ITIL - Session 03-04 - Service Strategy
ITIL - Session 03-04 - Service Strategy
ITIL - Session 03-04 - Service Strategy
Course Agenda
A. Introduction
B. Basic concepts
C. Processes and other activities
D. Organization
E. Methods, techniques and tools
F. Implementation and operation
G. Financial Management
H. Service Portfolio Management
I. Demand Management
J. Exam Prep Questions
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Objectives of SS
Service Strategy delivers guidance with designing, developing and
implementing service management as a strategic asset.
Strategy Considered
• Acknowledge other
organization
• Decide differentiate
objective
• Meet Customer’s
business outcomes
• Superior performance
VS competing
alternative
Building Blocks High Serves IT Professionals
Performance Service
Strategy
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Scope
Topics of Service Strategy include:
• Strategy generation
• The development of markets (internal and external)
• Service assets
• Service catalogue
• Implementation of strategy through the service lifecycle
• Demand management
• Financial management
• Service portfolio management
• Organizational development
• Sourcing strategies
• Strategic risks
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What is function
“A Function is a team or group of
people specialized to perform certain
types of work and be responsible for
specific outcomes.”
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What is process
“Process is a structured set of activities designed to
accomplish specific objective.”
• Measurable
• Have Specific results
• Have customer
• Respond to spesific
event
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Service Management
Driven by SS
Service Strategy Service Portfolio
Service Levels
Service Design Service Model
Delivered
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Perspective Plans
Strategy
Patterns Positions
Infrastructure Organization
Capabilities
Resources
Applications Processes
Informations Knowledge
People
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Desired Outcomes
Value Creation
ith
w s
l ue bia
a
Low Impact on business V n ty ce
h
g arra n
outcomes but with high i
H W la
uncertainty Ba
f ith
O w
ue s
Fitness For Use
Z i g t
H U
ith
w s
l ue bia High Impact on business
a
V anty outcomes but with low
w r
Lo War ith uncertainty
w
ue as
a l bi (unbalanced value)
V y
o w tilit
L U
Utility
Assets Services
IT Service Provider
Utility
Customer
Resource
Warranty
Capabilities
Value
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II III
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SS Steps 2: Develop
Offering
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SS Steps 3: Develop
Strategic Asset
• Service
Management as
a closed-loop
control system
• Service
Management as
a Strategic
Assets
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Organization
There are five recognizable phases in organizational development within the spectrum
of centralization and decentralization:
1.Stage 1: Network - An organization in stage 1 focuses on fast, informal and ad hoc provision of
services. The organization is technologically oriented and is uncomfortable with formal structures.
3.Stage 3: Delegation - In stage 3, efforts are made to enhance technical efficiency and provide
space for innovation in order to reduce costs and improve services.
4.Stage 4: Coordination - In stage 4 the focus is directed towards the use of formal systems as a
means of achieving better coordination.
5.Stage 5: Collaboration - During stage 5, the focus is on the improvement of cooperation with the
business.
The goal of the Service Strategy phase is to improve the core competencies. Sometimes, it is more
efficient to outsource certain services. We call this the SOC principle (Separation of Concerns,
SOC): that which results from the search for competitive differentiation through the redistribution
of resources and capabilities.
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Organization
The following generic forms of outsourcing can be delineated:
• Internal outsourcing:
− Type 1 Internal - Provision and delivery of services by internal staff; this offers the most control,
but is limited in scale.
− Type 2 Shared services - Working with internal BUs; offers lower costs than Type 1 and more
standardization, but is still limited in scale.
• Traditional outsourcing:
− Complete outsourcing of a service - A single contract with one service provider; better in terms
of scaling opportunities, but limited in best-in-class capabilities.
• Multi-vendor outsourcing:
− Prime - A single contract with one service provider who works with multiple providers;
improved capabilities and risks, but increased complexity.
− Consortium - A selection of multiple service providers; the advantage is best-inclass with more
oversight; the disadvantage is the risk of the necessity of working with the competition.
− Selective outsourcing - A pool of service providers selected and managed through the service
receiver; this is the most difficult structure to manage.
− Co-Sourcing - A variation of selective outsourcing in which the service receiver combines a
structure of internal or shared services with external providers; in this case, the service receiver is
the service integrator.
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• Chief sourcing officer - The chief sourcing officer reports to the CIO and manages the
implementation of sourcing.
• Director of service management - The director supervises the provider on behalf of
the business.
• Contract manager - The contract manager manages the service contract from the
perspective of the service provider.
• Product manager - The product manager is a key role within service portfolio
management. The role is responsible for managing the services in the service provider’s
organization. Works closely with the business relationship manager.
• Business relationship manager - The business relationship manager brings
coordination and focus to the customer portfolio. This role represents the customer.
• Process owner - The process owner manages the process models that have been
developed on behalf of the users.
• Business representatives - They represent the customers’ interests and manage the
sourcing relationship from that perspective.
• The financial manager - The financial manager is responsible for implementing and
managing the IT Service providers budgeting, accounting and charging.
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• Simulation - System Dynamics is a methodology for understanding and managing the complex
problems of IT organizations.
• Analytical modeling - Six Sigma, PMBOK® and PRINCE2® offer well tested methods based on
analytical models. They must be evaluated and adopted within the context of Service Strategy and
service management.
• Business case - A way of identifying business objectives that are dependent on service
management.
• Strategy and design - Service strategies are implemented through the delivery of the portfolio in a
specific market area. Newly chartered services or services that require improvements in order to
suit the demand are promoted to the Service Design phase. The design can be driven by service
models, outcomes, constraints or pricing.
• Strategy and transition - To reduce the risk of failing, all strategic changes go through Service
Transition. Service Transition processes analyze, evaluate and approve strategic initiatives. Service
Strategy provides Service Transition with structures and constraints like the service portfolio,
policies, architectures, and the contract portfolio.
• Strategy and operations - The final realization of strategy occurs in the production phase. The
strategy must be in line with operational capabilities and constraints. Deployment patterns in
Service Operation define operational strategies for customers. Service Operation is responsible for
delivering the contract portfolio and should be able to deal with demand changes.
• Strategy and CSI - Due to constant changes, strategies are never static. Service strategies need to
be developed, adopted and continually reviewed. Strategic imperatives influence quality
perspectives processed in CSI. CSI processes deliver feedback for the strategy phase on, for
example: quality perspective, warranty factors, reliability, maintainability, redundancy.
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• Coordination and control - The people who make the decisions often have
limited time, attention and capacity. Therefore they delegate the roles and
responsibilities to teams and individuals. This makes coordination through
cooperation and monitoring essential.
• Preserving Value - Customers are not only interested in the utility and
warranty that they receive for the price they pay. They want to know the Total
Cost of Utilization (TCU).
Most IT organizations are good at monitoring data, but often they are not very
good at providing insights into the effectiveness of the services that they offer.
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Risks
The implementation of strategy leads to changes in the service portfolio. This involves management of related
risks. Risk is defined as follows: “a risk is an uncertain outcome, or in other words, a positive opportunity or a
negative threat.” Risk analysis and risk management must be applied to the service pipeline and service
catalogue in order to identify, curb and mitigate the risks within the lifecycle phases.
Financial Management
Charging
Cost Methods
Identify Financial Control
Objectives Methods
Feedback about
planned charges
Service Level Financial
Management Management
Introduction
Financial management is an integrated component of service management. It provides vital information that
management needs to guarantee efficient and cost-effective service delivery. If strictly implemented, financial
management generates meaningful and critical data on performance. It is also able to answer important
organizational issues, such as:
• Does our differentiation strategy result in higher profits and revenue, reduced costs or increased coverage?
• Which services cost most and why?
• Where are our greatest inefficiencies?
Financial management ensures that the charges for IT services are transparent via the service catalogue and that the
business understands them. The benefits are:
• improved decision-making
• inputs for service portfolio management
• financial compliance and control
• operational control
• value capture and creation
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Financial Management
Basic concepts
• Provisioning value - The actual underlying costs of IT (creation costs), both tangible and intangible.
Examples of these costs include: hardware and software license costs, annual maintenance costs, facility costs, taxes,
compliance costs.
• Service value potential - The value-adding component based on the customer’s value perception or the expected
additional utility and warranty that the customers can obtain compared to their own assets. Looks at the service’s
individual value components to determine the true value of the service. Determines the eventual
value of the service by adding these components and comparing them against the costs (provisioning value).
Financial Management ensures correct funding for the purchase and the delivery of services. The expected demand
for IT services is qualified and translated into financial.
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This plan may have three primary areas, each of which delivers financial results that are necessary for continued
transparency and service valuation:
• Operating and capital planning (general and fixed asset ledgers) - Translation of IT expenditures to collective
financial systems as part of the collective planning cycle.
• Demand planning - Need for and use of IT services as described earlier.
• Regulatory and environmental planning (compliance) - driven from the business.
Financial management acts as a bridge between financial systems and service management systems. A service-
oriented accounting function results in far more detail and understanding of the delivery and consumption of
services, as well as the production of data for the planning process. Related functions and accounting
properties are:
• Service recording - Allocating a cost center for a service.
• Cost types - High-level expenses, such as hardware, software, personnel costs, administration.
− Once the basis for cost administration (e.g. per department, service or customer)
is established, cost types are determined for cost entry.
− The number of cost types can vary depending on the organization's size.
− Cost types must have a clear and recognizable description, so that costs can be
easily allocated.
− The cost types can then be split up into cost items and settlement for each cost
item may be established at a later stage.
• Cost classification - To ensure good cost control, it is important to gain insight into the types of costs that
occur. Costs can be split up according to various aspects.
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Financial Management
Variable Cost Dynamics (VCD) analyzes and searches for insight into the many variables that have an impact
on the service costs. The VCD analysis is able to determine the expected impact of events like acquisitions,
divestments and changes in the service portfolio or service alternatives.
Activities
After having established the fixed and variable costs for each service, the variable cost drivers and variation
level of a service should be determined.
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Financial Management
Traditional models to fund IT services include:
• Rolling plan funding - A constant funding cycle; suitable for a service lifecycle for which a funding obligation is
incurred at the start of a cycle and continues until changes occur or the cycle ends.
• Trigger based plans - Critical triggers activate planning for a specific event; the change management process, for
instance, could act as a trigger for the planning process for all approved changes that have financial consequences.
• Zero based funding - Only include the actual costs of a service.
The Business Impact Analysis (BIA) represents the basis for planning business continuity. BIA identifies the
financial and operational impact that may result from an interruption of business operations as well as the impact
on assets and customers. This information can help shape and improve operational performance. This is because it
enables improved decision-making with regard to prioritization of incident handling, the focus of problem
management, change management, release and deployment management, and project
prioritization. BIA offers an additional tool to determine the costs of service failure and the relative value of a
service. The costs of a service failure consist of the value of lost productivity and income for a specific period.
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Financial Management
Some concepts in financial management have a big impact on the development of service strategies. A number of
these are highlighted, allowing each organization to determine which the best alternatives are for its Service
Strategy:
• Cost Recovery, Value Center, or Accounting Center? - IT’s financial cycle starts with investment in resources
that create the outputs. Customers identify those outputs as value, reinitiating the cycle. Depending on the
acknowledgement of the added value, IT is then considered a cost center or a valuable asset for the business
objectives.
• Chargeback: to charge or not to charge? - A chargeback model for IT can enable justification and transparency.
Charging increases the customer organization’s awareness of the costs incurred to provide it with information.
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Financial Management
Financial Management gathers data inputs from the whole organization and helps to generate and
disseminate information as an output to base critical decisions and activities on.
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Introduction
Basic concepts
By functioning as the basis of the decision framework, the service portfolio helps to
answer the following strategic questions:
• Why should a client buy these services?
• Why should a client buy these services from us?
• What are the price and charge back models?
• What are our strong and weak points, our priorities and our risks?
• How should our resources and capabilities be allocated?
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Financial Management
Activities
SPM is a dynamic and continuous process that entails the following work methods (see Figure 3.1):
• Define - Making an inventory of services, business cases and validating the portfolio data; start
with collecting information on all existing and proposed services in order to determine the costs of
the existing portfolio; the cyclic nature of the SPM process signifies that this phase does not only
inventory the services, but also validates the data over and over again; each service in the portfolio
should have a business case.
• Analyze - Maximizing the portfolio value, tuning, prioritizing and balancing supply and demand;
in this phase, the strategic goals are given a concrete form. Start with a series of top/down questions
such as: What are the long-term goals of the service organization? Which services are required to
realize these goals? Which capabilities and resources are necessary to attain these services? The
answers to these questions form the basis of the analysis, but also determine the desired result of
SPM. Service
investments must be subdivided into three strategic categories:
− Run the Business - RTB investments concentrate on maintaining the service production.
− Grow the Business - GTB investments are intended to expand the scope of services.
− Transform the Business - TTB investments are meant to move into new market spaces.
• Approve - Finishing the proposed portfolio, authorizing services and resources and making
decisions for the future. There are six different outcomes: retain, replace, rationalize, re-factor,
renew and retire.
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Service Portfolio
Management Service Strategy
•Inventories
Define
•Business Case
•Value Proposition
Analyse
•Prioritization
•Service Portfolio
Approve
•Authorization
•Communication
Charter
•Resource Allocation
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• Charter - Communicating decisions, allocating resources and chartering services. Start with a list of decisions and
action items and communicate these clearly and unambiguously to the organization. Decisions must be in tune
with the budget decisions and financial plans. New services proceed to the Services Design Phase and existing
services are renewed in the service catalogue.
Financial management is a key input to service portfolio management. By understanding cost structures applied in
the provisioning of a service, service costs can be benchmarked against other providers. This IT financial
information can be used together with service demand and internal capability information. This way, beneficial
decisions can be made regarding whether a certain service should be provisioned internally (the output). Service
portfolio management provides input for refreshing services in the service catalogue.
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Demand Management
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Demand Management
Introduction
Demand management is a vital aspect of service management. It aligns supply with demand and aims to predict the
sale of products as closely as possible and, if possible, even regulate it.
Service management must deal with the additional problem of synchronous production and consumption. Service
Operation is impossible without the existence of a demand that consumes the product. It is a pull-system, in which
consumption cycles stimulate the production cycles (Figure 3.2).
It is not possible to produce service output and store it until demand arises. The production capacity of the resources
available for a service is therefore adjusted in accordance with demand prognoses and patterns.
Activity-based demand management: business processes are the primary source of demand for services. Patterns of
Business Activity (PBAs) have an impact on demand patterns.
Basic concepts
• Service packages - A service package is a detailed description of an IT service that can be delivered to customers.
A service package consists of a Service Level Package (SLP) and one or more core services and supporting services.
• Service Level Package (SLP) - A defined level of utility and warranty for a particular service package, from the
perspective of the user. Each SLP is designed to meet the needs of a particular Pattern of Business Activity (PBA).
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Demand Management
• Core Service Package (CSP) - A detailed description of a core service that may be shared by two or more
service level packages.
• Line of Service (LOS) - A core service or supporting service that has multiple service level packages. A line of
service is managed by a product manager and each service level package is designed to support a particular
market segment.
Activities
Core services deliver the basic results to the customer. They represent the value that customers require and for
which they are willing to pay. Core services represent the basis for the value-proposition to the customer.
Supporting services enable that value proposition (enabling services or Basic Factors) or improve it
(Enhancing services or Excitement Factors).
Bundling core services and supporting services are a vital aspect of a market strategy. Service providers should
thoroughly analyze the prevailing conditions in their business environment, the needs of the customer
segments or types they serve, and the alternatives that are available to these customers. These are strategic
decisions – they shape a long-term vision that is intended to enable the organization to create lasting value for
customers, even if the methods, standards, technologies and regulations in an industry change. Bundling
supporting services with core services affects Service Operations and represents challenges for the Design,
Transition and CSI (Continual Service Improvement) phases.
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Demand Management
Service providers must focus on the effective delivery of value through core services, while at the same time
keeping an eye on the supporting services. Research has shown that customers are often dissatisfied with
supporting services. Some supporting services, such as the helpdesk or technical support, are generally
bundled but can also be offered separately. This is an important consideration in the strategic planning and
review of the plans. These strategic decisions can have a major impact on the service provider’s success at the
portfolio level. They are important primarily to service providers who supply multiple organizations or
business units while at the same time being forced to reduce costs in order to preserve the competitiveness of
their portfolio.
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Demand Management
Business processes are the primary inputs for demand management. Patterns of Business Activity (PBAs) influence
the demand forecasts and patterns. Analyzing PBAs within demand management can deliver inputs to other
service management processes such as:
Inputs:
• resource utilization profiles of services
• PBAs
Outputs:
• financial constraints (e.g. pricing and charging policies)
• physical constraints (e.g. limited availability)
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Contoh Soal
2. Which of the following activities is NOT an activity in the Financial Management process?
a. Service devaluation
b. Service Portfolio Management
c. Service Investment Analysis
d. Compliance
3. Which of the following identifies two Service Portfolio components within the Service Lifecycle?
a) Requirements Portfolio and Service Catalogue
b) Service Knowledge Management System and Service Catalogue
c) Service Knowledge Management System and Requirements Portfolio
d) Requirements Portfolio and Configuration Management System
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Exam Prep
Contoh Questions
Soal
5. Setting policies and objectives is the primary concern of which of the following elements of the Service
Lifecycle?
a) Service Strategy
b) Service Strategy and Continual Service Improvement
c) Service Strategy, Service Transition and Service Operation
d) Service Strategy, Service Design, Service Transition, Service Operation and Continual Service
Improvement
10. Which of the following concepts and activities help Demand Management in managing the demand for services?
1. Differentiated offerings
2. Differentiated service levels
3. Major Incident Management
4. Analysing and tracking the activity patterns of a business process
a. 4 only
b. 1 and 2 only
c. 1, 2 and 4 only
d. All of the above
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IT-MDC
IT Management Consulting and Training Partner
[email protected]
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