The Business Value of Information Lifecycle Management (ILM)

Information Lifecycle Management (ILM) is a growing set of recommended practices and technologies to manage data more efficiently and effectively. Organizations process, manage, move, protect and archive various business data according to unique characteristics such as age, usage patterns, compliance and archiving policies, security and disaster protection rules, and value.

With consolidation to storage area networks and advances in storage management solutions, the concept of hierarchies and intelligent management like ILM is again at the forefront of storage architecture planning.

ILM has its roots in hierarchical storage management (HSM), which was popularized with mainframe storage management strategies in the early 1980s. Driven by the high cost of mainframe disk subsystems and exploding compound annual storage growth of 50 percent or more, mainframe managers sought HSM to reduce storage costs by migrating rarely accessed data from expensive on-line hard drives to near-line optical jukebox storage (at the time about 1/4th the cost of disk storage), and eventually to off-line tape library storage (about 1/10th the cost of disks). By correctly establishing migration rules, the organization would see little to no delay in information access (keeping frequently accessed information or data requiring instant access regardless of age near-line), but would save significantly by conserving precious disk subsystem space and eliminating disk subsystem purchases to support growth.

The savings could be significant beyond storage costs. As research by Strategic Research and other luminaries shows, more than $7 was spent for storage management, administration and utilities costs for every $1 of disk capital cost. Because more than 90 percent of data stored on hard disks was not actively accessed by users or applications, it was ripe for more intelligent management and migration to less expensive storage.

Although HSM remained popular as a mainframe process, early attempts at HSM for distributed computing in the late 1980s / early 1990s never gained mainstream adoption. Obstacles included heterogeneous network complexity, distributed storage arrays and falling hard disk prices.

Fast forward to 2003, and the concept of managing storage for lower costs is all the rage with storage vendors seeking to re-energize the storage marketplace and with CIO?s. Organizations still desire to get a handle on storage growth (remaining at more than 50 percent annually, too), escalating capital and operating costs (the 7:1 administration to storage cost ratio holds), increased security and disaster risks, and growing compliance regulations and mandates.

According to Gartner, in late 2004 fewer than 6 percent of organizations had purchased and implemented ILM solutions, but more than 50 percent are planning on purchasing them in 2005 and 2006.

ILM as a concept is not new, it was introduced by records and information librarians in the early 1990s as a way to track the lifecycle of data from creation or acquisition, editing and refinement, publication and evolution, through retention and data disposal. Similar to HSM, ILM seeks to minimize storage costs by providing various storage mediums such as disk, optical and tape, and various rules to manage migration, archiving and disaster recovery. And as with mainframe HSM, the economics are similar. Most data older than 90 days are seldom (if ever) accessed, and on-line storage remains expensive to procure and manage, making migration to increasingly cost-efficient technologies attractive. All data is not created equal, and taking advantage of this fact helps save costs.

ILM outdoes HSM by taking a more holistic view, incorporating data?s business value into the equation. Implementing ILM identifies not only the right storage medium to minimize storage costs while meeting access speed, but the right process and path to manage the data to meet business requirements such as information security, disaster recovery, data retention rules, compliance regulations and retirement. It?s the right storage at the right time and at the right price, helping the IT department manage larger amounts of information, while simultaneously lowering costs and improving storage operations? efficiency.

The business value of ILM for all storage includes:

Reduced need to add hard disk storage for growth.
Reduced storage administration tasks such as moves, adds and changes to support growth, performance optimization, and backup and restore tasks.
Reduced backup window overruns and resultant performance degradations.
Reduced disaster recovery time by minimizing the necessary on-line storage restoration.
Reduced compliance costs and risks of compliance issues.
For application or e-mail databases in particular, archiving older data from the production database organizations can:

Improve application and database performance by minimizing the size of production databases.
Reduce database upgrade or maintenance downtime.
Reducing risk of batch job window overruns.
Reduce development / test workloads and storage requirements.
Most organizations which can migrate 50 percent or more of their data to less expensive media can easily justify the investment in hardware, software, training, systems administration, and support to implement and maintain ILM solutions. With 50 percent or higher storage growth, an organization's reduced costs and storage administration productivity improvements alone generate paybacks of fewer than 12 months and typical ROIs of 250 percent or higher.

ILM ROI success is at risk if the solution and processes overwhelm the capability and maturity of the IT team; poor results can lead to incorrect migration rules, delay in information access for users, lost data, compliance issues, application performance or availability issues. Prior to implementing ILM technology, the team should thoroughly understand and document the processes by which data is to be managed: analyzing and categorizing all data by age and usage characteristics, value, retention and compliance rules, and other important management criteria. Profiling all management rules and lifecycle paths comes first and drives the selection of systems and solutions to meet the needs, rather than selecting an ILM solution first.

ILM can minimize the total costs and maximize the business value of storage through proper analysis and planning combined with thorough documentation, valuation technology selection, integration and implementation.

Advance in IT Value Management: Capability and Maturity
The concept of aligning IT investments with business goals is as old as the IT function itself. Tangible examples of IT alignment, however, have been rare over the last 40 years, despite respected IT thought leaders widely promoting the concept.

The reason why is simple. Until a few years ago there was simply no need.

Through IT's infancy and adolescent stages, budgets and functionality dutifully followed the growth curves associated with Moore's law for more than 40 years. (Moore's law says, "The number of transistors on a chip doubles every 18 months.") While Dr. Moore's views are likely to continue with regard to technological advances and cost reductions, its correlation with aggregate IT spending no longer applies.

Emergence of the ?Need? for IT Value Management (ITVM)
Once upon a time, IT budgets were entirely dedicated to innovation. But the dotcom destruction of three trillion dollars of shareholder value, coupled with high-profile examples of corporate mis-governance, has created a permanent shift in IT budget priorities and spending behavior.

Following that shift, the pendulum continued to swing the other way over the last few years with a 20 percent reduction in total IT spending. Alinean's research shows that the typical company today spends 90 percent of its IT budget on ?lights-on? operations, leaving a scarce 10 percent for innovation. As market conditions require greater innovation to maintain competitiveness, the sunset of the IT budget growth era has resulted in a bona fide need to prove and improve returns from IT investments.

ITVM Capability and Maturity Defined
As such, almost all companies have adopted some level of ROI analysis on their technology investments, ranging from elementary to sophisticated. Alinean has identified 5 phases of ITVM development to help companies do a thorough technology ROI approach, starting from the ground up.

Alinean ITVM Capability and Maturity Model

Level 1 - When in Doubt, Use Spreadsheets
According to a 2003 IT Governance Institute survey, 80 percent of CIOs acknowledge the need for ITVM. Reminiscent of the mid 80?s trend to use PCs to solve every business process problem, IT and business professionals have responded with spreadsheet models that attempt to identify and quantify the business value of IT investments. Currently, more than 75 percent of companies use spreadsheets for ad hoc analysis of IT projects.

While better than not measuring IT value, spreadsheets inherently limit scalability and multi-user integrity. More importantly, most companies lack the subject matter expertise to ensure completeness (i.e. they have considered all dimensions of the project) and relevance (i.e. realistic real-world assumptions).

Alinean's research indicates that there is enormous payback to companies of all sizes that have adopted ITVM best practices. These top performers produce three times more shareholder value per IT dollar spent (a factor of 3.28 for companies over $1 billion revenue and a factor of 3.08 for companies with less than $1 billion revenue).

Interestingly, smaller companies (less than $1 billion in revenue) tend to achieve on average 70 percent greater shareholder value per IT dollar spend than their large company counterparts (greater than $1 billion revenue) due to cost advantages in the areas of security, compliance, and other diseconomies of scale associated with managing and staffing larger IT infrastructures.

However, as the correlation between shareholder value and IT spending is much better among larger companies (1.5 times better among leading companies and 3.2 times better among profitable companies) due to their ability to develop robust processes and value measurement discipline, it is unclear where the optimal balance between governance and agility will occur and whether smaller or larger organizations will be the first to achieve it.

Realizing the competitive importance of ITVM, both large and small companies are shifting from the ubiquitous use of home-grown spreadsheet solutions to third-party tools and research.

Level 2 - Leverage Third-Party Analysis
The fundamental challenge with Level 1 ITVM maturity is that resources are finite and perspectives are limited to organizational experience. Given the constantly changing technology landscape and lessons learned from each deployment, articulating the theoretical value of IT investments is an enormous undertaking attainable only through a team of dedicated analysts with perspectives that span multiple organizations and industries. As these skills are rare, most organizations can?t assemble the staff to produce accurate models reflecting the current technology landscape.

By leveraging credible third party skills and assets, companies can tailor models to produce meaningful pre-implementation analysis and prioritization of proposed projects, and post-implementation assessment of results.

According to Alinean's research, 20 percent of companies doing ITVM analysis are deploying or exploring the deployment of third-party solutions. Almost all of these are doing so on a ?phased deployment? basis that validates ITVM for their organizations with a group of pilot ?super users? and more extensive analysis of major projects.

Level 3 - Corporate Governance through Enterprise-Wide Deployment
Enterprise-wide propagation of Level 2 capability is being championed and institutionalized through IT governance or Value Management Offices with joint accountability to the finance and IT function, giving way to a third level of ITVM maturity.

While the rate of enterprise-wide deployment varies, the ability to validate ITVM benefits in phases as a precursor to broader adoption is common. Acceptance tends to be most closely correlated with change management and business performance measurement capabilities.

Level 4 - Post-Implementation Measurement
Consistent and meaningful pre-implementation ITVM assessment serves as the basis for post-implementation comparison to actual results. Companies have begun to automate this with a closed-loop system that integrates business intelligence analytics to both measure and recapture unrealized results, and provide input improvements to subsequent predictive models.

Level 4 has given rise to additional opportunities and complexities: integration with complementary technologies such as Project Portfolio Management (PPM) and Business Intelligence (BI) / Business Performance Management (BPM) solutions. These IT governance technologies combine into a ?total lifecycle? integrated approach to IT investments that span project selection and approval (ITVM), deployment (PPM) and automated post-implementation value measurement (ITVM/BPM/BI).

Level 5 - ITVM Service Level Agreements
Once a mutually agreed upon standard measurement framework is demonstrated, buyers, sellers, and consultants are empowered to pursue new levels of fact-based engagement and collaboration.

Level 5 allows companies to put their money where their mouths are ? with confidence. Through the consistent measurement of expected project value, buyers and sellers identify value opportunity, assign responsibility, and share the fruits of success or costs of failure with objective service level agreements (SLAs).

Years ago, companies? desire to focus on core competency were constrained by their inability to measure performance in areas such as supply chain efficiency, call center operation, and IT support. These limitations have been superseded by SLAs that measure anything and everything. Metrics for cases per hour, cost per call, average handle time and other performance indicators allow companies to confidently provide outsourcers with objective standards.

As ITVM capability and maturity evolves, IT performance measurement will focus on business value, rather than operational metrics, as the basis for attracting capital investment and rewarding team members for their contribution to business goals

Source : Alinean