ITIL® V3 - A Pocket Guide (eBook)

3    Lifecycle Phase: Service Strategy

3.1    Introduction

In this section, the axis (principal line of development, movement, direction, reference point) of the lifecycle is introduced. As the axis of the lifecycle, Service Strategy delivers guidance with designing, developing and implementing service management as a strategic asset. Service Strategy is critical in the context of all processes along the ITIL Service Lifecycle.

The mission of the Service Strategy phase is to develop the capacity to achieve and maintain a strategic advantage.

The development and application of Service Strategy requires constant revision, just as in all other components of the cycle.

3.2    Basic concepts

To formulate the strategy, Mintzberg’s four Ps are a good starting point (Mintzberg, 1994):

•   Perspective - Have a clear vision and focus.

•   Position - Take a clearly defined stance.

•   Plan - Form a precise notion of how the organization should develop itself.

•   Pattern - Maintain consistency in decisions and actions.

Value creation is a combination of the effects of utility and warranty. Both are necessary for the creation of value for the customer. For customers, the positive effect is the “utility” of a service; the insurance of this positive effect is the “warranty”:

•   Utility - fitness for purpose. Functionality offered by a product or service to meet a particular need. Utility is often summarized as “what it does”.

•   Warranty - fitness for use. A promise or guarantee that a product or service will meet its agreed requirements. The availability, capacity, continuity and information security necessary to meet the customers’ requirements.

The value networks are defined as follows: “A value network is a web of relationships that generate both tangible and intangible value through complex and dynamic exchanges between two or more organizations.”

Resources and capabilities are the service assets of a service provider. Organizations use them to create value in the form of goods and services.

•   Resources - Resources include IT Infrastructure, people, money or anything else that might help to deliver an IT service. Resources comprise the direct input for the production.

•   Capabilities - Capabilities are used to develop, implement and coordinate the production. Service providers must develop distinctive capabilities in order to maintain services that are difficult to duplicate by the competition. Service providers must also invest substantially in education and training.

Service providers are organizations that supply services to one or more internal or external customers. Three different types of service providers are distinguished:

•   Type I: Internal service provider - An internal service provider that is embedded within a Business Unit. There may be several type I service providers within an organization.

•   Type II: Shared Services Unit - An internal service provider that provides shared IT services to more than one Business Unit.

•   Type III: External service provider - A service provider that provides IT services to external customers.

The Service Portfolio represents the opportunities and readiness of a service provider to serve the customers and the market space. The Service Portfolio can be divided into three subsets of services:

•   Service Catalogue - The services that are available to customers.

•   Service Pipeline - The services that are either under consideration or in development.

•   Retired Services - Services that are phased out or withdrawn.

3.3    Processes and other activities

This section briefly explains the processes and activities of Service Strategy.

More information about each of these processes can be found in Chapter 9 of this pocket guide.

The Service Strategy processes:

•   Financial management - An integral component of service management. It anticipates the essential management information in financial terms that is required for the guarantee of efficient and cost-effective service delivery.

•   Demand management - An essential aspect of service management in which offer and demand are harmonized. The goal of demand management is to predict, as accurately as possible, the purchase of products and, where possible, to balance the demand with the resources.

•   Service Portfolio Management (SPM) - Method to manage all service management investments in terms of business value. The objective of SPM is to achieve maximum value creation while at the same time managing the risks and costs.

The Service Strategy activities:

•   Defining the market - Understand the relation between services and strategies, understand the customers, understand the opportunities, and classify and visualize the services.

•   The development of the offer - Create a Service Portfolio that represents the opportunities and readiness of a service provider to serve the customers and the market.

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

•   Preparation for execution - Strategic assessment, setting objectives, defining Critical Success Factors, prioritizing investments, et cetera.

3.4    Organization

There are five recognizable phases in organizational development within the spectrum of centralization and decentralization:

1.    Stage 1: Network - An organization in stage 1 focuses on fast, informal and ad hoc provision of services. The organization is technologically oriented and is uncomfortable with formal structures.

2.    Stage 2: Directive - In stage 2, the informal structure of stage 1 is transformed into an hierarchical structure with a strong management team. They assume the responsibility for leading the strategy and for guiding managers to embrace their functional responsibilities.

3.    Stage 3: Delegation - In stage 3, efforts are made to enhance technical efficiency and provide space for innovation in order to reduce costs and improve services.

4.    Stage 4: Coordination - In stage 4 the focus is directed towards the use of formal systems as a means of achieving better coordination.

5.    Stage 5: Collaboration - During stage 5, the focus is on the improvement of cooperation with the business.

The goal of the Service Strategy phase is to improve the core competencies. Sometimes it is more efficient to outsource certain services. We call this the SoC principle (Separation of Concerns, SOC): that which results from the search for competitive differentiation through the redistribution of resources and capabilities.

The following generic forms of outsourcing can be delineated:

•   Internal outsourcing:

–  Type 1 Internal - Provision and delivery of services by internal staff; this offers the most control, but is limited in scale.

–  Type 2 Shared services - Working with internal BUs; offers lower costs than Type 1 and more standardization, but is still limited in scale.

•   Traditional outsourcing:

–  Complete outsourcing of a service - A single contract with one service provider; better in terms of scaling opportunities, but limited in best-in-class capabilities.

•   Multi-vendor outsourcing:

–  Prime - A single contract with one service provider who works with multiple providers; improved capabilities and risks, but increased complexity.

–  Consortium - A selection of multiple service providers; the advantage is best-in-class with more oversight; the disadvantage is the risk of the necessity of working with the competition.

–  Selective outsourcing - A pool of service providers selected and managed through the service receiver; this is the most difficult structure to manage.

–  Co-Sourcing - A variation of selective outsourcing in which the service receiver combines a structure of internal or shared services with external providers; in this case, the service receiver is the service integrator.

3.5    Methods, techniques and tools

Services are socio-technical systems with service assets as the operational elements. The effectiveness of Service Strategy depends on a well-managed relationship between the social and technical sub-systems. It is essential to identify and manage these dependencies and influences.

Tools for the Service Strategy phase can be:

•   Simulation - System Dynamics is a methodology for understanding and managing the complex...