Service

Strategy
Agenda/Learning
Objectives
• Primary goals &objectives of Service
Strategy
• Generic concepts & definitions:
– Utility & Warranty
– Resources and Capabilities
– Three types of ServiceProvider
– Risk
– The Service Portfolio (and the Service
Catalogue)
– The Business Case Information Technology Learning
– Service Assets as the basis of Value Creation
Agenda/Learning
Objectives
• Processes and Activities
– 4 Main activities of ServiceStrategy
• Define market
• Define offerings
• Develop strategic assets
• Prepare for execution
– Processes – Objectives, basic concepts &
roles
• Service Portfolio Management
• Demand Management
• Financial Management of ITServices
Information Technology Learning
Goal of Service
Strategy
• To establish the overall strategy for
both IT Services and IT Service
Management
– The aim being to develop IT Service
Management, as strategic asset
• To define the market for new
services,design and catalogue the services
themselves, and understand how these
services will create value for customers
Information Technology Learning
Primary Goals &
Objectives
Service
Strategy
Primary
Goals
• To establish the overall strategy for both IT Services
and IT Service Management
– The aim being to develop Service Management, not
just an organisational capability but as a strategicasset
• To define the market for new services, design and
catalogue the services themselves, and understand how
these services will create value for customers
• Provides underpinning principles to assist in developing
– Policies
– Guidelines
– Processes

Information Technology Learning

The
Framework
Requirements The
business/customers
Objectives
from
Service Resource Requirements
&
Policies Constrain
ts
Strateg Strategies
y

Information Technology Learning

Objectiv
es
• What services should we offer and to whom?
• How should we define servicequality?
• How can financial management provide visibility and
control over value‐creation?
• How do we:
– differentiate ourselves from competing alternatives?
– truly create value forcustomers?
– capture value for stakeholders
– choose between different pathsfor improving service quality?
– efficiently allocate resources across a portfolio ofservices?
– resolve conflicting demand for sharedresources?
– make a case for strategicinvestment?

Information Technology Learning

Key Generic Concepts &
Definitions
Service
Strategy
Creating Service
Value
• From the Customer’s perspective,
valuehas two facets:
– Utility – is functionality offered by a product
or service from the customer’sperspective
– Warranty – is a promise or guarantee
that a product or service will meet its
agreed requirements. This may be a formal
agreement such as Service Level Agreement
or Contract

Information Technology Learning

Utility &
Warranty • WHAT the customergets
• e.g. Reducing constraints
• Increases the performance
average

• HOW the service isdelivered

• e.g. Available when needed/
sufficient capacity as
required
• Reduces the performance
variation
Information Technology Learning
The 3 Type of
ServiceProviders
• Type 1 providers
– Are typically embedded within a business unit and
there may be several service providers in an
organisation
• Type 2 providers
– Provide shared services to several business units
• Type 3 providers
– Provide services to externalcustomers

It is a strategic decision to determine the

basic service provider type for an
organisation Information Technology Learning
Type 1
Providers
• Service can be highly customised and resources are
dedicated to provide relatively high servicelevels
• Their growth is limited by the growth of the business unit
(BU) they belong to
• Each BU may have its own Type 1 Provider
• The success of Type 1 Provider is not measured in terms of
revenues or profits as they tend to operate on a cost‐
recovery basis with internal funding
Business unit1 Business unit2

Service Service
Provider Provider

Organisation

Information Technology Learning

Type 2 Providers
(SharedServices)
•Functions such as finance, IT, are not always at
the core of an organisation’s
competitiveadvantage
– The service of such shared functions can therefore
be consolidated into an autonomous special unit
called a shared services unit (SSU)
– They can leverage opportunities across the enterprise
and spread their cost and risks across a wider base
Business unit 1 Business unit2

Service Provider

Organisation

Information Technology Learning

Type 3 Providers
(ExternalSP)
• Certain business strategies are not adequately served by
internal service providers (Type 1 or Type 2), and customers
may pursue sourcing strategies requiring service from
external providers

Business unit3
Business unit1 Business unit2
External
Service Business unit1
Business unit2
Provider
Organisation 1 s Organisation 2

Information Technology Learning

Service
Packages

Information Technology Learning

Ris
k
•Service reduce risk to the customer’s business
but they also transfer risk to the service
provider
– e.g. by maintaining and operating service assets so
that customers do not have to, the service providers
is assuming risks associated with those assets
– Customer compensate service providers
forthese transferred risks in many ways(e.g.
payment)
– Addition or changes to the customer portfolio should be
preceded by an evaluation of risk that the service
provider is willing to assume on behalf of the
customer Information Technology Learning
Service Assets (Resources
&Capabilities)
• Service Assets are used by organisations to
create value in the form of goods and
services
Capabilities Resources

Management Financial Capital

Organisation Infrastructure

Process Applications

Knowledge Information

People
Information Technology Learning
Activities and
Processes
Service
Strategy
Main
Activities
Define • Look at what the business needs
the and what it doesn’t need
Market • Develop strategies to
satisfythe business needs
Develop
the • Focus on using services to
Offerings create business value

Develop • Select the appropriate

StrategicAsse strategyto deliver services
ts
Information Technology Learning

Prepare for
Service Portfolio
Management
Service
Strategy
Service Portfolio
Management
• A Service Portfolio
describesprovider’s services in
terms of businessvalue
– Includes the complete set of services managed
by a Service Provider
– These portfolios are used to articulates business
needs and the provider’s response to those
needs
• Service Portfolio Management is the
process responsible for managing the
ServicePortfolio Information Technology Learning
The Service
Portfolio
• The Service Portfolio should
forma comprehensive Service Service Knowledge Management System

Knowledge Management System Service Portfolio

(SKMS) and registered as a Service Lifecycle

document in the Configuration ServiceStat

us
Management System (CMS) Requirement
s Defined
Service
Pipeline
Analysed
• The Service Portfolio should Approved
Chartered
contain information relating to
Viable
Designed section
Developed of the
Service
everyservice and its current status Built Service
Catalogue Portoli
Test o

within organisation Released

Operationa
Retired
l

Information Technology Learning

The Service
Portfolio
Service Pipeline
Service Portfolio
Service
• Requirements Catalogue
• Description Service Description
• Value proposition Functional
Specifications Business
• Business cases English Options
• Priorities Gold,
• Risks Silver,Bronze
Customizations
• Offerings and Availability times
packages (Price list)
• Cost and pricing
Retired Service
Information Technology Learning
Service
Catalogue
•Is the subset of Service Portfolio visible to
Customers
– ‘Menu’ of presently active and approved services
(status between “chartered” and “operational”)
– It is the virtual Projection of the service provider’s
actual and present operational capabilities
– Acquisition portal for customers
• Pricing, service‐level commitments & terms of
serviceprovisioning
– Communicates and defines
• Policies, guidelines and accountability
– A subset of the Service Catalogue may be third‐
party or outsourced services Information Technology Learning
Service
Catalogue
Busines • Contains detail of all the IT services delivered to the customer

s • It includes the relationships to the business units and the

business process that rely on the ITservices

Catalogu
Service
e
Technic • Underpins Business Services Catalogue – not part of customer
view

alServic
• Detail relationships to supporting services, shared services,
components & CIs necessary to support provision of service to
the business

e alogu
• Facilitates development of SLAs, OLAs &Ucs
• Identify technology required to support aservice
• Identify support group(s) that supportcomponents

e
Information Technology Learning
SPM ProcessSteps
• Define (Create the Service Portfolio)
– Collecting information from all existing Defin
Analyse
e
services (Inventory services) as well
asevery proposed service
– Ensure all existing and proposed
serviceshave business cases and validate
portfoliodata
– The cyclic nature of SPMprocess set
Approv
means that this phase not only creates
an initial inventory of services, but
validates thedata on a recurring basis
e

Charter

Information Technology Learning

SPM ProcessSteps
• Analyse (Where strategic intent
iscrafted Defin
Analyse
e
– Where do we want to be?)
– • What
Beginarewith
the long‐term goal of the
a set top‐downquestions:
service organisation?
• What services are required to meet
those goals?
• Whatcapabilities and resources are required for
the organisation to achieve thoseservices? Approv
• How wil we getthere?
– The answers to these questions guide not
only the analysis but also the desired e
outcome of SPM
Charter

Information Technology Learning

SPM ProcessSteps
• Approve
– This is where deliberate approval or Defin
Analyse
e
disapproval of the future stake
(wherewe wan to be) takeplace
– With approvals come the corresponding
authorisation for new services
andresources
– The outcome for existing services fall
Approv
intothe
• Retainfollowing categories:
• Replace
• Rationalis
e e
• Refactor
• Renew
Charter
• Retire

Information Technology Learning

SPM ProcessSteps
• Charter
– Decisions to charter should becorrelated Defin
Analyse
e
to budgetary decisions and financialplans
– Communicate decisions and
allocate resources
– Newly chartered services are
promotedto Service Design and existing
serviceare refreshed in the Service
Approv
Catalogue
• Refreshing Portfolio
– Conditions and marketchange e
– Some services may no longer be optimal due
to compliance or regulatoryconcerns Charter
– Events occur as Merger and Acquisitions, divestures,
new public legislation or redeployedmissions
Information Technology Learning
The Business
Case
• The Service Portfolio outlines the strategic
information for all services and will include the
high level business case for the services and for
the Service Strategy as awhole
• A Business case is decision support and
planning tool that projects the likely
consequences of a business action
– The business case for each Service would be contained within
the Service portfolio
– Is a justification for a significant item ofexpenditure (incl.
information about cost, benefits, options, issues, risks,
andproblems)
Information Technology Learning
The Business Case
Structure
A. Introduction
Present the business objectives addressed by the
servicemanagement initiative
B. Methods andAssumptions
Defines the boundaries of the business case, such as time period,
whose costs and whosebenefits
C. Business Impacts
The financial and non‐financial business caseresults
D. Risk and Contingencies
The probability that alternative results will emerge
E. Recommendations
Specific actions recommended

Information Technology Learning

 Common Business
Objectives
Operational
Shorten development time
Increase productivity
Increase capacity
Increase reliability
Minimize risks
Improve resource utilization
Improve efficiencies
Financial
Improve return on assets
Avoid cost
Increase discretionary spending as
a percentage ofbudget
Decrease non‐discreationary spending
Increase revenue
Increase margins
Keep spending to withinbudget
Strategic
Establish or enhancestrategic
positioning
Introduce competitive product
Improve
professionalismof
organization
Improve customer satisfaction
Provide better quality
Provide customized offering
Introduce new productsor
services
Information Technology Learning
Industry
Increase marketshare
Increase marketposition
Increase repeat business
Take market leadership
Recognized as producer of reliable or
quality products orservices
Recognized as lowprice leader
Recognized as compliant to
industry standards
Single Business Impact toMultiple
Business Objectives
Business Impacts Business
Objectives

Lower Costs
Tangible Measure:
Service Delivery
Cost Target:
Improve Lower SD costs by
Maintainabilit Customer
30% MTRS Satisfaction
y Tangible Measure:
MTTR (Meantime
Tangible to Repair)
Measure: Repeat Rate of
Impact: Business Target:
MTTR to 2 hours from 6 Improve rate to 60%
hours from 25%
Market Image
Tangible Measure:
Customer quality
survey Target:
Improve Industry
ranking to 1st from 3rd
Information Technology Learning
Multiple Business Impact toSingle
Business Objectives
Business Impacts Business
Objectives

Improve Reliability
Tangible Measure:
MTBF (Meantime BeforeFailure)
Impact:
MTBF from 200 hours to 600 hours Customer
Improve Maintainability
Satisfaction
Tangible Measure:
MTTR (Meantime to Repair) Repeat
TangibleRate of Business
Measure:
Impact: Target:
MTTR to 2 hours from 6 Improve rate to 60% from
hours 25%
Improve Services
Tangible Measure:
Product orders now can be
placedonline Impact:
Product order available 24x7

Information Technology Learning

Demand
Management
Service
Strategy
Demand
Management
• Demand Management is a critical
aspectof service management
– Excess capacity generates cost
withoutcreating value
– Insufficient capacity has impact on the quality
of services delivered and limits the growth of
the service
– Poorly managed demand is a risk for service
provider because of the uncertainty in
demand
Information Technology Learning
User Profile vs. PBA
(samples)
User Profile
Senior executive
Applicable PBA
Moderate travel‐domestic and overseas; highly sensitive information; zero
PBAcode

45F;45A;35D latency on service requests; high need for technical assistance; need to be
highly available to thebusiness

Highly mobileexecutive Extensive travel‐domestic and overseas; sensitive information; low latencyon
45A;35D;22A service requests; moderate need for technical assistance; high customer
contact; need to be highly available to customers

Office‐based staff Office‐based administrative staff; low travel‐domestic; medium latency on

22A;14B;3A service requests; low need for technical assistance; full‐featured desktop
needs; moderate customer contact; high volume of paperwork; need to be highly productive during
workhours

Payment processingsystem Business systems; high volume; transaction‐based; high security needs; low
12F latency on service requests; low seasonal variation; mailing of
document by
postal service; automatic customer notification; under regulatorycompliance; need for low unit costs;
need to be highly secure and transparent (audit control)

Customer assistance process Business process; moderate volume; transaction‐based; moderate security
24G;10G needs; very low latency on service requests; medium seasonal variation;
mailing of replacement parts by express; automatic customer notification; need to be highly responsive
tocustomers

Information Technology Learning

Objectiv
es
• Reduce risk of unavailability because
poorly managed demand
• Managecost & create value through
reducing exces capacity
• Balance supply & demand ofresources
• Ensure quality of service ismaintained
with sufficient capacity

Information Technology Learning

Key
Activities
• Monitor overall demand and capacity
• Manage capacity potential of
individual resources
• Respond to changing Patterns
ofBusiness Activity (PBA)
– Frequency, Volume, Location,Duration
• Work with SLM (and Financial Management)
to devise appropriate penalties and
incentives to influence demand
(consumption) Information Technology Learning
Financial Management of IT
Services
Service
Strategy
Financial
Management
• Provides the business and IT with the
quantification, in financial terms, of
thevalue of IT services, the value of the
assets underlying the provisioning of those
services, and the qualification of
operational forecasting

Information Technology Learning

Objectiv
es
•Provides Business and IT with the quantification
in financial term of:
– Value of ITservices
– Value of the underlying asset that provide the
service
– Qualification of operational forecasting
• Work together with Business and IT
to:
– Identify and Document costs and benefits
– Agree the value of services being received
– Enable demand modeling
andmanagement Information Technology Learning
Service
Valuation
• Combined with Service Level Management,
Service valuation is the means to mutual
agreement with the business regarding
whata service is, what its components are,
and its actual cost or worth.
• There are two aspects to beconsidered
– Provisioning Value – is the actual underlying
cost to IT related to providing aservice
– Service Value Potential is the ‘value‐add’

Information Technology Learning

Provisioning
Value
• Provisioning Value is the actual underlying cost to IT
related to providing a service
• The sum of these actual service costs typically represents
the baseline from which the minimum value of a service
is calculated
• These cost types include items suchas
– Hardware and software licensecosts
– Annual maintenance fees for hardware andsoftware
– Personnel resources used in the support or maintenance of a
service
– Utilities, data center or another facilitiescharges
– Taxes, capital or interest charges
– Compliance costs
Information Technology Learning
Service Value
Potential
• Service Value Potential is the value‐added
component based on the customer’s
perception of value from the service or
expected marginal utility and warranty
from using the service in comparison
with what is possible using the
customer’s ownassets

Information Technology Learning

Service Valuation
Structure
Service
value
realization

Service Unlocked
• Service Value • Customer potential
value
Asset Potential assets • Desired
• Service level Outcom
e
performanc
Service Performanc
e designed
Provisioning e
& delivered
value potentital

Information Technology Learning

Learning Objectives –
Achieved?
• Primary goals &objectives of Service
Strategy
• Generic concepts & definitions:
– Utility & Warranty
– Resources and Capabilities
– Three types of ServiceProvider
– Risk
– The Service Portfolio (and the Service
Catalogue)
– The Business Case Information Technology Learning
– Service Assets as the basis of Value Creation
Learning Objectives –
Achieved?
• Processes and Activities
– 4 Main activities of ServiceStrategy
• Define market
• Define offerings
• Develop strategic assets
• Prepare for execution
– Processes – Objectives, basic concepts &
roles
• Service Portfolio Management
• Demand Management
• Financial Management of ITServices
Information Technology Learning