Quantifying Cost Reduction from IT Service Management Automation in Fortune 500 Enterprises

Abstract

Many Fortune 500 companies expend upwards of $10 billion per year for Information Technology Service Management (ITSM). The baseline cost structure defining the cost of ITSM at an enterprise level shows that the following costs are the bulk of the expenditures: workforce direct costs (salaries, benefits overburden, and shift premium), space costs (office space, operational space for the Data Centers, branches, DR site), tools costs, internal communication, training, external communication, consulting services, operational supplies, IT consumables, intercustodial costs, and other expenses. The workforce direct cost is responsible for 78% of the expenditures when both direct and indirect costs are considered. The costs of operational tools infrastructure related to ITSM represent 20% of the total cost; IT consumables and other internal maintenance costs are also relevant items [13,14,16].

ITSM is an entire range of process-managed activities covering the entire life cycle of the information services offered to the business unit customers—business application consultancy, preparation of new business applications, incident management, service request management, problem management, change enablement, service asset and configuration management, service continuity management and information security management. Reducing operational costs is a general aspiration of businesses: the cost reduction potential of ITSM in Fortune 500 companies has been estimated—without the need for any reference to the activity maturity levels—by applying a simplified approach that considers only workforce and tooling costs. Cost reduction from the automation of ITSM points can reasonably be expected, as enterprise-class ITSM solution features allow for higher automation ratios for these domains compared with bespoke in-house implementations.