Once again, I’m posting in response to a reader’s emailed question.  The reader wrote:

While trying to understand the difference between Demand management, Portfolio Management and Project management from an IT Infrastructure Service delivery perspective, I stumbled upon your blog and found some interesting reads.  Could you please share your thoughts on how to define Demand Management for a service delivery company – what is in-scope and out of scope?”

IT Leaders Tend to Focus on Supply Management

Delivering IT products and services has been challenging since businesses first became IT-dependent.  There’s lots of complexity, layers of specialization, an unnatural separation of IT producer and consumer, and significant capital investments.  Exacerbating this is the typically high ongoing maintenance and life cycle costs, rapidly changing generations of technology, with resulting technological obsolescence.  As a result, IT leaders have focused far more on supply management – figuring out their supply chains, providing security, integrity and stable services, squeezing out costs,and so on.

Meanwhile, the demand side has typically received short shrift.  Demand chains are unclear at best, and complexities such as the IT infrastructure implications of supply activities and changing technologies are opaque.  IT planners have a hard time answering fundamental questions such as, “What’s in the pipeline for the next 6 months?” or, “What is our projected resource utilization for the next 6 months?”

There are also common problems where demand meets supply – IT delivers products and services that business users don’t understand, did not really want, or did want but do not know how to extract the business value.  It is generally seen that IT’s job is to “deliver” the solution, but not to ensure it is working to full effect.

So, What is IT Demand Management?

According to Wikipedia:

Demand management is a planning methodology used to manage and forecast the demand of products and services. In business, the term is used to describe the proactive management of work initiatives (demand) with business constraints (supply).” (Bold font added for emphasis)

I like to think of IT demand management as:

A set of disciplines, tools, and governance mechanisms designed to surface, stimulate and shape business demand for IT products and services in balance with supply constraints.”

In other words, given that IT supply is always limited, how do we surface and shape demand to get optimum business value from limited IT supply?

Key Elements of IT Demand Management

Getting demand management working effectively requires an orchestration of several techniques and processes – and ultimately, a moderate to high level of Business-IT Maturity (earned through the focus on supply management mentioned above).

The key elements include:

  • Portfolio Management is an important demand management technique and tool (and, if implemented properly, a governance mechanism).  Portfolio Management can help balance IT demand across time horizons (short versus long term), across risk/reward profiles (high risk/high potential return, low risk/low potential return), across business units or business processes, and across IT investment categories, such as IT projects and programs versus IT infrastructure.  Portfolio Management can make these balancing acts explicit so that they become strategic choices (Portfolio Planning) rather than the result of natural “drift.”
  • Product and Service Life Cycle Management.  In the world of IT, creating a solution is a fraction of the cost – maintaining and evolving it, keeping up with changing business needs and shifting technologies is costly.  Traditional accounting practices add to the load as depreciation of capital expenditures creates an ongoing drag on funding sources.  So, ensuring that life cycle costs are taken into account with the initial investment, and managing product life cycles to ensure that necessary investments are made, and unnecessary products and services are retired in a timely fashion is a key Product and Service Management function.  Also, maximizing ‘reuse’ of products and services – “why bring in yet another Customer Relationship Management system when we already have three” is a common refrain that often goes unanswered.  Finally, understanding cost drivers, and influencing business behavior towards ‘responsible’ consumption of IT products and services is an important part of the demand management equation.
  • The role of the Business Relationship Manager (BRM) – the key interface between business and IT.  The BRM is an important demand management channel.
  • My reader’s question asked about what Project Management has to do with IT Demand Management.  Project Management is mostly a supply management technique.  However, poor project management can negatively impact demand.  For example, I’ve seen business behavior that essentially says, “I will ask for more than I need because I know IT will screw it up!”  Or, “I will ask for as much as I can get because I know nobody is keeping count on the results!”)
  • Though not mentioned in my reader’s question, Program Management embodies an important set of both Demand and Supply Management disciplines, tools and governance mechanisms.  Program Management is a critical linkage between Portfolio Management and Project Management.
  • Effective demand management also requires agile supply capabilities.  This is one of the best reasons for techniques such as selective outsourcing and cloud computing – being able to flex up as demand increases and scale back when it wanes.

The COBIT and ITIL Trap

I’m generally supportive of frameworks such as COBIT and ITIL – there’s no really good reason to reinvent these wheels – they embody ‘good practice’ for IT governance and service management respectively.  However, they have to be customized to fit your environment, and many companies short-change this activity and end up with processes-in-theory, but not in practice.  In other words, the processes, control objectives, and so on that they think they have are not what people actually do!

Another problem these frameworks can induce is deluding their proponents into thinking that tools and processes solve the problems of demand management.  Yes – you need clear, transparent demand (and supply) management processes, and these can certainly benefit from good frameworks and tools.

However, effective demand management hinges on strong business understanding and buy-in, highly skilled Business Relationship Mangers (or whatever you call people in that role) and robust business-IT governance.  In particular, governance must address how demand is justified, funded, and how benefits are tracked and accountability held for them.


Graphic courtesy of Vendeka

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