Considering ITIL? Ignore ROI that other organisations have achieved
Research on ITIL ROI would be a useful thing for the general information of the industry, but if you are considering whether or not to adopt ITIL, any ROI information you can find now is useless.
Your ROI will be entirely dependent on how broken your organisation is. So the fact that organisation X got $7.43 in ROI by implementing ITIL incident management is of zero interest to your organisation, unless they happen to be remarkably similar organisations.
ITIL isn't some new and magical thing that doesn't already exist in your organisation. ITIL is a transformation of existing processes from one maturity to another (hopefully higher) maturity. So the return depends totally on the current maturity levels of your organisation - how much room for improvement there is.
The average weightloss on a particular diet is not a predictor for what I would lose, especially if I were already underweight (which I most certain am not but work with me here - it is just an analogy).
If there were tables available of average ROI in moving between any two maturity levels, and if you went to the expense of taking a read on your current ITIL maturity levels, THEN that generic ROI information would be useful in predicting your return.
But the only data available currently is all this anecdotal drivel that comes out of the analysts and vendors about how one organisation saved a million bucks. This is (a) not a predictor of your own results and (b) usually bullshit anyway .
Made in New Zealand 
Comments
Organizational Maturity and ROI
Skep is right on the mark when he talks about benefits of using ITIL to mature the service delivery of the IT services to the business/organization. As he mentions, ITIL is not "some new magical solution that doesn't already exist in your organization", any organization that is delivering halfway effectively have some type of service delivery processes. Now whether they're consistent, documented, repeatable and measurable can be questionable.
"ROI" for ITIL should be looked at in the sense of process and organization efficiency and service availability, which then can be translated into a financial ROI. Many organizations struggle with creating a ROI justification for ITIL implementation because they don't measure their current delivery process.
There's very little ROI data around.
>>Many organizations struggle with creating a ROI justification for ITIL implementation because they don't measure their current delivery process.
I totally agree. I was at the itSMF Australia 2008 conference and whenever I struck up a conversation with other implementers about their predicted ROI, the response was usually vague or we're not baselining (at the start of the project). Generally, I find it very hard to get any ROI data on ITIL implementations for comparison or guidance. So my focus is totally internal and just centres on reducing costs to the organisation by reducing customer incidents and our SLA breaches.
ROI in this ecconomy
In my time being involved in ITSM the question of ROI is constantly asked. We come up with metrics for reduced headcount for service desk implementations and better service levels etc, all of which are valid. Now we have some basic infrastructure costs and overheads, reducing these is part of the road to ultimate infrastructure collapse and these need to be costed as part of the services that we offer and i believe that we can assume that many of us are doing these well and cost effectively now. The real value is understanding if the IT enabled business service we are offering is delivering business value and to ascertain this we need a complete view of costs, business and IT and the value that the business obtains, tangible in intangible....
Where organizations do this well they understand the IT contribution to the business and have enhanced organizational value. One hospital group i worked with changed their IT metrics to include the IT Component to generate revenue and amazingly last week IT was approved an additional 13 headcount to rollout a revenue generation project......
Food for thought!
Robert E Stroud
assumes a high level of maturity
This works but it assumes a high level of maturity, to have that kind of information available.. Can't have a KPI on generated revenue unless you can measure that and lots of organisations can't. So what about the lesser mortals?
Robin D. England
Financial Management is key
From my experience in times of recession we all turn to cost as a metric and even if you are not at a high level some form of basic estimation based on some base information will get you started. For instance rather than costing the service desk, identify the business metric for instance cars sold if your a manufacturer and split the total IT cost per car, not perfect but a start...... Promotes business focus in IT and gives IT and the business a good sense per unit.....
To get to a destination you have to start the journey!
Robert E Stroud
ITIL ROI 101 - help needed - apply within...
Rob
An interesting start on the ROI journey. You are in a unique position of being a very well respected 'ITIL evangelist', having visited with many, many organizations and networking with even more who are active in our realm. Perhaps I can persuade you to share more of your experiences with us? I'll go first in the spirit of sharing.... anyone else reading this should feel welcome to chime in...
A recent finance manager put it very simply - " If I give you 25 cents can you give me back 75 cents?". Thats 25 cents for ANYTHING you need to succeed - this is a year one figure. Another finance director had quite a different view - "I'm satisfied if I get back 15-20% on any investment of dollars in an IT project". That was a $1 spend and 20 cents returned (which presumably meant 80 cents lost! - Oh that return was eventually negotiated over 3 years - like a lease).
Another finance representative would not allow outage avoidance to count as benefit - only speedier recovery from a hard failure (!). Yet another translated the term 'savings' into badges on their desk - a reduction in permanent headcount.
What level of ROI do you regard as 'reasonable'? What financial terms have you encountered that you encourage we use, or avoid?
A key first step seems to be to talk to those in the organization who can help you understand how the impact of issues and benefit is measured and to understand how the finance folks count beans (money), how they count benefit, and their calculations for ROI. Do you agree?
Another key step might be to appreciate the huge burden up-front 'leap of faith' of a traditional 'heart transplant' styled approach proffered by many ITIL enthusiasts where wholesale reengineering or replacement of existing practices is the starting position, often tacked onto a new software tool. There was one survey that reported an AVERAGE cost of an ITIL initiative to be approximately $10,000 per IT head (all software, training and effort) - thats per IT employee not project participant. Is this reported figure anywhere near what you have seen?
Finance folks typically see process improvement (especially ITIL centered) coming and as benefit IT alone, and will ask for help/justification in diverting vital project resources and precious funds from other perhaps more customer or business focused projects. How have you seen organizations persuade management to favor an ITSM/ITIL project over others?
How have you overcome the perception that an ITIL centered project is only for the larger organizations, is this a symptom of large up front costs?
What up front investment have you had to prepare management for, is there any correlation between this and headcount?
How long should they have to wait before they see an initial return on an investment?
I would suggest everyone needs is a repeatable and proven method for finding areas where savings can be made and stating this BEFORE doing anything substantial that may introduce any process, policy or cultural (or social) change into a service organization. Change without cause and stakeholder support is easily seen as disruption. Is this compatible with the ITIL view?
What methods do you suggest or recommend that help us all define problems and get stakeholder commitment and that precious funding?
As an ITIL evangelist, what return should any organization expect as a default from an ITIL centered initiative in year one? Is the target ROI affected by the size and geographic scope of the organization, or the type of industry they serve?
Do you agree that "process improvement is irrelevant unless it directly affects the quality of service, or cost of providing service"....?
Some have suggested "there is no correlation between the level of ITIL certification and the number of staff certified, with actual savings achieved", is this a fair comment?
When is a best practice a best practice? Some say, only when it can be mapped to an issue and presented in the form of benefit resulting from an improvement led change", any comments on this?
I'll stop there.... if any of these questions are answered in core ITIL, or any companion products and services please point me in their direction.
Couldn't agree more
Absolutley agree Rob. In all my ITIL years I've never understood why financial management has been such a Cinderella, and how many metrics don't leverage the advantage of including a financial dimension. I always want to know about the "bangs per buck".
I was quite taken with Bob Kress' IT scorecard in the guest editorial of the latest copy of the ISACA Journal.
James
It has only just begun
And we are only just seeing the imapct of the recession beginning to bite. A year from now IT projects that impact costs, or make better use of exisiting resources, will be grabbing C level attention, but not if they demand high levels of sghort term investment.
Charles J E Finister
ITIL ROI
Although I fully understand the logic of needing to ignore the ROI of ITIL , I don't know if I agree. Surely one cannot look at the raw numbers of ROI, but one must look at indicators which illustrate process improvement and 'maturity' of the company before and after ITIL was implemented. Key indicators could be comparing the costs of process changes before and after ITIL was implemented. Similarly, KPI can be compared pre and post implementation.
With the maturity of the BPM field progressing at such a rapid pace I think the point is that BPM software can do this analysis for you. Many BPM Suites are now using BI platforms to do their business analysis and intelligence.
ROI seems unimportant to customers
When I first began giving presentations to customers about ITIL, I always included a slide about ROI that I found from various sources. Interestingly enough, customers never cared about that slide and I dropped it from my presentation.
Usually, customers have to be convinced about the ROI of any program they embark on, but ITIL is a different animal. Customers seem to want to implement ITIL regardless of ROI. It may be that the popularity of ITIL itself is enough of a reason for many customers to want it.
ITIL in a Time of Recession
I think what you say has been true for the last few years. Heading into another recession things might change, as they did during the last recession. I think we might see fewer projects that are "Me too" ITIL implementations that are justified by the imagined prestige they bring (I can think of several multi year projects where that has been the sole justification when you scratched the surface) and more projects that use ITIL to achieve a direct aim, such as a percentage cut in headcount.