Service Design Principles Tutorial

2.1 Service Design Principles

Welcome to Learning Unit 2 of ITIL Lifecycle Intermediate Service Design Certification Course by Simplilearn! Having a mature service design practice will not only enable organisations to develop holistic designs that meet business requirements and objectives but also reduce risk in the transition and operational stages of service. In this unit we shall be discussing the various principles, concepts, inputs and outputs relating to the Service Design practice. Let‘s look at the syllabus details of this learning unit in the next slide.

2.2 Learning Unit 2: Syllabus

Before moving further let us take a quick look at the Learning Unit-2 syllabus that will be covered in this session. • To meet the learning outcomes and examination level of difficulty, the candidates must be able to understand, describe, identify, demonstrate, apply, distinguish, produce, decide or analyse: – The knowledge, interpretation and analysis of service design principles, techniques and relationships and their application to the design of effective service solutions – Design service solutions related to a customer’s needs – Design and utilise the service portfolio to enhance business value – The measurement systems and metrics – Service design models to accommodate different service solutions. Let’s begin with the introduction to Service Design Principles.

2.3 Introduction to Service Design Principles

Service Design is the stage in the service lifecycle that transforms a service strategy into a plan for delivering the business objectives. We know that service is a means of delivering value to business and to achieve this, the service should be designed with the sole aim of enabling business to achieve the business outcomes and objectives. Also, the design should cover all aspects of an IT organisation as it is the organisation as a whole that delivers and supports the services. • The role of the Service Design stage within the overall business change process can be defined as: – The design of appropriate and innovative IT services, including their architectures, processes, policies and documentation, to meet current and future agreed business requirements; and – In this direction, accurate information must be obtained on what is required and these requirements should be signed off by the business to plan for the delivery of a service. We are aware that IT services support business processes and that IT service design is a part of the overall business change process. The diagram in this slide clearly shows this relationship. A business change leads to defining the new business requirements and performing a feasibility study. This documented new business requirements will trigger IT service changes and this results in determining the IT service requirements. The new or changed business process is then developed, and implemented. The IT services changes are implemented in alignment with the business changes and timelines. This will finally result in realisation of expected business benefits. Let’s understand the composition of service in the next slide.

2.4 Service Composition

Services can be designed, built, tested, deployed and managed well when all the components of the service and their relationships and dependencies are established. The diagram on this slide provides a comprehensive representation of this fact. We shall now discuss these components. • Business processes define and represent the functional needs of the service being provided. Some examples of business processes are invoicing, procurement, recruitment process, etc. • The services that are being delivered to customers and business by the service provider. Messaging, billing, email are examples of services. • Policy, strategy, governance, compliance are some important elements defined by the organisation to direct activity and to ensure adherence to organisational goals and objectives. • The service level requirements and agreements agreed with customer represent the level, scope and quality of service to be provided. • Infrastructure covers all of the IT equipment necessary to deliver the service to the customers and users. Servers, networks, switches, firewalls, telephones, etc. fall under this category. • Environment represents the buildings and facilities required to secure and operate the IT infrastructure. Server rooms, data centres, and air conditioners are some examples of environment. • The data and information required to support the service and business processes are also important components of a service. Examples are sales data, production data, employee records, etc. • Software applications enable functionality required by business processes and to process data. • Support Services like service desk, network management and server management are required to support the operation of the delivered service. • Operational Level Agreements and Underpinning Contracts are agreements with internal departments and suppliers respectively. These agreements support provision of services as per service level agreements. • Support Teams are internal teams providing support for performing activities relating to other service components. • Suppliers are third parties providing goods and services required for delivering and managing services delivered by the service provider. • And finally, the service management processes are required to ensure the successful provision of the services. Let’s understand the goals of service design in the next slide.

2.5 Service Design Goals

Having understood the components of a service, let us now look at the goals of Service Design. • The main goal of Service Design is to design services to satisfy business objectives and align with business needs, based on the quality, compliance, risk and security requirements. • The other goals are : • To design services that can be easily and efficiently developed and enhanced within appropriate timescales and costs, and, wherever possible, reduce the long-term costs of service provision. • To design an efficient and effective service management system, including processes for the design, transition, operation and improvement of high-quality IT services, together with the supporting tools, systems and information, especially the service portfolio, to manage services through their lifecycle. • To identify and manage risks so that they can be removed or mitigated before services go live. • To design secure and resilient IT infrastructures, environments, applications and information resources and capability that meet the current and future needs of the business and customers. • To design measurement methods and metrics for assessing the effectiveness and efficiency of the design processes and their deliverables. • To produce and maintain IT plans, processes, policies, architectures, frameworks and documents for the design of quality IT solutions, to meet current and future agreed business needs. In the next slide we will learn about Balanced Design.

2.6 Balanced Design

Service design must ensure designing the required functionality through effective use of available resources and within the defined timescales. Thus service design is a delicate balancing act of three elements, namely – Functionality, Resources and Schedule. Let us look at what these three terms refer to. • Functionality is basically the utility of the service and includes everything that is part of the service and its provision. This includes features, quality, management and operational aspects of the service. • Resources represent the people, technology and money available for delivering the service. • Schedule refers to the timescales for completion of service implementation. As seen in the diagram, these three elements are represented as three sides of a triangle. This implies that changes made to one side of the triangle invariably impacts at least one other side of the triangle. A complete understanding of the business drivers and needs is important to deliver effective business solutions with an appropriate balance of these three elements. Let us now understand about identifying the service requirements in the next slide.

2.7 Identifying Service Requirements

It is important that a holistic approach is adopted while developing service designs. Identifying all relevant components and their interrelationships is the foremost activity. The next step is to ensure that services are designed to meet business requirements covering all the following areas: • The scalability of the service to meet future requirements, in support of the long-term business objectives; • The business processes and business units supported by the service; • The IT service and the agreed business requirements for functionality, in other words the utility of the service; • The service itself and its Service Level Requirement or Service Level Agreement; • The technology components used to deploy and deliver the service, i.e. infrastructure, environment, data, and applications; Let’s continue to discuss this in the next slide.

2.8 Identifying Service Requirements

• The internal supporting services and components and their associated Operational Level Agreements; • The externally supplied supporting services and components and their associated underpinning contracts; • The performance measurements and metrics required; and • The legislated or required security levels. So far we have looked at identifying service requirements. Next, let us understand identifying technology domain requirement.

2.9 Identifying Technology Domain Requirements

Technology is one of the key areas of IT service provision and gaining a clear understanding of this area enables better and efficient design, build, deployment and provision of services to business and customers. The four domains of technology are Infrastructure, Environment, Data and Applications. Let us try to understand the technology requirements of a service by exploring these four domains. • Infrastructure requirements are towards the management and control of all infrastructure elements, including mainframes, servers, network equipment, database systems, mass storage systems, systems software, utilities, backup systems, firewalls, development and test environments, management tools, etc. • Environmental requirements represent the management and control of all environmental aspects of equipment rooms, including the physical space and layout, power, air conditioning, cabling, physical security, etc. • Data or information requirements are towards the management and control of all data and information and its associated access, including test data where applicable. • Applications related requirements are towards the management and control of all applications software, including both purchased applications and in-house developed applications software. Next, let us discuss about identifying and documenting business requirements and drivers.

2.10 Identifying and Documenting Business Requirements and Drivers

Business needs and requirements trigger changes to business processes. Business processes are supported by IT services. It is therefore essential that IT teams should identify and document business requirements and drivers in a systematic way so that these can be used to design and build appropriate IT services. Some key points in this direction are: • IT should retain accurate information on business requirements and drivers to provide the most appropriate catalogue of services with an acceptable level of service quality that is aligned to business needs. • Business drivers are the people, information and tasks that support the fulfilment of business objectives.

2.11 Identifying and Documenting Business Requirements and Drivers(contd..)

• It is very important that IT teams develop and maintain close, regular and appropriate relationships with key business representatives and exchange information in order to understand the operational, tactical and strategic requirements of the business. This is achieved through the Business Relationship Management process and role. The business information that needs to be obtained mainly relate to the following three areas : – Information on the requirements of existing services, basically indicating what changes will be required to existing services and includes new features and functionality required; changes in business processes, transaction volumes and service levels; and requirements for additional service management information. – Information on the requirements of new services. This should cover information on new features and functionality, business processes supported, business cycles, service level requirements and targets, business transaction levels and level of business capability or support to be provided. – Information on requirements for retiring services. The information that needs to be captured includes exact scope of retirement, business justification, services (if any) that would replace the retiring services, interfaces and dependencies with other services, disposal or reuse requirements and archiving strategy for business data if required. Let us now understand the design activities in the next slide.?

2.12 Design Activities

The importance of Service Design stage of the lifecycle can be appreciated by understanding the activities that are performed during this stage. This stage establishes the blueprint for the remaining stages of the lifecycle. While these activities are covered in more detail in the subsequent learning units, let us now take a high-level view of these activities. • Requirements collection, analysis and engineering to ensure that business requirements, service provider requirements and technical requirements are clearly documented and agreed; • Design of appropriate service solutions, technology, processes, information and metrics to meet business requirements • Review and revision of the design of all processes and the maintenance of processes and process documents involved in service design, including designs, plans, architectures and policies • Production and maintenance of IT policies and design documents, including designs, plans, architectures and policies • Review and revision of all design documents for completeness and adherence to standards • Planning for the deployment and implementation of IT strategies using ‘roadmaps’, programmes and project plans • Risk assessment and management of all design processes and deliverables • Ensuring alignment with all corporate and IT strategies and policies • Production of service designs and/or Service Design Packages for new or changed services. In the next few slides let us understand the Service Design inputs and outputs.?

2.13 Service Design Inputs

We are aware that ITIL adopts and recommends a process-oriented approach for IT service management. A process takes various inputs to perform the activities and delivers specific outputs and results. Similarly, each stage of service lifecycle uses inputs from other stages and sources to deliver the required outputs. We shall now look at some of the important inputs and outputs of Service Design stage. To start with, the inputs: • Corporate visions, strategies, objectives, policies and plans, business visions and business continuity plans; • Service management visions, strategies, policies, objectives and plans; • Constraints and requirements for compliance with legislated standards and regulations; • Measurement tools and techniques; and • IT strategies and strategic documents from Service Strategy – All IT strategies, policies and strategic plans – Details of business requirements – All constraints, financial budgets and plans – The Service Portfolio Let us continue to discuss the inputs in the next slide.

2.14 Service Design Inputs

In continuation to the inputs here are few more of them: • IT Service Management processes, risks and issues registers • Service Transition plans including Change, Configuration and Release and Deployment Management Plans • Security policies, handbooks and plans • The procurement and contract policy, supplier strategy and Supplier Management processes • The current staff knowledge, skills and capability

2.15 Service Design Inputs

• IT business plans, Business and IT Quality Plans and policies • Service Management plans – these include Service Level Requirements, Service Level Agreements, Service Improvement Plans, Capacity Plans, Availability Plans and IT Service Continuity Plans • Relevant improvement opportunities from the continual service improvement register. Moving ahead, let us now understand the key outputs of Service Design.

2.16 Service Design Outputs

Now let us look at the Service Design stage outputs. The key deliverables are: • Suggested revisions to IT strategies and policies • Revised designs, plans and technology and management architectures, including: – The IT infrastructure and infrastructure management and environmental strategy, designs, plans, architectures and policies – The applications and data strategies, designs, plans, architectures and policies • Designs for new or changed services, processes and technologies documented in the service design packages. This includes the sourcing strategy as well

2.17 Service Design Outputs

• Process review and analysis reports, with revised and improved processes and procedures • Designs for revised measurement methods and processes • Managed levels of risk, and risk assessment and management reports • Business cases and feasibility studies, together with Statements of Requirements and Invitations to Tender or Request for Proposal • Revised budgets and service costing • Comments and feedback on all other plans • Business benefit and realisation reviews and reports. As we have an understanding of the inputs and outputs of Service Design, let us now look at the five major aspects of Service Design.

2.18 Five Major Service Design Aspects

We are by now aware that ITIL takes a holistic approach for the management of IT services. This enables organisations and service providers to plan, design, implement and manage IT services more efficiently. In line with this best practice, the Service Design guidance also recommends adopting an integrated approach while designing new or changed services. There are five important areas that need to be considered and these are popularly known as ‘Five Major Service Design Aspects’. Each of these aspects is discussed in detail in the coming slides. For now, let us have a quick look at what these five aspects are? 1. Designing Service Solutions – this covers functionality, performance, resources, and capabilities 2. Designing management information systems and tools - especially the Service Portfolio 3. Designing technology architectures and management architectures – covering infrastructure and management systems required to provide the services 4. Designing Processes – this includes processes, roles and responsibilities required across the lifecycle 5. Designing measurement methods and metrics – relating to quality of processes and their deliverables Let us discuss about these aspects in detail.

2.19 Designing Service Solutions:

The next few slides will elaborate the five aspects of service design. We shall now start with a detailed discussion of the first aspect - Designing Service Solutions. The main objective of this aspect is to ensure that the service solutions will meet the desired business needs and outcomes. • The areas that need to be considered within the design of the service solution should include: – Analysing the agreed business requirements. – Reviewing the existing IT services and infrastructure and producing alternate solutions with a view to reusing or exploiting existing components and services wherever possible. – Designing the service solutions to the new requirements, including their constituent components. This should cover documenting the features and functionality required, the business processes supported, the business cycles and seasonal variations, the service level requirements and targets, the timescales involved, the planned outcomes and requirements for integration into the overall service management system. – Ensure that the Service Acceptance Criteria are incorporated and the required achievements planned into the initial design. – Evaluating and costing alternative designs, clearly highlighting the advantages and disadvantages of the alternatives. – Agreeing the expenditure and budgets. – Re-evaluating and confirming the business benefits, including the Return On Investment from the service. Care should be taken to consider the total cost of ownership while computing the return on investment. – Agreeing the preferred solution and the planned outcomes and targets. – Checking that the solution is in balance with all corporate and IT strategies, policies, plans and architectural documents.

2.20 Designing Service Solutions:

– Ensuring that the appropriate corporate and IT governance and security controls are included in the solution. – Planning for organisational readiness assessment to ensure that the service can be effectively operated to meet its agreed targets. – Verifying the business capability and maturity as well as the IT capability and maturity. – Ensuring availability of suppliers and supporting agreements required to maintain and deliver the service. – The assembly of the Service Design Package for the subsequent transition, operation and improvement of the new or changed service. In the next slide let us look at aligning new service to business requirements.

2.21 Aligning New Service to Business Requirement

Before we move on to the next aspect let us try to look at the broader perspective of designing, developing, deploying, operating and improving the new or changed services. The diagram on this slide makes it easy for us to understand the phases, flow, relationships, dependencies and controls involved in developing and delivering services. Let us try to explore this diagram in a bit more detail. • The stages from ‘documenting the business requirements’ till ‘deployment’ are normally handled as a project. • Though business requirements and service acceptance criteria are generally documented and agreed during Service Strategy stage, they sometimes keep evolving till transition stage. • The service acceptance criteria is verified before it goes live and becomes one of the key inputs for change management approval for live release. • Service Design Package is passed on by Service Design to Service Transition. • The service level requirements are created and updated till it goes live, by which time the service level agreements are put in place. • There are multiple approvals required from change management during the design and transition stages. • Transition and operation teams are involved right from initial stages. Next, let understand Designing Management Information Systems and Tools.

2.22 Designing Management Information Systems and Tools

The second aspect of service design is Designing Management Information Systems and Tools. • The most effective way of managing all aspects of services through their lifecycle is by using appropriate management information systems and tools to support and automate efficient processes. A systematic way of collecting, analysing and presenting information to various management stakeholders will enable proper control and decision making regarding services or service changes. • The Service Portfolio is the most critical management information system used to support all processes and describes a provider’s services in terms of business value. It articulates business needs and the provider’s response to those needs. By acting as the basis for a decision framework, a service portfolio either clarifies or helps to clarify strategic questions like: – Why should a customer buy these services? – Why should they buy these services from us? – What are the pricing or chargeback models? – What are our strengths and weaknesses, priorities and risks? – How should our resources and capabilities be allocated? The service portfolio contains details of all services and their status with respect to the current stage within the service lifecycle. The service portfolio information is organised into a database or a structured document listing all services. The service pipeline, service catalogue and retired services are subsets of the service portfolio. In the next slide let us understand Designing Technology Architecture.

2.23 Designing Technology Architecture and Management Architecture

‘Designing Technology Architecture and Management Architectures’ is the third aspect of service design. Before we discuss this topic let us try to understand some basic terms relating to this area. • Architecture may be defined as the fundamental organisation of a system, embodied in its components, their relationships to each other and to the environment, and the principles guiding its design and evolution. • The term ‘System’ refers to a collection of components organised to accomplish a specific function or set of functions. In this context a whole organisation, a business function, or an information system can fall with scope of the term ‘system’. Each system will have an architecture made up of the components of the system, the relationships between them, the relationship between the system and its environment, and the design principles that define, guide and constrain its structure, operation and future development. • Architectural Design is defined as the development and maintenance of IT policies, strategies, architectures, designs, documents, plans and processes for the deployment and subsequent operation and improvement of appropriate IT services and solutions throughout an organisation. • Enterprise Architecture is a much broader term and refers to the process of translating business vision and strategy into effective enterprise change, by creating, communicating and improving key principles and models that describe the enterprise’s future states and enable its evolution. Enterprise architecture will be discussed in more detail later in this unit. For now, let us get back to the third design aspect.

2.24 Designing Technology Architecture and Management Architecture

Designing Technology Architecture and Management Architectures is concerned with providing the overall strategic ‘blueprints’ for the development and deployment of IT infrastructure, applications, environment, data, management tools and automated procedures that satisfy the current and future needs of the business. • This design aspect involves assessing various needs and considers the following factors: • Infrastructures, environments, data, applications, and external services are used to meet business needs. It is essential that the design considers not only the technology components but also the management of these components. • It should be ensured that a right balance is struck between innovation, risk and cost whilst seeking a competitive edge, where desired by the business. • It should also be ensured that the design complies with relevant architectural frameworks, strategies, policies, regulations and standards. • The design of services involves both business as well as IT. Hence, a coordinated interface needs to be established between IT designers and planners, strategists, and business designers and planners. In the next slide let us look at the Enterprise architecture.

2.25 Enterprise Architecture

• An enterprise is a complex system, with many types of components, such as its staff, business functions and processes, organisational structure and physical distribution, information resources and information systems, financial and other resources including technology, and the strategies, plans, management, policies and governance structures that drive the enterprise. • Enterprise architecture should show how all these components are integrated in order to achieve the business objectives, both now and in the future. However, from a service design perspective we are concerned with the business of the organisation and the information systems that support it.

2.26 Enterprise Architecture

We shall now discuss the key components of enterprise architecture. Let us use the diagram in this slide to understand these components and their relationships better. • The most important point to note is that the enterprise architecture should be an integrated element of the business architecture. • Service Architecture represents how applications, infrastructure, organisation and support activities are integrated to represent a set of services. It also signifies the approach to delivering services to the business and includes management of the services as well. • Application architecture provides a blueprint for the development and deployment of individual applications, maps business and functional requirements onto applications, and shows the interrelationships between applications. • Data and information architecture describes the logical and physical data assets of the enterprise and the data management resources. It shows how the information resources are managed and shared for the benefit of the enterprise. • IT infrastructure architecture describes the structure, functionality and geographical distribution of the hardware, software and communications components that underpin and support the overall architecture, together with the technical standards applying to them. It includes the product architecture and the management architecture of the infrastructure components. • Environmental architecture represents all aspects, types and levels of environment controls and their management. In the next slide let us look at the Enterprise architecture frameworks.

2.27 Enterprise Architecture Frameworks

There are a number of proprietary and non-proprietary frameworks for development of enterprise architectures. These frameworks provide descriptions of the organisational structure, business processes, planning and control systems, management and governance mechanisms, policies and procedures of the enterprise. They show how these components interoperate and contribute to the achievement of business goals and objectives, and provide the basis for identifying the requirements for information systems that support these business processes. This slide provides a list of some well-known enterprise architecture frameworks along with their short forms. Please take a few minutes to go through the list and see if you recognise or are aware of any of these frameworks. Let us now learn about designing processes.

2.28 Designing Processes

Processes have become an integral part of every organisation. The tremendous benefits reaped out of process-oriented approaches have enhanced using this key method in almost every area of organisational and enterprise management. We shall now discuss this very important aspect of service design – ‘Designing Processes’. • A process is a structured set of activities designed to accomplish a specific objective. A process clearly defines the activities and the sequence in which these activities need to be performed. • A process takes one or more inputs and turns them into defined outputs. The inputs are determined while defining the processes and the outputs that would be delivered by the process are also established. • A process clearly defines all of the roles, responsibilities, tools and management controls required to reliably deliver the outputs. The roles and responsibilities for each activity within the process are clearly identified and communicated. The RACI model is generally used to define the roles and responsibilities in relation to process and activities. • A process may also define or revise policies, standards, guidelines, activities, processes, procedures and work instructions if they are needed. • Process control is the activity of planning and regulating a process with the objective of executing the process in an effective, efficient and consistent manner. All processes must be documented and controlled. When a process is under control, it is repeatable, reusable and manageable. • A process is always organised around a set of objectives and the outputs of the process are driven by these objectives. Hence it becomes essential to have metrics and measurements in place to measure and improve the process. • Every process should have a process owner who is accountable for the process, its adherence and improvement. He should also ensure that the process meets its objectives. The designing of process should comply with all the points discussed here. Organisations should adopt a formalised approach to the design and implementation of the service management processes. The goal should be to design processes and support them with tools to integrate various units of the organisation as well as other related organisations. As metrics are the outputs of a process, let us understand the designing measurement methods and metrics in the next slide.?

2.29 SDA5: Designing measurement methods and metrics

The fifth aspect of service design is ‘Designing measurement methods and metrics. Hope you are familiar with this famous quote by management guru Peter Drucker “If you don’t measure it, you can’t improve it”. So measurement is the key to improvement. Measurement is the quintessential factor around which organisation growth, development and transformation rely on. Designing appropriate measurements and metrics is therefore given lot of importance while designing services. • In order to manage and control the design processes, they have to be monitored and measured. As introduction of measurements and metrics affect the behaviour of people, care should be taken to encourage selection of metrics that are directed towards meeting business objectives. • Some key principles to follow while designing the measurement methods and metrics are: • Design measurements and metrics that are ‘Fit for purpose’ • Design for the appropriate level of quality – not over or under engineered • Ensure that the designs are ‘Right first time’ and meet their expected targets • Design measurement and metrics solutions that minimise the amount of ‘rework’ or ‘add-ons’ that have to be rapidly developed after solutions have been deployed • Design measurement and metrics solutions that establish effective and efficient metrics from the perspective of the business and the customers The process measurements selected need to be appropriate for the capability and maturity of the processes being measured. Let us proceed to learn about the types of metrics.

2.30 Four types of Service Design Metrics

There are four types of metrics that can be used to measure the capability and performance of processes. Service design should consider various aspects like maturity of the organisation and processes while designing metrics required across the lifecycle of the service. • Progress metrics relate to milestones and deliverables in the capability of the process • Compliance metrics are for measuring compliance of the process to governance requirements, regulatory requirements and compliance of people to the use of the process • Effectiveness metrics are for measuring the accuracy and correctness of the process and its ability to deliver the ‘right result’ • Efficiency metrics are related to productivity of the process, its speed, throughput and resource utilisation. While designing measurement methods and metrics – the selection of the metrics, the point of measurement and the methods of measuring, calculating and reporting on the metrics must be carefully planned and considered. Let’s look at the Metrics tree in the next slide.

2.31 Metrics Tree

While designing measurement methods and metrics it should be ensured that it enables correlation, integration and consolidation of metrics at various levels. The most effective method of measurement is to establish a ‘Metrics Tree’. It is also known as ‘Key Performance Indicator Tree’. This approach employs a hierarchy of metrics to create a comprehensive view at multiple, interconnected levels. While the top most level is generally depicted by a Balanced Scorecard, the lowest level shows individual component metrics. Let us look at the various levels and types of metrics that constitute the Metrics Tree. The top most level is the ‘Business objectives and metrics’ which, as stated earlier is represented through a Balanced Scorecard. It has four components covering Customer perspective, Business perspective, Innovation perspective and Financial perspective. This is generally meant for the Business managers and customers. The next level is the ‘IT objectives and Metrics’ which has a similar Balanced Scorecard as that of the top level but the contents are specific to IT performance and objectives. This meets the requirements of senior IT managers and customers. The next two levels are the ‘Overall service and customer metrics’ and the ‘Individual service and customer metrics’. These dashboards constitute service quality, customer feedback, customer complaints and service functionality. These cater to the requirements of Service owners and customers who need information on overall services or individual services. ‘Individual process metrics’ is the next level. These include the progress, compliance, effectiveness and efficiency metrics. Process owners need this information to monitor and improve the performance of their respective processes. The lowest level is the ‘Individual component metrics’ and the covers availability, performance, capacity, failures and changes relating to each component. Technical specialists use these metrics to manage, control and improve individual components for which they are responsible. Next, we will learn about the Design Activities.

2.32 Subsequent Design Activities

Service design stage is concerned with five activities, namely – Analysing, documenting and agreeing requirements; Designing Service solution, evaluating alternate solutions, procuring the preferred solution and finally developing the solution. We have covered the first two activities so far. We shall now discuss the remaining three Activities. • Evaluation of alternative solutions – This activity is performed where external supplier services and solutions are involved. It includes the following steps : – Selecting a set of suppliers and completing a tendering process. – Evaluation and review of supplier responses and selection of the preferred suppliers and their proposed solutions. – Evaluation and costing of the alternative designs, possible including identification of potential suppliers and evaluation of their proposals, technologies, solutions and contracts. • Procurement of the preferred solution – This includes : – Completing all necessary checks on the preferred supplier – Finalizing the terms and conditions of any new contracts, ensuring that all corporate policies are enforced – The procurement of the selected solution. • Developing the service solution - This activity consists of translating the service design into a plan for the development, reuse or redevelopment of the components required to deliver the service and the subsequent implementation of the developed service. The deliverables include: – The needs of the business – The strategy to be adopted for the development and/or purchase of the solution – The timescales involved – The resources required, taking into consideration facilities, IT infrastructure and the right personnel skills in order to ensure the delivery of the service meets the customer’s needs – The development of the service and its constituent components, including the management and other operational mechanisms, such as measurement, monitoring and reporting – Service and component test plans. Let us now proceed to understand design constraints driven by strategy.

2.33 Design constraints driven by strategy

Apart from taking care that business requirements and other stakeholder requirements are taken into consideration while designing service solutions, Service Design may also have to operate within many constrains. It becomes essential that these constraints are identified, documented and considered while designing the service solutions. The service provider and the customer must both recognise the fact that they are free to design solutions but that they are working in an environment where many internal and external factors can influence the design. The primary constraints that determine the boundaries of a service solution design are the utility and warranty desired by the customer. The next critical constraints are related to financial and comparative unit costs. There may be insufficient budget available for the most appropriate or the preferred solution; therefore a cheaper alternative service would have to be identified and agreed with the business. Technology, capability, existing commitments and resource constraints fall in the next category. IT organisations may have to operate with existing techonology, capability and resources. In some cases these may not meet the levels required for designing more efficient solutions. Compliance with internal and external policies, governance, standards and regulations also have a major bearing on how designs can be developed and design activities can be performed. Sometimes these may not be easily visible and design teams will have to make special efforts to identify and document most of them. Another important constraint relates to copyrights, patents and trademarks. Designs must ensure that copyrights, patents and trademarks pertaining to other organisations, if used, should be with prior approval from those organisations. Thus operating within these constraints may lead to variation between desired service solution and possible service solution. Design coordination teams should make all stakeholders aware about this gap and get the acceptable service solution signed-off. Let’s look at external influence on solution design in the next slide.

2.34 External Influence on Solutions Design

We have seen earlier that one of the key constraints within which design solutions are developed is compliance to external standards and regulations. Let us now look at some of these external standards and regulations that may influence while designing service solutions. ISO/IEC 27001 is an information security management system standard that suggests bringing information security under explicit management control. This standard requires that management should: • Systematically examine the organisation’s information security risks, taking account of the threats, vulnerabilities and impacts; • Design and implement a coherent and comprehensive suite of information security controls and/or other forms of risk treatment to address those risks that are deemed unacceptable; and • Adopt an overarching management process to ensure that the information security controls continue to meet the organisation’s information security needs on an on-going basis. The Control Objectives for Information and related Technology - COBIT is a governance and control framework for IT management created by ISACA and the IT Governance Institute. • It covers five key governance focus areas: strategic alignment, value delivery, resource management, risk management and performance management. COBIT is primarily aimed at internal and external stakeholders within an enterprise who wish to generate value from IT investments; those who provide IT services; and those who have a control or risk responsibility. ISO/IEC 20000 is an internationally recognised standard for IT Service Management covering service providers who manage and deliver IT-enabled services to internal or external customers. • One of the most common routes for an organisation to achieve the requirements of ISO/ IEC 20000 is by adopting ITIL best practices. The Capability Maturity Model Integration -CMMI is a process improvement approach developed by the Software Engineering Institute of Carnegie Mellon University. • CMMI provides organisations with the essential elements of effective processes. It can be used to guide process improvements across a project, a division or an entire organisation. • CMMI helps integrate traditionally separate organisational functions, sets process improvement goals and priorities, provides guidance for quality processes, and suggests a point of reference for appraising current processes. ISO 9000:2005 describes the fundamentals of quality management systems that are applicable to all organisations which need to demonstrate their ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements. ISO 9001:2008 specifies generic requirements for a quality management system. • Many process-based quality management systems use the methodology known as ‘Plan-Do-Check- Act’ - PDCA, often referred to as the Deming Cycle, which can be applied to all processes. So as we have detailed understanding of the external frameworks that influence on solutions design, let us now proceed to service-oriented architecture in the next slide.

2.35 Service Oriented Architecture

• Service-Oriented Architecture is recommended for designing and developing business processes and solutions. • This best practice approach is used by many organisations to improve their effectiveness and efficiency in the provision of IT services. Service-Oriented Architecture brings value and agility to an organisation by encouraging the development of ‘self-contained’ services that are reusable which in turn, promotes a flexible and modular approach to the development of ‘shared services’ that can be used in many different areas of the business. • Service-Oriented Architecture is defined by the ‘Organisation for the Advancement of Structured Information Standards’ - OASIS as “A paradigm for organising and utilising distributed capabilities that may be under the control of different ownership domains. It provides a uniform means to offer, discover, interact with and use capabilities to produce desired effects consistent with measurable preconditions and expectations”. Let’s continue to learn about SOA key principles.

2.36 Service Oriented Architecture

It is recommended that IT service provider organisations should use the Service-Oriented Architecture approach and principles to develop flexible, reusable IT services that are common and can be shared and exploited across many different areas of the business. • The key principles of Service-Oriented Architecture are that IT should: – Define and determine what a service is – Understand and clearly identify interfaces and dependencies between services – Utilise standards for the development and definition of services – Use common technology and toolsets – Investigate and understand the impact of changes to ‘shared services’ – Ensure that SOA-related training is planned and achieved for IT staff members in order to establish a common language and improve the implementation and support of the new or changed services. In the next slide we will discuss about Business service management.

2.37 Business Service Management

Focus on business processes supported and business value provided is a fundamental principle of IT service management. With this focus, the impact of technology on the business and how business change may impact technology can both be predicted. The creation of a totally integrated service catalogue – including business units, processes and services, and their relationships and dependencies on IT services, technology and components – is crucial for increasing the IT service provider’s capability to meet the business’s needs. The business focus in IT service management enables an IT service provider organisation to: • Align IT service provision with business goals and objectives • Prioritise all IT activities based on business impact and urgency, ensuring critical business processes and services receive the most attention • Increase business productivity and profitability through the increased efficiency and effectiveness of IT processes • Support the requirements for corporate governance with appropriate IT governance and controls • Create competitive advantage through the exploitation and innovation of IT infrastructure as a whole • Improve service quality, customer satisfaction and user perception • Ensure regulatory and legislative compliance • Ensure appropriate levels of protection on all IT and information assets • Ensure that IT services continue to be aligned with changing business needs over time. Let’s proceed to understand the sourcing options in the next slide.

2.38 Service Design Models

Before we proceed to learn various sourcing options, let us discuss about Service design models in this slide. A service design model represents the structure of the service considering all relevant aspects. It is essential that organizations and service providers perform an assessment of their current capabilities and resources before adopting a design model for a new service. The aspects to cover during the assessment are: •The business drivers and requirements •The demands, targets and requirements of the new service •The scope and capability of the existing service provider unit •The scope and capability of external suppliers •The maturity of the organizations currently involved and their processes •The culture of the organizations involved •IT infrastructure, applications, data, services and other components involved •Degree of corporate and IT governance and the level of ownership and control required •Budgets and other resources available •Staff levels and skills. This assessment provides a structured mechanism for determining an organization’s capabilities and state of readiness for delivering new or revised services in support of defined business drivers and requirements. This assessment also determines the gap between the current and desired capabilities and will help in determining the delivery strategies or models that can be used. It helps in determining how and to what degree the service provider will have to rely on external suppliers. The model selected for the design of IT services will depend mainly on the model selected for the delivery of IT services. Now let us look at sourcing options.?

2.39 Sourcing Options

The service delivery model or strategy will involve identifying an appropriate sourcing option that would support the delivery of the service in line with the business objectives and requirements. The various sourcing options that may be considered are : Insourcing Outsourcing Co-sourcing or Multisourcing Partnership Business Process Outsourcing Application Service Provision Knowledge Process Outsourcing Cloud Services We shall now explore these sourcing structures and try to understand their advantages and disadvantages.

2.40 Insourcing Option

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. • The advantages of insourcing approach are : – The service provider organisation has direct control on the services as well as resources – It has a freedom of choice to select, modify, change or prioritise the services and service components – It enables rapid prototyping of leading-edge services where timelines are a key aspect – The staff, customers and users are familiar with the policies and processes – The services are based on Company-specific requirements and knowledge. • The disadvantages are: – The service provider may not be able to scale the resources or services to meet the rapid growth or changes in the organisation – Sometime the cost and time to market for services might be more and the services may be readily available outside – The biggest constraint is the dependency on internal resources and their skills and competencies. If the skills and competencies are low, the services quality will also be low. Next, let’s discuss outsourcing option.

2.41 Outsourcing Option

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 key advantages of outsourcing approach are : – As the outsourcing organisation provides similar services to various other organisation there could be economies of scale and cost-efficiency – Where ever specific expertise is required, it can be purchased from the outsourcing organisation – The greatest advantage of outsourcing option is that the organisation can focus on its core competencies, reducing its involvement in IT services management – Where the service requirements or of a temporary nature the service provider can get them from the outsourcer thereby avoiding unnecessary investment. • The disadvantages of this approach are : – The organisation will have less direct control as the service is majorly managed by the supplier organisation – There could be some exit barriers in these type of arrangements – The services will be majorly impacted if there is any solvency risk of suppliers – It may not be possible to judge the supplier skills, capabilities and competencies – This approach may require some changes to the way business operates and may result in business process integration challenges – Outsourcing option normally results in an increase in governance and verification activities to ensure customer requirements are continuously met and their satisfaction is also maintained Moving on let’s understand Co-sourcing options.

2.42 Co-sourcing or Multi-sourcing Option

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. • The advantages of co-sourcing and multi-sourcing options are : – The time to market the services will be more efficient – The expertise from internal as well as external organisations and resources can be leveraged – There will be better control as internal organisation has an equal or major participation – Where unique or special skills and competencies are required these can be sourced through specialised providers. • The disadvantages are : – The project complexity may increase as more number of communication channels and management structures would be required – There might be a threat to intellectual property and copyright protection as information exchange and usage is key for the development and provision of services – Where organisations involved are from different regions, the risk of culture clash between companies may arise.

2.43 Partnership Option

Another popular approach is Partnership. In this model, two or more organisations enter into formal agreements to work together to design, develop, transit, maintain, operate and support IT services. The focus here is on strategic partnerships to leverage critical expertise or market opportunities. • The advantages of partnership model are : – A quicker time to market the services as the organisations work together to meet common objectives – Better opportunity for market expansion or entrance considering the combined competencies and locational advantages – A better competitive response to similar services being provided by other organisations – Opportunity to leverage expertise from all organisations involved – Trust, alignment and mutual benefit amongst the organisations partnering together – ‘Risk and reward’ agreements can lead to better performance by the partnering organisations. • The disadvantages are : – The project complexity may increase as more number of communication channels and management structures would be required – There might be a threat to intellectual property and copyright protection as information exchange and usage is key for the development and provision of services – Where organisations involved are from different geographic or cultural regions, the risk of culture clash between companies may come up Next, let’s understand business process outsourcing option.

2.44 Business Process Outsourcing Option

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. • The key advantages of going in for Business Process Outsourcing option are : – There will be a single point of responsibility for the complete business process – The outsourcing organisation will be the ‘One-stop shop’ for all the business process requirements – The biggest advantage is the access to specialist skills and competencies of the outsourcing organisation – The risk of managing the complete business process is transferred to the outsourcer – As the services are provided by the outsourcer in large scale, generally from a low-cost location, it results in cost-efficiency as well. • The disadvantages are : – Where organisations involved are from different geographic or cultural regions, the risk of culture clash between companies may come up – Over a period of time there is a risk of loss of business knowledge as the business process is completely managed by the outsourcer – There is also a risk of loss of relationship with the business as the business will interact and coordinate with the outsourcer rather than the internal IT organisation. In the next slide let us understand application service provision option.

2.45 Application Service Provision Option

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 handled by the application service provider. The customer organisation has to just pay for the usage of the application as per agreements entered. • The advantages of the application service provision sourcing model are : – Access to expensive and complex solutions without investing in infrastructure, networks, databases and applications – As these type of services are provided in large scale and generally from a low-cost location, it results in cost-efficiency as well – The complete support for the application and the responsibility to upgrade the application lies with the application service provided and is normally included within the scope of the agreement – This type of service agreements include ensuring adequate security of data and information and the supplier also implements and owns the IT Service Continuity Management requirements for the application services provided. • The disadvantages are : – Where organisations involved are from different geographic or cultural regions, the risk of culture clash between companies may come up – The customer organisation will have access to application functionality only and not to the knowledge surrounding the application and infrastructure – Sometimes the supplier may adopt usage-based charging models which could turn out to be more expensive. Now let us proceed to understand knowledge process outsourcing option.

2.46 Knowledge Process Outsourcing Option

Knowledge Process Outsourcing is an extension to business process outsourcing. KPO 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. • The key advantages of this sourcing approach are : – The organisation will have access to specialist skills, knowledge and expertise owned by the supplier – These type of services are normally delivered from a low-cost location and hence they are comparatively cheaper than local or internal service provision – As the supplier provides the services in large scale and the customers don’t have to invest in costly resources, significant cost savings can be achieved. • The disadvantages are : – Where organisations involved are from different geographic or cultural regions, the risk of culture clash between companies may come up – Over a period of time there is a risk of loss of internal expertise as the business processes and knowledge is completely managed by the supplier – There is also a risk of loss of relationship with the business as the business will interact and coordinate with the outsourcer rather than the internal IT organisation. Lastly, let us understand cloud computing in the next slide.

2.47 Cloud Services

Cloud Services 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 a specific 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. • The advantages from adopting cloud services approach are : — Services are easily defined as they can represent a specific service component or a complete service — Sourcing is straightforward as we can decide and request for what is actually required - infrastructure, platform, database or applications — Mapping between the service and business outcome is relatively straightforward — Greater customer control of the service as the complete service or individual components can be managed as required by the customer. • The disadvantages are : — Establishing internal clouds are still complex as it requires specialised skill and competencies — Focus on the technology could mask the relationship between IT activities and the business outcomes — There could be difficulty in coordinating insourced offerings with external cloud services — There could be a risk of security of information and assurance of business continuity for services hosted externally. As we have come to the end of learning unit 2, let us proceed to recap in the next slide.

2.48 Summary

Under this unit so far we have covered information about: • Service Design Principles • Design Service Solution • Service Design aspects, inputs and outputs • Service Design Activities • Measurement systems and Metrics • Service Design Models Next is the quiz section, attempt these questions before proceeding to learning unit 3 on Service Design Processes.

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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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