Customer expectations have been transforming in recent years. Digitalization has led to a situation where customers increasingly want to access and purchase products and services 24 hours a day, seven days a week and 365 days of the year. Organisations have been struggling to adjust to these changes, yet evolve they must. The changes in customer expectations of companies has had an impact on what they want (what they demand) from organisations and when they demand it. For Technology teams, this applies to internal customers that have demand for Technology infrastructure, architecture and services. This has made demand management for IT significantly more complex than in the past. The result is an ever increasing need to manage demand more effectively. This has a considerable impact on Technology teams which may often need to start from scratch in finding ways to go about this.
Demand and supply are well understood concepts. Demand is what people, teams or companies want, and supply is how much of what they want that is available to go around. Demand management is the way in which organisations comprehend demand and how they go on to predict what they think will happen and influence customer demand so it is easier to handle. In the information technology context, this can regard making sure that the IT infrastructure will meet the demand of both internal and external customers. As a result of digitalization, the changing needs of customers external to the organisation influences both external and internal demand management for technology services and infrastructure. This in turn leads to a need for enhanced demand management for digital services.
Demand Management Complexity
Demand management is a complicated matter because failing to meet demand means that customers may look elsewhere, or critical services are not provided. It may also mean that strategic imperatives cannot be delivered. On the other hand, oversupplying when there is not sufficient demand to take up that supply can be a costly matter for organisations. In the technology sector, professionals have been criticized in the past for putting too much energy into supply without sufficiently considering demand. This is neither cost-effective nor efficient. At the same time, internal customers to technology teams may be unable to clearly articulate their needs or understand the costs associated with these, which makes the whole process fraught with difficulty. Due to the increased demand brought about through the introduction of digital services, a better model is needed so that costs can be more effectively managed and waste avoided.
Making decisions about demand is further complicated because in many cases there may not be a decision making process guiding it effectively. Silos also make demand management more complex in the digital age, since need could be better managed without these in many cases. On the other hand, digitalization does bring about opportunities to integrate the organisation horizontally to increase collaboration. This can be very helpful in managing demand.
Planned demand is perhaps the easiest sort of demand to manage because it is known about in advance. This allows time for it to be understood, and priorities drawn up around it. Not all IT projects should be approved, but understanding total overall demand is critical in being able to prioritize and deliver the most important projects as effectively as possible. It is highly recommended that a cost benefit analysis is carried out to understand which projects make the most sense. This should consider all costs and benefits, including intangibles. By undertaking due diligence in this way, it is easier to understand which projects should go ahead, and where demand is highest (and why). Yet in some cases such processes and systems do not exist. This can lead to the person who shouts the loudest getting what they want — which is not a way to either run a business, or to manage demand effectively. When demand can be planned for both the business and technology teams, it is handled more effectively.
A commercial model of demand management can be helpful in making sure that the different business silos all understand the priorities that have been agreed for the IT team. While a function may be frustrated that its project has not been prioritised, with a clear list of priorities and processes around decision making that have led to these, it is easier to understand why decisions have been made in the way they were. The commercial model is explained in greater detail below.
Further complicating matters is the issue of unplanned demand. One of the problems with digitalization has been the speed of change. This has meant that IT is often expected to respond to urgent unplanned demand, despite already being stretched. While there may be an IT plan and road-map, digitalization and innovation move the industry in a new direction that the business needs to keep up. Alternatively, if someone within the business has a ground breaking idea of how to gain competitive advantage it can place extra demand on the IT team.
Unplanned demand is unpredictable but somehow has to be squeezed into the current plan, so there is greater need but reduced capacity to deal with it. It is critical that technology teams find a way to address these needs, as the pace of change in technology is certainly not getting any slower. Requirements for unplanned demand are going to keep coming up. The challenge lies in trying to plan for the unplanned as well.
Commercial Model of Demand Management
Some of the more forward thinking technology teams and leaders are already identifying and implementing ways to better manage infrastructure for digitalization by introducing a more commercial model of demand management. As already highlighted, making good business decisions based on a more scientific cost-benefit analysis that takes into account all of the factors regarding priorities is very beneficial. Yet it is not the only step to take, and some technology teams have been going further.
One of the commercial model approaches that has been working well for IT teams has two main elements. The first of these is the provision of a list of services that are priced out and that can be purchased in units. This allows pricing to be much more easily understood and the commercial model of provision of infrastructure can in turn be better understood. The other step that has been undertaken in some of the more successful organisations that have moved to such a model is the introduction of new ways of IT working with the rest of the business. A more commercial approach is taken and product managers help explain what is on offer and how needs can be met.
Industry analysts suggest that introducing this type of model can save the business between 10% and 20% on technology infrastructure costs. This is clearly achieved through firstly better understanding demand, and secondly, meeting that demand much more effectively. In achieving this it is necessary to have a good comprehension of the drivers of demand, so that planning is effective.
Recommended Components to Improve Demand Management for Digital Services
In brief there are a few recommended components that can be introduced to help better manage IT demand for digital services within the business. These are as follows:
· Distinct and well explained services — services should be clearly laid out into categories that can be easily understood and which cover the majority of likely infrastructure requests. This allows internal customers to pick and choose depending on their needs, aided and advised by technology professionals.
· Clear pricing — pricing needs to be easy to understand for the non-IT professional. Costs should be clearly documented so that business owners can select between meaningful options. Costs should also be linked to demand, and usage should be monitored to ensure services are provided within the costs charged.
· Measurement and reporting — agreed SLAs for each of the services should be managed through portals that automatically generate reports and useful information for both IT and the business. From the technology point of view, analytics can be deployed to measure demand from the business and capture a picture of trends over time. This is beneficial because it makes it easier to project need going forward — though the other challenges of unplanned demand will still exist to some extent.
The need for more effective demand management is only increasing in the digital age. Digitalization has made it increasingly more challenging for IT functions to manage demand due to the speed of change. There has also been a tendency in the past to be inefficient with supply, leading to costs that are unpalatable. It is recommended that IT management work towards a more commercial model within the organisation for managing demand so that the need for digital services can be met. This requires clearly defining services and costs as well as measuring use, to ensure that ultimately a better service can be offered to the business.
Originally published at https://www.linkedin.com.