SEC1 OGC Service Strategy.qxd 20/5/07 11:50 Page i Service Strategy London: TSO SEC1 OGC Service Strategy.qxd 20/5/07 10:01 Page ii Published by TSO (The Stationery Office) and available from: Online www.tsoshop.co.uk Mail,Telephone, Fax & E-mail TSO PO Box 29, Norwich, NR3 1GN Telephone orders/General enquiries: 0870 600 5522 Fax orders: 0870 600 5533 E-mail: [email protected] Textphone 0870 240 3701 TSO Shops 123 Kingsway, London,WC2B 6PQ 020 7242 6393 Fax 020 7242 6394 16 Arthur Street, Belfast BT1 4GD 028 9023 8451 Fax 028 9023 5401 71 Lothian Road, Edinburgh EH3 9AZ 0870 606 5566 Fax 0870 606 5588 TSO@Blackwell and other Accredited Agents Published for the Office of Government Commerce under licence from the Controller of Her Majesty’s Stationery Office. © Crown Copyright 2007 This is a Crown copyright value added product, reuse of which requires a Click-Use Licence for value added material issued by OPSI. Applications to reuse, reproduce or republish material in this publication should be sent to OPSI, Information Policy Team, St Clements House, 2-16 Colegate, Norwich, NR3 1BQ, Tel No (01603) 621000 Fax No (01603) 723000, E-mail: [email protected], or complete the application form on the OPSI website http://www.opsi.gov.uk/click-use/value-added-licence- information/index.htm OPSI, in consultation with Office of Government Commerce (OGC), may then prepare a Value Added Licence based on standard terms tailored to your particular requirements including payment terms The OGC logo ® is a Registered Trade Mark of the Office of Government Commerce ITIL ® is a Registered Trade Mark, and a Registered Community Trade Mark of the Office of Government Commerce, and is Registered in the U.S. Patent and Trademark Office The Swirl logo ™ is a Trade Mark of the Office of Government Commerce First published 2007 ISBN 978 0 11 331045 6 Printed in the United Kingdom for The Stationery Office SEC1 OGC Service Strategy.qxd 20/5/07 10:01 Page iii | iii Contents List of figures iv 7 Strategy, tactics and operations 159 List of tables viii 7.1 Implementation through the lifecycle 161 7.2 Strategy and design 163 OGC’s foreword ix 7.3 Strategy and transition 168 Chief Architect’s foreword x 7.4 Strategy and operations 170 7.5 Strategy and improvement 173 Preface xi 8 Technology and strategy 179 Acknowledgements xii 8.1 Service automation 182 1 Introduction 1 8.2 Service interfaces 185 8.3 Tools for service strategy 188 1.1 Overview 3 1.2 Context 5 9 Challenges, critical success factors 1.3 Purpose 9 and risks 191 1.4 Expected use 10 9.1 Complexity 193 2 Service management as a practice 13 9.2 Coordination and control 193 9.3 Preserving value 194 2.1 What is service management? 15 9.4 Effectiveness in measurement 197 2.2 What are services? 16 9.5 Risks 199 2.3 The business process 18 2.4 Principles of service management 19 Afterword 209 2.5 The Service Lifecycle 24 Appendix A: Present value of an annuity 213 2.6 Functions and processes across the Lifecycle 26 Appendix B: Supplementary guidance 217 3 Service strategy principles 29 B1 Description of asset types 219 3.1 Value creation 31 B2 Product managers 221 3.2 Service assets 38 3.3 Service provider types 41 Further information 223 3.4 Service structures 47 References 225 3.5 Service strategy fundamentals 52 Further reading 226 4 Service strategy 63 Glossary 229 4.1 Define the market 65 Acronyms list 231 4.2 Develop the offerings 70 Definitions list 233 4.3 Develop strategic assets 78 Index 257 4.4 Prepare for execution 84 5 Service economics 95 5.1 Financial Management 97 5.2 Return on Investment 112 5.3 Service Portfolio Management 119 5.4 Service Portfolio Management methods 123 5.5 Demand Management 129 6 Strategy and organization 139 6.1 Organizational development 142 6.2 Organizational departmentalization 147 6.3 Organizational design 148 6.4 Organizational culture 149 6.5 Sourcing strategy 150 SEC1 OGC Service Strategy.qxd 20/5/07 10:01 Page iv iv | List of figures All diagrams in this publication are intended to provide an Figure 3.3 Utility increases the performance average illustration of ITIL Service Management Practice concepts Figure 3.4 Warranty reduces the performance variation and guidance. They have been artistically rendered to visually reinforce key concepts and are not intended to Figure 3.5 Value of a service in terms of return on assets meet a formal method or standard of technical drawing. for customer The ITIL Service Management Practices Integrated Service Figure 3.6 Utility framed in terms of outcomes supported Model conforms to technical drawing standards and and constraints removed should be referred to for complete details. Please see www.best-management-practice.com/itil for details. Figure 3.7 Combined effects of utility and warranty on customer assets Figure 1.1 Sourcing of service management practice Figure 3.8 Resources and capabilities are the basis for Figure 1.2 The ITIL Core value creation Figure 1.3 The Golden Pony Figure 3.9 Business units are coordinated goal-driven Figure 2.1 Generalized patterns and specialized collections of assets instances Figure 3.10 Customer assets are the basis for defining Figure 2.2 Logic of value creation through services value Figure 2.3 A conversation about the definition and Figure 3.11 Common relationships between business units meaning of services and service units Figure 2.4 Business processes apply experience, know- Figure 3.12 Type I providers how and resources Figure 3.13 Common Type II providers Figure 2.5 The end points of a business process are Figure 3.14 Type III providers often defined by enterprise applications Figure 3.15 Customer decisions on service provider types Figure 2.6 Relationships defined by the dynamics of ownership, control and utilization Figure 3.16 Advantage of being a well-performing incumbent Figure 2.7 The agency model in service management Figure 3.17 Generic value network Figure 2.8 Encapsulation based on separation of concerns and modularity Figure 3.18 Basic value chain and value network Figure 2.9 Types of feedback Figure 3.19 Example value network Figure 2.10 The Service Lifecycle Figure 3.20 Unit of analysis for value nets in service management Figure 2.11 Great leverage for sustainable change lies in structure Figure 3.21 Existing flowchart of how the Service Desk was supposed to work Figure 2.12 Today’s problem is often created by yesterday’s solution Figure 3.22 Value net exchanges showing how things really worked Figure 2.13 Performance over time for differing service management structures Figure 3.23 Innovative solutions break through performance barriers Figure 2.14 A basic process Figure 3.24 Building blocks of a high performance service Figure 2.15 Service management processes are applied strategy across the Service Lifecycle Figure 3.25 Perspectives, positions, plans and patterns Figure 3.1 Attributes, perceptions and preferences Figure 3.26 Strategic approach taken by a Type II provider Figure 3.2 Economic value of a service for an international law firm SEC1 OGC Service Strategy.qxd 20/5/07 10:01 Page v List of figures | v Figure 3.27 Variety-based (left) and needs-based (right) Figure 4.21 Critical success factors positioning Figure 4.22 Critical success factors leveraged across Figure 3.28 Positioning based on location, scale or market spaces structure Figure 4.23 Critical success factors and competitive Figure 3.29 Combining variety-based, needs-based and positions in playing fields access-based positioning Figure 4.24 Strategic analysis of Customer Portfolio Figure 3.30 Operational plans and patterns are driven by Figure 4.25 Prioritizing strategic investments based on strategic positioning customer needs Figure 4.1 Strategies for services and services for Figure 4.26 New service development strategies Figure 4.27 Customers and market spaces Figure 4.2 Analysing an outcome Figure 4.28 Strategies and market spaces Figure 4.3 Customer outcomes are used to tag services and service assets Figure 4.29 Expansion into adjacent market spaces Figure 4.4 Provider business models and customer assets Figure 4.30 Growth in a market space Figure 4.5 Asset-based and utility-based positioning Figure 4.31 Differentiation in the market space Figure 4.6 Visualization of services as value-creating Figure 5.1 Shared imperatives framework: business patterns and IT Figure 4.7 Market spaces are defined by the outcomes Figure 5.2 Customer assets are the basis for defining that customers desire value Figure 4.8 Actionable components of service definitions Figure 5.3 Translation of cost account data to service in terms of utility account information Figure 4.9 Actionable components of service definitions Figure 5.4 Shared services in terms of warranty Figure 5.5 Business Impact Analysis Figure 4.10 Service Portfolio Figure 5.6 The funding lifecycle Figure 4.11 Service Pipeline and Service Catalogue Figure 5.7 Single business impact can affect multiple Figure 4.12 Elements of a Service Portfolio and Service business objectives Catalogue Figure 5.8 Multiple business impacts can affect a single Figure 4.13 Service Catalogue and Demand Management business objective Figure 4.14 Growth and maturity of service management Figure 5.9 Post-programme ROI approach into a trusted asset Figure 5.10 Trend line analysis Figure 4.15 Mutual welfare when service assets are Figure 5.11 Business service and IT service engaged in supporting customer outcomes Figure 5.12 Service perspectives Figure 4.16 Service management as a closed-loop control system Figure 5.13 Simplified vertical