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ITIL Service Strategy
The document outlines the principles and practices of ITIL Service Strategy based on ITIL V3, highlighting the importance of strategic thinking for service providers to achieve long-term success. It covers various aspects such as service management practices, organizational capabilities, service economics, and implementation strategies. The key focus is on building value through effective service offerings, understanding customer needs, and managing service portfolios for optimal performance.
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ITIL Service Strategy
- 1. ITIL SERVICE STRATEGY Based onITIL v3 Service Strategy publication Marvin Sirait Last updated November 2016
- 2. Topics Service Strategy Introduction Service management asa practice Service strategy principles Service strategy Service economics Strategy and organization Strategy, tactics and operations Technology and strategy Challenges, critical success factors and risk
- 3. Service Strategy Introduction Overview Context Purpose Expected Use Service managementas a practice What is service management What are services The business process Principles of service management The Service Lifecycle Functions and processes across the Lifecycle Service strategy principles Value creation Service assets Service provider types Service structures Service strategy fundamentals Service strategy Define the market Develop the offerings Develop strategic assets Prepare for execution Service economics Financial Management Return on Investment Service Portfolio Management Service Portfolio Management methods Demand Management Strategy and organization Organizational development Organizational departmentalization Organizational design Organizational culture Sourcing strategy Strategy, tactics and operations Implementation through the lifecycle Strategy and design Strategy and transition Strategy and operations Strategy and improvement Technology and strategy Service automation Service interfaces Tools for service strategy Challenges, critical success factors and risk Complexity Coordination and control Preserving value Effectiveness in measurement Risks
- 4. Introduction • Overview • ITleaders have the ability to shape and execute service strategies. The rigid ‘plan and deploy’ model is giving way to the dynamic ‘engage and collaborate’ model. • Context • Multiple views of IT: component, organization, service, asset • Purpose • To operate and grow successfully in the long-term, service providers must have the ability to think and act in a strategic manner. • Expected Use • Developing capabilities in service management that set up and maintain a strategic advantage in their goals of being valuable service providers
- 5. Service management asa practice • What is service management • Service management is a set of specialized organizational capabilities for providing value to customers in the form of services • What are services • A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks • Primary elements of value: • Utility: fit for purpose • Warranty: fit for use • The business process • A process is a set of coordinated activities combining and implementing resources and capabilities in order to produce an outcome, which, directly or indirectly, creates value for an external customer or stakeholder.
- 6. Service management asa practice (cont.) • Principles of service management • Specialization and coordination • The agency principle • Encapsulation hides what is not the customer’s concern and exposes as a service what is useful and usable to them • Separation of concerns • Modularity • Loose coupling • Principles of system • A system is a group of interacting, interrelated, or interdependent components that form a unified whole, operating together for a common purpose • Closed-loop control • Feedback and learning
- 7. Service management asa practice (cont.) • The Service Lifecycle • The Service Lifecycle is a comprehensive approach to service management: seeking to understand its structure, the interconnections between all its components, and how changes in any area will affect the whole system and its constituent parts over time • Functions and processes across the Lifecycle • Functions are units of organizations specialized to perform certain types of work and be responsible for specific outcomes. They are self-contained with capabilities and resources necessary for their performance and outcomes. Capabilities include work methods internal to the functions. Functions have their own body of knowledge, which accumulates from experience. They provide structure and stability to organizations. • Characteristics of processes: • Measurable • Have specific result • Have stakeholders • Respond to specific events • Specialization and coordination across the lifecycle
- 8. Service strategy principles •Value creation • Utility • increases the performance average • outcomes supported and constraints removed • Warranty • reduces the performance variation • availability: the service will be available for use under agreed terms and conditions • capacity: the service will support a specified level of business activity or demand at a specified level of quality • continuity: the service will continue to support the business through major failures or disruptive events • security: the utilization of services by customers will be secure • Service assets • Resources and capabilities • Resources: people, information, applications, infrastructure, financial capital • Capabilities: people, knowledge, processes, organization, management • Business unit and service unit • Business unit: bundle of assets meant to create value for customers in the form of goods and services • Service unit: bundle of service assets that specializes in creating value in the form of services
- 9. Service strategy principles(cont.) • Service provider types • Type I – internal • business functions embedded within the business units they serve • have the benefit of tight coupling with their owner-customers, avoiding certain costs and risks associated with conducting business with external parties • Type II – shared services unit • customers are business units under a corporate parent, common stakeholders, and an enterprise-level strategy • can offer lower prices compared to external service providers by leveraging corporate advantage, internal agreements and accounting policies • Type III – external • can offer competitive prices and drive down unit costs by consolidating demand • Access to knowledge, experience, scale, scope, capabilities, and resources that are either beyond the reach of the organization or outside the scope of a carefully considered investment portfolio • How to choose? • transaction costs, strategic industry factors, core competence, and the risk management capabilities
- 10. Service strategy principles(cont.) • Service structures • New strategies available to service providers: • Marshal external talent • Reduce costs • Change the focal point of distinctiveness • Increase demand for complementary services • Collaborate • Value network • a web of relationships that generates tangible and intangible value through complex dynamic exchanges through two or more organizations
- 11. Service strategy principles(cont.) • Service strategy fundamentals • Building blocks of high performance service providers: • Market focus and position • Distinctive capabilities • Performance anatomy • Four Ps of strategy: • Perspective – vision and direction • Position – decision to adopt a well-defined stance • Variety-based, needs-based, access-based • Plan – means of transitioning from ‘as is’ to ‘to be’ • Pattern – series of consistent decisions and actions over time • Strategy as a perspective: the governing set of beliefs, values, and a sense of purpose shared by the entire organization • Strategy as a position: distinctiveness in the minds of customers • Variety-based positioning: focuses on a particular variety of customers’ needs and aims to meet them in distinctive fashion • Needs-based positioning: provide most or all of the needs of a particular type of customer • Access-based positioning: serve customers with particular needs with respect to location, scale, or structures • Strategy as a plan: course of action from one point to another within a competitive scenario. • Strategy as a pattern: an organization’s fundamental way of doing things
- 12. Service strategy • Definethe market • Services and strategy • Understand the customer • Understand the opportunities • Classify and visualize • Develop the offerings • Market space • set of business outcomes, which can be facilitated by a service. • Outcome-based definition of services • plan and execute all aspects of service management entirely from the perspective of what is valuable to the customer • Service portfolio, pipeline, and catalogue • The Service Portfolio represents the commitments and investments made by a service provider across all customers and market spaces. It represents present contractual commitments, new service development, and ongoing service improvement plans. • The Service Catalogue is the subset of the Service Portfolio visible to customers. It consists of services presently active in the Service Operation phase and those approved to be readily offered to current or prospective customers. • The Service Pipeline consists of services under development for a given market space or customer. • Retired services: phased-out services not available to new customers or contracts unless a special business case is made
- 13. Service strategy (cont.) •Develop strategic assets • Increasing the service potential • Increasing performance potential • Demand, capacity and cost • Prepare for execution • Strategic assessment • Factors: strength and weaknesses, distinctive competencies, business strategy, critical success factors, threats and opportunities • Setting objectives • Aligning service assets with customer outcomes • Defining critical success factors • Critical success factors and competitive analysis • Prioritizing investments • Exploring business potential • Alignment with customer needs • Expansion and growth • Differentiation in market spaces
- 14. Service economics • FinancialManagement • Enterprise value and benefits of Financial Management • Enhanced decision making • Speed of change • Service Portfolio Management • Financial compliance and control • Operational control • Value capture and creation. • Concepts, inputs and outputs • Service valuation • Demand modeling • Service portfolio management • Service provisioning optimization • Planning confidence • Service investment analysis • Accounting • Compliance • Variable cost dynamics
- 15. Service economics (cont.) •Financial Management • Methods, models, activities and techniques • Service valuation • Direct versus indirect costs • Labor costs • Variable cost elements • Translation from cost account to service value • Service provisioning models and analysis • Managed services: business unit requiring a service funds the provision of that service for itself. • Shared services: provisioning of multiple services to one or more business units through use of shared infrastructure and resources. It represents significant cost savings to practitioners over the managed services model through the increased utilization of existing resources. • Utility-based provisioning maximizes the combination of services being provisioned over the same infrastructure so that even more services are provisioned utilizing the same resources found in the Shared Services model. • Service provisioning cost analysis is the activity of statistically ranking the various forms of provisioning (and often providers) to determine the most beneficial model • Funding model alternatives • Rolling plan funding • Trigger-based plans • Zero-based funding • Business impact analysis • identify a company’s most critical business services through analysis of outage severity translated into a financial value, coupled with operational risk.
- 16. Service economics (cont.) •Financial Management • Key decisions for Financial Management • Cost recovery, value center or accounting center • Chargeback • Notional charging • Tiered subscription • Metered usage • Direct plus • Fixed or user cost • Financial Management implementation checklist • Track 1 – Plan • Track 2 – Analyze • Track 3 – Design • Track 4 – Implement • Track 5 – Measure
- 17. Service economics (cont.) •Return on Investment • Business case • Business objectives • Business impact • Pre-program ROI • Screening decisions (NPV) • Preference decisions (IRR) • Post-program ROI • Program objectives • Data collection • Isolate the effects of the program • Data to monetary conversion • Determine program cost • Calculate ROI • Identify qualitative benefits
- 18. Service economics (cont.) •Service Portfolio Management • Service Portfolio Management is a dynamic method for governing investments in service management across the enterprise and managing them for value • Business service and IT service • IT service management • Business service management • Service Portfolio Management methods • Define: inventory services, ensure business cases and validate portfolio data • Analyze: maximize portfolio value, align and prioritize and balance supply and demand • Approve: finalize proposed portfolio, authorize services and resources • Charter: communicate decisions, allocate resources and charter services
- 19. Service economics (cont.) •Demand Management • Patterns of business activities (PBA) • Service packages • Core services and supporting services • Developing differentiated offerings • Service level packages • Advantage of core service packages • Segmentation
- 20. Strategy and organization •Organizational development • Stage 1: Network • Stage 2: Directive • Stage 3: Delegation • Stage 4: Coordination • Stage 5: Collaboration • Deciding on a structure • Organizational change • Diagnosis • Determining the desired state • Implementation
- 21. Strategy and organization(cont.) • Organizational departmentalization • Functional • Product • Market space or customer • Geography • Process • Organizational design • Strategy • Departmental structure • Key processes • Organizational structure • Key people • Roles and responsibilities • Performance measures • Training and development
- 22. Strategy and organization(cont.) • Organizational culture • Organizational culture is the set of shared values and norms that control the IT organization’s interactions with each other and customers • Types of organizational values: • Terminal: desired outcomes or end states • Instrumental: desired modes of behavior • Sourcing strategy • Deciding what to source • Sourcing structures • Multi vendor sourcing • Service provider interfaces • Sourcing governance • Critical success factors • Sourcing roles and responsibilities
- 23. Strategy, tactics andoperation • Implementation through the lifecycle • Top-down • Strategy and design • Service models: codify the service strategy for a market space • Design driven by outcomes • Design driven by constraints • Pricing as a design constraint • Strategy and transition • Strategy and operation • Deployment patterns • Hosting the contract portfolio • Managing demand • Strategy and improvement • Quality perspectives • Warranty factors • Reliability • Maintainability • Redundancy • Time between failures and accessibility • Interactions between factors of availability
- 24. Technology and strategy •Service automation • Preparing for automation. • Guidelines: • Simplify the service processes before automating them • Clarify the flow of activities, allocation of tasks, need for information, and interactions • In self-service situations, reduce the surface area of the contact users have with the underlying systems and processes • Do not be in a hurry to automate tasks and interactions that are neither simple nor routine • Service analytics and instrumentation • How does this incident affect the service? • How is the business impacted? • How do we respond?
- 25. Technology and strategy(cont.) • Service interfaces • Characteristics of good service interfaces • easily located or ubiquitous enough • available in forms or media that allow choice and flexibility for users • available with enough capacity to avoid queuing or backlog when supporting concurrent use by many users • accommodate users with varying levels of skills, competencies, backgrounds and disabilities • Types of service technology encounters • Technology-free • Technology-assisted • Technology-facilitated • Technology-mediated • Technology-generated • Self-service channels • Technology-mediated service recovery • Tools for service strategy • Simulation • Analytical models
- 26. Challenges, critical successfactors and risks • Complexity • Coordination and control • Preserving value • Deviations in performance • Operational effectiveness and efficiency • Reducing hidden costs • Substantiating hidden benefits • Leveraging intangible assets • Effectiveness in measurement • Risks • Definition of risk • uncertainty of outcome, whether positive opportunity or negative threat • Transfer of risks • Service provider risks • Contract risks • Design risks • Operational risks • Market risks, reduced through differentiation and consolidation