Information Technology Infrastructure Library Service Strategy based on ITIL v3 Service Strategy Publication

1. ITIL
SERVICE STRATEGY
Based on ITIL v3 Service Strategy publication
Marvin Sirait
Last updated November 2016

2. Topics
Service
Strategy
Introduction
Service management as a 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
management as 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
• IT leaders 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 as a 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 as a 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 as a 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
• Define the 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
• Financial Management
• 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 and operation
• 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 success factors 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