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ITIL Service Strategy and what it means for your business
Technical people are used to working tactically and we love to get down into the weeds on technical details, but good design and stable operations can only be achieved when the technical organization is in lock-step with the business from a strategic view. Only when they know the business strategy can application teams suggest improvements or ideas that might benefit the business. Only with knowledge of the business strategy can the IT organization predict service usage, including increased or decreased demand. Only when working with the business, can IT know new ways the business is using a service. Working together at the strategic level enables IT to give the business a competitive edge. This guide introduces service strategy and some key steps to getting strategic. IT requires people with both strategic and tactical capabilities to contribute to overall organizational success.
The objective of service strategy is to define the services that are needed to support overall business objectives and the supporting services needed to carry out day to day work.
Service strategy is where the value proposition begins: strategy is where the business determines their vision, objectives and what’s needed to realize it, therefore it’s here that IT has the opportunity to get aligned to the business strategy. It’s at this strategic level that IT can work with the business to define the services needed to reach business objectives.
Many service management professionals get confused by the terminology used to describe a service (a means of providing value to the business without specific ownership of cost and risk), but the best way to understand service definition is to think commercially, like a managed service provider. The question to ask is “how would I define my services if I could package and sell them for a fee?” The cable TV industry provides a great example. While they basically offer Internet connectivity and entertainment programming, they package their services in a way that enables them to market different services. There’s a basic cable service that comes with a certain number of stations, there are premium packages that provide movie channels and there are offerings that bundle several services together.
This is a great analogy to use because it enables IT to look at what it provides as basic services, like the few examples below:
End-user computing services: computing equipment and support to company employees, including service desk services from 6 AM to 6 PM
Internet and telecom services: Internet connectivity and wired telephone services for international and local calling
External web hosting: web site design, programming, hosting and support for customer-facing websites, including high availability and virtual operation
On top of these supporting services, IT may also provide some business-line specific services like:
Accounting support services: programming and equipment needed to manage accounts payable and receivable
Enterprise resource planning: a collection of applications, data warehouse storage and tools for predictive analytics that enable the organization to make sound business decisions
Payroll services: applications and equipment to support managing payroll and issuing both payroll checks and direct deposits
Once the basic services are designed, service offerings can also be defined. A service offering is similar to the bundling that cable TV providers and telecom companies provide. It can combine aspects of several services along with defined support packages for a set price, enabling business consumers to select the right offering for their needs and budget. This does assume that IT is either charging for services, providing show-backs or being provided budgets based on business unit consumption. All of these are healthy models for IT being able to provide services at the level the business requires, rather than treating everyone in the business the same. A few unique offerings email offerings might include:
Standard email: included at no additional fee, provides a 20Gb mailbox, with back up and standard user support (4-hour response, 8-hour resolution)
Enhanced executive email: included for $4 extra per month, executives are provided with a 50Gb mailbox and enhanced support for themselves and their administrative assistant (immediate response, 4-hour resolution)
Sales email: included for $2 extra per month, provides a 50GB mailbox and standard user support
These offerings enable IT to raise the funding to provide the extra space and faster support that come along with the offering while enabling the business to get what they need.
There are several advantages to taking part in strategic planning, doing so:
Enables IT to move away from day to day fire-fighting
Enables it to take a longer-term view of their own objectives and what they need to achieve
Helps IT predict future capacity needs and optimize costs
Helps IT plan for upcoming initiatives and provide resources for them
Improves the support IT provides to the business by providing higher levels of engagement
When IT is simply providing infrastructure and applications without this understanding, they will always be playing catch up. For example:
The use of an application doubles when a second business unit begins using it, causing capacity issues
An application built for casual operation begins to be used for a business-critical function and the support provided is no longer acceptable
The network slows down because a video streaming capability was purchased and used without IT’s knowledge
Working at the strategic level also enables IT to be working directly with business leaders to understand their challenges. This leads to IT personnel making suggestions for services the organization could use to perform more effectively or act more competitively. In our digital economy, business leaders need IT’s knowledge of technology and the direction technology is taking to help shape ways they can use technology to succeed as a business.
Alignment occurs during discussions at the strategic level, enabling IT operations to be focused where needed.
“Alignment with the business” has often taken the form of a gray area: we know we need to be better aligned, but we don’t know what that means. Alignment is very simple: it’s an understanding of the business vision and objectives that enable IT to know what the business needs and ensure they are working on those services that support those needs.
Focusing development and operations with the business need in mind also mean moving project approval to the strategic level. Often people approach IT with projects for their business unit and IT figures out how to fund and deliver what they need. This does not ensure strategic alignment and IT can find themselves caught in between departmental needs. Decisions on how IT uses its resources, both technical and financial should come from business executives and include a decision about whether the request aligns with the overall business strategy. This is true service strategy: everything IT does is driven by the strategy of the business. When this is achieved, and when IT has made the transition to providing services rather than infrastructure, IT stops being overhead to the business and becomes a fully aligned, strategic partner.
Once this occurs, business strategy becomes the driver for identifying and managing services. The business strategy identifies what the business is working on and the technology needed to accomplish it. At this point, services can be evaluated for the value they provide, and IT is able to work with the business to review services, their value, changes the business needs and changes to business use that could affect operations. Instead of attempting to work with the business to plan for infrastructure improvements, which doesn’t really resonate with the business, IT is now working with them on concrete planning for services the business uses and the business can be more heavily engaged in decision making.
When IT moves to a more strategic operation, there are several strategies to consider:
Aligning IT activities to the business strategy, defining and operating the services the business needs to be competitive and effective are all part of the business strategy and this is the strategy IT should be most focused on.
To achieve desired business outcomes, the IT organization also needs to adopt a strategy for using and improving service management. This doesn’t just happen on its own, there needs to be an overarching strategy of how service management will be adopted:
Which frameworks will be used
How they fit together
Defining the ways in which IT will operate
Aligning IT organizations (silos) to work together
IT also needs the ability to plan their own growth and improvement over the longer term, rather than engaging in reactive planning. This could include the architecture to be supported, programs for evaluating retirement, and planning for the IT portfolio of services and infrastructure projects. It may be very difficult to engage the business until operations are stable, so this may be a key part of IT’s strategy.
Yes, financial management can be strategically driven. Traditionally, IT is managed as a cost center and both budgeting and accounting are done at the infrastructure, applications and consumption level. Moving to a service-based accounting methodology and charging for services are strategic changes an organization can make. There are two key components to this:
Service-based accounting: tracking the IT spend based on services enables both IT and the business to know where investments are being made and money is being spent, then compare revenue generated by a business service to the cost of operating the service. Additionally, they can see the portion of the spend going to supporting services and how much overhead each supporting service uses.
Charging for services: many organizations are hesitant to allow IT to charge other departments for consumption-based services, but then expect IT to control a spend over which they have no control. Shifting these costs to the business units that consume the services (or equipment, accessories etc.) enables the business to make better decisions about areas where cuts might be warranted. It also lowers some of the spend. People are far more likely to request something someone else pays for and don’t place as much value on free services as they might if they had to pay for the service.
Instead of trying to drive resource budgets for infrastructure and generalized application development, IT is now able to have discussions at the service level. If the service is not performing because an equipment refresh is needed, for example, a specific project or budget can be approved to improve the service. All of ITSM revolves around this model, which is why many organizations don’t see the value to ITSM adoption programs when the cherry-pick and adopt only transition and operations processes.
The graphic above demonstrates how this can work:
A strategic business need leads to the definition of the services the business needs from IT (and other providers)
Projects are then established to develop, improve or change a service
The projects and operational needs are expressed in the form of budgets that become part of the overarching financial management of IT, based on managing service financials
All resources are allocated back to services and used to provide service support and improvement. In this way, the business is always able to go back and determine the value the service is providing by comparing perceived revenue against the cost of operations, considering as well that some support services are provided directly to employees.
While charge-backs are actual charges transferred from one department to another, show-backs generally refer to reporting the way in which departments consumed portions of a provider’s budget.
This is why charge-backs or show-backs become important: while financial management can account for the cost of operating a service based on revenue use of the service generates, end user computing services cannot be attributed to business services and evaluated. They often appear to be unidentified IT costs, when in fact they represent consumption costs of the departments incurring them.
Service planning is a strategic activity that enables all members of IT to understand what the future brings. As the business plans expansion or reduction in use of a service based on its value (or lack of value), IT is aware this is coming. Capacity planning can enable the organization to ensure any infrastructure changes are planned to occur at the right time. As new services are introduced, IT has sufficient time to get the service desk and operational teams ready. When the change management process starts with business approval to make a change, engagement happens earlier and planning the service, as well as its transition to operations, becomes much smoother.
This same level of planning ensures that all IT planning can be performed in alignment with business needs, which in turn stabilizes the daily operation of a service:
Business continuity and disaster recovery plans can be updated to include the new service or reflect changes in a service’s criticality
Availability management plans can be adjusted to ensure the planned availability meets business needs as they change
Information security management will understand changes to services that could affect its protection
Capacity plans can be adjusted based on predicted growth or reduction in planned use
The ability to plan appropriately is why it’s not as effective to operate a service in a vacuum as it is to operate it in alignment with business needs. Business expansion can easily bring a service down or significantly impact its performance when IT is unaware of the expanded use and doesn’t know to plan for it. While virtual environments help stabilize operations significantly, even this architecture can only go so far in covering up a lack of planning.
All in all, driving operations to the level of a service and ensuring all project proposals are evaluated for their contribution to the overall business strategy ensures that IT is working only in those areas that support business initiatives and supporting business users. This goes a long way to ensuring IT is not wasting resources on pet-projects for departments or non-authoritative personnel that ultimately don’t align with business need, wasting resources on “wants” rather than strategic needs.
This becomes critical when business and IT resources are stretched or when the business starts asking IT where the money is going. Focusing resources through strategic thinking enables IT to optimize spending in alignment with business need.
Before IT can get strategic, it needs to know how the business perceives their relationship and the accomplishments of IT. Without knowing this, initial attempts to engage the business more closely may fail. There are several areas to consider and improve at the tactical level to clear the way for a strategic partnership:
System and service operations: initial attempts to stabilize systems and service operations is critical. Even if there are no expected service levels, IT should begin measuring availability from the business’ viewpoint and ensure they have done everything to achieve acceptable levels of availability for services that are currently in operation.
End-user computing services: it’s possible for an organization to be really good at keeping systems and services operational, but they will still be viewed poorly if they don’t meet the needs of individuals outside of IT. Requests and support needs also need to be delivered at acceptable levels to shift the perception of IT.
Communication of achievements: without a set way of communicating achievements to the business, the perception of IT will still rest at the emotional level. Without reports and regular communication, the perception will still be based on the last outage or the last time a request took too long to fulfill.
With this in mind, IT needs to understand how the business perceives them before looking to partner with the business on strategy. This comes back to IT’s internal strategy. IT needs a vision for what great support looks like in within their organization and needs to be able to evaluate their ability to deliver on it to the satisfaction of the business. This can only be achieved through some initial conversations to know what the business needs from IT operationally, then defining measures to support the vision.
Building a metrics program in alignment with this vision also requires business engagement, to ensure both the business and IT agree on measures and the targets that should be reached. IT then needs to begin measuring and reporting their achievements and progress back to the business. Essentially, before IT can engage the business at the strategic level, they need to build relationships that indicate they are capable of doing the work needed to support the business. At that point, it’s time to get strategic.
Getting started with service strategy isn’t as difficult as it may seem. It’s mostly about understanding the business you’re in and building relationships with associates outside of IT. The rest comes naturally as others begin to understand that IT truly is interested in partnering with other personnel. The most difficult aspect of it is to make the shift from talking about infrastructure and applications to talking about business processes and initiatives. People love to talk about what they’re doing. All they need is for IT to demonstrate an interest and ask the right questions. That said, there are some steps that can be taken to build a strategic relationship with key stakeholders.
Frequently people in IT consider themselves in the IT business rather than the business of their organization. Shifting this mindset is the first step to getting strategic as shown below:
The easiest way to make this shift is to talk to people in different roles in the organization and even to shadow them for a few days. Even here, the focus should be on revenue-generating departments, not other service providers, the goal being to understand how the organization makes money and the activities they perform to do so.
Another focus should be the interaction with external parties: customers, other businesses, government agencies, anyone with who business associates interact and how they interact. When an IT person does this, they automatically see opportunities for technology that can help personnel perform these activities. Often opportunities are overlooked simply because people in the business who perform these activities wouldn’t think to ask about automating a particular activity that they are used to performing manually.
Ultimately, understanding how the organization makes and spends money, how it is invested and an understanding of compliance and audit pressures all provide an understanding of the challenges the business faces.
While relationships will be started while shadowing operational members of the business community, they also need to be built with key strategic stakeholders (or leadership) from all revenue generating areas of the business. This forms the opportunity to begin talking about findings and potential innovation.
It also requires that IT is ready to acknowledge any perception of insufficient support or lack of business awareness. It may be that work will need to be done to improve current performance before the business leaders look to IT for innovation. This in itself is a strategy, and the business stakeholders can be engaged to identify improvements needed and prioritize them before moving into less operational areas.
With an understanding of the business, IT personnel can begin looking at business initiatives and how to drive innovation in those areas, working with management to bring these ideas back to the business. They can also take a fresh look at existing services to find ways to improve those services.
These inputs can then be taken back to the appropriate business units to define joint initiatives to implement innovative solutions. Once this pipeline begins to grow, a means of prioritizing investments and resources will be needed.
The Service Portfolio is like any other financial portfolio: it’s a listing of services and investments in those services that enable IT and the business they support to see where IT funding is used. There are three components of this portfolio:
Service Pipeline: The pipeline represents initiatives and services under consideration for funding. Once funded as projects, these may stay in the pipeline until the resources to build or improve them are available. Projects in the pipeline represent an investment in growth and innovation.
Service Catalog: The service catalog represents operational services or services which are about to be released into operation. These services must be maintained and supported, so to a large degree, the service catalog represents the operational budget (or run costs) of an organization. Even support services like end-user computing services are part of the service catalog, as employees themselves consume a large portion of an IT budget to support their own day to day needs.
Retired Services: There may come a time when a service is no longer needed due to changes in the business model or because it has been replaced by another service. Often organizations fail to intentionally retire services, so even when not used they occupy computing and personnel resources. Reviewing all services and retiring those no longer needed, enable an organization to recapture these resources and apply them to pipeline projects. Essentially, the retirement portfolio represents an investment opportunity.
Often the service portfolio is related to the “run, grow, transform” activities of an organization. The operational services represent the “run” needs, while the pipeline represents both “growth” and “transformation”. Growth can come from the expansion of the use of a service or revenue growth made possible as the result of using a service, while transformation represents an investment in additional markets or completely changing the ways business is done (like Amazon’s branching out from books to sell other products). Without the capacity to grow, an organization will eventually start to fail. Thus, a critical part of service management is to optimize IT operations so that the run budget doesn’t consume the funding needed for growth and transformation. Viewing the IT investment in terms of the service portfolio enables an organization to balance its investments appropriately.
Once the activities related to identifying existing services and proposing new ones grows into a large enough bucket, IT will no longer be able to work projects in an ad hoc or disorganized fashion. At this point, it will become necessary to formalize the project lists and work with key stakeholders to ensure everything on the list is needed by the business unit. This will result in the creation of a formal pipeline, but the organization will ultimately still need a way to prioritize and fund the work.
A formal governance body or steering committee becomes the mechanism for ensuring IT is working on those projects that are most important to the business. The committee should be chaired by a high-ranking business leader and include senior executives from all lines of business and/or operational departments. Together, this committee bears the responsibility for reviewing, prioritizing and funding those initiatives on which IT and the business will work.
It should be noted that not all initiative will include technology. This is a sign the organization is moving jointly into a strategic operating model that supports all initiatives, whether they are technology-based or not. Even if IT drives the creation of such a body, it is still a sound means for business leaders to work together on carrying out the organization’s strategy.
With the governance body in place, the organization can formalize the processes used to initiate, approve and govern the success of strategic initiatives. This is an important part of the strategic operating model as it ensures each business unit understands and is accountable for their participation in carrying out the plans of the organization.
Project initiation processes ensure everyone knows how a project can be proposed and the criteria for evaluating and prioritizing projects. Some organizations weight their evaluation based on a project’s ability to: generate revenue, address compliance needs, support business initiatives and/or grow new business. It’s important for all key stakeholders to understand the evaluation process so they can look for opportunities to align with overarching organizational need.
Approval rules regarding the level of approval needed in alignment with a project’s anticipated budget ensure that senior executives time is not wasted approving small improvements but also ensuring everyone is working primarily on key organizational initiatives.
Governance may cover a wide variety of areas, but in this context, it relates to governance for the programs being proposed and the management model to be used for key initiatives, including initiation and funding or chartering of projects.
As the IT organization moves towards the support of key strategic initiatives, with more formal processes, it will need a way to ensure all personnel understand the new means of working and are aware of the initiatives being approved for work. IT (and the organization at large) need communication plans and some level of organizational change management in place to support the shift to a more service-based, strategic operation. It’s possible that without communication, developers will continue to work on pet projects of business people they support as well as new initiatives, then indicate they’re not ready to move onto the next project due to too much work, even though resource plans indicate availability.
Additionally, communication of the new way of working needs to be performed throughout the organization to ensure that the business as a whole is adopting the new approach. There can be a lot of change when moving from a tactical operating model to a strategic one and everyone needs to be aware of the change.
An organizational newsletter or frequent town hall meetings are a great way to publicize initiatives and get people aligned and excited about them. This makes it easier for everyone in the organization, including IT, to know where they should be focusing their energies.
Through strategic planning, specific initiatives and governance, the organization begins to work more closely towards business goals and IT becomes less of a silo, off working on their own. While this approach may start with IT approaching key business personnel, no one intentionally excludes IT, more likely they just don’t know how to approach IT.
When IT and the business are able to move out of their respective silos and work together, virtually any strategy can be achieved. In fact, one could argue that to get people out of their silos an organizational strategy is needed.
Thus, at this point, when there is a true service lifecycle from inception to retirement that is worked on at the strategic level, IT and other departments know what to work on and can work together to achieve the organization’s vision.
The ability to move away from siloed operations and for IT to be working in true alignment with the business offers tremendous value to the organization. For one thing, the business knows where its IT spending is going and can drive how it’s being used. For another, moving towards a service-based financial operation for IT enables the business to work together with IT to plan where the money should be spent, via the service portfolio. In general, benefits can be seen in the following areas:
IT knows which services are most business critical and can ensure they prioritize activities in alignment with this need. Understanding the future use for services also helps IT plan their operation more effectively, ensuring they have enough (but not too much) capacity for the service to be well-operated.
Being in lock-step with the business enables IT to know which services’ use will expand as well as which will be reduced, enabling them to ensure their own resources are properly aligned with the services they operate. Being able to put resources on the most important activities and retire services that are no longer needed also helps contain the expansion of IT costs.
Shifting operational costs to the departments that consume services can also make it possible to understand how consumption leads to cost and make the consumers of IT services more accountable for their use of equipment and accessories.
Provides the business with a competitive edge
In the digital economy, innovation is key. Innovation comes from people who understand how technology can be used to transform business operation or offer new digital services that are not yet available in the marketplace. The partnership between IT and other business units supports bringing people together in a way that drives innovative thinking.
Without a formal structure for proposing and aligning ideas with organizational strategy and without service-based financial management, the business really has no idea where their IT spend is going and IT really doesn’t know what they should be working on. Once IT and other business units begin to work together strategically, IT knows how and where to spend their time.
No matter how responsive IT thinks they are, if they don’t understand what’s important to the business units they support, they’re not responsive. Being responsive requires working on the right things, in a timely manner and to work on the right things, you need to know what they are. Starting at the strategic level ensure IT knows what’s important to the business and that they have the relationships to find out if they are meeting peoples’ needs.
Ultimately, the highest business value of working strategically is the value of having an entire organization moving together to accomplish the business’ vision.
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What is ITIL? – ‘What is’ Series – Part 1
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