ServiceDesign

Service

ITIL

ServiceStrategy

ServiceOperation

ServiceDesign

Continual ServiceImprovement

ServiceTransition

ITIL V3 Core Framework – Service Strategy

Service Strategy Planning and implementation of IT Service Management practices and their alignment to business needs.

Service Strategies (SS)

SS will appeal to those who have the need to understand strategic analysis, planning, positioning, and implementation with respect to service models, strategies and strategic objectives.

It provides guidance on how to leverage service management capabilities that can effectively deliver value to customers and capture value for service providers.

Decisions about service portfolios, capability development, operational effectiveness, organizational models and the importance of knowledge assets are some of what Service Strategies will provide guidance on.

Main Target Audience:– Senior Leadership of customers and service providers.

Main Influencers:– Service Managers and operations managers.

Service Strategy (SS) – Key Terms

Business Case : Justification for a significant item of expenditure

Capability : The ability of an organization, person, process, application, Configuration Item, or IT services to carry out an activity.

Process Values : A process is a set of coordinated activities combining in order to produce an outcome, which, directly or indirectly, creates value for an external customer or stakeholder.

Resource : A generic term that includes infrastructure, people, money or anything else that might help to deliver an IT service.

Risk : A possible event that could cause harm or loss, or affect the ability of achieved objectives.

Service Catalog : A database or structured document with information about all live IT services, including those available for development.

Service Portfolio : The complete set of services that are managed by a service provider.

Service Strategy (SS) – Key Terms

Utility : Functionality offered by a product or service to meet a particular need.

Warranty : A promise or guarantee that a product or service will meet its agreed requirements.

Service Utility : The functionality of an IT service form the customer’s perspective.

Service Warranty : Assurance that an IT service will meet agreed requirements.

Value Chain : A sequence of process that creates a product or service that is of value to a customer.

Value Network : A complex set of relationships between two to more groups or organizations.

Value

Service

“A means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.

What creates VALUE?– The value of a service resides in the combined effects of two criteria:

Its Utility Its Warranty

Utility & Warranty

Utility – Fitness for purpose

• Functionality offered by a Product or a Service to meet a particular need.

•Utility is often summarized as “what it does”.

Warranty- Fitness for use

• A promise or guarantee that a Product or a Service will meet its agreed requirements (”how it is done”).

• Characteristics of warranty are defined in terms of Availability, Capacity, Continuity and Security.

Capability & Resources

Service Management is a set of specialized organizational capabilities for providing value to customers in the form of services.

Capability is the ability of an organization, person, process, application configuration item or IT services to carry out an activity.

Resources is a generic term that includes IT infrastructure, people, money or anything else that might help to deliver an IT service.

Capabilities & Resources

Service Assets & Stragegic Assets

Service Assets : A Service Asset is anything that could contribute to the delivery of an IT service.

A Service provider’s capabilities & resources

People, Processes, Knowledge and Infrastructure

Strategic Assets

Service Assets that support strategic objectives

Service Management is a strategic asset

Assets Types

An IT organization owns 9 types of assets:– Management

– Organization

– Process

– People

– Knowledge

– Information

– Application

– Infrastructure

– Financial Capital

Service Provider Types

There are many different strategies and service providers within the organization.

There are 3 main types of service providers which are:

Type I– Internal Service Provider

Type II– Shared Services Unit

Type III– External Service Provider

Type I - Internal Service Provider

Internal Service Provider is normally part of the enterprise that is serves.

This type of service provider exists or can exist within an organization solely in order to deliver service to one specific business unit

Typically it is funded as an overhead allocation against the Business Units it supports.

Its objective is to provide cost-optimized services in support of technology-enabled business processes.

Type II - Shared Service Unit

Shared Services Provider is typically grouped with other functions shared across the enterprise.

Dedicated to service multiple business units in the same organization

While providing its services to the enterprise it is in a position of being forced to compete directly for its customers

Often Shared Services are not considered strategic to the enterprise so do not enjoy many of the same protections as an Internal Service Provider might.

Type III - External Services Unit

External Service Provider is not part of the enterprise

This service provider is the wider one and operates as an external service provider serving multiple external customers

It provides IT services to the business for a fee

It is able to lower costs through the aggregations of demand for it service by a number of different customers. While this allows it to drive down costs, it limits its flexibility in situations that require flexibility in the functionality of its services

Service Structure

Value Chain– Vertical Integration & Coordination of Dedicated Assets

Value Network– Relationships That Generate Value

Dynamic Exchange Two or More Organizations

Service Strategy Fundamentals

Deal With Complexity, Uncertainty & Conflict

Discern Patterns & Project Trends

Consider All factors & Their Relationships

Understand Underlying Principles & Basic Theory

Processes - Service Strategy

Strategy Generation

Service Portfolio Management

Financial Management

Demand Management

Strategy Generation

Strategy Generation delivers guidance on formulating a Service Strategy in terms of all life cycle phases

To ensure the four main activities of the Strategy Generation process are performed to ensure long term success for the customer.

The 4 Ps of Strategy

All key concepts to Service management strategy can be allocated to one of four strategy area's

The four P's of Strategy are :

Perspective– Have a clear vision & focus

Position– Take a clearly defined stance

Plan– Form a precise notion on how the

organization should develop itself

Pattern– Maintain consistency in decisions &

actions

Strategy

Perspective

Plan

PositionPattern

The 4 Ps of Strategy

Perspective: where the service strategy is articulated as a mission statement or vision statement.

Position: where the service strategy is expressed in a specific way that allows comparison between competitors.

Plan: where the service strategy is asked as a question.

Pattern: where the service strategy is defined as a consistent set of activities to be performed in a defined period of time.

Strategy Generation – Main activities

Four main activities of the Service Strategy process are:– Define the Market

– Develop the offerings

– Develop Strategic Assets

– Prepare for Execution

Define the market

Develop Offerings

Develop Strategic Assets

Prepare for execution

Define the Market

Customers and Opportunities– To understand the customers and opportunities in terms of services.

Understand the Customer– How to provide value?– Enable / enhance the performance of business assets better

outcomes Understand the opportunities

– Are there poorly-supported outcomes? Which outcome could be improved?

– Establish relationships : service assets and customer outcomes

Classify & Visualize the Services– Classify and visualize the services offered by the IT organization based on how they

provide value for a specific Customer asset.

Develop the offerings

Market Space– A Market space is a set of opportunities for service providers to deliver value( by

enabling or facilitating the outcomes)

Definition of Services– A clear service definition should specify:

The context in which the resources apply The business outcomes that justify the expenses from a customer perspective.

Breakdown the service components– Breakdown the service components into discrete elements

Actionable tasks that can be assigned to different groups within the IT organization.

Develop Strategic Assets

Strategic Assets – Set of distinct capabilities that provide superior value to customers through services

– Distinctive performance, core competence and durable available of an IT organization

Service Provider depends on its Strategic Assets to succeed

Prepare for Execution

The aim of this activity is to formulate a Service Strategy in terms of:– Service Portfolio– Service Design requirements– Service Transition requirements– Service Operation requirements

Service strategies are executed by delivering and supporting the Service Portfolio. – The aim of the Service Portfolio is to fulfill the present and future needs of the business and therefore contains

all the present and future commitments made to customers with respect to specific services.

Service Portfolio

The Service Portfolio represents the commitments & investments made by a service provider across all customers and market spaces and may include third-party services.

The Service Portfolio includes the service catalogue and the service pipeline.

Elements of the Service Portfolio:– Value proposition

– Business Case

– Priorities

– Risks

– Costing and pricing

Service PortfolioService pipeline Service Catalogue Retired Service

Service Portfolio Methods

The Service Portfolio should answer the following questions:– Why should a customer buy these services?

– Why should they buy these services from us?

– What are the pricing or chargeback models?

– What are our strengths and weakness, priorities and risk?

– How should our resources and capabilities be allocated?

The Service Portfolio represents a complete list of the services managed by the service provider.

– Some of these services are visible to the customers (Business Services, defined by SLAs), while others are not (Infrastructure Services, defined by OLAs or UCs).

Service Portfolio Management

Objective: To decide on a strategy to serve customers, and to develop the service provider's offerings and capabilities.

Service Portfolio Management consists of four activities– Define

Deals with collecting information from all existing services as well as every proposed service.

Every existing (or future) service in the portfolio should include a business case. – A business case is a model of what a service is expected to achieve.

– Analyze The information gathered during “Define” process step is revised to maximize the portfolio

value, to align and prioritize and to balance supply and demand.

– Approve proposals/plans of this future state/development path per service are authorized or rejected.

– Charter Start with a list of decisions and actions items. After communicating them clearly the

organization, these are then correlated to budgetary decisions and financial plans.

KPIs - Service Portfolio Management

Key Performance Indicator (KPI) Definition

Number of Planned New Services Percentage of new services which are developed, being triggered by Service Portfolio Management

Number of Unplanned New Services Percentage of new services which are developed without being triggered by Service Portfolio Management

Number of Strategic Initiatives Number of strategic initiatives launched from the Service Portfolio Management process

Number of New Customers Number of newly won customers

Number of Lost Customers Number of customers which were lost to competing service providers

Financial Management – Objectives & Scope

Objectives of Financial Management– To account for running IT

– To facilitate accurate budgeting

– As a basis for business decisions

– Balancing cost, capacity and SLRs

– To recover costs where required (Charging)

Scope of Financial Management– Budgeting (mandatory)

Forecasting, control and monitoring of expenditure

– IT Accounting (mandatory) Enables IT to account for where money is spent on running the department and providing

services

– Charging (optional)

– Billing customers for services

Budgeting & IT Accounting

Budgeting– The process of predicting and controlling the spending of money within the enterprise -

consists of a periodic negotiation cycle to set budgets, usually annual, and the day-to-day monitoring of the current budgets.

IT Accounting– The set of processes that enable the IT organization to fully account for the way its money is

spent, particularly the ability to identify costs by customer, by service or by activity. It usually involves ledgers and should be overseen by someone trained in accountancy.

Charging– The set of processes required to bill a customer for the services supplied to them. To achieve

this requires good IT Accounting, to a level of detail determined by the requirements of the analysis, billing and reporting processes.

Billing– Bills must be:

Simple Understandable Justifiable

Different Cost Elements

ITIL distinguishes several major Cost Types.

These Cost Types are in a way the categories where an organization can spend money on.

The following Cost Types are identified:– Hardware

– Software

– People

– Accommodation

– Transfer

– External Services

Cost Elements

Major type Cost Elements Hardware Servers, storage, workstations, laptops,

PDAs, printers, networks

Software Operating systems, applications software, utilities

People Recruitment, employment costs, benefits, cars, relocation costs, expenses, training

Accommodation Offices, power, lighting, water, storage, secure areas

External Services

Internal charges from other cost centres within the organisation

Transfer

Security services, IT Service Continuity services, outsourcing services

The IT Accounting System — Cost Models

Cost Classification– Fixed and variable

– Direct and Indirect (absorbed and unabsorbed overheads)

– Capital and Operational (Revenue expenditure)

– Depreciation

Cost Units

Cost Centers

Monitoring

Classification of Cost Elements

Fixed Costs – Costs that cannot be influenced; they will be the same even when services will stop

Variable Costs – Variable Costs follow changes in business activity. E.g. overtime; consumables; telecom charges; fees for

contractors

Direct Costs – Costs that can be allocated to one specific department or service like some application software; dedicated

hardware

Indirect Costs– Costs that can not be allocated to one specific department or service but that have to be divided among more

departments and/or services

Capital Costs – Costs applying to the physical (substantial) assets of the organization.

Operational Costs– Costs resulting from the day-to-day running of the IT, e.g. staff costs, hardware maintenance and electricity

Depreciation– A noncash expense that reduces the value of an asset as a result of wear and tear or age

Cost Units

A cost unit is the basic unit of service that a customer will use or be charged for.

Cost units need to be items that can easily be measured or seen by the customer. The different types of cost will be calculated and allocated or apportioned to cost units.

A simple calculation will include the following steps:– Identify the direct costs of the service

– Apportion the indirect costs

– Add the two figures together

– Divide by the projected number times that service will be used (e.g. number of transactions)

– Add any variable cost

Cost Centers

There are 3 types of accounting organization in ITIL:

Accounting Center – This type of organization simply identifies the costs of providing service, and may do some

budgeting. The focus is on measuring performance and conducting investment assessment.

Recovery Center – This is where the organization analyses its full expenditure and investments so that they can be

recovered from the customers – usually in some form of charging. The main focus is on making customers aware of the true costs of using services.

Profit Center– This is where the IT department acts as a business in its own right, although its objectives are

set by the organization as a whole. This does not always imply that the department has to make a profit.

Demand Management

Objectives:– Minimize uncertainty in demand

– Provide reliable planning data for Capacity Management

– Avoid unused excess capacity and insufficient capacity

Demand Management

Activity Based

Business Activity Patterns & Users

Service package– Core & Supporting Services

– Differential Offerings

– Service Level Packages

– Segmentation