Service Strategy

Service Strategy - Section Overview & Objective

By the end of this session, you will be able to:

• State the goals, objectives & business value of service strategy.
• Purpose of Service strategy .
• Define service assets.
• Purpose of utility & warranty .
• Describe different types of service providers .
• Describe the sourcing structure or delivery strategies .
• Classify different types of service strategy processes .
• Explain Strategy Management of IT services .
• Describe service portfolio management process.
• Describe Financial management of IT services process.
• Describe Demand management process.
•
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Explain Business relationship management process.
Service Strategy - Goal, Objective and Business Value

Goal:

Service providers to operate and grow successfully in the long-term and provide the ability to think and act in a strategic
manner.

Objective:

Provide direction for Growth, Prioritizing investments and Defining outcomes against which the effectiveness of service
management may be measured.

Clear Direction
Prioritize Investments
Building Strategic Assets
Business Value:
Guides entire Service Design
Service Transition
Service Operation
Service Strategy – Why?

Service Strategy provides best-practice guidance for the service strategy stage of the ITIL service lifecycle.

Below are the questions which Service Strategy answers

What Services should we offer and to whom?

How should we define Service Quality?

How can Financial Management provide visibility and control over value creation?

How do we differentiate from competing alternatives?

Do we create value for customers?

Do we efficiently allocate resources across Service Portfolio?

How to make a case for strategic investment?

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Service Assets

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Value Through Utility & Warranty

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Utility is what the service does and Warranty is how it is delivered.
Service Providers - Types

Type I – Internal Service Provider

• They are the service providers that are dedicated, and often embedded within, an individual business unit.
• They have the benefit of tight coupling with their owner- customers, avoiding certain costs and risks
associated with conducting business with external parties.
• They focus on designing, customizing and supporting specific applications or on supporting a specific type of
business process.
• The success of Type I providers is not measured in terms of revenues or profits.

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Service Providers - Types

Type II – Shared Services Unit:

• Type II can offer lower prices compared to external service providers by leveraging
corporate advantage.
• They can standardize their service offerings across business units and use market-based
pricing to influence demand patterns.
• successful Type II service provider can find itself in a position where it is able to provide
its services externally as well as internally.
Service Providers - Types

Type III – External Service Provider:

• A Type III service provider is a service provider that provides IT services to external customers.
• The additional risks that Type Ill providers assume over Type I and Type II are justified by increased
flexibility and freedom to pursue opportunities.
• Customers may pursue sourcing strategies requiring services from external providers.
• The experience of Type Ill providers is often not limited to any one enterprise or market.
• They assume a greater level of risk from their customers compared to Type I and Type II.

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How to Define Services

Below are the steps to define services:

Step 1 • Define the market and identify customers.

Step 2 • Understand the customer.

Step 3 • Quantify the outcomes .

Step 4 • Classify and visualize the service .

Step 5 • Understand the opportunities (market spaces).

Step 6 • Define services based on outcomes.

Step 7 • Service models.

Step 8 • Define service units and packages.

Step1 – Define the Market and Identify Customers

A market can be defined as the group of customers that are interested in and can afford to purchase the service .

A Type I service provider will typically only serve one business unit.

A Type II service provider’s market will consist of several business units.

A Type III service provider cannot provide limitless numbers of services to every market.

Markets can be defined by following criteria

• Industry: Manufacturing , retail, healthcare etc.
• Geographical: A different service provider may provide a lower standard of service but delivers it consistently
across multiple regions.
• Demographic: The service provider may deliver a service geared towards a specific cultural group.

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• Corporate relationships: Service providers provide services to a group of companies with a common shareholding.
Step 2 — Understand the customer

Understanding the customer involves understanding:

Desired business How value will be

Customer assets: Constraints:
outcomes: perceived and measured:

Understanding of
outcomes helps Services enable
Understanding
the service and support the It is vital that the
the constraints
provider to performance of service provider
will enable the
define the the assets the understands how
service provider
warranty and customer uses to the customer
to define
utility of the achieve their measures the
boundaries for
services and to business service .
the service .
prioritize service outcomes.
needs
Step 3 – Quantify the outcomes

• The service provider will work with the customer to identify their desired outcomes.
• Defining outcomes is an important part of defining services.
• The Service provider has to work with each outcome and document.

Outcomes for review will be found in:

The Service
Each service in the service catalogue should be clearly linked to defined and quantified outcomes.
catalogue:

The service
It is used as a criterion for the success of the service design and validation.
pipeline:

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Service level agreements will specify the service as well as the outcome it has been designed to support.
agreement:
Step 4 – Classify and visualize the service

Creating a way to classify services and represent them visually will help in
identifying whether a new service requirement fits within the current
strategy or whether it will represent an expansion of that strategy.

Creating a way to classify services and represent them visually assists the
service provider to decide not to make an investment in a service that
moves them away from their strategy.

Services with closely matching patterns indicate opportunity for

consolidation or packaging as shared services.

A collection of patterns can make a particular service strategy attractive .

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Step 5 – Understand the opportunities (market spaces)

• Each customer has a number of requirements and each service provider has a number of competencies.
• Intersections between the service provider’s competencies and the customer’s requirements are called market
spaces.
• A market space is defined by a set of business outcomes which can be facilitated by a service.
Examples of business outcomes are :
Sales teams

Online bill payment E-commerce website

Loan officers Key business applications

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customers normally prefer the outcome with lower costs and risks.
Step 6 – Define services based on outcomes

• An outcome-based definition of services ensures that managers plan and execute all aspects of service management
entirely from the perspective of what is valuable to the customer.

• Solutions that enable or enhance the performance of the customer assets indirectly support the achievement of the
outcomes generated by the assets.

• Customers can express dissatisfaction with a service provider even when terms and conditions of service level
agreements (SLAs) are fulfilled.

• Lack of clarity leads to poor designs, ineffective operation and lack luster performance in service contracts.

• A proper definition of services takes into account the

DEMOcontext in which customers perceive value from the services.
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Step 6 – Define services based on outcomes

Example1 :
Well-formed service definitions lead to • Collaboration services provide value to the customer when cooperative business communications
are conducted without the constraints of location or device.
effective and efficient service
Example2 :
management processes
• Application-hosting services provide value to the business when business function services and
processes continue to operate without the need to invest capital in a non-core business capability.

• Without complete definition of value, there cannot be complete production of value.

• Certain services create value by preventing or recovering from undesirable conditions or states.
• The second-order effect of services is that the changes they produce or prevent have a positive and usually
measurable effect on the performance and outcomes of the customer’s business.
Step 7 – Service Models

• Service models describe the structure of a service and the dynamics of the service.
• Service models can take many forms from a simple logical chart showing the different components and their dependencies
to a complex analytical model .

Service models have a number of uses especially in service portfolio management including;

• Identifying critical service components, customer assets or service assets.

Understanding what it will take
to deliver a new service.
• Illustrating how value is created.
• Mapping the teams and assets that are involved in delivering a service and ensuring that they
understand their impact on the customer’s ability to achieve their business outcomes.
• As a starting point for designing new services.
• As an assessment tool for understanding the impact of changes to existing services.
• As a means of identifying whether new services can be delivered using existing assets.
• Assessing what type of investment would be required to deliver the service.
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• Identifying the interface between technology, people and processes.
Sourcing Structures (Delivery Strategies)

In-Sourcing Outsourcing Co-sourcing

Partnership or Multi-Sourcing Business Process Outsourcing (BPO) Knowledge Process Outsourcing (KPO)

Multi-Vendor Sourcing Cloud Sourcing

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Once the resource and organizational discussion begins, the organization must be sure to account for the introduction of new critical skills.
Risk & Investment Decision

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Service Strategy Processes

The five processes under Service Strategy :

Strategy Management of IT Services: • It is responsible for ensuring the implementation of the strategy.

• It ensures that every proposed new service or any strategic change to an

Service Portfolio Management: existing service is analyzed to determine the level of investment required
and the proposed return on that investment.

Financial Management for IT Services: • It indicates that a service costs significantly more or less than anticipated

• It ensures that the service provider has sufficient capacity to meet the
Demand Management: required demand.

Business Relationship Management: • It identifies the needs of existing and potential customers .
Goal and Objectives - Strategy Management for IT Services

Goal:
Defining and maintaining an organization’s perspective, position, plans and patterns

Objective:

Analyze the internal

and external the Strategy Plans.
environments.

the Service
Identify constraints. Management
Strategy.

Establish the Produce and

position of the maintain IT
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service provider. strategy.
Strategy Management for IT Services

Define the Market

Understand
Services and Understand Classify and
the
strategy the customer visualize
opportunities

Develop the Offerings

Outcome-
Understand
based Service
market
definition of Portfolio.
space.
services.
Strategy Management for IT Services

Develop Strategic Assets

Service Management as a closed-loop control system.

Service Management as a strategic asset.

Prepare for Execution

Aligning Service Assets

with Customer
Outcomes.
Prioritizing investments.

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Service Portfolio Management - Goals & Objectives

A dynamic method for governing investments in service management across the enterprise & managing them for value.

Goal of Service Portfolio Management is to manage Service Portfolio by considering services

Goal
in terms of the business value they provide.

Apply comparable practices to manage Service Portfolios maximize value while managing
Objective
risks and costs.

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Understanding Service Portfolio

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Service Portfolio Management in SKMS

Service Portfolio, Service Catalogue’s

representation in Service Knowledge
Management System (SKMS)

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Demand Management - Goals & Objectives

Goal:
Understand and influence customer demand.

Objectives:

Reduce risk of
unavailability because Manage cost & create Balance supply & Service Quality /
of poorly managed value. demand. Capacity.
demand

Key Points to Remember:

• At a Strategic level Demand Management can involve analysis of Patterns of Business Activity and User Profiles.
• At a Tactical level it can involve use of Differential Charging to encourage Customers to use IT Services at less busy times.
Understanding Demand Management

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Service Level Packages

Customer
Segment Z2

Customer
Segment X Customer
Segment Z
‘OEM’
Segment
Customer
Segment Y

Service Level
Package D

Service Level Service Level Service Level

Package A Package B Package C

Core Service Package

Financial Management for IT Services - Goals & Objectives

Goal:

Secure the appropriate level of funding to design, develop and deliver services that meet the strategy

Objectives:

Defining and
maintaining a Evaluating the financial
framework to identify, impact of new or
manage and changed strategies on
communicate the cost the service provider
of providing services

Securing funding to Understanding the

manage the provision relationship between
of services expenses and income

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Key Terms

Accounting Charging

Budgeting

Budgeting: Accounting: Charging:

• This is the process that enables

the IT organization to account
• This is the process of predicting
fully for the way its money is
and controlling the income and
spent (particularly the ability to • This is the process required to
expenditure of money within
identify costs by customer, by bill customers for the services
the organization.
service and by activity). supplied to them.
• Budgeting consists of a periodic
• It usually involves accounting • This requires sound IT
negotiation cycle to set budgets
systems, including ledgers, accounting practices and
(usually annual) and the
charts of accounts, journals etc. systems.
monthly monitoring of the
and should be overseen by
current budgets.
someone trained in
accountancy.
Major Activities of Financial Management for IT Services

• Assist to identify, document & agree value of services to the business.

• Participate in Demand Modelling activities (incentive or penalty).
• Provision of cost information for Service Portfolio Management.
• Maintain regulatory compliance regarding financial issues.
Business Relationship Management

Purpose & Objective of Business Relationship Management:

To establish and maintain business relationship

To identify customer’s business needs

To identify changes to customer environment which potentially will impact value of IT services

Establish formal complain and escalation procedure for customers

Mediate in case of conflicting requirements from different business

Identify technology trends which potentially will impact utilization of services

• The key role in Business Relationship Management is Business Relationship Manager (BRM),
Business Relationship Management

• Internal service providers the emphasis is on aligning the objectives of the business with the activity of the service provider.

The way in which

How the service
services are
provider is
currently offered Levels of customer
Services that are Technology trends represented to the
including who is satisfaction, and
currently offered to that could impact customer. This at
Business outcomes responsible for the what action plans How to optimize
the customer and current services and times, means raising
that the customer services, what levels have been put in services for the
the way in which the customer as well concerns around
wants to achieve. of service have been place to deal with future.
they are used by the as the nature of the commitments that
agreed, the quality the causes of
customer. potential impact. the business made
of services delivered dissatisfaction.
to IT but is not
and any changes that
meeting.
are anticipated.
Differences between BRM and SLM

Business Relationship Management Service Level Management

To establish and maintain a business relationship To negotiate SLAs (warranty terms) with customers and
between the service provider and the customers ensure that all service management processes, OLAs and
Purpose based on understanding the customer and their underpinning contracts are appropriate for the agreed
business needs. service level targets.

Strategic and tactical — the focus is on the overall Tactical and operational — the focus is on reaching
Focus relationship between the service provider and their agreement on the level of service that will be delivered
customer and which services the service provider for new and existing services, and whether the service
will deliver to meet customer needs. provider was able to meet those agreements.

Customer satisfaction, also an improvement in the Achieving agreed levels of service (which leads to
Primary measure customer’s intention to better use and pay customer satisfaction).
for the service. DEMO SESSION
Service Strategy - Session Summary

In this session you have learnt about:

• Goals, objectives & business value of service strategy.
• Need of Service strategy.
• Service Assets in detail.
• Value generation through Utility & Warranty.
• Service provider types.
• Delivery strategies & sourcing structures.
• Service strategy processes in details i.e.,
• Strategy Management of IT services process.
• Service portfolio management process.
• Financial management of IT services process.
• Demand management process.
• Business relationship management process. DEMO SESSION