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Having a cost advantage over competition is one among many options. Being the lowest-cost provider is necessary but not always sufficient to support business strategies. There is a need to develop other strengths over and above
efficiency in costs. Helping customers enter new markets and quickly scale up
operations, for example. An IT organization can better serve customers and outperform competition by better understanding the complexity, uncertainty, and trade-offs the customer is facing. The key is to decide on an
objective or end-state that differentiates the value of what you offer, on what terms, and in what form so that it outperforms what customers consider to be alternatives.
Strategy need not simply be an exercise in gathering requirements or the pursuit of operational
effectiveness. It is a means to become
not optional.
Formulating strategy has traditionally been in the hands of upper levels of management. Yet in the world of IT, where conditions change rapidly and the knowledge and expertise required for sound decisions are usually found on the front lines, IT leaders have an important role to play. From CIOs to front-line managers, each has the ability to shape and execute service strategies. The rigid ‘plan and deploy’ model is giving way to the dynamic ‘engage and collaborate’ model.
The ultimate success of service management is indicated by the strength of the relationship between customers and service providers. The publications of the core ITIL library provide the necessary guidance to achieve such success. In addition to this publication, the volumes Service Design, Service Transition, Service Operation and Continual Service Improvement define a body of knowledge and set of good practices for successful service management. They provide guidance for:
Converting innovative ideas and concepts into services for customers
Solving problems with effective and enduring solutions
Controlling costs and risks that can potentially destroy carefully created value
Learning from successes and failures to manage new challenges and opportunities.
The guidance can be applied by IT organizations in the public and private sectors; by for-profit and non-profit organizations; for internal service providers with cost-recovery objectives; and commercial outfits with profitability targets. Terms such as profitability, income, pricing, revenue and competition can be interpreted or substituted to be meaningful in the context of all service providers with rare exceptions. As such they are used throughout this publication with minimal annotation or clarification to avoid interrupting the flow of text.
Finally, the frequently cited objective of ‘alignment with the business’ characterizes a common problem faced by the leadership of IT organizations in general and CIOs in particular. Those who succeed in meeting this objective are those who understand the need to be business-minded. The increasing popularity of managed services and outsourcing places tremendous pressures on internal providers to adopt the structure and behaviour of a professionally managed business. A well-managed IT organization can act like a business within a business and deliver value that meets or exceeds the value proposition of commercial alternatives. For this reason, concepts such as utility, warranty, market spaces, portfolios and playing fields, are introduced
1.2 Context
1.2.1 Information technology and services
Information technology (IT) is a commonly used term that changes meaning with context (Table 1.1). From the first perspective, IT systems, applications and infrastructure are components or sub-assemblies of a larger product. They enable or are embedded in processes and services. From the second perspective, IT is an organization with its own set of capabilities and resources. IT organizations can be of various types such as businessfunctions, shared services units, and enterprise-level core units.
View
Visualization
Vernacular
IT/Component
Components of systems and processes
‘Our billing system is IT-enabled.’
‘We use IT to improve interactions with our customers through self-service terminals at key locations.’
‘IT touches every part of our business. Without appropriate controls, that in itself is a risk.’
IT/Organization
Internal unit or function of the enterprise or commercial service provider
‘Our IT is headed by a CIO with tremendous experience in the transportation business.’
‘Our heavily centralized IT suits our business model which more than anything requires stability and Contract Portfolio over business operations.’
‘IT does not understand the language of our business. Much is lost in translation.’
IT/Service
Type of shared service utilized by business units
‘I haven’t been able to access the internet since yesterday. When do you expect the service to be restored?’
‘Our remote-access service is very secure but it is also very difficult to set up and use.’
‘We decided not to build our own enterprise applications for administrative functions. We are better off utilizing IT Services provided to us under a commercial contract.’
IT/Asset
Capabilities and resources that provide a dependable stream of benefits
‘IT is at the core of our business process. We use IT to create value for our customers. It is part of our core production process.’
‘Our IT investments are like Cost of Goods Sold (COGS). They are direct costs, not overheads.’
‘IT is our business.’
Table 1.1 The multiple views of IT
From the third perspective, IT is a category of services utilized by business. These services are typically IT applications and infrastructure that are packaged and offered as services by internal IT organizations or external service providers. IT costs are treated as business expenses. From the fourth perspective, IT is a category of business assets that provide a stream of benefits for their owners, including but not limited to revenue, income and profit. IT costs are treated as investments. It is important to be clear what the term means in a given context. It is often used with different meanings in the same sentence or paragraph, often exacerbating problems.
1.2.2 Good practice in the public domain
Organizations operate in dynamic environments with the need to learn and adapt. There is a need to improve performance while managing trade-offs. Under similar pressure, customers seek advantage from service providers. They pursue sourcing strategies that best serve their own business interest. In many countries, government agencies and non-profit organizations have a similar propensity to outsource for the sake of operationaleffectiveness. This puts additional pressure on service providers to maintain a competitive advantage with respect to the alternatives that customers may have. The increase in outsourcing has exposed internal service providers in particular to unusual competition.
To cope with the pressure, organizations benchmark themselves against peers and seek to close gaps in capabilities. One way to close such gaps is the adoption of good practices in wide industry use. There are several sources for good practices including public frameworks, standards, and the proprietary knowledge of organizations and individuals (Figure 1.1).
Figure 1.1 Sourcing of service management practice
Public frameworks and standards are attractive when compared with proprietary knowledge:
Proprietary knowledge is deeply embedded in organizations and therefore difficult to adopt, replicate, or transfer even with the cooperation of the owners. Such knowledge is often in the form of tacit knowledge, which is inextricable and poorly documented.
Proprietary knowledge is customized for the local context and specific business needs to the point of being idiosyncratic. Unless the recipients of such knowledge have matching circumstances, the knowledge may not be as effective in use.
Owners of proprietary knowledge expect to be rewarded for their long-term investments. They may make such knowledge available only under commercial terms through purchases and licensing agreements.
Publicly available frameworks and standards such as ITIL, COBIT, CMMI, eSCM-SP, PRINCE2, ISO 9000, ISO/IEC 20000, and ISO/IEC 27001 are validated across a diverse set of environments and situations rather than the limited experience of a single organization. They are subject to broad review across multiple organizations and disciplines. They are vetted by diverse sets of partners, suppliers, and competitors.
The knowledge of public frameworks is more likely to be widely distributed among a large community of professionals through publicly available training and certification. It is easier for organizations to acquire such knowledge through the labour market.
Ignoring public frameworks and standards can needlessly place an organization at a disadvantage. Organizations should cultivate their own proprietary knowledge on top of a body of knowledge based on public frameworks and standards. Collaboration and coordination across organizations are easier because of shared practices and standards. According to research by the UK Department of Trade and Industry (DTI), the value to the UK economy from standards is estimated to be about £2.5 billion per annum.4
The following public frameworks and standards are relevant to service management:
ISO/IEC 20000
ISO/IEC 27001
Capability Maturity Model Integration (CMMI®)