Service Strategy

The Service Strategy book focuses on how to design, develop, and implement
Service Management as a strategic asset.

1 Demand Management

2 Service Portfolio Management (SPM)

3 Financial Management for IT Services

A Business Relationship Management

B Strategy Management for IT Services

Created by PelegIT, Ltd. – www.pelegit.com, - All Rights Reserved 2

To stop and think about WHY something
has to be done, before thinking HOW.


Minzberg’s four P’s

1) Perspective – Have a clear vision and focus

2) Position – Take a clearly defined stance

3) Plan – Form a precise notion of how the organization
should develop itself

4) Pattern – Maintain consistency in decisions and
actions.
(Minzberg, 1994)


Asset:
(ITIL Service Strategy, SS)

Any resource or capability. The assets of a service provider include anything that could
contribute to the delivery of a service. Assets can be one of the following types:

• Management
• Applications
• Organization
• Infrastructure
• Process
• Financial Capital
• Knowledge
• People
• Information

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Created by PelegIT, Ltd. – www.pelegit.com, - All Rights Reserved

Resource:

A generic term that includes IT infrastructure, people, money or anything else that might
help to deliver an IT service. Resources are considered to be assets of an organization.

© Crown copyright 2011. Reproduced under license from OGC. - Created by PelegIT, Ltd. – www.pelegit.com, - All Rights Reserved
7

Service Portfolio Management (SPM):

The process responsible for managing the service portfolio. Service portfolio
management ensures that the service provider has the right mix of services to meet
required business outcomes at an appropriate level of investment. Service portfolio
management considers services in terms of the business value that they provide.

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Governance:
Ensures that policies and strategy are actually implemented, and that required
processes are correctly followed. Governance includes defining roles and responsibilities,
measuring and reporting, and taking actions to resolve any issues identified.

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Cost Benefit Analysis:

An activity that analyzes and compares the costs and the benefits involved in one or
more alternative courses of action. See also Business case; Internal rate of return; Net
present value; Return on investment and value on investment.

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Internal Rate of Return (IRR):

A technique used to help make decisions about capital expenditures. It calculates a
figure that allows two or more alternative investments to be compared. A larger
internal rate of return indicates a better investment. See also Net present value or
Return on investment.

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Net Present Value:

A technique used to help make decisions about capital expenditures. It compares cash
inflows with cash outflows. Positive net present value indicates that an investment is
worthwhile. See also Internal rate of return and Return on investment.

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Return on Investment:
(ITIL Service Strategy, SS & Continual Service Improvement, CSI)

A measurement of the expected benefit of an investment. In the simplest sense, it is the
net profile of an investment divided by the net worth of the assets invested. See also
Net present value or Value of investment.

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Value on Investment (VOI):
(ITIL Continual Service Improvement, CSI)

A measurement of the expected benefit of an investment. Value on investment
considers both financial and intangible benefits. See also Return on Investment.

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Supplier:
(ITIL Service Strategy, SS & Service Design, SD)

A third party responsible for supplying goods and services that are required to deliver IT
services. Examples of suppliers include commodity hardware and software
vendors, network and telecom prodders, and outsourcing organizations. See also supply
chain and underpinning contracts.

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Pattern of Business Activity (PBA):
(ITIL Service Strategy)

A workload profile of one or more business activities. Patterns of business activity are
used to help the IT service provider understand and plan for different levels of business
activity. See also user profile

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User Profile (UP)
(ITIL Service Strategy)

A pattern of user demand for IT services. Each user profile includes one or more patterns
of business activity (PBA’s).

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Strategic
(ITIL Service Strategy):

The highest of the three levels of planning and delivery
(strategic, tactical, operational). Strategic activities include objective setting and long-
term planning to achieve the overall vision.

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Tactical

The middle of the three levels of planning and delivery (strategic, tactical, operational).
Tactical activities include medium-term plans required to achieve specific
objectives, typically over a period of weeks to months.

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Operational

The lowest of the three levels of planning and delivery (strategic, tactical, operational).
Operational activities include day-to-day or short-term planning or delivery of a
business process or IT service management process. The term is also a synonym for live.

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The customer does not buy the drill…

…they buy the hole it can make for them. 22


Thus the value is derived by what the service allows the customer to do.

Because they (Customer) decide what they will do with the
service.

23


There are two factors for value.

Fit for PURPOSE or
Fitness for PURPOSE

Fit for USE or
Fitness for USE
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Is the functionality offered by the product or service to meet a
particular need.

What the service does!

Because it can meet certain requirements it is:
FIT FOR PURPOSE
Example: A service which improves the ability of the performance of
processing sales orders would be considered a utility.

Any attribute of a service that removes or reduces the effect of constraints on
the performance of a task.
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Is the assurance that a product or service will meet the agreed
requirements.
How the service is delivered!

Because it can meet availability, capacity, reliability,
continuity and security it is: FIT FOR USE
Example: A service which increases the speed or availability of a service may
be considered a warranty.

Any attribute of a service that increases the potential of the business to
perform a task.
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Warranty refers to any means by which utility is made available to users.

Utility is the service does &
Warranty is it is delivered.
Utility

Performance Supported?

OR
Constraints Removed?
Fit for
Purpose?
T/F
AND
Warranty
Available Enough? Fit for
Use?
Capacity Enough?
Continuous Enough?
AND
T/F
Secure Enough?
T = True
F = False

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Warranty and utility
should be designed at
the same time to save
time and money.

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A Service Package Contains
Corse Service Package Supporting Service Package

(Basic Critical Services) (Provides differentiation or more
effective use of Core Services)

Service Level Package

(Defines level of Utility and Warranty provided
by Service Package)


Broadband Super User ($120.00 per month)
Corse Service Package Supporting Service Package

• Internet connection • Static IP Address
• E-Mail Address • Spam Filtering
• Web Site • 1 GB Web space
• VOIP

Service Level Package

• Download Speed: 30 mbs
• Download Quota: 1 TB
• Automatic Cloud back-up (500 MB)
• 98% Uptime


Service Portfolio Management Questions?

Why should a customer buy these services?
Why should they buy these services from us?
What are the pricing and chargeback models?
What are our strengths and weaknesses
priorities and risks?
How should our resources and capabilities be
allocated?

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The service portfolio represents the commitments and investments made by a service
provider across all customer and market spaces.

Service Portfolio

Service Retired
Service Catalog
Pipeline Services

Configuration Management System

Customer Application Supplier & Contract Customer
Project
Portfolio Portfolio Management Information Agreement CMDB
Portfolio
System Portfolio

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Service Knowledge
Management System (SKMS)
(Requirements to Retirement)
Service Portfolio
(Complete set of services
managed by the service provider)
Service Lifecycle

Service Pipeline
(Proposed or services in development)

Business Service Catalog Technical Service Catalog
Visible to Customer Visible to IT
Service Catalog
(Live IT services including those available for deployment)

Retired Services
(Services and components that are no longer in use)

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• Articulate business needs…service providers response to those needs.
• …multiple service portfolios may exist depending on customers.

Service Portfolio

Service Retired
Service Catalog
Pipeline Services

What do you find in the Service Portfolio?

Requirements Business Case Offerings &
Packages
Descriptions Priorities

Value Risks Cost & Pricing
Proposition


Steps of Service Portfolio Management 4 Major Steps

Define Analyze

Charter Approve

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Define

Used to validate portfolio data in terms of:
• Potential Benefits
• Recourses and Capabilities Required
• Enables service provider to define what it can do
• Enables service provider to define what it cannot do (due to maturity
levels, capabilities, risks, etc.)

38


Analyze

Maximize portfolio value, align, prioritize and balance supply and
demand. Questions asked are:
• What are the long term goals of the service organization?
• What services are required to meet these goals?
• What capabilities and resources are required to deliver and support
those services?
• How will we get there?

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Approve

Finalize proposed portfolio; authorize services and resources needed to
deliver services.

40


Charter

Plans and tracks the progress of service investments across the portfolio
and allocates required resources. Used to schedule and manage:
• Design of Services
• Transition of Services
• Change of Services
• Retirement of Services

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Service Portfolio Review of Existing Services

Renew Theses services meet functional fitness criteria, but fail technical fitness.

Replace These services have unclear and overlapping business functionality.

Retain Largely self contained, with well defined asset, process and system
boundaries. These services are well aligned and relevant to the
organizational strategy.

Refactor Often services that meet technical and functional criteria of the
organization display fuzzy processes or system boundaries. In these
cases, the service can be refactored to include only the core functionality
, with common services used to provide the remainder.

Retire Retired services do not meet minimum levels of technical and functional
fitness.

Rationalize Used to address portfolios that offer services which in fact are composed
of multiple releases of the same operating system, service or application
etc.
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Transform Transform the Business (TTB)
Venture the TTB investments are focused on
Business indicatives to enter new market spaces
(TTB) with new capabilities being created.

Grow the Business (GTB)
Growth Grow the
Risk

GTB are investments intended to grow
Business the organizations scope of services.
Discretionary (GTB)

Run the Business (RTB)
Core Run the RTB are investments centered on
Business Service Operations or maintaining the
Non-Discretionary (RTB) Status-Quo.

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Account fully for the financial resources consumed by IT service provider and attribute
those costs to the services delivered to the organizations customers.

Business
Business
Opportunities

Financial
Management

IT
Opportunities IT


Activities

1. Funding – Predicting the expected future requirements for funds to deliver
agreed upon services and monitoring and adhering to the defined budgets.

2. IT Accounting – Enables the IT organization to account fully for the way its
money is spent. The definition of Cost Models can be used to identify costs by
customer, by service, by activity or other logical grouping.

3. Chargeback (Optional) – Charging customers for their use of IT Services.
Charging can be implemented in a number of ways in order to encourage more
efficient use of IT resources. Notional charging is one particular option, in which
the cost of providing services to customers is communicated but no actual
payment is required.


Goal: Understand and influence customer demand for
services and the provision of capacity to meet these
demands.

• Identification and analysis of Patterns of Business Activity (PBA)
• Utilizing techniques to influence and manage demand in such a way that
excess capacity is reduced but business and customer requirements are still
met.

• When and why does the business need the capacity?

• Does the benefit of providing the required capacity
outweigh the cost?


Capacity / Demand Management: Capacity management is supported
initially in SS where the decisions and analysis of business requirements and customer
outcomes influence the development of patterns of business activity, lines of service
(LOS) and service options.
Demand Pattern

Business Service
Process Process
Capacity
Management
Pattern of Service Belt Plan
Business
Activity

Delivery Schedule

Incentives and penalties to influence consumption Demand
Management
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Capacity and Availability Management can optimize designs to
Service Design meet demand patterns

Change and Service Validation and Testing can ensure
Service Transition appropriate level of warranty are provided.

Can optimize the availability of staff based on patterns of
Service Operation demand.

Can identify opportunities to consolidate demand or introduce
Continual Service
improved incentives or techniques to be utilized in influencing
Improvement demand.


There are two ways to influence demand:

1. Physical/Technical Constraints (Restrict number of
connections, users, running times, etc.)
2. Financial Chargeback (using expensive charging of services near
full capacity or capacity quotas.)

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Service Strategy Activities

Define the Market
Understand the relationship between services and strategies, understand the customers, understand the
opportunities and classify and visualize the services.

The development of the offering
Create a service portfolio that represents the opportunities and readiness of a service provider to serve the
customer and the market.

The development of strategic assets
Define the value network and improve capabilities and resources (service assets) to increase the service
performance and potential.

Preparation for execution
Strategic assessment, setting objectives, defining Critical Success Factors (CSF), prioritizing investments, etc.

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3 Main Types of Service Providers

Type 1: Internal Service Provider
…embedded within a business unit. There may be several type 1 service
providers within an organization.

Type 2: Shared Services Unit
An internal service provider what provides shared IT services to more then
one business unit.

Type 3: External Services Provider
A service provider that provides IT services to external customers.

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Every business should focus on both the
financial and non-financial impacts of the
proposed project or service.

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Value is defined by the customer

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Business
Outcomes

Value

Preferences Perceptions

57


Perceptions are also influenced by the
customers self image or actual position in the
market such as those of being an innovation;
Market leader and or risk-taker.

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Positive Negative
Difference Difference

- Net
Difference
Losses from
utilizing the service

+
Based on DIY strategy or
existing arrangements

Reference Value Economic value
of service
59


Resources (Easy)

Capabilities (Difficult)

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• IT Budgets
Service Strategy • Patterns of Business Activity (PBA)
• Service Portfolio Information

• New and changed service assets
Service Design • Service Catalogue, SLA’s, OLS’s, UC’s
• Testing and Validation Criteria

• Known Errors from
Service Transition Development
• Testing and Validation Results
• Change Authorization

• Incidents, Problems, Events,
Service Requests
Service Operation • Request for Change (RFC)
• Information collected for
infrastructure monitoring

Continual Service
• Service and Process Improvements
Improvement


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