ITIL - Service Strategy Processes Tutorial

Welcome to the fourth chapter of the ITIL Foundation tutorial (part of the ITIL® Foundation Certification Training). This lesson helps you to understand service strategy, its importance and how it adds value to the business. It also focuses on the classification of services based on the customer's requirement.

Objectives

After completing this lesson, you will be able to:

  • Describe the purpose and objective of the different processes in service strategy

  • Describe the activities involved in Service Portfolio Management (SPM) and financial management for IT services

  • Identify the responsibilities of a Business Relationship Manager

Demand Management - Overview

Let us begin with an overview of demand management.

Demand management is an important aspect of the service strategy phase of IT Service Management. It is the process of understanding the demands for services and managing them.

This helps customers to achieve their business objectives. Unmanaged demand leads to higher risk and cost for service providers.

Purpose

The purpose of demand management is as follows:

  • Understand and influence customer demand for services.

  • Work with the capacity management to ensure the service provider has the capacity to meet its demand.

Objective

The objective of demand management is as follows:

  • Identify and analyze Patterns of Business Activity (PBA) and User Profiles (UP).

  • Anticipate, prevent or manage the situations where the demand for a service exceeds the capacity.

  • Gear the utilization of resources that deliver services to meet the fluctuating levels of demand.

Scope

The scope of demand management is as follows:

  • Identify and analyze the PBA that initiates the demand for services.

  • Identify and analyze how different types of users influence the demand for services.

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Managing Demand for Services

The primary source of demand for IT services comes from the execution of the business process within the organizations.

The image below illustrates managing demand for services.

managing demand for services

Demand pattern

Patterns of Business Activity influence the demand pattern. Service providers need to understand how the customer’s business activity operates. This helps them to improve the way in which capacity is planned and produced for any supporting service.

This is achieved with the support of the capacity management plan that helps in the delivery schedule maintaining the service belt.

Service belt

A service belt is a concept, which describes the ability of the business to increase its performance to be in the service industry. Over time, demand management should be able to build a profile of business processes and Patterns of Business Activity.

This can be done in such a way that seasonal variations as well as specific events, such as adding new employees, can be anticipated in terms of the associated demand.

Analyzing and tracking the activity patterns of the business process makes it possible to predict demand for services in the catalog that support the process. It is also possible to predict demand for underlying service assets that support those services.

Every additional unit of demand generated by a business activity is allocated to a unit of service capacity.

Patterns of Business Activity and User Profiles

Now we will focus on PBA and UP.

PBA and UP play a vital role in designing the service strategy.

User Profiles

User Profiles represent different groups of users for a given service. They are also based on the roles, responsibilities, interactions, schedules, work environments and social context of related users.

Business Activity

Patterns of Business Activity represent how users in different User Profiles access a service over a course of a given time period.

PBA and UP (contd.)

Business activities drive demand for services. Customer assets such as people, processes, and applications generate PBA.

PBA defines the dynamics of a business and includes interactions with customers, suppliers, partners and other stakeholders. Services often directly support PBA.

The Patterns of Business Activity can change over time with changes and improvements in business, process, people, organization, applications, and infrastructure. PBAs are placed under change control.

UPs are based on the roles and responsibilities within an organization. They are also based on the functions and operations of processes and applications.

The image below illustrates an example of UP and PBA.

pba and up in itil foundation

Example

An Internet service provider provides cheaper download rates for users in the age group of 16-20 years, during the night. This group of 16-20-year-olds belongs to one User Profile, and the pattern analyzed is users downloading data during the night.

PBA and UP ensure a systematic approach to understand and manage the demand of the customers.

Service providers should gather the necessary information to serve the demand of the customers with appropriately matched services, service levels, and service assets. This leads to improved value for both customers and service providers by eliminating waste and poor performance.

Service Portfolio Management - Introduction

Now we will focus on Service Portfolio Management.

Service Portfolio Management refers to the complete set of services offered by a service provider under management across all customers and market spaces.

The image below depicts the grouping between the customers and service portfolio, supported by an understanding of the market space.

service portfolio management for itil foundation

Market space is a combination of PBA and UP, which is correlated to a customer or a group of customers. Service portfolio includes services catering to a specific market space.

Changes to portfolios are governed by policies and procedures. The Service Improvement Plan or SIP is meant for the third-party services to gain more customers according to their market space or line of service

Service Portfolio Management - Overview

SPM represents the ability and readiness of a service provider to serve customers and market spaces. We will now discuss the purpose, objective and scope of SPM.

Purpose

The purpose of SPM is to:

  • Ensure that the service provider has the right mix of services to balance the investment in IT with the ability to meet business outcomes.

  • Track the investment in services throughout their lifecycle, and work with other service management processes. This ensures appropriate returns are achieved.

  • Ensure services are clearly defined and linked to the achievement of business outcomes.

This ensures that all design, transition, and operation activities are aligned with the value of services.

Objective

The objective of SPM is to:

  • Provide process and mechanisms to enable an organization to investigate and decide the services they can offer. This is based on an analysis of the potential return an acceptable level of risk.

  • Maintain the definitive portfolio of services provided, articulating the business needs and outcomes it supports.

  • Provide a mechanism for the organization to evaluate how services achieve their strategy, and respond to changes in the internal or external environments.

  • Control the services offered in specific conditions, and the level of investment.

  • Analyse the services that are no longer viable and decide when they should retire.

Scope

The scope of Service Portfolio Management is to maintain information on all services that a service provider plans to deliver.

SPM also maintains information on services currently delivered by the service provider, and those that have been withdrawn.

The primary concern is whether the service provider is able to generate value from the services.

SPM evaluates the value of services throughout their lifecycle and must be able to compare what better services have been offered over the retired services they have replaced.

Service Portfolio-Components

We will now focus on the components of a service portfolio.

The components of service portfolio are service pipeline, service catalog, and retired services.

Service portfolio

The service portfolio represents all resources presently engaged or being released in various phases of the service lifecycle. Each phase requires resources for the completion of projects, initiatives, and contracts.

The portfolio should have the right mix of services in the pipeline and catalog to secure the financial viability of the service provider.

As shown in the image below, the service pipeline consists of services under development for a given market space or customer.

service portfolio components in itil foundation

Service transition

These services are phased into operation by service transition. This is done after the completion of design, development, and testing.

Service design

The design, development, and testing are performed as part of the service design phase of IT Service Management. Service pipeline includes the services to be launched by the service provider.

Service catalog

Service catalog, as defined in ITIL, is a database or structured document with information about all live IT services, including those available for deployment. The service catalog is the subset of the service portfolio visible to customers. It is the only part of the portfolio that recovers costs or earns profits.

A subset of the service catalog may be third-party or outsourced services. These are the services offered presently by the service provider.

Retired services

Another component of the service portfolio is retired services.

Once the services reach the end of their contracts, they are phased out or retired. These are the services that the service provider decides not to offer in future because of various reasons.

One such reason can be that the service is no longer required by its customer or it might not be financially viable. The arrows in the image indicate the movement of services from one phase to the other.

Third party catalog

The third party catalog, as indicated on the image, represents third-party services such as maintenance and procurement.

Service Portfolio Management-Process

Let us now discuss the process activities of Service Portfolio Management.

SPM consists of four main phases of activity. It is a dynamic and ongoing process set. It includes the following activities:

Define

This phase involves activities such as making inventory services and ensuring business cases are documented to understand the opportunities and threats. It also involves validating the portfolio data.

Analyze

This phase involves maximizing the portfolio value. It is vital to align, prioritize and balance supply and demand. If the organization does not understand what analysis to perform, they are unlikely to know the right data to collect.

Data collection exercises are disruptive and should be as streamlined as possible. This is where the strategic intent is crafted.

Begin with a set of top-down questions which are:

  • What are the long-term goals of the service organization?

  • What services are required to meet those goals?

Approve

This phase includes finalizing the proposed portfolio and authorizing services and resources. The previous phases have led to a well-understood future state (‘to be’). This is where deliberate approval or disapproval of the future state takes place. With approvals comes the corresponding authorization for new services and resources.

Charter

This phase involves communicating decisions, allocating resources and chartering services. This phase begins with a list of decisions and action items. These decisions are correlated to budgetary decisions and financial plans. Budget allocations should enforce the allocation of resources.

Financial Management-Overview

Financial management provides an understanding of opportunities associated with services in financial terms. It is responsible for budgeting, accounting, and charging requirements. We will now focus on the purpose, objective and scope of financial management for IT service processes.

Purpose

The purpose of financial management for IT service process is as follows:

  • Secure the sufficient level of funding to design, develop and deliver services.

  • Ensure the service provider does not commit to services that cannot be provided.

  • Identify the balance between cost and quality of service, and maintain the balance of supply and demand between the service providers and their customers.

Objective

The objective of financial management for IT service process is as follows:

  • Define and maintain a framework to identify, manage and communicate the cost of services offered.

  • Assess the financial impact of new or changed strategies on the service provider.

  • Execute the financial policies and practices in provisioning the services.

  • Engage in accounting for money spent on the creation, delivery, and support of services.

Scope

Financial management is a well-established and well-understood part of any organization.

Professional accountants manage dedicated finance departments, which set financial policies, budgeting procedures, financial reporting standards, accounting practices and revenue generation or cost recovery rules.

In an IT context, financial management is often a separate function either reporting to the Chief Information Officer or CIO or the Chief Financial Officer or CFO.

However, there exists some form of functional reporting between the two areas. Regardless of where the function is actually situated in the organization, financial management for IT services is a specialized area that requires an understanding of the world of finance and business as well as that of technology.

Financial Management - Activities

There are three fundamental activities involved in the financial management of IT services.

  • Budgeting

  • Accounting

  • Charging

Let us focus on each of these activities.

Budgeting

It involves forecasting the requirements for funds to deliver the agreed-upon services and monitoring adherence to the defined budgets. This ensures that the required resources to fund IT are available and can improve the business case for IT projects and initiatives.

Accounting

It enables the IT accounting team to track the way money is spent. The definition of cost models can be used to identify costs by customer, service, activity or other logical groupings. It involves accounting systems including ledgers, charts of accounts, journals and so on.

Charging

It establishes a pricing policy for charging customers for the services delivered to them. Notional or ghost charging is one particular option in which the costs of providing services to customers are communicated, but no actual payment is required.

This requires sound IT accounting practices and systems.

Financial Management - Benefits

We will now discuss the benefits of financial management. Financial management is a well-established and well-understood part of any organization.

Following are the benefits of financial management:

  • Enhanced decision-making and increased speed of change, which means the business is able to respond faster to opportunities.

  • Improved SPM and operation control.

  • Financial compliance and control required with financial regulatory requirements such as Sarbanes-Oxley Act of the U.S. for financial organizations.

  • Greater insight and communication of the value created by IT services.

  • Increased visibility of IT leading to an increased perception of IT.

Business Relationship Management - Overview

Business Relationship Management or BRM process ensures that the service provider understands the changing needs of the customer. This helps the provider to assist the business in articulating the value of a service.

Purpose

Let us now discuss the purpose, objective and scope of BRM. Purpose: The purpose of the BRM process is two-fold and includes the following:

  • Firstly, BRM helps to establish and maintain a business relationship between the service provider and the customer. The relationship is based on an understanding of the customer and their business needs.

  • Secondly, BRM helps to identify customer needs. It ensures that the service provider meets the changes in business requirement over time and between circumstances.

Objective

Following are the objectives of BRM:

  • BRM ensures that the service provider understands the customer’s perspective of service and is, therefore, able to prioritize services and service assets appropriately. It is also required to ensure high levels of customer satisfaction.

  • It establishes and maintains a constructive relationship between the service provider and the customer based on an understanding of the customer and their business drivers.

  • It identifies changes in the customer environment that can potentially impact the type, level or utilization of services provided.

  • It establishes and articulates business requirements for new services or changes to existing services.

  • It establishes formal complaints and escalation processes for the customer.

Scope

BRM focuses on understanding how services meet customer requirements.

To achieve this, the process must emphasize understanding and communicate:

  • Business outcomes that the customer wants to achieve.

  • Services that are currently offered to the customer and the way in which they are used by the customer.

  • Technology trends that can impact current services and the customer, and the nature of the potential impact.

  • Levels of customer satisfaction and the action plans that are in place to deal with the causes of dissatisfaction.

  • Ways to optimize services for the future.

BRM External and Internal Service Providers

Let us discuss the business-related activities performed by external and internal service providers.

The two main activities of BRM are being the voice of the service provider to the customer and vice versa.

External Service Providers

In case of external service providers, Business Relationship Management is executed by a separate and dedicated function of a business relationship or account managers. Each manager is dedicated to a customer or a group of fewer customers. The emphasis is on maximizing contract value through customer satisfaction.

Internal Service Providers

Business Relationship Management is also executed by a senior representative from IT and senior managers from the business units for internal service providers. The emphasis is on aligning the objectives of the business with the activity of the service provider.

Business Relationship Manager Responsibilities

We will now focus on the responsibilities of the Business Relationship Manager.

As someone playing a key role in the process, the Business Relationship Manager maintains the relationship with one or more customers. This is done by understanding the customers’ business outcomes and acting as a representative of the customer and the service provider.

The manager also works with other service management processes and functions for information gathering.

In addition, they assist the Service Level Manager in creating a seamless conduit from customer to service provider capabilities. These capabilities are used to ensure value. The manager also documents customer complaints and instigates corrective action if required.

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Summary

Let us summarize what we have learned in this lesson:

  • Demand management helps to understand the demands for services and manage them to help customers achieve their business objectives.

  • Service Portfolio Management refers to the complete set of services offered by a service provider under management across all customers and market spaces.

  • Financial management provides an understanding of opportunities associated with services in financial terms.

  • The Business Relationship Manager documents customer complaints and instigates corrective action.

Conclusion

Next, we will focus on the fifth lesson Service Design.

  • Disclaimer
  • 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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