Capacity Management – Management Information

Framework
General Considerations
The information that will be provided will concern senior management. This information
needs to be put in comparison between the current situation and previous situations, and
with predictions for the future. Key information that needs to be addressed is as follows 1:

• Key resource measures – what the key resources are, when they may be approaching
exhaustion, and the impact on the business
• System capacity – looks at the current capacity and its ability to meet service levels
regarding current and planned workloads; management will look for the current and
projected usage and whether current and future spare capacity may exist
• User service levels – provide information surrounding the quality and timeliness of
the user service
• Workload measures – determine where the workload resides regarding the users and
applications (vital business functions) to inform management of activity and growth;
look at Service Level Agreement monitoring to determine individual workloads
• Costs – provide information surrounding the costs of providing the service,
determining workloads, and potential cost of expansion

Performance Measurement
The terms listed are key when discussing performance measures as they relate to process.
• Critical Success Factors
• Key Performance Indicators
• Metrics, Activity Measures
• Baseline

These terms are detailed below.

Critical Success Factor (CSF)

Certain factors that will be critical to the success of the organization, in the sense that if
the objectives associated with those factors are not achieved, the organization will fail in
reaching its stated goals.

Key Performance Indicator (KPI)

A measure (quantitative or qualitative) that enables the overall delivery of a service to be
assessed by both business and IT representatives.

Metrics Or Activity Measures

A measurable element of a specific process activity.

1
Capacity Planning, 1989. CCTA.

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Further details surrounding metrics for Capacity Management can be obtained from the
Capacity Plan. These metrics will outline the different categories that the metrics are
measured from and will provide an indication of what is required to be measured, e.g.
utilization and components and services.

Also it’s of value to develop a Capacity Database (CDB) to collect and compile all the
data that is being acquired from the multiple sources including the business plans, and
other process’ information2.

Baseline
A snapshot or position which is recorded. Although the position may be updated later,
the baseline remains unchanged and available as a reference of the original state and as a
comparison against the current position.

Capacity Management Critical Success Factors & KPIs3

CSF KPIs
Accurate business • Production of workload forecasts on time
forecasts • Percentage accuracy of forecasts of business trends
• Timely incorporation of business plans into capacity plan
• Reduction in the number of variances from the business plans
and capacity Plans
Knowledge of current • Increased ability to monitor performance and throughput of all
and future technologies services and components
• Timely justification and implementation of new technology in
line with business requirements (time, cost and functionality)
• Reduction in the use of old technology causing breached SLAs
due to problems with support or performance
Ability to demonstrate • A reduction in panic buying
cost-effectiveness • Reduction in the over-capacity of it
• Accurate forecasts of planned expenditure
• Reduction in the business disruption caused by a lack of
adequate it capacity
• Relative reduction in the cost of production of the capacity plan.
Ability to plan and • Percentage reduction in the number of Incidents due to poor
implement the performance
appropriate IT capacity to • Percentage reduction in lost business due to inadequate capacity
match business need • All new services are implemented which match Service Level
Requirements (SLRs)
• Increased percentage of recommendations made by Capacity
Management are acted upon
• Reduction in the number of SLA breaches due to either poor
service performance or poor component performance

2
Refer to Capacity Management – Capacity Plan for indication of metrics.
3
Best Practice Service Delivery, 2001. Office of Government Commerce.

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Measurement Framework
The Balanced Scorecard Approach (Kaplan and Norton)
In order to understand something you must look at it more than one way. Organizations
recognize the impact that measures have on performance. However, they rarely think of
measurement as an essential part of their strategy. For example, executives may introduce
new strategies and innovative business processes such as ITIL, intended to achieve
optimization of performance and then continue to focus on the same short sited financial
based metrics they have been using for years. Not only is it important to introduce new
measures to monitor new goals but also to question whether or not the former metrics still
have bearing against the new initiatives.

As companies around the world transform themselves for competition that is based on
information, their ability to exploit intangible assets or business processes has become far
more decisive that their ability to simply manage physical assets. In 1992, Kaplan and
Norton introduced a new corporate measurement system called the “Balanced Scorecard”
which supplemented the traditional focus on financial matters such as bottom line with
three additional areas for measurement. The Balanced Scorecard proposes that to truly
understand the health of an organization, department goals, targets, and metrics need to
be developed for the following areas:

• Customer: How do customers see us? (Customer perspective/Quality)

• Internal: What must we excel at? (Internal processes/Performance)
• Innovation: Where can we improve and create new value? (Ability to
innovate/Compliance)
• Financial: How do we improve cost efficiency? (Bottom line/Value)

Management Framework
The following four quadrants represent a dashboard by which the Process Owner can
determine the health of a process. A minimum of one or two measurements should be
determined for each quadrant to ensure a balanced perspective on the use and
effectiveness of the process.

Value: Reports or surveys to measure the effectiveness and perceived value of the
process to the stakeholders and users.

Quality: Process quality indicators are typically activity based and are established to
measure the quality of individual or key activities as they relate to the objective of the
end-to-end process.

Performance: Metrics established under this quadrant measure the average process
throughput or cycle time. (E.g.: Metrics to capture the speed and performance of the
stated process objective and output).

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Compliance: Process compliance seeks to measure the percentage of process deployment
across the IT organization. A process may have a good perceived value, good quality and
speedy throughput but only be adhered to by a fraction of the IT organization.

These can be summarized as follows:

Value: Is what we are doing making a difference?

Quality: How well are we doing it?
Performance: How fast or slow are we doing it?
Compliance: Are we doing it?

A single measure may contain or cover more than one category. When this occurs the
success criteria for this measure is more difficult to satisfy.

Choosing KPIs
Ideally to measure a process at least one KPI per category should be chosen to provide a
balanced perspective. However, due to the difficulty of measurement or tool limitation a
Process Management staff may find it necessary to limit what is measured according to
what category is the most important to the objective of the process.

1. Establish the core objective of the process

2. Evaluate which category is of the highest priority to achieve the process objective
3. Define measures according to the categories which are appropriate to achieve the
overall process objective

Building a Measurement Grid

1. Define the measure
2. Determine the KPI category
3. Establish the policy and target (target will change with process maturity)
4. Determine the tool or medium to realize the measure
5. Define the output format (graph, data, etc)
6. Define distribution list and report frequency

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Measurement Grid
Category CSFs KPI Policy Target Tool
Value Accurate All recommendations for
business tuning actions are
forecasts accompanied with
predictions of their likely
effect - the actions are
reviewed for their success
and the results documented
Quality Knowledge of Recommendations for
current and hardware or software
future upgrades that are identified
technologies in the Capacity Plan are
accurate, both in terms of
the financial cost and the
timescale in which they are
required
Performance Ability to All regular management
demonstrate reports are produced on
cost- time and all ad hoc reports
effectiveness are produced within the
agreed timescales
The annual Capacity Plan
is produced on time and is
accepted by the senior IT
management
Compliance Ability to plan The utilization of all
and implement components and services is
the appropriate being recorded in the CDB
IT capacity to
match business The correct amount of
need utilization data is being
collected in the CDB - too
much data and the
collection overhead
becomes unacceptable and
filestore is wasted, too little
data and investigations into
Incidents and Problems
may be unsuccessful, and
Capacity Plans may be
inaccurate
The SLM process is
informed of any potential
or actual breaches of the
targets in the SLAs

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 Constraints that are
imposed on demand occur
with the understanding of
the Customers and do not
seriously affect the
credibility of the IT
Service Provider

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Determining Productivity Gains
Productivity can be defined as optimization of existing resources to achieve a defined objective
or goal.

Establishing productivity improvements is a separate and distinct measurement activity from the
measurement of process health and maturity represented by the KPI framework model
documented in this presentation.

Translating A KPI improvement To Productivity

When evaluating a KPI improvement for a productivity gain or cost reduction one must
determine the net gain by understanding how the improvement is offset by additional
requirements for value add and non value add work.

Example:
KPI: # of repeat incidents reduced by 25%
Waste Removed = Reduced incidents
Value Added = Improved process activity
Non Value Add = Additional reporting effort

Waste Work Removed = -25%

Value Added Work = +10%
Non Value Add = +5%
Net Improvement = 10%

Expressing Productivity Gains

An improvement gain from the perspective of productivity should be translated into the
following three categories:

• Resources: Additional capacity and efficiency added to existing resources

• Cost: A reduction of cost in achieving the objective or goal of the process
• Quality: The positive or negative relationship of the first two factors on the quality of the
delivery of the goal or objective must be understood and can be determined from the KPI
framework

Balanced View Of Productivity

The ultimate goal of productivity is to improve efficiency, reduce costs while maintaining or
improving quality. While this ultimate goal is not always obtainable productivity improvement
should be viewed from this context.

Productivity Gain = Resource% + Cost%

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