ITIL MALC Governance and Organisation Tutorial

5.1 Welcome


5.2 Governance and Organisation

Welcome to Learning Unit 5 of ITIL Managing Across the Lifecycle Certification Course by Simplilearn. Good governance is the essence of organisational success. IT governance is part of overall corporate governance and IT steering group plays an important role in setting the direction and policies for IT. Defining the appropriate organisation structures and developing the required skills and capabilities of staff involved moves organisational performance and efficiency to higher levels. Understanding the different types of service providers and selecting the right delivery strategies results in developing appropriate service solutions. This module focuses on these important topics. First we will understand the importance and impact of good governance.

5.3 Importance and Impact of Good Governance

Governance is the single overarching area that ties IT and the business together. It defines the common directions, policies and rules that both the business and IT use to conduct business. IT service management strategies must be established and executed within the existing governance structures for attaining the desired results and to be successful. Corporate governance refers to the rules, policies and processes by which businesses are operated, regulated and controlled. These rules and policies are generally defined by a board of directors or shareholders or the constitution of the organisation. In some cases these are also defined by legislation, regulation, standards bodies or consumer groups. The standard for corporate governance of IT is ISO/ IEC 38500. The purpose of this standard is to promote effective, efficient and acceptable use of IT in all organisations. It enables stakeholders in gaining confidence in the organisation’s corporate governance of IT. It provides guidance to directors in governing the use of IT in their organisation and also provides a basis for objective evaluation of the corporate governance of IT. We will now look into the diagram in the next slide which will help us in understanding the different expressions of governance.

5.4 Governance

Governance works to apply a consistently managed approach at all levels of the organisation. As indicated in this slide, governance is expressed in a set of strategies, policies and plans. At the outset, governance ensures that a clear strategy is set. The purpose of strategy is to provide clearly defined direction for achieving objectives. This is followed by defining the policies through which the strategy will be achieved. The policies also define boundaries within which the organisation should operate and what activities fall outside the scope of organisation's operations. Policies also clearly identify the authority structures of the organisation. These structures indicate how decisions are made and what the limits of decision-making will be for each level of management. Next, the plans prepared ensure that the strategy can be achieved within the boundaries of the policies. These plans are developed by managers and approved by the executive body and governors. It is the responsibility of the governors to review the progress and implement the plans. Let us move on to the diagram in the next slide and understand the three governance activities.

5.5 Governance

Governance is a key aspect of service strategy. It should evaluate, direct and monitor the strategy, policies and plans we discussed in the previous slide. We shall now discuss these three governance activities - evaluate, direct and monitor. These three activities are neither one time activities nor independent activities. They are interdependent and are cyclical in nature. As represented in this slide, one activity influences and leads to another activity. We shall start with evaluation first. This activity involves the on-going evaluation of the organisation’s performance and its environment. It requires a thorough and up-to-date knowledge of the industry, its trends, regulatory environment and the markets that the organisation serves. The key inputs for evaluating the organisation include: Information on financial performance of the organisation; Service and project portfolios; On-going operations; Escalations; Opportunities and threats; Proposals from managers, shareholders, customers, etc.; Contracts with suppliers and customers; and Feedback from users, customers and partners. The next activity is to direct and is concerned with communicating the strategy, policies and plans to, and through, management. It also includes defining and sharing appropriate guidelines to management to ensure compliance. Appropriate level of authority and responsibility are delegated and where required escalations are made. The third activity is to monitor. Monitoring is a continuous process to ensure whether the strategies, policies and plans are executed as expected and if there are any exceptions. This should lead to corrective and preventive actions. Monitoring requires establishment of measurement systems and key performance indicators. Risk assessments, compliance audits and capability analysis are part of this activity. Monitoring activity provides inputs to the evaluation activity and also triggers further evaluation. Moving on, we will look at the next diagram to understand the role of managers relative to the activities of governance.

5.6 Governance and Management

A key question that arises frequently is 'what is the difference between governance and management?' Let us try to understand this. Governance is performed by governors. They set the organisational strategy and define the rules and policies. They are also responsible for ensuring that the organisation adheres to rules and policies in order to achieve the strategy and organisational objectives. Management is performed by executives and managers. Their job is to execute the rules, processes and operations of the organisation according to the governance policies and to achieve the strategies defined by the governors. The diagram on this slide shows the role of managers relative to the activities of governance. The inner circle, as we discussed in the previous slide, represents the activities of governance. The outer circle represents the activities performed by management. Based on the evaluation of internal and external environment, the strategies and policies are defined by Governors. The plans and proposals for executing these strategies in line with the policies are prepared by the executives and managers and approved by governors. Governors direct the organisational performance by communicating the strategy, policies and plans to all concerned. The managers execute the operations and processes by adhering to the defined strategies and policies. Governance includes monitoring to ensure that the strategies, policies and plans are executed as performed. Management is responsible for keeping track of the performance and ensuring conformance to the rules and policies. In other words they are concerned with executing the right activities in the right way as required by governance. Thus, an organisation can function effectively and efficiently when there is a right level of integration between governance and management. In the next slide we will look at the concept of IT governance.

5.7 IT Governance

IT governance does not exist as a separate area. Since IT is part of the organisation, it cannot be governed in a different way from the rest of the organisation. ISO/IEC 38500 refers to ‘corporate governance of IT’ and not IT governance. This implies that IT complies with and fulfils the policies and rules of the organisation and does not create a separate set for itself. Where IT governance is defined and executed independently, there is a possibility that it may deviate from corporate governance and lead to inefficient and conflicting organisational performance. IT and the other business units share the same objectives and corporate identity and are required to follow the same governance rules. IT is also an integral part of each business unit and hence the IT steering committee contributes to help business units to comply with corporate governance. IT governance is usually a matter of the CIO or senior IT manager, enforcing corporate governance through a set of applied strategies, policies and plans. CIO is part of the IT steering group which defines IT strategy and is involved in all major decisions regarding IT and its role in the organisation. Now that we understand what IT governance is, let us move on to discuss sourcing governance.

5.8 Sourcing Governance

Sourcing governance refers to the framework of decision rights that encourages desired behaviours in the sourcing and the sourced organisation. It is a complex area and is generally neglected by many organisations. As discussed earlier, governance and management are two different aspects and similarly sourcing governance and vendor or supplier management are two different but interrelated areas. We shall now look at some important aspects that need to be taken care of in order to make sourcing governance more effective. A key step to effective sourcing governance is to create a governance body. This governance body should have representation from all concerned departments or units, but should be of manageable number. This body should have clear understanding of the service sourcing strategy and should be able to take decisions without escalating to senior management. The next aspect is to establish governance domains. This will facilitate decision-making for specific areas of the service sourcing strategy like contract management, service delivery or communication. Another aspect to be considered is the creation of a decision-rights matrix. This enables a clear definition of the roles, responsibilities and authorities required for sourcing governance and management. Another very important aspect is to define and implement a supplier management process. This ensures that external service providers and the related contracts are managed in a systematic way. It also ensure adherence to organisation’s governance rules, policies, standards and controls. We will learn about IT strategy or steering group in the next slide.

5.9 Role of IT Strategy or Steering Group(ITSG)

IT strategy or steering group consists of senior management roles from the business and IT organisations. The key objective of this group is to ensure that business and IT services remain synchronised and work together in achieving organisational goals. It also has overall accountability for setting governance, direction, policy and strategy for IT services. It is also responsible for defining the vision, setting direction and determining priorities of individual programmes and projects to ensure that IT is aligned and focused on business targets and drivers. The composition of this group provides a good platform for discussing and agreeing various aspects of business and IT. We shall briefly discuss these areas: The group can regularly review business and IT plans to identify any changes in either area that would trigger the need to create, enhance or improve services in the other area. It can perform demand planning and identify any changes in demand for both short- and long-term planning horizons. One important responsibility of this group is - authorisation and prioritisation of projects. The discussion and decisions around these, helps to ensure that projects are authorised and prioritised to the mutual satisfaction of both the business and IT. The group can perform periodic review of projects to ensure that the expected business benefits are being realised in accordance with project business cases and also to track progress with plans and schedules. It can also identify areas of potential outsourcing. This will also include identifying the need and content of sourcing strategies for the IT service provision. Another important area is the periodic review of business and IT strategies. This should focus around major changes to business strategy and major proposed changes to IT strategy and technology. The objective is to ensure continuous business—IT alignment. This group or a sub-set of this group should regularly review business continuity and IT service continuity strategies to ensure alignment of both. The group is also responsible for ensuring that IT policies and standards are in place and aligned with the overall corporate vision and objectives. In the next slide we will discuss how governance is applied in change management.

5.10 Authorising Changes

We shall now discuss the application of governance in change management, through policies and change authorisations to ensure the integrity of live services. Change management policies define how changes will be managed, controlled and authorised. It provides the boundaries of each type of change and the related level of authorisations applicable. Change management process and policies ensure that formal authorisation is obtained for each change from a change authority that may be a role, person or a group of people. The levels of authorisation for a particular type of change should be judged by the type, size, risk and potential business impact of the change. In most cases, the organisation culture dictates the manner in which changes are authorised. The level of delegated authority is generally determined by the anticipated business risk, financial implications and scope of the change. The level at which change is authorised, should rest where accountability for accepting risk and remediation exist. Higher the level of risk, higher will be the authority level that makes authorisation decisions. It should also be ensured that in case any disputes arise over change authorisation or rejection, there should be a right of appeal to the higher level. Reason for rejection should be intimated to the initiator of change and all such changes should be formally reviewed and closed. The diagram representing the change authorisation model in the next slide will help us understand it better.

5.11 Authorising Changes

Change Authorisation Model: The diagram on this slide is a very good representation of a change authorisation model. It shows the change authorisation hierarchy and, as discussed earlier, is mapped with the level of risk and impact of the proposed change on business. While standard changes and low-risk changes are authorised by local authrority or change manager, the high cost and high risk changes are authorised by executive boards. Another important point to note is that escalations and communication of risks and issues flows from lower levels in the hierarchy to higher levels. On the other hand, the authorisation decisions and actions flow from higher levels to lower levels. This is just a representaive model and organisations may adopt other types of models based on organisational culture and requirements. Let us now discuss about change advisory board and the different roles played by them in the next slide.

5.12 Role of Change Advisory Board

A change advisory board is usually made up of representatives from all areas within the IT service provider, the business and third parties such as suppliers. Its key purpose is to support the authorisation of changes. It also assists change management in the assessment, prioritisation and scheduling of changes. It is therefore essential to include people with a clear understanding of the whole range of stakeholder needs. Change advisory board meetings are a very critical component of the overall service management, governance and organisational control. Regular meetings should be planned and conducted with specific agenda. A standard change advisory board meeting agenda should include: Change proposals that have been received from service portfolio management; Requests for changes that are required to be assessed by change advisory board members—in structured and priority order; Change reviews; Outstanding changes and changes in progress; Evaluation reports and interim evaluation reports received from the change evaluation process; Scheduling of changes and updates of change schedules and projected service outage documents; Review of unauthorised changes detected through service asset and configuration management, to understand underlying issues and take corrective action; Failed changes, unauthorised, backed-out changes or changes applied without reference to the change advisory board from incident management, problem management or change management; Change management wins or accomplishments for the period under discussion; The change management process, including any amendments made to it during the period under discussion, as well as proposed changes to the process; and Advance notice of requests for change expected for review at the next CAB meeting. In the next slide we will learn how to establish and maintain service management system.

5.13 Establishing and Maintaining a Service Management System

Governance works to apply a consistently managed approach at all levels of the organisation. Areas of specialisation and processes within the organisation are managed by management systems. ISO 9001 defines a management system as “The framework of policy, processes, functions, standards, guidelines and tools that ensures an organisation or part of an organisation can achieve its objectives”. A management system of an organisation can adopt multiple standards such as ISO 9001’s quality management system, ISO/IEC 20000’s service management system and ISO/IEC 27001’s (pronounce as I-S-O I-E-C 27001) information security management system. ISO/IEC 20000 (pronounce as I-S-O I-E-C 20000) is an internationally recognised standard for IT service management. Service providers and organisations are increasingly adopting this standard to demonstrate their service management capability. A service management system is used to direct and control the service management activities to enable effective implementation and management of the services. Processes are established and continually improved to support delivery of service management. A service management system includes all service management strategies, policies, objectives, plans, processes, documentation and resources required to deliver services to customers. Defining the organisation’s structure, roles, authorities and responsibilities associated with service management processes is also an important activity within the service management system. The design and implementation of the service management system will be influenced by the service provider’s needs and objectives, requirements, processes and the size and structure of the organisation. The service management system should be scalable to meet the growth and evolving needs of the organisation. Where other management systems are also implemented by the organisation, an integrated approach should be adopted for better management of over-lapping and interfacing areas. In the following slide, let us discuss the different stages of organisational development through a diagram.

5.14 Stages of Organisational Development

We shall now discuss the stages of organisational development. An organisation’s age and size affect its structure. As the organisation grows and matures, changes in roles and relationships must be designed and implemented. This is particularly important for organisations adopting a service orientation. As shown in the diagram, organisations generally evolve from a network structure to a collaborative structure. The focus of a network organisation is on the rapid, informal and ad hoc delivery of services. A network structure is a cluster whose actions are coordinated by agreements rather than through a formal hierarchy of authority. The members work closely together to complement each other’s activities. The organisation is highly technology-oriented and the main goal is to share its skills with the customers in order to allow them to become more efficient, reduce costs or improve quality. The network organisation structure results in a leadership crisis and leads forming a strong management team. This stage is called directive organisation structure. The management team takes responsibility for directing strategy and guide low-level managers to assume functional responsibilities. The focus of this stage is on hierarchical structures that separate functional activities. Communication is more formal and basic processes are implemented. Growth of the organisation and too much of direction and control results time lags in decision-making and implementation. The focus hence shifts to adopting a decentralised or delegation organisational structure. More responsibility shifts from functional owners to process owners. Process owners focus on process improvement and customer’s responsiveness. Conflicts may arise between functional and process objectives. Functional owners feel a loss of control and seek to regain it. The next stage uses formal management systems in achieving greater coordination. Senior executives acknowledge the criticality of these systems and take responsibility for success of the solutions. The solutions lead to planned service management structures that are intensely reviewed and continually improved. Each service is systematically designed, implemented and monitored. Technical functions remain centralised while service management processes are decentralised. The final stage is to move towards stronger collaboration with the business. Relationship management gains more prominence and is more flexible. Managers are highly skilled in teamwork and conflict resolution. The organisation responds to changes in business conditions and strategies in the form of teams across functions. Experiments in new practices are encouraged. A matrix-type structure is generally adopted during this stage. The matrix relies on minimal formal vertical control and maximum horizontal control from the use of integrated teams. The table in the next slide will helps us understand the generally adopted department structures.

5.15 Organisation Departmentalisation

An organisation represents a set of functional units. When functional groups become larger, they transform into departments. The departmentalisation can be based on various factors. The table on this slide shows the generally adopted department structures. It also indicates the preferred structure based on strategic considerations. A functional structure is preferred where the focus is on specialisation, pooling of resources and reducing duplication. A product oriented structure is preferred for servicing businesses with strategies of diverse and new products, usually manufacturing businesses. Strong product knowledge and confidentiality of this knowledge are also key considerations here. Another form is market space or customer based structure. Here departments are aligned to market structures. This enables differentiation in the form of increased knowledge of and response to customer preferences. Departments can also be created as per geographical regions. This sometimes depends on the significant industries in the region. By providing services in close geographical proximity, travel and distribution costs are minimised while local knowledge is leveraged. Process based departmentalisation is also becoming more popular. This structure is preferred for managing and controlling end-to-end activities of a process. This approach is expected to minimise process cycle times and increase process excellence. Moving on, in the next slide, we will look into a diagram which represents the service provider organisation structure.

5.16 Service Provider Organisation Structure

A service provider organisation structure is influenced by the culture, governance, decision-making process and maturity of the organisation. The diagram on this slide represents a logical structure and shows the major organisational aspects, processes and the way in which major roles are related to each other. The top portion illustrates the major strategic components of a service provider organisation. They are: The IT steering group consists of executives from the business and IT service provider. It ensures that the enterprise strategy is appropriately represented in the service provider and also evaluates initiatives within the service provider that might influence or change the current strategy in future. The project management office ensures that all projects and programmes are evaluated, managed and reported according to the enterprise and IT service provider’s strategy. The service management office coordinates all processes and functions that manage the service provider’s services throughout their lifecycle. Business relationship management has been identified as a process as well as a role or function because, as an advocate of the customer, it plays an important role in articulating and communicating the strategy of the customer and the strategy of the service provider. The bottom half of the diagram represents the tactical and operational components of an IT service provider organisation. They are: The large dark-coloured box represents the technology— service assets of the service provider and includes infrastructure, applications and IT technical staff. It is in this area that the actual design, build, transition and operation of the services takes place. All the other boxes represent the service management processes and are coordinated by the service management office. The process owners and managers are responsible for design, implementation, execution, monitoring, control and improvement of their respective processes. The next slide contains a diagram to represent service design organisation structure for small organisation.

5.17 Service Design Organisation Structure for Small Organisation

The diagram on this slide represents the service design organisation structure for a small organisation. Some general characteristics of this structure are : The roles of process owner and process manager are likely to be combined. In this case, the design cordination process owner, process manager and process practioner roles rest with the service design manager. One person may be handling or responsible for several roles. For example, in this structure, the role of service level manager can be that of supplier management process owner as well. It is important to ensure not to combine roles where there is governance or compliance requirements or where there is a conflict of responsibilities involved. Let us now look into an example of service design organisation structure in the next slide.

5.18 Service Design Organisation Structure for larger Organisation

We shall now look at an example of service design organization structure for a large organisation. You may note that : There is a central headquarters organisation which constitutes all process owners and the service design team. There is a separate service management office, a project management office and a global programmes group at the headquarters. Each geographical region has its own process managers and practionioners. Good communication and coordination are very essential in this type of structure. The responsibilities must be clearly demarcated between global and regional teams to avoid gaps, duplication and rework. The diagram in the next slide shows the multiple roles and responsibilities assigned to general managers of smaller organisations.

5.19 Service Transition Organisation Structure for Small Organisation

In smaller organisations, generally managers and individuals are assigned multiple roles and responsibilities. The figure on this slide shows a similar situation. This is an example of service transition organisation structure for small organisations. Service transition manager heads the transition organisation and holds the overall ownership and managerial responsibility for transition planning and support process. He is supported by a change, configuration and release manager and an evaluation and test manager. The change, configuration and release manager is the process owner and manager for the change management, service asset and configuration management and release and deployment management processes. He leads a team of practitioners who perform specific activities of these processes. Similarly, the evaluation and test manager is the process owner and manager for change evaluation and service validation and testing processes. His team of practitioners execute the assigned activities of these two processes. We will proceed towards another diagram in the following slide, which represents an example of a service transition organisation structure for a large organisation.

5.20 Service Transition Organisation Structure for Large Organisation

Larger organisations, spread across multiple geographical locations will have a complex organisational setup. The diagram on this slide represents an example of a service transition organisation structure for a large organisation. In this organisation structure, there is a central head quarter organisation which has individual process owners for each of the service transition processes. For change management, release management and service validation and testing there are separate teams managed by respective process managers. The team members are the practitioners who perform the process activities. Each of the geographical regions has its own process managers and practitioners for the key service transition processes. As with any geographically dispersed organisation, in this case too, good communication and coordination are very essential. The responsibilities between global and regional teams must be clearly differenciated and documented to avoid gaps, duplication and rework. Let us now look into a diagram which will help us understand the service transition organisation and its interfaces.

5.21 Organisational Context for Transitioning a Service

Service transition stage is not an independent stage by itself. It is a part of the overall service lifecycle. Hence, the service transition organisation has a number of interactions and interfaces with other organisational units and third parties. This diagram represents the service transition organisation and its interfaces. Service transition gets changes, service assets and components from programmes, projects, service design and suppliers. The interfaces and handover points should be clearly defined to ensure the delivery of the projects and other deliverables within the agreed schedule by service transition. For the long-term benefit of the organisation, projects and programmes should never be executed in isolation from service transition and operations. During the release and deployment of changes or new services, there will be interactions with the business, customers and users, which should also be well managed and coordinated. Cooperation, understanding and mutual respect amongst the organisational units represented in this diagram are critical to ensure that new, changed and on-going delivery of services to customers are optimised. In the slide that follows, we will learn what function is and the key factors that influence the decision as to how activities should be assigned to teams or departments.

5.22 Functions and Activities in Organisational Structuring

A function is a team or group of people and the tools or other resources they use to carry out one or more processes or activities. Activities are a set of actions designed to achieve a particular result. Activities are defined as part of processes or plans and are documented in procedures. Activities can be mapped to a team or department in a number of ways. For example, one activity could be performed by several teams or departments or one department could perform several activities. These decisions as to how activities should be assigned to teams or departments are influenced by certain factors. Let us look at these factors: The key influencing factors are the size and location of the organisation. Smaller and less distributed organisations will combine a number of activities and assign them to a team or department. On the other hand large, decentralised organisations may have several teams or departments performing the same activity. The next factor is the complexity of technology used in the organisation. The more the number of tools and technologies used, the more will be the number of teams and departments. Probably some of these departments may perform the same set of activities but in different contexts. The third factor is the availability of skills. Certain skills are easily available and certain others are unique and scarce. Activities related to general skills can be easily grouped together whereas activities related to unique and scarce skills may be utilised across departments. Another important influencing factor is the culture of the organisation. Some organisations prefer to work in highly specialised environments, while others tend to prefer the flexibility of generalist staff. Last but not the least is the financial situation of the organisation. The financial status determines the number of people, type of skills, experience levels while employing staff. It will also influence how they will be organised. Let us understand the different functions within service operation in the next slide.

5.23 Functions within Service Operation

The ITIL service operation guidance discusses four functions which are required to manage the ‘steady state’ of operational IT environment. These four functions are service desk, technical management, IT operations management and application management. These are logical functions and are not the suggested organisational structure. Service providers and organisations will decide the appropriate structure based on the factors discussed earlier. The four functions and the typical groups of activities performed by each function are shown in this diagram. Let us briefly discuss these functions and the related activities. Firstly, service desk is the single point of contact between the service provider and the users. A typical service desk manages incidents and service requests. It also provides a point of communication to the users and a point of coordination for several IT groups and processes. To enable them to perform these actions effectively, the service desk is usually separate from the other service operation functions. Secondly, technical management function provides the technical skills and resources needed to support the on-going operation of IT services and the management of the IT infrastructure. It is the custodian of technical knowledge and expertise related to managing the IT infrastructure. Technical management also ensures that resources are effectively trained and deployed to design, build, transition, operate and improve the technology required to deliver and support IT services. Thirdly, IT operations management function is responsible for performing the on-going activities and procedures required to manage and maintain the IT infrastructure so as to deliver and support IT services at the agreed levels. IT operations management has two sub-functions—IT operations control and facilities management. IT operations control ensures that routine operational tasks are carried out. It also performs centralised monitoring and control activities. Typical activities include console management, job scheduling, backup and restore and routine maintenance activities. Facilities management is responsible for the management of the physical IT environment, typically data centres, computer rooms and recovery sites together with all the power and cooling equipment. Lastly, application management is responsible for managing applications throughout their lifecycle. It is the custodian of technical knowledge and expertise related to managing applications. It also ensures that resources are effectively trained and deployed to design, build, transition, operate and improve the applications required to deliver and support IT services. In the next slide we will learn about the key competencies and attributes that are required by all people within service management teams irrespective of the roles they perform.

5.24 Competence and Skills for Service Management

Good service management is essentially a right mix of people, processes, products and partners. Of these four elements ‘people’ play a significant role. The service lifecycle stages and processes depend on appropriate skills and experiences of people and their knowledge to perform the assigned activities and make key decisions. People need to understand their role and how they contribute to the overall organisation, services and processes to be effective and motivated. ITIL guidance describes a number of specific roles required for service management. All these require specific skills, attributes and competencies from the people involved to enable them to work effectively and efficiently. However, there are certain essential competencies and attributes that are required by all people within service management teams irrespective of the roles they perform. These essential attributes include: Awareness of the business priorities, objectives and business drivers; Awareness of the role IT plays in enabling the business objectives to be met; Customer service skills; Awareness of what IT can deliver to the business, including latest capabilities; The competence, knowledge and information necessary to complete their role; and The ability to use, understand and interpret the best practice, policies and procedures to ensure adherence. We will move on to the next slide and discuss the examples of attributes required for each type of roles.

5.25 Competence and Skills for Service Management

Within service management we come across key roles like service owner, process owner, process manager and practitioner. While the responsibilities may differ from one role to another, there are some specific attributes required for each type of role. We shall now discuss examples of such attributes: One key attribute for manager and owner roles is 'management skills'. People with these roles should be able to manage and control the overall process as well as the people involved in executing the process activities and tasks. Another very important attribute required for managers and team leads is the 'ability to handle meetings'. This includes organising and chairing the meetings with a clear agenda, documenting the minutes of the meeting and ensuring that actions are followed up and completed. One common attribute required for all roles is 'communication skills'. An ability to communicate at all levels within the organisation is essential. Also, people should be able to communicate in a clear way and use the appropriate modes to ensure that the purpose and objective of the communication are met. Cultural aspects should also be taken care of. Articulateness is another attribute required for most of the roles. Both written and verbal aspects should be considered to provide a clear and convincing message to the intended audience. For some roles 'negotiation skills' are very essential. Service management aspects such as procurement, agreements and contracts are the areas where negotiation skills are vital. Another common attribute for all roles is 'an analytical mind'. People have to analyse situations, resolutions, risks, issues, reports and metrics related to process and activities within service management. Let us look into the diagram given in the next slide to see the relationship between organisational structure, process focus and strategic forces.

5.26 Organisational Development

We have earlier discussed the stages of organisational development. This slide shows the relationship between organisational structure, process focus and strategic forces. Let us try to explore the relationship amongst these three areas. A network organisati,on structure is a cluster whose actions are coordinated by agreements rather than through a formal hierarchy of authority. There are no processes in place and the strategy is to get things done as quickly as possible and to encourage creativity in delivery of services and speedier execution of tasks. In a directive organisation structure, top-level managers direct lower-level managers to execute functional responsibilities and to get tasks completed. Communication is more formal and basic processes are in place. The strategic forces are to create a hierarchical structure with centralised authority, decision making and control. As organisation grows, authority is delegated to lower-level managers. More responsibility shifts from functional owners to process owners. Process owners focus on process improvements and customer responsiveness. Thus the strategic forces that drive delegation of organisational structure are process orientation and decentralisation of authority and control. The coordinated organisation structure uses formal management systems in achieving greater coordination. Processes are well established and become an important component of service management system. The ability to control all aspects of the service and harmonisation of processes and systems are the strategic forces that drive this stage. The collaborative organisation structure represents better relationship management and stronger collaboration with the business. The organisation responds to changes in business conditions and strategy in the form of teams across functions. This becomes possible due to well-integrated processes and clearly defined roles and responsibilities. The strategic force here is building partnership with business as well as suppliers. Let us now proceed to discuss the different types of service providers.

5.27 Service Provider Types

There are three main types of service providers. They are: Type I, also known as internal service provider; Type II, known as shared services unit’; and Type III, representing external service provider. Type I service providers are dedicated to an individual business unit and are required to have an in-depth knowledge of the business and its goals, plans and operations. They are usually highly specialised, often focusing on designing, customising and supporting specific applications or on supporting a specific type of business process. The key objectives of internal service providers are to achieve functional excellence and cost effectiveness for their business units. All costs are borne by the owning business unit or enterprise. Type II or shared service unit is a single department with a service catalogue that is available to multiple business units. A shared service unit can create, grow and sustain an internal market for their services and can leverage opportunities across the enterprise. They spread their costs and risks across the business units they serve. A type III service provider provides IT services to external customers. They can offer competitive prices and drive down unit costs by consolidating demand. Organisations engage type III service providers due to varied reasons and strategic objectives. These include access to knowledge, experience, scale, scope, capabilities and resources that are either beyond the reach of the organisation or outside the scope of a carefully considered investment portfolio. These service providers maintain a catalogue of services with variations in the levels and quality of services to meet requirements of different types of customers. The table in the following slide will show us the possible types of customer decisions while selecting service providers.

5.28 Customer Decisions on Service Provider Types

Customers may source services from internal or external service providers based on a number of factors like transaction costs, strategic industry factors, core competence and the risk management capabilities. Customers may also decide to switch between types of service providers depending on changing strategic objectives, new economic conditions, regulations and technological innovations. The table on this slide show the possible types of customer’s decisions while selecting service providers or while switching from one service provider type to another. They are: In functional reorganisation strategy, the business has undergone a functional reorganisation, which requires a change in structure of type I service providers. The current service provider is reorganised to be able to provide better or more cost-effective services. Corporate reorganisation is a strategy where the type II service provider model is retained, but the shared services units are reorganised to provide better or more cost-effective services. In value net reconfiguration, the strategy is to reorganise the utilisation of external service providers. Some new providers are integrated into the value network, others are moved out and yet others may play a different role. The next one is aggregation. In this strategy, all services provided by type I service providers are centralised under a single type II provider. The type I service providers do not exist anymore. Another strategy is disaggregation. This involves decentralising the shared services unit and establishing dedicated service provider for each business unit, service or activity. Now the most popular one—outsourcing, this strategy involves using a type III service provider to provide a service or services that were earlier delivered by an internal service providers, either type I or type II or both. Insourcing is a situation where an internal service provider takes-over delivery of services that were previously provided by an external service provider. Normally, it is rare to find customers adopting or utilising only one type of service provider. Sourcing strategies may try to combine the advantages and mitigate the risks by adopting two or all three types of service providers. In such cases customers may allocate their needs across the different types of service providers based on whichever type best provides the business outcomes they desire. ? This slide and the following one deal with selecting service delivery strategies. Please spare some time to go through this table and understand the advantages and disadvantages of each type of sourcing strategy.

5.29 Selecting Service Delivery Strategies(12)

Selecting an appropriate service delivery strategy is a complex task. This decision may be influenced by a number of factors. The table on this slide details sourcing structure types and their respective advantages and dis-advantages. They are: Insourcing is an approach wherein the service provider relies on utilising internal organisational resources in the design, development, transition, maintenance, operation and support of new, changed or revised services. In case of outsourcing, the service provider utilises the resources of an external organisation or organisations, through a formal arrangement to provide a well-defined portion of the service lifecycle. The more general form of service provision is the co-sourcing or multi-sourcing approaches. Co-sourcing is basically a combination of insourcing and outsourcing. In case of multi-sourcing, the service provider involves a number of organisations during the service lifecycle. Another popular approach is partnership. In this model, two or more organisations enter into formal agreements to work together to design, develop, transition, maintain, operate and support IT services. The focus here is on strategic partnerships to leverage critical expertise or market opportunities. Business process outsourcing is a very popular model where one organisation provides and manages the other organisation’s business processes or functions from a low-cost location. Common examples are payroll, credit card issue, telesales, etc. Application service provision is a very good cost-effective option. This approach involves formal arrangements with an application service provider or organisation that will provide shared computer-based services to customer organisations over a network from the service provider’s premises. The infrastructure, applications, networks and other components of the service are taken care of by the application service provider. The customer organisation has to just pay for the usage of the application as per agreements entered. Knowledge process outsourcing is an extension to business process outsourcing. Knowledge process outsourcing organisations provide domain-based processes and business expertise rather than just process expertise. In other words the organisation is not only required to execute a process, but also to make certain low-level decisions based on knowledge of local conditions or industry-specific information. Legal, insurance and finance domains are the areas where the knowledge process outsourcing approach is extensively used. Cloud service is the most recent addition to service delivery strategies. Cloud service providers offer specific pre-defined services, usually on demand. Services are usually standard, but can be customised to the specific requirements of an organisation, if there is enough demand for the service. Cloud services are considered to be very cost-effective as the infrastructure, platforms and applications are completely owned by the cloud service provider and the customer organisation pays only for the usage of the services. Multi-vendor sourcing involves sourcing services from different vendors. It could be a combination of the sourcing options we discussed so far. It depends on the needs, costs and business outcomes desired to be achieved. Let us summarise what we have learnt so far in the next slide.

5.31 Summary

At the end of learning unit 5, let’s discuss the key points that we have learnt so far: ? Importance and impact of good governance ? IT governance ? Sourcing governance ? IT steering group and meetings ? Change authorisation and CAB ? Establishing and maintaining service management system ? Organisational development and departmentalisation ? Functions and activities in organisational structuring ? Competence and skills for service management ? Service provider types and service delivery strategies Next is learning unit 6 on Measurement.

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  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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