing management platforms and uses
the data already collected by these offerings. These solutions are geared to make the connection between
business and IT by facilitating the SLA development process and reporting results historically or in real-time.
In addition, there are vendors exclusively focused on validating SLA performance as a service, suites and
platforms that have grown out of traditional network management frameworks, and policy-oriented solutions
that can enable proactive infrastructure changes to accommodate changing service needs.
This year, EMA is publishing an updated SLM Buyer's Guide. While several of the smaller SLM vendors
have either gone out of business or have been acquired by larger players, there are still many new vendors
appearing in the Guide with an expected 80 to 85 vendors that will be included due to the extreme interest by
enterprise and service providers in SLM.
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.
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,
and Mercury Interactive 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. For example, Viadyne Corporation adopted
ITIL prior to building its product and Proxima Technology is 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.
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.
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.
EMA Perspective
IT professionals are really under the gun today to prove value to the organization. Outsourcing has been an
important driving factor for the past several years where outsourced service providers are essentially coming
in and selling a higher service quality than is currently available with internal IT staff. This is often done, or at
least sold, at a lower overall cost to the firm. Companies have been taking these claims seriously and outsourcing
many aspects of IT where the outsourcer commits to a particular level of service and then delivers to that
level.
Internal IT groups are now viewed as the service provider for remaining capabilities. They must essentially
compete with outside organizations on a cost and quality of service basis. Executive management is pressuring
IT management to reduce costs, improve customer satisfaction, and manage IT capabilities from a services
perspective. In response, IT executives are looking for solutions and have acknowledged SLM as one approach
to addressing this issue.
The biggest challenge for SLM implementation has been lack of knowledge by the very groups that must
do the implementation. Most are looking for guidance and methods that can help them do a good job with
service management from the outset. Six Sigma is an approach that can ease this process. It provides a
proven structure for increasing customer satisfaction and reducing costs in a way that positively affects the
bottom-line of any company. EMA's research shows that the time for Six Sigma applicability to IT service
management is arriving. Organizations are recognizing the value of Six Sigma and wanting to learn more
about it. It not only can address the cause of issues that previously may have resulted in long-term, poor
service quality, but can also demonstrate measurable results for IT. These results can generally be made
available through the development of a scorecard that summarizes performance for executive management.
Six Sigma offers many benefits for the investment and can be a clear competitive advantage. The downside
is that Six Sigma is very process-intensive and may not be a good fit for all organizations-especially those
that are small and not prepared to make the investment in time or resources. Additionally, the process
orientation of Six Sigma may be overwhelming for some organizations that have not evolved to the point
where clear processes and procedures can be defined. Still, for those prepared to make the investment, the
results are proven in studies of large enterprises that have adopted Six Sigma already. The results show value
in the form of real cost reduction and contributions to increased revenue through customer satisfaction.
Proxima Technology offers a good solution for attacking SLM using Six Sigma. It has developed its Six
Sigma solution from the ground up and contains comprehensive functionality for handling Six Sigma reporting.
The major hurdles are to identify and develop effective processes. For some large organizations, Proxima
Technology is a small company, which may be cause for concern. This concern can be overcome by looking
at its customer list, which is dominated by large, well-established corporations such as Sun, EDS, and Mutual
of Omaha, Qualcomm, and T-Mobile.
About Proxima Technology
Proxima Technology provides products that use the Six Sigma quality management
process to improve business service and accountability through service-level
measurement, reporting and alert notification in distributed computing environments.
About Enterprise Management Associates, Inc.
Enterprise Management Associates, Inc. is the fastest growing analyst firm focused
on the management software and services market. EMA brings strategic insights to
both vendors and IT professionals seeking to leverage areas of growth across e-
business, network, systems and application management. Enterprise Management's
vision and insights draw from its ongoing research and the perspectives of an
experienced team with diverse, real-world backgrounds in the IT, service provider,
ISV and publishing communities.
© 2003 Enterprise Management Associates, Inc. All Rights Reserved.
This report in whole or in part may not be duplicated, reproduced, stored in a retrieval system or retransmitted without prior
written permission of Enterprise Management Associates, Inc.
All opinions and estimates herein constitute our judgement as of this date and are subject to change without notice.
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