01-3 Define and explain the concept of a service (SS 2.1.1)

ITILFND01 Service Management as a Practice

01-3 Define and explain the concept of a service (SS 2.1.1)

There are a multitude of definitions for the term service. ITIL provides an excellent definition that covers much ground but truly understanding the concept of service management and running IT like a business requires more than just this one definition. Throughout this book we will cover several definitions of service that derive from its Economic and therefore business based understanding. There are many underlying Economic principles that drive human nature in relation to services and the exchange of value. Running IT like a business means that we understand and leverage those human reactions that make free economies work so well, to include good governance and managing the overall system of exchange.

The following paragraph is straight from the ITIL Service Strategy book and describes well the idea of a service in terms of creating an organization that delivers a wide range of value through services or in other words, a service business:

Services are a means of delivering value to customers by facilitating the outcomes customers want to achieve without the ownership of specific costs and risks. Services facilitate outcomes by enhancing the performance of associated tasks and reducing the effect of constraints. These constraints may include regulation, lack of funding or capacity, or technology limitations. The end result is an increase in the probability of desired outcomes. While some services enhance performance of tasks, others have a more direct impact – they perform the task itself.

This definition is useful in a complex environment where exact replication is not sufficient to meet the needs. Instead of an exact recipe this description provides a pattern of operation that can be changed to meet changing needs as long as the key components are understood and implemented correctly.

ITIL services are described in terms of outcomes as opposed to outputs. The difference is important in relation to the scale of the service in question. Outputs can be described as precise repeatable results produced from a service request. When the service to be delivered is discrete such as deploy a specific security profile, then an output is a desirable result. However, when dealing with customers on more complex or on large collections of service requests delivered as a comprehensive service, the desires and needs of the customer are often much more important than a precisely defined output. When delivering an outcome instead of an output it is important to understand the end result the customer desires and to help facilitate that end result even if it means deviating slightly from the specifications of the service.

This concept is often expressed in the difference between IT/business alignment and IT/business integration. In alignment, delivering the specific outputs the business desires is crucial. In integration, IT seeks to understand their customer to the point where IT contributes to forming the desires. It is important to realize that as desirable as integration is it is not a replacement for alignment. IT/business integration can only happen if IT and the business are first aligned and there are many aspects of the relationship where alignment provides the maximum benefit. The most successful organizations apply each concept at the appropriate time and place.

When an IT organization operates at the integration level it generally has customer relationship managers who are the primary interface with the customer for determining business needs and ensuring that desired outcomes are understood and that they drive requirements gathering. If this activity is being run by development resources on a project by project or technology by technology basis then your organization is far from this ideal state. In the ideal state this relationship is managed on a permanent basis and all projects and technologies, no matter how big or important, are managed within the scope of this relationship. Organizational politics makes achievement of this ideal a tremendous challenge in many large organizations that I have worked with.

ITIL defines outcome specifically as: “The result of carrying out an activity, following a process, or delivering an IT service etc. The term is used to refer to intended results, as well as to actual results.”

When thinking of a service and what customers seek from a service it is helpful to consider some simple examples. Package services such as those provided by UPS or FedEx are services we are all familiar with. Before these services existed many businesses such as department stores ran their own delivery services. There was significant management overhead involved. Investments in equipment and people had to be made. And, of course, there is the risk involved in having your own employees operating vehicles all over the city. If you are the only company providing this service then it might increase your core business but once all of your competitors offer the same service it becomes nothing more than a cost of doing business that you cannot avoid. Moreover since this is a business whose cost respond significantly to scale, it is inefficient and costly to run on a small scale.

When FedEx and UPS came along they created an opportunity for department stores to get the same outcomes without having to manage the costs and risks of running their own delivery business. In addition, since these services span the country, department stores are able to centralize their delivery service away from their expensive store space and deliver all purchases from a single location. So, as a general statement, customers seek service outcomes without the need to directly manage the costs and the risks. These factors are managed by the service provider and are simply reflected in the cost. For shared-service providers the marginal costs and risks go down with each additional service delivered. This allows those service providers to provide better service, cheaper service, or both simultaneously. In this way service providers bring efficiency and therefore value to the economy.

From this understanding comes the standard ITIL definition of service: A means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.  When speaking of services in their aggregate sense or in the form of a service business this definition is very useful. When we consider Enterprise IT as a service business, this definition is very appropriate. This definition is even useful when we talk of services in an aggregate sense such as networking services. Where you may begin to have trouble understanding is when you get to the level of building a service catalog and try to apply this definition to a simple service such as provide access to a team data share site. Part of the reason for this is that we are no longer dealing with customers but with consumers at this level. Another part of the reason is that this definition doesn’t articulate the concept of the value transaction at the core of any economic or business service. Services, provided to people as opposed to the technology services that programmers are familiar with, are transactions of value from one person to another. In an Enterprise IT environment the pathways that the value exchange takes may include multiple levels of budgeting but the exchanges to happen.

There are a number of ways to think about services, to label services, and to categorize services. Some are useful in one scenario and not another. ITIL provides many different ways of identifying services. Some of these work together and should be thought of together and others are completely separate concepts useful in different scenarios. Sometimes it is difficult to tell the difference.

IT services are one classification of services that distinguish the services provided by IT from other parts of the business. The key aspect of IT services is that they generally have technology at their core or they are delivered in support of a technology solution. They will include technology, people, and processes. The customers of an Enterprise IT organization are other business units within the Enterprise. Even if IT ends up directly supporting end-customers of the business, those are the business’s customers not IT’s customers. The concept of customer is complex and nuanced. Good business people understand well the different faces of their customers. When IT delivers services to its customers it should have service targets defined in a Service Level Agreement (SLA). SLA’s are specifically between a service provider and their customer.

Customers must be satisfied with the services they receive or they will seek changes. They may seek those services from an external provider or they may seek organizational changes within the IT department. It is important that IT measure its performance against service targets as well as its customer’s perceptions of that performance. A key component of perception is the expectations that the customer has about the level of service to be provided. These expectations change often and must be actively managed by the service provider. There are several categories of services that are useful in relation to managing perceptions and expectations.

Services are often named and categorized by the outcomes they produce. Core services are defined around that outcome that is most central to the needs or desires of the customer. These are the essential elements of what are often complex and elaborate services. If the service provider fails to provide the expected value from the core services often nothing else will matter.

Often the core service cannot be provided without other services that enable the core service. You can’t go to the theater and watch a movie unless the theater receives electricity and delivery of the films but as a customer you are not consciously aware of these services. These types of services are called enabling services.

There are other types of services that are not essential but that make the core service better. I could enjoy a movie without popcorn but the experience simply wouldn’t be as good. For me, providing popcorn and a drink at the theater is an enhancing service that I would not want to do without. If I had to choose between two theaters and one did not provide popcorn, I would choose the one with popcorn every time. These services that are non-essential but that enhance or make the service better are called enhancing services.

Services are often complex. Providing a movie experience to the public requires tracking and managing many services both visible and invisible to the customer. Enterprise IT is no different. The services that business customers pay for as budget items are usually made up of many smaller services that are delivered directly to that customer’s agents, end-users. Enterprise IT may not list all of these services out for the customer but they must be managed. As business owners, IT managers must determine to what level they will track and manage services. Some outcomes are so small or so routine that they need not be tracked as services but simply make up elements of work tasks. However, most Enterprise IT departments can have service catalogs with many thousands of individual services that need to each be owned and managed. These smaller services will be discussed further under the term service request and the tool used to manage them may also be distinguished as a service request catalog.

When many of these discrete services are grouped together we create a term called a service package to describe them as a group. Networking services is a service package made up of many services, some the customer sees and some they do not. Customers generally recognize wireless access as part of the networking services they receive but most would not know what a DNS service is much less an IP routing service. These packages can even contain other packages. VPN services is an example of a package within the general networking services package. There are services within VPN services that customers may never realize exist such as encryption and authentication services that are unique to VPN services.

These packages can also be created for customer segmentation reasons. They can be created to manage costs with VPN services only being offered to those who need remote access to reduce costs and maintenance issues. These packages can even be created based on the level of service to be offered to different customers. Internet service providers do this by providing different connection speeds at different price points. These are generally called service level packages.

The above content was adapted from the ITIL Service Strategy book section 2.1.1 to meet the ITIL Foundation exam requirement 01-3. This content will form the foundation for the licensed version of my updated “IT Service Management Foundations: ITIL Study Guide” book and my licensed version of the ITIL foundation course. The book and course will provide additional discussion of these topics and deliver them in an integrated format. The Course will be offered online via streaming video.

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01-2 Describe and explain why ITIL is successful

ITILFND01 Service Management as a Practice

01-2 Describe and explain why ITIL is successful (SS 1.4)

Many believe that ITIL is successful because it provides a practical approach to apply what has worked for other organizations and codifies that “best practice” into a framework that others can apply in their organizations—hopefully to achieve similar or better results. ITIL collects and presents best practices with an aim to solving the core challenge that every business is faced with—delivering value in return for value. The essence of business is to create something of value that others are willing to trade for and to receive a value in return that is greater than your cost of creating value. This is the magic of business where increased value is created from nothing more than some raw materials, a little hard work, and the creative imagination of an entrepreneur. ITIL seeks to introduce this spark of value creation into enterprise IT and to teach technology managers how to run IT as a business which simply means creating more value than you consume for people who desire what you produce.

There are three characteristics of ITIL that are believed to greatly contribute to its success:

  • ITIL is a vendor neutral framework that applies in any industry or to any technology platform. The fact that it is not commercially owned means that a wide number of organizations can adopt it for themselves with minimal cost.
  • ITIL offers a non-prescriptive approach that can be adapted and adopted by any organization of any size whether public or private.
  • ITIL Codifies best practices that best-in-class service providers throughout the world have used to improve their IT operations.

ITIL is successful because it teaches IT organizations to deliver key aspects of business value to the businesses they serve. Some of the key enabling results from adopting ITIL are:

  • The ability to deliver value in the form of services which along with goods is one of only two ways in which economic value can be exchanged
  • The ability to connect IT strategy to business strategy using the concept of services and the market forces that result from having customers purchase services
  • The ability to deliver increasing service value in terms that resonate with the business
  • The ability to manage the IT budget in a manner that more directly connects business value received with the money the business spends
  • The ability to factor risk into the business equation so that it can be properly managed
  • The ability to develop unique tactics—specific combinations of resources and capabilities that produce desired outcomes—in support of service value delivery
  • The ability to standardize IT business practices in a way that builds upon standardization of technology
  • The ability to develop a business value focused where technology focused cultures typically flourish
  • The ability to leverage the economic feedback mechanisms that operate when customers directly purchase the services that they or their agents consume to improve the value exchange
  • The ability to create an economic system within an organization where the distribution of goods and services is optimized in terms of economic value to the organization
  • Create an economic environment that naturally drives high value at minimum cost

The above content was adapted from the ITIL Service Strategy book section 1.4 to meet the ITIL Foundation exam requirement 01-2.

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01-1 Service Management as a Practice

ITILFND01 Service Management as a Practice

01-1 Describe the concept of best practices in the public domain (SS 2.1.7, Fig 2.3)

Best practices are a way of doing things that has been shown by others to produce good results. Generally, best practices will be developed and proven by leading organizations independently. These best practices are sometimes gathered and published so that they can become widely adopted. ITIL is the most recognized and widely used collection of best practice guidance in the industry. Sometimes these best practices are codified into a standard by which organizations can be reasonably objectively measured. ISO/IEC 20000 is an international standard based on the ITIL framework that serves this purpose for IT service management organizations. Sometimes organizations will protect their independently developed best practices as proprietary knowledge because they believe that it gives them a competitive advantage or it remains protected simply because they have never committed it to writing.

For those organizations seeking operational excellence it is recommended that publically available best practices be the starting point upon which further proprietary improvements can be developed. There are several reasons why it is advantageous to start with publically available best practices:

  • Attempting to replicate the proprietary knowledge of others is difficult because it can be unique to the culture of the organization, it is often poorly documented, and it is difficult to extract all of its elements even with the cooperation of the owners
  • Proprietary knowledge is customized to the needs of the business where it was created and my further be customized to the local or business type. This makes it of little value for replication.
  • Proprietary knowledge is often considered valuable by its owners who look to be compensated for sharing it with others. It can often be expensive to acquire.
  • Public frameworks and standards are designed to be applicable across a wide range of environments. Many organizations have used them and proven them in diverse situations. This makes them easier to adopt into your organization. Some of the frameworks and standards useful in the IT context are: ITIL, LEAN, Six Sigma, COBIT, CMMI, PRINCE2, PMBOK, ISO 9000, ISO/IEC 20000, and ISO/IEC 27001.

For these reasons, smart organizations maximize the use of public frameworks and standards to form a base of common highly performing organizational capabilities upon which they build specific proprietary capabilities. What is common and widely understood should be done in a common best practice fashion. What is unique to your organization and only understood by your organization should get special attention by internal specialists as opportunity for increased competitive advantage.

 The above content was adapted from the ITIL Service Strategy book section 2.1.7 to meet the ITIL Foundation exam requirement 01-1. Figure 2.3 is also part of the subject matter for this exam requirement. The figure is NOT reproduced here in an effort to respect the OGC copyright. It will be reproduced and discussed in the licensed version of my updated “IT Service Management Foundations: ITIL Study Guide” book and my licensed version of the ITIL foundation course.

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The Four Aspects of IT Services, Aspect Two

If you have been struggling with building a services business, then ITIL has provided some help in the form of a new definition for services targeted to the business owner or leader of a services organization. It builds upon the conceptual economic definition of service and provides an excellent foundation for creating a service business. The foundation, however, is not the whole building and service managers need more specificity and operational detail to truly deliver on the service management promise.

Four Aspects of Service Definition Business Model Focus by Ron B Palmer

Four Aspects of Service Definition Business Model Focus

The ITIL definition reads, “A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.”

This definition builds on the conceptual economic idea that a service is one of only two ways to deliver economic value. It then focuses in on one of the core differences between goods and services, the fact that services produce intangible outcomes. When you seek a shoe shine service, the outcome you want is shiny shoes. When you seek a messenger service, the outcome you want is to have some item, such as a document, delivered to a recipient. When you seek an email service, the outcome you want is the ability to deliver and receive email. All of these outcomes are valuable to somebody who is willing to pay for them and is completely intangible.

Furthermore, customers don’t want to become experts at shining shoes or managing email servers. Those things aren’t central to their business and aren’t the best use of their time. Customers, businesses particularly, are focused on producing their own goods or services, and they receive value from service providers when the service provider takes ownership of some essential but peripheral aspect of their process and produces the desired outcome in a way that is preferable to the customer. This, in essence, is the business model of every service provider.

Successful service providers understand their customers and their customer’s processes well enough to identify desired outcomes where ownership of the factors of production for those outcomes are not essential to the customer. The service owner of a messenger service understands that although some customers, like attorneys, need rapid delivery of critical documents on a regular basis, managing and scheduling a group of couriers would take away from the time they spend helping their clients with specialized professional skills that take years to develop. Anytime an attorney can reduce the time spent not directly helping clients and increase the time they spend directly helping clients, both the client and the attorney win. This concept can be applied to all businesses and even individuals.

The job of the service owner is to figure out which factors of production, if owned by the provider, would make the customer better off to the degree that they would be willing to pay the provider. In the shoe shine scenario, for example, customers are better off by not having to carry around shoe polish and brushes.

If you have difficulty relating to the idea of owning “costs and risks”, try thinking of owning all of the elements required to deliver the desired outcome, or in economic terms, the factors of production. In the shoe shine example, this includes polish, brushes, buffing towels, learning technical tricks, etc. In the email example, it includes owning servers and software, the technical expertise needed to install and maintain them, the regular maintenance of software updates, and all of the associated costs, (none of which adds any competitive advantage for most companies, even though they couldn’t function without email.) The concept of the “Internet Cloud” is driven by this simple equation and you can expect many companies to begin off loading these types of activities to a service provider, simplifying email provision to a highly predictable monthly charge with few other worries. The major barriers to this transition today are legal uncertainty, security concerns, and cultural inertia not the desire of companies to rid themselves of these menial tasks.

The truth of this definition can be seen even in very traditional industries as demonstrated in this passage from the Harvard Business Review article Pricing to Create Shared Value, HBR June 2012.

In an industry accustomed to selling tools to construction companies, Hilti decided to provide a service instead. Customers subscribing to Hilti’s Fleet Management program pay a monthly fee – customized to fit their business models – that covers the use, service, and repair of all tools. Driving the creation of Fleet Management was the realization that construction companies cared not about owning tools but about the productivity they could achieve from using them. Hilti’s approach is best captured in the slogan, “we manage your tools, so you can manage your business.” By removing the burden of ownership, the company simplified customer’s financial planning and reduced their administrative work and downtime. Customers report finding new types of intangible value in the relationship, such as the enhanced professionalism of using a set of high quality tools.

In this example, Hilti has built a successful business model and a win-win situation for itself and its customers by following the concepts expressed in the ITIL definition of service.

I believe in always understanding the importance of the fundamentals and executing them with excellence. Enterprise IT is a business within a business and as such it must focus on delivering value in exchange for value. This exchange is the magic of creation through business, where both parties to the exchange are better off from the exchange, value is created, and the proverbial pie gets larger. The ITIL definition builds on these fundamentals and gives service business owners a powerful conceptual way to think about creating value in the form of a business.

As every service management practitioner can tell you though, there remains a big gap in understanding that limits the organization’s ability to implement the thousands of individual services that make up an enterprise IT department, to align costs and ownership to them, and to fundamentally align the organization’s activity with value creation. The next aspect of service definition, the concrete business definition, provides the operational detail needed to close this gap.

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The Four Aspects of IT Services, Aspect One

IT service management is about delivering sustainable value to the business from the use of technology. It is not about defining the best process. It’s not about assigning process owners or service level managers. It is not about implementing a tool or resolving incidents or problems. It’s not even about managing change. It is about delivering value to the business from services. If you want to build an IT service business you better clearly understand the four aspects of IT services.

Those four aspects are identified in this graphic and the first definition to understand is the

Four Aspects of Service Definition Economic Focus by Ron B Palmer

Four Aspects of Service Definition Economic Focus

conceptual economic definition.

Four Aspects of Service Definition

There are two and only two ways to deliver economic value. You can produce goods or you can produce services. There is no other way. The business decisions needed to produce goods are very different from the business decisions needed to produce services. One of the fastest ways to go out of business is to organize your business around producing goods when you are in a service market.

IT service management draws a line in the sand stating that Enterprise IT exists to deliver services. Many IT departments have a difficult time understanding this when they deliver physical products such as servers and laptops. The point they miss is that an Enterprise laptop is about as useful as a brick without the services provided via the laptop such as network connectivity, business applications, communications connectivity, etc. The value is not in the individual having a laptop, it is in the outcomes that the individual produces for the business using the laptop.

Goods and services are opposite ends of the value spectrum and most businesses actually deliver a combination of the two. You can think of goods and services as existing on opposite ends of a continuum. New car dealers clearly sell goods in the form of cars. However, they wouldn’t be able to sell many cars if they didn’t include a service warranty with the purchase. Likewise restaurants clearly provide a service in preparing, serving, and cleaning up after your meal. The meal is a good, but you wouldn’t go to a restaurant without the service, you would go to the grocery store instead.

There are significant differences between goods and services and understanding these differences is critical to your success in ITSM. These differences are clearly defined in every Economics 101 text book and if you want to be successful in ITSM you should clearly understand these differences. An good discussion of Economic Goods and Services can be found in Wikipedia and I recommend this as a key place to start.

The first step in building an IT service business is to understand services as economic concepts with unique characteristics that distinguish them from economic goods. These distinctions dictate the rules of successful production and sales. If you attempt to produce services the same way you would produce goods, you will provide inadequate services. If you try to sell services the same way you might sell goods, you are likely to go hungry.

An excellent discussion of how successfully selling services differs from selling goods can be found in a Harvard Business Review Article by Warren J. Wittreich titled, How to Buy/Sell Professional Services.

From there the advanced definition provided in the ITIL Service Strategy book will make a lot more sense and become a lot more useful as the third aspect of services. Their new definition and introduction of the terms utility and warranty are very useful to an advanced conceptual understanding of economic services. These two aspects combined provide the conceptual underpinning for services as the building blocks of a value producing IT Service Management organization. There are two types of building blocks that you will use in building your service management organization, business transactions and technology transactions.

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How to present value in business terms in the real world

A few years ago, I found myself in a two day meeting with a sales person, a technical presales person, and a client’s IT executive team. The company I worked for sold IT Service Management software and the client was a rather important client. The client as it turns out had attempted to purchase four hundred thousand dollars of software from us outside of their normal budget but the request had been denied. Continue reading

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IT support sucks but we made our metrics

SLAs should only include those items that can be effectively monitored and measured at a commonly agreed point. Inclusion of items that can’t be effectively monitored almost always results in disputes and eventual loss of faith in the SLM process.

It is essential that monitoring matches the customer’s true perception of the service. A service that is available only to the edge of the data center and not to the end-user is incomplete service and provides little value to the business. Continue reading

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The End-user’s Perception is Your Reality

In order for processes and services to be managed and optimized, there must be a feedback loop that provides management information regarding the functioning of the processor service. This requires monitoring the process or service in appropriate ways to ensure that it is meeting the stated goal in the most effective and efficient manner. From an ITIL or quality perspective, the success of the process or service is Continue reading

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IT as Strategic Partner

The quantity and levels of service that IT is able to provide are always bounded by the associated costs. IT Service Level Management (SLM) is tasked with helping the customer understand the tradeoffs between cost and benefit. This should be accomplished in a way that allows the business to make decisions about which services it requires and what levels of service are justifiable, given the current business environment.

In organizations without strong SLM, Continue reading

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Configuration Management Database Introduction

The configuration management database is a virtual concept and is made up of many physical databases and physical stores of information. It becomes a CMDB, when the information is brought together with a common interface that makes the information accessible and relevant for decision makers; most importantly, the CIs are related (linked) to one another.

Too many organizations take a technical view of the CMDB and begin by trying to Continue reading

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