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This publication encourages exercises in strategic thinking much needed by IT organizations and others vying to be service providers preferred by customers. It has established a strategic context for service management in the real world. But that world is about change and uncertainty. Commercial pressures, competition, legislation and environmental factors all affect business priorities and consequently also the strategies that support the business. Public sector and non-profit organizations may not have to make profits for shareholders, but they share many of the same concerns as companies and corporations. Public sector organizations, for example, have to deliver cost-effective services, and at the top level or at the internal department level run the risk of being shut down, merged or outsourced if they are not effective. This publication is about being prepared for possible scenarios, and turning threats into opportunities.

We all want to be ‘not optional’. To survive and flourish, every organization, department, branch, section and individual has to understand how they create value for themselves and for their customers and the way that their suppliers enhance that value. They must appreciate the strategic choices both for their own services and those they receive from providers. Because of the environment of constant change, strategy is not something to do once, and service strategies need to be developed, applied and continually reviewed, just like all the other parts of the Service Lifecycle. If the strategy is effective, then the effort in all the other stages of the lifecycle will be applied appropriately and successfully.

Services are a predominant form in which value is created and transferred between organizations, and service management is in time maturing as a discipline. A wealth of knowledge and good practice is available for use if there is clarity on why services may be used to support the customer’s business. Clarity is attained if there is a willingness to take a long-term view, to search for patterns among the noisy detail, and to be guided by business fundamentals rather than technical possibilities. Good practice is rooted in hard facts and sound principles, which are often dismissed under the pretext of being practical. Poor practice is often the blind pursuit of success in the footsteps of early champions and leaders who, unbeknownst to their followers, have been far more diligent. This publication encourages its readers to adopt a practical but principled approach to finding long-term success and durable capabilities in service management.

Appendix A: Present value of an annuity

Use Table A.1 to find the present value of an annuity of £1 in arrears.

Find the column under your discount rate (or cost of capital). Then find the horizontal row corresponding to the last year of the investment. The point at which the column and the row intersect is the present value of a series of £1 payments. Multiply this value by the number of pounds you expect to receive in each payment, in order to find the present value of the series.

Present worth of £1 per period payable at end of each period

Years

3.5%

4.5%

£0.970874

£0.966184

£0.961538

£0.956938

£1.913470

£1.899694

£1.886095

£1.872668

£2.828611

£2.801637

£2.775091

£2.748964

£3.717098

£3.673079

£3.629895

£3.587526

£4.579707

£4.515052

£4.451822

£4.389977

£5.417191

£5.328553

£5.242137

£5.157872

£6.230283

£6.114544

£6.002055

£5.892701

Years

5.5%