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Approval from
Service Transition is necessary to add or remove services from the
Service Catalogue. This is necessary for the following reasons:
Once an item enters the catalogue it must be made available to customers who demand it. Due diligence is necessary to ensure that the service is a complete product that can be fully supported. This includes technical feasibility, financial viability, and operational capability. Incomplete products offered in haste can result in significant losses for service providers and customers.
Items in the Service Catalogue are mostly in the Service Operation phase with contractual commitments made to customers. Any changes to the catalogue have to be evaluated for impact on the ability to meet those commitments.
Adding items to the Service catalogue means the need to set aside capabilities and resources for present and prospective customers. This is like maintaining spares for every piece of equipment in every type of aircraft in operation in the fleet. Having more has advantages if each item is doing well. Otherwise, valuable resources are locked by catalogue items not doing well. There is a need to balance flexibility and choice for customers with the increase in complexity, uncertainty, and resource conflicts.
Standardization and reuse
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There are instances in which certain business needs cannot be fulfilled with services from a catalogue. The service provider has to decide how to respond to such cases. The options are typically along the following lines:
Explain to the customer why the need cannot be fulfilled.
Explain what is needed of the customer in terms of commitment, sponsorship or funding for new service development. Customers may reconsider their needs in view of service development costs they may have to bear.
Develop the service if the customer makes the necessary commitment
Decline the opportunity if the customer cannot commit.
Consider supporting the customer in partnership with third parties.
4.3 Develop strategic assets
Service providers should treat service management as a strategicasset and entrust it with challenges and opportunities in terms of customers, services, and contracts to support. Investments made in trusted assets are less risky because they have the capability to deliver consistently time and again. Service management begins with capabilities that coordinate and control resources to support a catalogue of services (Figure 4.14). Challenges are overcome in achieving progressively higher service levels. There is mutual reinforcement between the two. Capabilities and resources are adjusted until the goal is reached. Customers perceive demonstrated value from the service provider.
Figure 4.14 Growth and maturity of service management into a trusted asset
Customers perceive benefits in a continued relationship, and entrust the provider with the business of increasing value and also adding new customers and market spaces to the realm of possibilities. This justifies further investments in service management in terms of capabilities and resources, which have a tendency to reinforce each other.
Stakeholders may initially trust the provider with low-value contracts or non-critical services. Service management responds by delivering the performance expected of a strategic asset. The performance is rewarded with contract renewals, new services, and customers, which together represent a larger value of business. To handle this increase in value, service management must invest further in assets such as process, knowledge, people, applications and infrastructure. Successful learning and growth enables commitments of higher service levels as service management gets conditioned to handle bigger challenges.
Over time, this virtuous cycle results in higher capability levels and maturity in service management leading to a higher return on assets for the service provider. Services play the role of a belt that engages service assets with customer assets (Figure 4.15). Service agreements or contracts define the rules of engagement. Unless properly defined the cost of service assets spent in support of customers’ assets may be difficult to account for and recover. This leads to situations where there is adequate creation of value for the customer but inadequate value capture for the provider.
Figure 4.15 Mutual welfare when service assets are engaged in supporting customer outcomes
Value capture is an important notion for all types of service providers, internal and external. Good business sense discourages stakeholders from making major investments in any organizational capability unless it demonstrates value capture. Internal providers are encouraged to adopt this strategic perspective to continue as viable concerns within a business. Cost recovery is necessary but not sufficient. Profits or surpluses allow continued investments in service assets that have a direct impact on capabilities.
Linking value creation to value capture is a difficult but worthwhile endeavour. In simplest terms customers buy services as part of plans for achieving certain business outcomes. Say, for example, the use of a wireless messaging service allows the customer’s sales staff to connect securely to the sales force automation system and complete critical tasks in the sales cycle. This has a positive impact on cash flows from payments brought forward in time. By linking purchase orders and invoices expedited from use of the wireless service it is possible to sense the impact of the service on business outcomes. They can be measured in terms such as Days Sales Outstanding (DSO) and average time of the Order-to-Cash cycle. The total cost of utilizing the service can then be weighed against the impact on business outcomes.
It is difficult to establish the cause-and-effect relationship between the use of the service and the changes in cash flows. Quite often, there are several degrees of separation between the utilization of the service and the benefits customers ultimately realize. While absolute certainty is difficult to achieve, decision making nevertheless improves.
4.3.1 Service management as a closed-loop control system
As defined earlier, service management is a set of organizational capabilities specialized in providing value to customers in the form of services. The capabilities interact with each other to function as a system for creating value. Service assets are the source of value and customer assets are the recipients (Figure 4.16). Services have the potential to increase the performance of customer assets and create value to the customer organization. Improvements in the design, transition and operation of the service increase this customer performance potential and reduce the risks of variations on customer assets. This requires a clear and complete understanding of customer assets and desired outcomes.
Figure 4.16 Service management as a closed-loop control system
Services derive their potential from service assets. Service potential is converted into performance potential of customer assets. Increasing the performance potential frequently stimulates additional demand for the service in terms of scale or scope. This demand translates into greater use of service assets and justification for their ongoing maintenance and upgrades. Unused capacity is reduced. Costs incurred in fulfilling the demand are recovered from the customer based on agreed terms and conditions.
From this perspective, service management is a closed-loop control system with the following functions, to:
Develop and maintain service assets
Understand the performance potential of customer assets
Map service assets to customer assets through services
Design, develop, and operate suitable services
Extract service potential from service assets
Convert service potential into performance potential
Convert demand from customer assets into workload for service assets
Reduce risks for the customer
Control the cost of providing services.
4.3.2 Service management as a strategic asset
To develop service management as a strategic asset, define the value network within which service providers operate in support of their customers. This network may exist entirely within a business enterprise, as is often the case for Type I and Type II providers (Figure 4.17). More often the value network extends across organizational boundaries to include external customers, suppliers, and partners. By identifying the key relationships and interactions in the network, managers have better visibility and control over the systems and processes they operate. This allows managers to manage the complexity that exists in their business environments as customers pursue their own business models and strategies. It also helps account for all the costs and risks involved in providing a service or supporting a customer.
Figure 4.17 Service management as a strategic asset and a closed-loop system
Strategic assets are dynamic in nature. They are expected to continue to perform well under changing business conditions and objectives of their organization. That requires strategic assets to have learning capabilities. Performance in the immediate future should benefit from knowledge and experience gained from the past. This requires service management to operate as a closed-loop system that systematically creates value for the customer and captures value for the service provider. An important aspect of service management is controlling the interactions between customer assets and service assets.
4.3.2.1 Increasing the service potential
The capabilities and resources (service assets) of a service provider represent the service potential or the productive capacity available to customers through a set of services (Figure 4.17). Projects that develop or improve capabilities and resources increase the service potential. For example, implementation of a Configuration Management System leads to improved visibility and control over the productive capacity of service assets such as networks, storage, and servers. It also helps quickly to restore such capacity in the event of failures or outages. There is greater efficiency in the utilization of those assets and therefore service potential because of capability improvements in Configuration Management. Similar examples are given below in Table 4.4. One of the key objectives of service management is to improve the service potential of its capabilities and resources.
Service management initiative
Increasing service potential from capabilities
Increasing service potential from resources
Data centre rationalization
Better control over service operations
Lower complexity in infrastructure
Development of infrastructure and technology assets