Demonetization @India: A Case For Collapse Of Service Management

Demonetization in India has taken people like a storm whether one horded the declared illegal currencies or not. Only the impact has been different. The hoarders have been facing the challenge to get their illegal wealth or black money converted while others are struggling to convert, deposit and withdraw their legally earned money.

I found this to be a very interesting case of a complete collapse of service management. In this blog I am going to cover the very basics concepts of Service Management that were ignored.

For an analogy let us consider a global business enterprise having presence in numerous location within multiple countries globally. Assume that the Managing Director or head of the conglomerate (consider a banking group) takes a decision without consulting anyone. The decision is that within next 12 hours the existing vendors, to whom their IT services including data centre is outsourced to, will be replaced by his/her preferred vendor. So there is no transition time available. What will happen to the customers of this banking group? What will happen to functioning of various business units?

The result of such a decision is obvious – devastation for this banking group; their stock value in no time would be 0. Thus, such a decision would lead to winding of the entire group’s operation.

The scenario in India is somewhat similar – the only difference being that instead of a group of companies it is the Government of India (GoI). In my analogy, the group is listed in a stock exchange and the pain to its customers have an immediate direct impact. In India, the situation is slightly different with GoI being able to manage people’s perception by bringing in nationalistic feelings; But the reality does not evade for long. They have more time to turnaround the decision to show the benefit than our analogy. Unfortunately, this granted time is not everlasting, once the stock value for the government (i.e. the people of India who are supporting this decision as of now and their patience as well as belief in Government) starts to fade, the result for the government could be utter devastation; the other stock value for the government is reflected by the economic health of the country, which for the next couple of quarters is going to take a dive and will directly reflect on Sensex and Nifty, the Indian stock exchanges.

The above para links directly to Strategy Management For Services – What is the value this decision would provide to people of India – Already we have seen the GoI’s claim on value creation has undergone quite a few changes. Thus, despite approx. 2 month I am not able to get the answer to my question ‘what is the value creation from this service?’

Before we dive further let us structure our assumption for the case:

1.       Stakeholders:

a.       GoI - the holding company that controls the majority stake in a believed independent organization RBI (Reservice Bank Of India) and having Income Tax Department as a key internal supplier for driving compliance

b.       RBI – the company that owns the service and facilitates it through its sales partners

c.       Sales Partners - Banks

d.       Customer – The income tax payers of India, payers of service tax and other taxes for related banking operations

e.       User – The people who uses the banking services for currency withdrawal, deposits, payments and transfer

f.        Suppliers – Both internal and external suppliers involved in the overall service provisioning:

·         Supplier for RBI – Printing press, printing ink providers, currency paper provider, logistics and transportation service providers, IT service providers, etc.

·         Supplier for Banks – Business units providing staff for banking operations, suppliers for support staffs, IT service providers, ATM machine - maintenance & support service providers, services providers who load the currency in ATMs, logistics and transportation service providers, etc.

g.       Key resources related to service provisioning: Staff, paper, vehicle and IT systems & applications

2.       Service:

a.       Primary Business Service: RBI provides a Service “money” to people of India through its various partner channels – Banks. This service constitutes of various service packages based on the denomination of the currency. It gets these currencies printed and sends it to banks. Various suppliers, internal or external, are involved in moving the currencies from the printing press to the banks. Banks then decides the ratio in which they would want to distribute the received stock of the currencies to its various branches and ATMs. Again, it too needs to rely on multiple suppliers.

b.       Secondary Business Services: Primary Business Service – ‘Money’ constitutes the core service on which the following Banking services are based on:

                                                               i.      Money Withdrawals:  ATM cash withdrawal and cash over counter

                                                             ii.      Money Exchange: Exchange of demonetized currencies over the counter

                                                           iii.      Money Deposits: Deposits over the counter or through deposit machines and/or ATMs

                                                           iv.      Money Payments: Point of Sales (Credits/Debit card payment), Online payments, payment through online transfers and Bank’s eWallet

                                                             v.      Money Transfers - Online inter/intra bank transfers

                                                           vi.      Others

3.       Change to the Service: GoI’s decision to demonetize 500 and 1000 denomination currency and replace them with new 500 and 2000 ones; Secondary services are impacted as the constituent ones are changed

Strategy Management for Services:

To understand the value creation from the change, we need to understand the Utility & Warranty for the same.

Utility:

1.       Performance is associated with the performance of the tasks related to the desired outcomes. So, let us see what the desired outcomes of demonetization was and way it itself underwent a change:

a.       End to black money: This was one of the initially projected outcomes. GoI projected that black money would not come back to the system and will eventually lead to de-burdening RBI – This outcome has not been realized as more that 97% of the demonetized currency has come back to the system.

b.       End to fake currency: This was another initially projected outcome. This seems to be realized to a significant extent.  Only thing to be seen is what percentage of fake currency has been accepted in banks by mistake. One of the key attributes of the new denomination has been the extremely less probability of it getting duplicated. But already fake currencies of the new denomination has started surfacing and agencies are trying to investigate the same.

c.       End to corruption: This was another initially projected outcome. Initially it did curb corruption since money was not there in the system. Eventually instead of eliminating corruption, it has given another opportunity to many individuals to build black money. Tax inspectors have got an opportunity to earn in return for giving clearance to tax evaders; Bankers and many others have taken commission to convert black into white; etc.

Only hope that remains here is that with digital economy the corruption would reduce. This realization can be evident only in a longer run. Another, potential gain would be in terms of income tax and indirect taxes. These could be major gains for this initiative. This again would be evident only in next few quarters but degree of realization and attributing it to such a gain would be extremely difficult to quantify and would always be questionable.

d.       Making India a digital economy: Initially this was not one of the expected outcomes. But as digital payments surged and benefits from projected outcomes diminishing, GoI started projecting it as an expected outcome. Significant push has been made to promote this (probably as a face saving gesture). There is a significant surge in digital transactions, but coming quarters would tell if this would sustain. Primary reason for this surge is lack of liquidity in the market.

2.       Undesired outcomes:

a.       Pain to customer and end users: Businesses and people have faced significant difficulty in withdrawing their hard-earned money. Many sectors and villages are far from having the capability to be digital and this has had a major impact.

b.       Economy is affected and this is going to reflect in GDP as well as IIP besides the stock values of various companies in coming weeks. Banks’ credit business has taken a hit; Manufacturing is affected due to poor demand and in many cases production is impacted as multitude of things were based on cash economy; etc.

3.       Are there any constraints removed due to this change? Yes, a higher denomination currency is introduced thus the need for the same is addressed. But at the same time a new constraint of unavailability of 1000 denomination is introduced besides the liquidity of lower denomination notes which is critical for using the higher one.

Thus, I am of the perspective that the change in service overall does have some utility but not a considerable one; Most of the desired outcomes are not achieved or offsets have happened due to undesired outcomes.

Warranty:

1.       Available when required? – So far availability of the changed service is an area of concern since it has not been available enough since:

a.       Replacement currencies are unavailable to the bank

b.       Withdrawals are restricted

c.       Though ATM recalibration is complete to certain extent but this was not well planned for

d.       Availability of the currency in the ATM

Though the availability situation has improved, but overall the answer to this remains as “NO”.

2.       Can handle the required load (capacity) – The systems still do not have the sufficient capacity to address the needs of the users:

a.       Sufficient new currency is not available to the banks

b.       Printing press do not have the capacity to meet the demand and no stock was planned for (printed) based on the demand that would come-up post demonetization

c.       Insufficient capacity to route the currency stock to banks, to bank’s branches and fill the ATMs

My answer to this question remains as “NO”.

3.       Continuity issues addressed? – There was no continuity of services post demonetization; Users have suffered considerably.

My answer to this question is “NO”.

4.       Security requirements addressed? – There is no direct security implication to the changed service. But the push for the outcome for digitization has some security concerns as host of people who have moved to digitization are not conscious or aware of the security implications that their device may expose them to. In a country where netizens are victims of many online frauds, exposing them (and many who have never even tried internet banking) to digital world directly (without any sort of awareness campaign) is a risky proposition.

My answer is “MAYBE” (since depending on the perspective the answer would be different)

Thus, I am of the perspective that the change in service does not provide the desired warranty and more so most of the warranty parameters are -ve.

Value Creation – Thus, the changed service has not created any value for the customers/users (citizens).

Nationalist feeling is the only thing which has created the perceived value till now; only time will tell whether the perceived value becomes a real value (utility and warranty is achieved) or the patience of the customers and users gives away.

Demand Management: Demand management has completely failed. The extent of impact of demonetization on demand is well beyond RBI and the banks. Following are some of the key demands that went unaddressed:

1.       Demand for new currency notes

2.       Demand for printing paper

3.       Demand for ink (for printing currency notes)

4.       Demand for ink (for marking on fingers) – temporary as the decision to mark the fingers was rolled back but it did trigger some corrective measures by the concerned manufacturing company

5.       Demand for logistics & manpower related to transporting notes from printing press to RBI

6.       Demand for logistics & manpower related to transporting notes from RBI to Banks

7.       Demand for logistics & manpower related to transporting notes from Banks to their Branches

8.       Demand for logistics & manpower related to calibrating ATM machines

9.       Demand for logistics & manpower related to loading ATM machines

10.   Demand for human resources at bank’s branches to:

a.       Exchange demonetized currency notes

b.       Deposit demonetized currency notes

c.       Teller counter (currency withdrawal)

11.   Demand for new POS machines

12.   Demand for bandwidth:

a.       Telecom providers for POS transaction

b.       App/infra layers of banks to handle quantum of transactions – Transfer to eWallets; Transfer to other accounts, POS transaction and online transactions

c.       App/infra layers of eWallet companies to handle quantum of eWallet transactions

d.       Telecom providers’ data bandwidth for eWallet transaction

Since the change came as a major surprise for the stakeholders, they were not prepared to handle the surge in demand. There was no time to take any demand management related corrective actions or have the forecast/inputs for capacity management to manage the capacity specific demands. This thus also led to the failure of Capacity Management process as well as Availability Management process. All aspects related to having the services available was missed, resulting in a significant downtime for the service.

The situation became a self-created disaster with no Service Continuity Management process in place to handle the same. The service levels gave way to the ones that never existed. Timelines were committed to the customers but never really achieved. Normalized services still elude them.

Change Management and Release & Deployment Mgmt: All fundamentals of the two processes were completely forgotten. Even in case of strategic changes concerned stakeholders are involved to ensure that the release and hence the change is successful. But unfortunately, GoI and RBI completely forgot the key to a successful change –concerned teams including its suppliers/partners and ones that supports the entire value chain enabling constituting and delivering the service.

Since the entire approach was reactive, the proactive part to eliminate incidents and to create the proactive service delivery environment has been completely overlooked so far.

Thus, I see demonetization as a classic example of complete collapse of the principles of service management.

Note: Concepts of ITIL® has been extrapolated to Service Management. 

5 Steps To Create A Proactive IT Organization

Host of IT organizations are reactive. Result is that most of the resources, including the critical ones, are always involved in fire fighting. This leads to:

•          Increased support cost
•          Poor CSAT
•          Customer attrition
•          Poor staff morale and satisfaction
•          Staff attrition

Management always talks about pro-activeness, but in a majority of organizations that I have come across, I felt that such 'commitment' was only vocal or only when there has been a severe customer escalation.

Employees have a feeling 'Proactive...Huh!!!'

The definite requirement for even thinking about creating a proactive IT organization is MANAGEMENT COMMITMENT...a real commitment and not simply a vocal one.

Now a question arises - "Got Management Commitment. Now WHAT???"

Following steps would help you turn your reactive IT organization into a proactive one:

Step 1: Implement Pro-active Problem Management

An effective problem management will ensure that similar incidents are eliminated or at worst minimized. Techniques like Pareto Analysis, Fishbone Analysis, 5 Why, Kepner Tregoe, FMEA and Fault Tree Analysis help in driving Problem Management. While analyzing the trends, a problem manager has to ensure analysis of the following data:

(a) Incident data: To identify incidents that could possibly be because of a problem associated with one of the parent CIs, or identifying trends which could possibly be pointing to a potential problem.

(b) Event data: To analyze event trends that could be pointing to a potential problem.

(c) CI status: To analyze CIs those have undergone frequent maintenance. They can point to a potential problem.

Step 2: Fortify Event Management

If event management is not implemented, then the first activity here would be to implement the same. Subsequently we need to fortify event management through intelligent ticketing. This would drive organization towards proactive incident management where a potential incident is identified and resolved even before it occurs.

Step 3: Implement Preventive Problem Management

A highly matured proactive problem management is towards preventing the problem itself and this is what I refer to as Preventive Problem Management. Ascertain that problem manager has a key role in CAB and that he/she ensures that a change is assessed not only for success of the release but also for potential incidents or problems that the release might lead to. Thereafter, approve changes only when such incidents or problems are eliminated from the release or in worst case resolution identified and KEDB updated.

Step 4: Implement Capacity Management

If capacity is not effectively and pro-actively managed it not only has an impact in terms of inadequate (more or less) capacity but even leads to incidents and problems (in cases where capacity is less). An effective capacity management contributes a lot towards a proactive IT organization and eliminating capacity related downtime.

Step 5: Implement Availability Management

Does meeting your incident SLA mean that your availability SLA is met? No. Not at all!!! Even if you have met your entire incident SLAs, there is likelihood with a high probability that your availability SLA is breached and this probability is near to one for a reactive organization. To minimize or make this probability zero, you need to drive your organization towards pro-activeness and availability management is a key process here. Implementing this process would ensure that your services are designed to provide the committed availability levels and your organization starts to work proactively in this direction.

'DIMAICR': A 6 STEP APPROACH TO IMPLEMENT CAPACITY MANAGEMENT IN YOUR ORGANIZATION

STEP 1: Define

• Define Capacity Management process
• Identify team responsible for capacity management
• Train relevant team members
• Establishing capacity requirements to meet service level requirements of new or changed services
• Map future business requirements
• Through periodic consultation with business stakeholders
• Translate business requirements into IT requirements
• Forecast IT requirements
• Forecast component capacity requirements considering current capacity utilization and performance
• For forecasting use techniques like trending, application and/or service sizing, capacity modelling, etc.
• Map technology needs:
• Research for emerging technologies and products
• Consider relevant emerging technologies and products as an alternative mean to efficiently and effectively meet IT capacity requirements considering cost, performance and other significant aspects
• Prepare and maintain an up to date Capacity Plan
• Conduct periodic reviews

STEP 2: Implement

• Implement Capacity Management process
• Deploy a Capacity Manager
• Responsible for process management and publishing periodic reports
• Identify all critical services
• Identify CIs mapping to these critical services
• Mark these CI as critical
• Capacity Plan

STEP 3: Monitor & Analyze:

• Collect capacity and performance data (like utilization, response time reports etc.,)
• Identify capacity/performance issues
• Identify underutilized and over utilized components
• Analyse collected data to identify current or potential capacity and performance issues
• Corrective actions

STEP 4: Improve:

• Propose & implement corrective actions in order to prevent business impact due to poor performance or lack of capacity; Corrective actions could be:
• Performance tuning
• Redeploying under-utilized capacity
• Procuring additional capacity
• Influencing demand
• Access. manage and improve capacity management process
• Cost optimization techniques

STEP 5: Control:

• Perform risk assessment , identify and implement mitigation options
• Maintain a risk register
• Analyze and resolve capacity related incidents and problems
• Analyze impact of changes and implement related recommendations

STEP 6: Report: Periodically report on-

• Corrective actions
• Performance of resources
• Resource utilization
• Capacity projections vs. utilization
• Issues with/due to capacity management
• Process performance

KPI: Capacity & Demand Management

KPI Definition	Unit of Measure	Frequency	Remarks
Number of capacity related incidents resulting in unavailability of service / resource	Count	Monthly	This KPI highlights poor capacity planning and/or capacity management.
Number of problems for which the root cause has been identified to be a capacity issue	Count	Monthly	This KPI highlights poor capacity planning and/or capacity management.
Number of incidents based on Capacity problems related to Demand Management (market changes, unattended customer need, etc.)	Count	Monthly	This KPI highlights poor demand management.
Percentage of PBAs analyzed and tracked by demand management	%	Monthly	This KPI provides information regarding effectiveness of demand management in determining the PBAs. Ideally all business activities should be tracked.
% Deviation between predicted demand and actual demand	%	Monthly	This KPI signifies the effectiveness of demand management in projecting future demand. Negative deviation (actual demand more than predicted demand) would possibly lead to unavailability of business services and would signify an ineffective demand management process.
% of time when resources wasn’t used or was used below a minimum demand value (expected utilization level), i.e. underutilized	%	Monthly	This KPI signifies the effectiveness of demand management in effectively projecting future demand. This KPI also signifies the effectiveness of capacity management in effectively projecting future capacity requirement.

Future Of ITSM Industry

Today, we see that business strategy is not only driving IT strategy but in some cases are being driven by IT Strategy. In future we will see these ‘some cases’ becoming ‘many cases’. This would be a time when IT would be integrated with business. We have already seen this shift of focus from ‘alignment’ to ‘integration’ in ITIL V3. Also, this would enable IT to effectively address the continuous evolution of organizations and their policies. 

One of my earlier blog has covered how integration of IT with business can happen. 

I believe the future of IT would be driven by some of the key ITIL processes or some specific areas of the same that has not been in much focus across majority of organizations. Also, the tools that would be enabling these processes or areas and facilitate real time decision making would drive the business of Software Product Companies who have such tools in their product catalog. 

Some key areas that would drive the future of ITSM industry would be: 

• Analytics: We have data everywhere. But today the reports or data analysis is predominantly being used to measure vendor performance and in other cases initiate service improvement plans (SIPs). We rarely see the ITSM data driving business decisions. Analytics would be a key for business enabling them to make real time decisions. 
• Automation: According to Forrester, “Service Management and Automation” is one of the key things for future. Automation would drive customer-centric, service-focused, and automated IT operations. It would reinforce the fundamental that customers and services always come first. Besides, automation will allow IT organization’s support and delivery of IT services to be faster, cheaper, and of a higher quality. 
• Proactive IT organizations: Currently we see that majority of IT organizations are highly reactive. Future IT organization would be highly proactive ones. 
• Some ITIL processes would gain importance or would address some key areas which are not being effectively addressed in IT organizations today: 
• Strategy For IT Services and Demand Management processes would enable organizations to innovate and plan to outpace competitors and meet demand.
• Financial Management would ensure that value of IT services are defined and managed. It would act as a decision making process for development and delivery of IT services. It would gain even more importance in cloud environment since charging units, charge per unit and cost per charging unit has to be effectively determined besides billing the customer (and customer’s customer) based on consumption. 
• Business and Service Capacity Management would gain prominence. Currently many organizations are managing capacity only at component level, i.e. they are having only component capacity management in place. 
• Change Management and Service Asset & Configuration Management processes would have more emphasis on focusing Services as CIs and Service Changes (Practically Service is not being recorded as a CI by many IT organizations) 
• Knowledge management would drive automation of management, control and facilitation of knowledge capture and sharing. 
• Proactive problem management, not effectively followed in many IT organizations, would drive pro-activeness. 
• Continual Service Improvement would gain focus so as to continually improve service performance and quality besides process efficiency and effectiveness