Part 9: Preventing Sprawl and Shaping Demand with Show back
The service catalog can be used to shape demand by making clear the cost of resources; then you can use that information to shape demand and better plan capacity.
You can starting by putting clear prices and costs for resource consumption. Whether you do charge back or "showback" (showing costs, but not charging) is not that important initially. Showback can be a stepping stone to full charge back at a future moment. What's important is that EVEN WITHOUT charge back, communicating costs starts to change behavior.
One of newScale's customers a few years ago put a $200 for a service they needed an external company to provide and watched requests drop 40%.
Just understanding that "Large Linux" is 3X small Linux, helps people, many for the first time, to understand the differences in cost to IT. For example, most people have zero idea of the huge difference in cost between 4 nines and 5 nines of availability. Showing what's included and the costs helps you communicate VALUE.
Show back also helps shape demand. Demand shaping is a very useful concept for DataCenter management. Here's an explanation from an EE times article:
"Demand shaping" is a demand-driven, supply-constraining customer-centric approach to planning and execution.
... It also helps optimize use of
resources, reducing excess inventory and improving inventory turns. At
the strategic level, the emphasis is on aligning customers' long-term
demand patterns to long-term resource and capacity constraints.
At the tactical level, the focus is on understanding demand patterns and then influencing customers' demand toward available supply, using the levers of price, promotion and products/services bundling.
Pragmatically this might mean showing the cost of "Small Linux VM instance for qa/testing for a month" as effectively $0, but the same configuration in physical form to be $nnn. This pricing sends the signal that the VM is a better deal.
We can also add other demand shaping info like lead times. VM's delivered in 5 minutes, physical in 5 weeks.
The basic tenet of demand shaping is that it starts with understanding the products the customers are requesting. This is where the standardization and packaging that a service catalog provide are so central to this process. Understanding which packages and what other services are bundled, then tracking consumption helps us come back with a better offer that is better aligned with our existing capacity and architecture.
Unless you've defined your "products" you can't do the kind of reporting needed to understand demand. This is what I see broken with most PPM tools -- it's all labor. You have no visibility to demand.
Applying the concept of optimizing resources and reducing excess inventory to Virtualization, translates to gaining higher density and utilization of our existing infrastructure. Which means we need to understand demand patterns in order to better plan capacity.
People really do respond to cost information. It can be a powerful tool to manage capacity.
Very good article. Demand shaping is a necessity, not a luxury any more. Emcien offers demand shaping for hard goods. As choices have grown, product proliferation is costing companies multiple points in margin and millions in added cost. Unlike in the services industry, in the hard goods industry the costs also show up in excess material and inventory cost.
Demand shaping for the hard goods entails the following capabilities:
1. Know what your customers are buying
2. Know where you making money
3. Capability to recommend good choices at point of sale, based on what meets the customer needs and what is profitable for the seller
The devils always in the details - and that is why Emcien has offers advanced analytics to detect buying patterns + BI for margin/product offering analysis + recommendation engine at point of sale.
Posted by: Jeff Fisher | Saturday, August 29, 2009 at 05:33 AM