Service Strategy

Planning for Long-Term Success

Contents

Objectives
Processes
Activities
Roles

Strategic planning supports the long-term operation and growth of an organisation. The Service Strategy phase of the ITIL Lifecycle is where the business and IT agree on what is required. Service Strategy provides the means to identify, select and prioritise opportunities.

The principle aim of Service Strategy is to develop Service Management as an Organisational Capability and a Strategic Asset to generate value. This requires proper management of the cabability and resource assets:

Resource

a generic term which includes infrastructure, people, money or 
anything else that might help to deliver a service.

Capability Assets

the ability of a service organisation, person, process, application,
configuration item or service to carry out an activity. 
Capabilities are intangible assets of an organisation.

Capabilities and resources are used to create value in the form of goods and services. Resource assets are generally easy to acquire whereas capability assets can only be developed over time. Capabilities reflect experience and are used to transform resources into services. Capabilities are unique to each service provider and represent their unique value proposition.

Service Assets
Resource Assets	Capability Assets
Financial Capital	Management
Infrastructure	Organisation
Applications	Processes
Information	Knowledge
People	People

The type of strategy will reflect the nature of the organisations business: an IT company will require an IT strategy that will shape or drive the business (Service Oriented Strategy); whereas non-IT business will require an IT strategy that supports the business.

The strategy will state what is required from IT to help the business reach their goals. These statements will be made in a Business Case, which will provide:

the reason for change
the options being considered
the costs involved
prospective options
investment appraisal information

As soon as the Business Case is approved, the service can be entered into the Service Portfolio

Service Strategy will be influenced by various constraints

Standards, Regulations and Legislation
Policy Compliance: the service offered must comply with customer policies
Contract Terms and Conditions
Resource and Capability Constraints
Organisational Values and Ethics
Pricing
Copyrights, Patents and Trademarks

These constraints form a boundary defining the 'Solution Space'

Objectives

The main objectives of Service Strategy are:

to understand what services should be offered to support the business
setting policies and objectives for the provision of services
to understand how to create value for the organisation
to identify and select strategic investments
to define service quality

Processes

Strategy Management for IT Services

IT Strategy Management is an executive responsibility that sets objectives and prioritises investment. The process will define the IT Strategy and will be responsible for ensuring that the Strategy is met.

The process objectives for Strategy Management are:

Analysis of the internal and external environment of the service provider
Spotting constraints affecting business outcomes
Define the service providers position against customers and competitors
Regularly review this position
Maintain strategy documents and inform stakeholders of changes
Ensure that business outcomes are being achieved

Financial Management

Financial Management quantifies the value of IT services in financial terms and the value of the assets underpinning those services. It ensures the correct funding for the purchase and delivery of services.

Financial Management assists in Service Portfolio Management by benchmarking the cost of a service against the cost of other providers: allowing decisions to be made about whether the service should be provisioned internally.

Financial Management is required to provide the best possible quality service within budget. The essential Financial Management systems for service providers are: Funding and Accounting. External IT Service providers will also need systems for Charging.

Service Valuation compares Provisioning Value to Service Value Potential.

Provisioning Value

the actual cost to IT of provisioning a service and may include:

Hardware and Software costs
Maintenance Fees
Personnel resources
Utilities and facilities
Taxes, capital or interest charges
Compliance costs

Service Value Potential

the customer's perception of the additional value provided from using a service in comparison to using their own assets. Value of the services individual components are aggregated to determine the true value of the service

Demand Modelling involves quantifying funding variations due to service demand changes to ensure that capacity and demand are aligned.

Service Provisioning Optimisation evaluates alternatives to see whether they would reduce costs or enhance service value.

Service Investment Analysis provides a value indication for the total lifecycle of a service based on value received and costs incurred and thus balances expected value against expected cost.

There are a variety of ways to classify the costs associated with a service:

Capital (owned and has worth) or Operational (on-going costs)
Direct (specific to a service) or Indirect (cost shared between more than one service)
Fixed or Variable (based on usage)

Financial Management ensures that the charges for IT services are understood by the business. The benefits are:

improved decision-making
inputs for Service Portfolio Management
financial compliance and control
operational control
value capture and creation

Demand Management

Demand Management involves balancing the customer demand for service to the providers supply capacity. Over capacity results in unneccessary extra cost: under capacity can result in loss of business because service levels do not match potential demand. Demand Management requires a proper understanding of Patterns of Business Activity (PBAs) and user profiles.

Service Portfolio Management

Service Portfolio Management provides the necessary links between Business Service Management and IT Service Management, by linking IT Service assets to business services or linking defined services to business outcomes. Service Portfolio Management should aim to achieve maximum value creation from the Service Porfolio and manage risks and costs - investments can be tracked to ensure appropriate returns are achieved. The Service Portfolio will thus inform decisions on the value of a service.

The Service Portfolio consists of current, planned and retired services and should contain all information associated with the Service, including:

Business Case
Project Documents
Risks
Costs
Continuity Plans
Requirements
Specifications
Plans
SLAs and Contracts
Changes approved

Current operational services and those available for deployment form the Service Catalogue element of the Service Portfolio. Planned services are said to be part of the Service Pipeline and form part of the Service Portfolio but not the Service Catalogue. Retired services are also documented in the Service Portfolio, along with the reasons for their retirement.

The Service Portfolio describes the services of a provider in terms of business value and should help to answer the following strategic questions:

Why should a client buy these services
Why should the client buy these services from us
What are the price and chargeback models
What are our strong and weak points, our priorities and risks
How should our resources and capabilities be allocated

Activities

Define the Market

Define the Market

Understand the relation between services and strategies
understand the customers
understand the opportunities
classify and visualise the services

This activity tries to identify what needs to be achieved, what will be delivered and how IT will support this. This phase will focus on understanding the customer, opportunities, assets and services.

To understand the customer, we must identify the customer assets, classified as either capabilities or resources. Capabilities cover the organisations ability to coordinate, control and deploy resources to produce value. Capabilities are intangible assets, experience-driven, knowledge-intensive and information-based, and typically encompass an organisations management, organisation, processes, knowledge and people. In contrast resources are tangible assets that are relatively easy to acquire and include financial assets, infrastructure, applications, information and people

Analysing outcomes increases understanding of business process and opportunities. Business outcomes can be broken down into three parts: objective, metric and desired outcome

Customer assets and services provided can be classified and mapped to each other. Patterns emerge during the mapping process, indicating opportunities for shared services. Classification and Visualisation helps to understand:

what relationships exist in an organisation
how services are being used
opportunities for short, medium and long-term support
what value can be created

Develop the Offerings

Develop the Offerings: Create a Service Portfolio that represents the opportunities and readiness of a service provider to serve the customers and the market

Three components must be considered to the Develop the offering:

Market Space

a set of business outcomes that customers desire and which can be facilitated by a service

Outcome-based Definition of Service

defining services in terms of value to the customer. Value for the customer will be expressed in terms of:

Utility - fitness for purpose or the functionality offered by the service
Warranty - fitness for use or a guarantee that the service will meet the agreed requirements

Service Portfolio

all the resources presently engaged or being released as part of the Service Lifecycle

Develop Strategic Assets

Develop Strategic Assets: Define the value network and improve capabilities and resources to increase the service and performance potential. A value network is a web of relationships that generate both tangible and intangible value through complex and dynamic exchanges between two or more organisations

Service Management is a 'Closed Loop' system, focused on directly supporting the business or customer needs to maximise the value achieved from the assets associated with the service, with no other customers competing for those assets. The assets will either be customer assets or service assets. These assets can be develop either in terms of their:

Service Potential: Generate increased value in the use of service assets
Performance Potential: Generate increased value in the use of customer assets

Performance Potential is increased by offering experience and training to the customer, maximising the value generated from customer assets. Service potential is increased by improving the efficiency and capacity of service assets, but the costs of increased capacity will need to be factored-in and passed-on to the customer

Prepare for Execution of Contract

Prepare of Execution

Strategic Assessment
Setting Objectives
Defining CSFs
Prioritising Investments

Investment needs to be prioritised in preparation for service execution. Business potential needs to be explored to understand potential growth that will need to be supported. Services should be aligned to and supporting business goals. Strategic alignment is achieved by considering what are:

most distinctive services
most profitable services
stakeholder satisfaction levels
stakeholder profitability levels

and why.

Service assets must be aligned with customer outcomes, providing best value to customer and minimising risks and costs of provider. Critical Success Factors (CSFs) should be defined, so they can be measured and analysed to maintain strategic competitiveness.

Roles

Product Manager

The Product Manager plays a key role in Service Portfolio Management. This role 'is responsible for ensuring that services are managed as a product throughout their entire lifecycle'. Product Managers own the Service Catalogue and work closely with Business Relationship Managers to manage the Service Catalogue and Service Portfolio - developing business cases for new service developments

Business Relationship Manager

The Business Relationship Manager role requires a high level focus to ensure that customer outcomes are understood and being met. The BRM should ensure high levels of customer satisfaction are achieved and track changes in the customer environment which could impact on service requirements. The BRM will maintain the Customer Portfolio tool.

Service Owner

The role is accountable to the Director of IT for delivery of the service, acts as the prime customer contact and liaises with process owners throughout the Service Lifecycle. The Service Owner needs to understand the service at a business and technical level and ensures that the SLA is met. The Service Owner will provide input on performance, availability and future requirements for Service Management, and will represent the service at Change Advisory Boards.

Process Manager

The Process Manager will plan and coordinate all process activities, ensuring that these are carried out to the required standard. The Process Manager will also be responsible for appointing people to the required roles and managing process resources. The role works closely with the Service Owners and other Process Managers.

Process Practitioner

Process Practitioners are responsible for carrying out one or more activities of a process, and ensuring that inputs, outputs and interfaces for the process are correct. The role will liaise with the process stakeholders to verify the effectiveness of the process.