New approaches to IT service management

Two CIOs discuss how service management works in a modern digital enterprise

Digital organisations such as Tabcorp and REA Group are extending their ITSM practices and techniques beyond the traditional and entrenched ITIL framework.

It goes without saying in IT that the one certainty all organisations can rely on is change. In addition to the obvious changes that occur in technology, personnel, business objectives and competition, there is also consistent evolution in the way services are managed and delivered.

ITIL was once the bible in IT service management for its ability to help define the processes, services and roles that ensure IT is efficient and cost effective. But new theories and practices are complementing and supplementing the notion of best practice in complex environments.

As a result, terms such as DevOps, Agile and Lean are finding their way into ITSM and changing the way modern IT organisations go about managing the services they deliver to the business.

What’s new?

DevOps has been defined as “a software development method that stresses communication, collaboration and integration between software developers and IT professionals.”

Both are dependent on each other, so in a world where digital services are at the core of competitive edge in many industries, the introduction of DevOps is used to help an organisation rapidly produce new software.

Meanwhile, there has been a rise of Agile software development movements which Wikipedia defines as “a group of software development methods based on iterative and incremental development where requirements and solutions evolve through collaboration between self-organising, cross-functional teams.”

It aims to promote adaptive planning, evolutionary development and delivery while encouraging rapid and flexible response to change.

Then there is the management philosophy derived mostly from car manufacturer Toyota’s production systems that is known as “Lean”.

Lean is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Essentially, the concept of Lean production is centred on preserving value with less work.

Doing it differently

At a recent members’ seminar convened by itSMF Australia’s Victorian branch, two high profile CIOs discussed how service management works in a modern digital enterprise where the quality of services delivered can be the difference between roaring success and dismal failure.

Kim Wenn, CIO at betting giant Tabcorp and Nigel Dalton, CIO at online property market Real Estate Australia (REA Group), both deploy large and complex IT services operations which are constantly developing new services to diverse market-places.

One is a long time player in its market that has undergone frenetic change in recent years while the other is a relative start-up that has rapidly grown to dominate the online real estate environment as it caters to Australia’s rabid desire to do everything online through PCs and personal devices.

Both need to keep improving the value they deliver to a broad range of customers. In addition, both organisations are totally dependent on the availability and resilience of the technology that underpins their operations.

For example, Tabcorp’s Wenn highlighted in the highly competitive world of online betting, if the TAB website is not available when punters want to place a bet, they have many other betting options and may never return. It is a harsh reality that serves to motivate Tabcorp’s IT service delivery operations.

REA is a $5 billion property website operator in seven countries. Its websites are used by more than 19,000 agents, attract around 8.8 million unique visitors and serve up more than one billion page views every month. It is arguably Australia’s most successful online business.

REA’s Dalton said that his organisation has embraced DevOps methodologies, uses Agile scorecards and operates on Lean principles.

“We’ve changed the culture at REA so that IT people are no longer serving the customer as merely the next person down the line,” Dalton said. “Instead, it is all about serving the real customers – the buyers and sellers of real estate.

“We are no longer developing features and functionalities that we think will work or improve the customer experience. We actually go out and ask the customer what they want and work out a way to achieve that. It’s a new way of thinking and it requires a new way of managing the services we deliver.”

Project? What project?

Change at REA is not just restricted to customer centricity, according to Dalton. The organisation has also moved away from traditional service management controls over projects and operations with a view to improving time to market on new web features, customer service functionalities as well as enabling better internal collaboration.

“We no longer have IT operations, a project management office or a change advisory board as such but that doesn’t mean we are cowboys,” Dalton said. “Our guys apply a lot of the foundation ITIL principles to what they do but what I love about them is that they are starting to think about how they can adapt that to a more Agile world.

“So they are desperately trying to work how they can adopt these new DevOps techniques and blend them with an ITIL world because they do want to maintain their service standards.”

Straddling the fence

As an older organisation Tabcorp has invested heavily in staying relevant in the digital age, according to Wenn. Tabcorp is a business whose revenue is almost 100 per cent reliant on its systems being available to multiple customers on multiple platforms.

Systems need to be resilient in the face of unforseen incidents and over-ridden by transparency and good governance so that it is compliant with strict regulatory controls across three separate state jurisdictions.

“ITIL-based processes and methodologies still play an important role in our operations and governance,” Wenn said. “Marketing and web development including release and distribution, however, is a different story.

“We certainly look for better agility in development and distribution as we need to be very nimble in a highly competitive market place or face the very real prospect of losing customers to other electronic betting services.

“Scale and impact is important which is kind of why we have embraced both ITIL and DevOps methodologies. At the backend – our core systems – we have to be very disciplined and therefore have very strong controls around change management processes,” Wenn added.

"We just cannot risk being unavailable and face huge penalties for non-compliance so the controls around that haven’t changed.

“However, at the front end we can be Agile with our rollout of new digital features for our customers. We have found a good balance. In the digital space, we have got the marketing, technology and distribution team co-located and working in a beautiful Agile space," Wenn said.

She said these teams are doing continuous releases and deployments and have embraced the Agile way of thinking. This has allowed them to make huge inroads into the way the business thinks about technology.

“We don’t have a separate service desk and operations teams in the digital space any more. They are all together and they are collectively responsible for every aspect of production. If they muck it up, they are the ones getting woken up at three in the morning to fix it.

“That was a massive change for our business but the cost, efficiency and time-to-market benefits have been huge.”

In the digital space, we have got the marketing, technology and distribution team co-located and working in a beautiful Agile space

Kim Wenn, CIO, Tabcorp

The great spike

Wenn also highlighted another phenomenon that makes Tabcorp’s resilience and availability a unique, critical consideration. Every Saturday is a busy racing day but Melbourne’s annual Spring Racing Carnival in general and the first Tuesday every November (Melbourne Cup Day) in particular are betting days that pale the rest of the year.

“We do over 23 per cent of our business on 65 days across the year,” Wenn said. “Then you have something like the spring racing carnival which is a massive spike again over a normal Saturday. Our transaction volumes on Melbourne Cup Day are incredible and our technology needs to be bullet proof at this time of year.

“On a normal Saturday we will use somewhere between 3 per cent and 7 per cent of our capacity. That’s it. On Melbourne Cup Day we run frontline at 100 per cent. Every year we add more capacity and every year we push it to the limit.”

Some of the stats about Tabcorp’s Melbourne Cup Day operations are mind-boggling. It processes more than 60 million transactions during operating times or up to 2000 bets per second. It can interact with up to 75,000 customers concurrently and will transact with 207,000 account customers over the day.

Betting turnover on Melbourne Cup day in 2012 was $183.4 million including $97.3 million on the main race alone. There are over 1800 terminal operators on duty at various race meetings on the day including more than 700 at Flemington racecourse.

“It is unimaginable for systems to fail on Cup Day as it would have a massive revenue and reputational impact,” Wenn said. “Spring racing is so important to us, that we have a lock-down and change embargo that comes into effect on 1 October every year.”

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Changing role of the CIO

Dalton and Wenn said that as a result of change in the way their organisations go about IT service delivery, their roles as CIO were also changing away from just managing IT infrastructure, applications and IT service delivery.

REA and Tabcorp have businesses that are totally dependent on technology, so the CIO now plays a more collaborative role with other senior executives with significant input to strategic direction, customer service and revenue development.

“By title, I am the CIO but in effect that is only 25 per cent of my job these days,” REA’s Dalton said. “We decided at REA that we had had enough of functional leaders in defined areas such as IT, products, HR, marketing, sales and finance etc.

“We no longer live in departmental silos with C-level executives polishing their own functional organisation to within an inch of its life and then throwing stuff over the fence to another group.

“Our IT group made a massive transformation in its ability to get things done and to deliver. This Agile philosophy is now being applied right across the business.”

Wenn said that Tabcorp is making significant progress in its transition to an Agile environment and this is changing her role “almost daily”.

“I am spending a lot more of my time now working with marketing officers and distribution and solving real business problems because in some respects the technology now takes care of itself,” Wenn said.

“The more interesting and compelling thing is to work with marketing on content management. My role is changing all the time and that is challenging for some of the management levels below in technology groups.

“It is a challenge for all ITSM practitioners to find their role in the transition to a more customer-centric technology operation that works collaboratively with the business. At the end of the day, you can resist it but that the way the industry is evolving means that to do so will most likely end up in an exit interview.

“Alternatively, you can embrace it and be part of the future. One of my major roles as CIO is to drive this change so that IT better serves the business and so that IT works in close consultation with the business.”

New recruiting models

The changing roles and responsibilities within ITSM operations also require a rethink about which sort of people are on the recruitment radar, according to Dalton and Wenn.

There are different triggers that recruiters have to look for when hiring people into the new, more Agile roles as opposed to the traditional process-driven service delivery models defined by ITIL.

“I have changed my recruitment criteria substantially over the years,” Wenn said. “I think we used to recruit people with strong technical skills whereas, now, my view now is that these are easily taught and easily learnt. It doesn’t matter what systems and applications you work on, you can learn it.

“I now look for leadership and people skills because I find that those sorts of qualities are innate and a lot harder to teach. I am looking for candidates that can collaborate and get on with people through recognising their strengths.

“There are a couple of tricks we use in terms of recruiting in the Agile space. We are interested in whether they blog and/or whether they actually contribute to open source forums or other industry communities. This allows us to determine whether they have a passion for what they do. We need energy and motivational levels. We can teach you all the other stuff.”

REA’s Dalton said that “it is not easy to get a job at our place” and that he relies on a system where often a candidate’s future colleagues assess whether there is a cultural fit with the team.

“All new recruits have come through a couple of interviews before they get a job,” Dalton said. “After a couple of conversations we are going to find out quite definitively if they are the kind of person we want on the team and whether they can work with the way we do things.

“People can transition from very traditional environments to our environment so long as they have high communication skills obviously. I guess we are an introverted culture so we do tend to recruit our own type to some extent but we also look for diversity of age and gender because we know that we get some resilience from that.

“Leveraging multiple opinions is one of the Agile fundamentals so we encourage that through diversity of recruits.”

Ever-quickening progress

If you thought that the rapid pace of change is unsustainable and that things are likely to slow down, Dalton and Wenn advise that you shouldn’t hold your breath.

“Unfortunately, the bad news is that however fast you are working now, how rapidly you have to deliver new products to customers is actually the slowest it will be for the rest of your lives,” Dalton said. “So enjoy it because it is only going to accelerate from here.

“Using new techniques, philosophies and principles such as DevOps and Agile provides a better way of coping with that but it is not going to slow things down.

“If you look at the way technology-based businesses such as Tabcorp and REA have expanded through acquisition and rolled it all into existing operations so quickly, you would have thought it impossible 20 years ago due to the complexity of it all but that is just the way you have to do it in the digital age.

“We need new tools and guidelines on the best way to do this while maintaining some sort of control over service delivery. Being lean and collaborative is the only way to do it but that too is likely to change over time.”

Wenn said that with new, aggressive competition always emerging to challenge the establishment, Tabcorp has had to embrace an unprecedented of rate of change.

“Everybody would be totally exhausted if we didn’t reassess our philosophy and approach to change,” Wenn said. “The change is about education and working with the business because IT is no longer the bunch of geeks in the corner.

“They are out of the back room and they are absolutely an integral part of the business.

Conversely, it is now an important part of my job to educate a lot of the IT group – and we have 400 of them – that it is OK for marketing to manage content and it is OK for distribution to change things.

“We’ve just got to make sure that we can do it in a way that supports the customer and we have to do it as quickly as possible so that we can move onto the next change.”

Gerard Norsa is publications editor at itSMF Australia. He can be contacted at