# IT Service Management/Service Strategy

Service strategy defines the perspective, position, plans and patterns that a service provider needs to execute to meet an organization’s business outcomes. Service strategy includes the processes of strategy management for IT services, service portfolio management, financial management for IT services, demand management, and business relationship management.

## Objectives and Skills

Objectives and skills for the Service Strategy portion of ITIL Foundation certification include:
* Account for the purpose, objectives and scope of service strategy
* Briefly explain what value service strategy provides to the business
* Describe value creation through services
* State the purpose, objectives and scope for:
** Service portfolio management and the service portfolio
** Financial management for IT services and the business case
** Business relationship management
* Define and explain:
** Assets, resources and capabilities
** Business case
** Customers and users
** Governance
** Outcomes
** Patterns of business activity
** Risk management
** Service portfolio
** Service provider
** Supplier
** Types of services
** Utility and warranty

## Readings

* Wikibooks: ITIL Service Strategy
* Wikipedia: ITIL#Service strategy
* Wikipedia: Service portfolio management
* Wikipedia: Financial management for IT services
* Wikipedia: Demand management
* Wikipedia: Business relationship management
* Archive.org: ITIL.org: Service Strategy
* UCISA: ITIL - Introducing Service Strategy

## Multimedia

* YouTube: Introduction to ITIL Service Strategy

## Activities

* Describe the purpose, objectives and scope of service strategy and explain the value service strategy provides to the business.
* Describe value creation through services. Include an example of how value is created using a specific service example you are familiar with.
* Explain the purpose, objectives and scope for service portfolio management and the service portfolio. Include examples of services included by your organization, your school, or a service desk you've contacted recently.
* Explain the purpose, objectives and scope for financial management for IT services and the business case. Include an example of a business case and its financial impact on IT services.
* Explain the purpose, objectives and scope for business relationship management. Include examples of business relationships supported by your organization, your school, or a service desk you've contacted recently.
* Case Project - Continue the hypothetical organization and service desk design your team documented in the previous lesson. Add the following information to the Service Strategy section.
** Describe the service portfolio. What services does the service desk provide, and what value do each of these services bring to the organization?
** Describe the financial environment of the service desk. Does it operate as a cost center or a profit center? What is the annual budget for the service desk? Note, you may need to refer to a resource such as salary.com to identify typical salary and benefit costs for service desk positions in your area.
** Describe any existing business relationships your service desk has. These may include relationships with other departments within the organization or relationships with external organizations the service desk depends on or supports.
** Describe the assets available to the service desk. List each member of the service desk team and identify their capabilities and skill levels.
** Based on the service portfolio, financial environment, business relationships, and assets available, identify the greatest challenge or opportunity for this service desk. What is the biggest challenge the team faces, or what is the biggest opportunity the team could address to bring better value to the organization? Describe the challenge or opportunity.
* Use the Discuss page to post comments and questions regarding this lesson.
* Review the lesson summary, key terms, review questions and assessments below.

## Lesson Summary

* Service strategy defines the perspective, position, plans and patterns that a service provider needs to execute to meet an organization’s business outcomes. Service strategy includes the following processes: strategy management for IT services, service portfolio management, financial management for IT services, demand management, and business relationship management.
* Strategy management for IT services is the process responsible for defining and maintaining an organization’s perspective, position, plans and patterns with regard to its services and the management of those services. Once the strategy has been defined, strategy management for IT services is also responsible for ensuring that it achieves its intended business outcomes.
* The business value of an IT service is created by the combination of utility and warranty.
* Service portfolio management ensures that the service provider has the right mix of services to meet required business outcomes at an appropriate level of investment by considering services in terms of the business value that they provide.
* Financial management for IT services defines function and processes responsible for managing an IT service provider’s budgeting, accounting and charging requirements. Financial management for IT services secures an appropriate level of funding to design, develop and deliver services that meet the strategy of the organization in a cost-effective manner.
* Demand management is the process responsible for understanding, anticipating and influencing customer demand for services.
* Business relationship management is the process responsible for maintaining a positive relationship with customers by identifying customer needs and ensuring that the service provider is able to meet these needs with an appropriate catalog of services.
* Assets are any resource or capability. Resources include IT infrastructure, people, money or anything else that might help to deliver an IT service. Capabilities are the abilities of an organization, person, process, application, IT service or other configuration item to carry out an activity.
* A business case is the justification for a significant item of expenditure. The business case includes information about costs, benefits, options, issues, risks and possible problems.
* Customers buy goods or services and define and agree to service level targets. Users use the IT service on a day-to-day basis, but are distinct from customers, as some customers do not use the IT service directly.
* Governance ensures that policies and strategy are actually implemented, and that required processes are correctly followed. Governance includes defining roles and responsibilities, measuring and reporting, and taking actions to resolve any issues identified.
* Outcomes are the result of carrying out an activity, following a process, or delivering an IT service etc.
* Patterns of business activity show the workload profile of business activities, and are used to help the IT service provider understand and plan for different levels of business activity.
* Risk management is the process responsible for identifying, assessing and controlling risks.
* The service portfolio is the complete set of services that is managed by a service provider, and includes three categories: service pipeline (proposed or in development), service catalog (live or available for deployment), and retired services..
* A service provider is an organization supplying services to one or more internal customers or external customers. Type I service providers are internal and embedded within a business unit. Type II service providers are internal and provide shared services to more than one business unit. Type III service providers provide services to external customers.
* A supplier is a third party responsible for supplying goods or services that are required to deliver IT services.
* Core services deliver the basic outcomes desired by one or more customers with a specific level of utility and warranty. Customers may be offered a choice of utility and warranty through one or more service options. Enabling services are services that are needed in order to deliver a core service. Enabling services may or may not be visible to the customer, but they are not offered to customers in their own right. Enhancing services are added to a core service to make it more attractive to the customer. Enhancing services are not essential to the delivery of a core service but are used to encourage customers to use the core services or to differentiate the service provider from its competitors.
* Utility is the functionality offered by a product or service to meet a particular need. Utility can be summarized as ‘what the service does’, and can be used to determine whether a service is able to meet its required outcomes, or is ‘fit for purpose’. Warranty is assurance that a product or service will meet agreed requirements. This may be a formal agreement such as a service level agreement or contract, or it may be a marketing message or brand image. Warranty refers to the ability of a service to be available when needed, to provide the required capacity, and to provide the required reliability in terms of continuity and security. Warranty can be summarized as ‘how the service is delivered’, and can be used to determine whether a service is ‘fit for use’.

## Key Terms

Key Terms definitions are copyright © AXELOS Limited 2011. All rights reserved. Material is reproduced with the permission of AXELOS.

### account manager

    A role that is very similar to that of the business relationship manager, but includes more commercial aspects.

### accounting

    The process responsible for identifying the actual costs of delivering IT services, comparing these with budgeted costs, and managing variance from the budget.

### accounting period

    A period of time (usually one year) for which budgets, charges, depreciation and other financial calculations are made.

### analytical modelling

    A technique that uses mathematical models to predict the behaviour of IT services or other configuration items.

### asset

    Any resource or capability that could contribute to the delivery of a service.

### asset specificity

    One or more attributes of an asset that make it particularly useful for a given purpose.

### billing

    The activity responsible for producing an invoice or a bill and recovering the money from customers.

### business

    An overall corporate entity or organization formed of a number of business units.

### business case

    Justification for a significant item of expenditure.

### business customer

    A recipient of a product or a service from the business.

### business impact analysis (BIA)

    The activity in business continuity management that identifies vital business functions and their dependencies.

### business operations

    The day-to-day execution, monitoring and management of business processes.

### business relationship management

    The process responsible for maintaining a positive relationship with customers.

### business relationship manager (BRM)

    A role responsible for maintaining the relationship with one or more customers.

### business unit

    A segment of the business that has its own plans, metrics, income and costs.

### capability

    The ability of an organization, person, process, application, IT service or other configuration item to carry out an activity.

### capital budgeting

    The present commitment of funds in order to receive a return in the future in the form of additional cash inflows or reduced cash outflows.

### capital cost

    The cost of purchasing something that will become a financial asset.

### capitalization

    Identifying major cost as capital, even though no asset is purchased.

### change proposal

    A document that includes a high level description of a potential service introduction or significant change, along with a corresponding business case and an expected implementation schedule.

### chargeable item

    A deliverable of an IT service that is used in calculating charges to customers.

### charging

    Requiring payment for IT services.

### charging policy

    A policy specifying the objective of the charging process and the way in which charges will be calculated.

### charging process

    The process responsible for deciding how much customers should pay (pricing) and recovering money from them (billing).

### charter

    A document that contains details of a new service, a significant change or other significant project.

### control perspective

    An approach to the management of IT services, processes, functions, assets etc.

### core service

    A service that delivers the basic outcomes desired by one or more customers.

### cost center

    A business unit or project to which costs are assigned.

### cost element

    The middle level of category to which costs are assigned in budgeting and accounting.

### cost management

    A general term that is used to refer to budgeting and accounting, and is sometimes used as a synonym for financial management.

### cost model

    A framework used in budgeting and accounting in which all known costs can be recorded, categorized and allocated to specific customers, business units or projects.

### cost type

    The highest level of category to which costs are assigned in budgeting and accounting.

### cost unit

    The lowest level of category to which costs are assigned.

### customer agreement portfolio

    A database or structured document used to manage service contracts or agreements between an IT service provider and its customers.

### customer portfolio

    A database or structured document used to record all customers of the IT service provider.

### demand management

    The process responsible for understanding, anticipating and influencing customer demand for services.

### depreciation

    A measure of the reduction in value of an asset over its life.

### direct cost

    The cost of providing an IT service which can be allocated in full to a specific customer, cost centre, project etc.

### economies of scale

    The reduction in average cost that is possible from increasing the usage of an IT service or asset.

### economies of scope

    The reduction in cost that is allocated to an IT service by using an existing asset for an additional purpose.

### enabling service

    A service that is needed in order to deliver a core service.

### enhancing service

    A service that is added to a core service to make it more attractive to the customer.

### enterprise financial management

    The function and processes responsible for managing the overall organization’s budgeting, accounting and charging requirements.

### eSourcing Capability Model for Client Organizations (eSCM-CL)

    A framework to help organizations in their analysis and decision-making on service sourcing models and strategies.

### eSourcing Capability Model for Service Providers (eSCM-SP)

    A framework to help IT service providers develop their IT service management capabilities from a service sourcing perspective.

### excitement factor

    An attribute added to something to make it more attractive or more exciting to the customer.

### external service provider

    An IT service provider that is part of a different organization from its customer.

### financial management

    A generic term used to describe the function and processes responsible for managing an organization’s budgeting, accounting and charging requirements.

### financial management for IT services

    The function and processes responsible for managing an IT service provider’s budgeting, accounting and charging requirements.

### financial year

    An accounting period covering 12 consecutive months.

### fit for purpose

    The ability to meet an agreed level of utility.

### fit for use

    The ability to meet an agreed level of warranty.

### fixed cost

    A cost that does not vary with IT service usage.

### indirect cost

    The cost of providing an IT service which cannot be allocated in full to a specific customer.

### insourcing

    Using an internal service provider to manage IT services.

### internal rate of return (IRR)

    A technique used to help make decisions about capital expenditure.

### internal service provider

    An IT service provider that is part of the same organization as its customer.

### IT service provider

    A service provider that provides IT services to internal or external customers.

### IT steering group (ISG)

    A formal group that is responsible for ensuring that business and IT service provider strategies and plans are closely aligned.

### Kano model

    A model developed by Noriaki Kano that is used to help understand customer preferences.

### line of service (LOS)

    A core service or service package that has multiple service options.

### marginal cost

    The increase or decrease in the cost of producing one more, or one less, unit of output.

### market space

    Opportunities that an IT service provider could exploit to meet the business needs of customers.

### near-shore

    Provision of services from a country near the country where the customer is based.

### net present value (NPV)

    A technique used to help make decisions about capital expenditure that compares cash inflows with cash outflows.

### notional charging

    An approach to charging for IT services where charges to customers are calculated and customers are informed of the charge, but no money is actually transferred.

### offshore

    Provision of services from a location outside the country where the customer is based, often in a different continent.

### onshore

    Provision of services from a location within the country where the customer is based.

### opportunity cost

    The revenue that would have been generated by using the resources in a different way.

### outsourcing

    Using an external service provider to manage IT services.

### pattern of business activity (PBA)

    A workload profile of one or more business activities.

### pricing

    The activity for establishing how much customers will be charged.

### profit center

    A business unit that charges for services provided.

### project management office (PMO)

    A function or group responsible for managing the lifecycle of projects.

### project portfolio

    A database or structured document used to manage projects throughout their lifecycle.

### real charging

    A charging policy where actual money is transferred from the customer to the IT service provider in payment for the delivery of IT services.

### resource

    A generic term that includes IT infrastructure, people, money or anything else that might help to deliver an IT service.

### return on assets (ROA)

    A measurement of the profitability of a business unit or organization which is calculated by dividing the annual net income by the total value of assets.

### return on investment (ROI)

    A measurement of the expected benefit of an investment.

### service analytics

    A technique used in the assessment of the business impact of incidents which models the dependencies between configuration items, and the dependencies of IT services on configuration items.

### service catalog

    A database or structured document with information about all live IT services, including those available for deployment.

### service charter

    A document that contains details of a new or changed service.

### ￼service contract

    A contract to deliver one or more IT services.

### service model

    A model that shows how service assets interact with customer assets to create value.

### service option

    A choice of utility and warranty offered to customers by a core service or service package.

### service owner

    A role responsible for managing one or more services throughout their entire lifecycle.

### service package

    Two or more services that have been combined to offer a solution to a specific type of customer need or to underpin specific business outcomes.

### service pipeline

    A database or structured document listing all IT services that are under consideration or development, but are not yet available to customers.

### service portfolio

    The complete set of services that is managed by a service provider, including service pipeline, service catalog, and retired services.

### service portfolio management (SPM)

    The process responsible for managing the service portfolio.

### service potential

    The total possible value of the overall capabilities and resources of the IT service provider.

### service provider

    An organization supplying services to one or more internal customers or external customers.

### service provider interface (SPI)

    An interface between the IT service provider and a user, customer, business process or supplier.

### service sourcing

    The strategy and approach for deciding whether to provide a service internally, to outsource it to an external service provider, or to combine the two approaches.

### service strategy

    The perspective, position, plans and patterns that a service provider needs to execute to meet an organization’s business outcomes.

### service valuation

    A measurement of the total cost of delivering an IT service, and the total value to the business of that IT service.

### strategic

    The highest of three levels of planning and delivery (strategic, tactical, operational), which includes objective setting and long-term planning to achieve the overall vision.

### strategic asset

    Any asset that provides the basis for core competence, distinctive performance or sustainable competitive advantage, or which allows a business unit to participate in business opportunities.

### strategy

    A strategic plan designed to achieve defined objectives.

### strategy management for IT services

    The process responsible for defining and maintaining an organization’s perspective, position, plans and patterns with regard to its services and the management of those services.

### supplier

    A third party responsible for supplying goods or services that are required to deliver IT services.

### ￼supply chain

    The activities in a value chain carried out by suppliers.

### total cost of ownership (TCO)

    A methodology used to help make investment decisions that assesses the full lifecycle cost of owning a configuration item, not just the initial cost or purchase price.

### total cost of utilization (TCU)

    A methodology used to help make investment and service sourcing decisions that assesses the full lifecycle cost to the customer of using an IT service.

### transfer cost

    A cost type which records expenditure made on behalf of another part of the organization.

### Type I service provider

    An internal service provider that is embedded within a business unit.

### Type II service provider

    An internal service provider that provides shared IT services to more than one business unit.

### Type III service provider

    A service provider that provides IT services to external customers.

### unit cost

    The cost to the IT service provider of providing a single component of an IT service.

### user profile (UP)

    A pattern of user demand for IT services.

### ￼utility

    The functionality offered by a product or service to meet a particular need.

### value chain

    A sequence of processes that creates a product or service that is of value to a customer.

### value network

    A complex set of relationships between two or more groups or organizations.

### variable cost

    A cost that depends on how much the IT service is used, how many products are produced, the number and type of users, or something else that cannot be fixed in advance.

### warranty

    Assurance that a product or service will meet agreed requirements.

## Review Questions

Click on a question to see the answer.
* Service strategy defines the _____, _____, _____and _____that a service provider needs to execute to meet an organization’s business outcomes. Service strategy defines the perspective, position, plans and patterns that a service provider needs to execute to meet an organization’s business outcomes.
* Service strategy includes the following processes: _____, _____, _____, _____, and _____. Service strategy includes the following processes: strategy management for IT services, service portfolio management, financial management for IT services, demand management, and business relationship management.
* Strategy management for IT services is the process responsible for defining and maintaining an organization’s _____, _____, _____and _____with regard to its services and the management of those services. Once the strategy has been defined, strategy management for IT services is also responsible for _____. Strategy management for IT services is the process responsible for defining and maintaining an organization’s perspective, position, plans and patterns with regard to its services and the management of those services. Once the strategy has been defined, strategy management for IT services is also responsible for ensuring that it achieves its intended business outcomes.
* The business value of an IT service is created by the combination of _____ and _____. The business value of an IT service is created by the combination of utility and warranty.
* Service portfolio management ensures that the service provider has _____ by considering _____. Service portfolio management ensures that the service provider has the right mix of services to meet required business outcomes at an appropriate level of investment by considering services in terms of the business value that they provide.
* Financial management for IT services defines function and processes responsible for managing an IT service provider’s _____, _____ and _____ requirements. Financial management for IT services defines function and processes responsible for managing an IT service provider’s budgeting, accounting and charging requirements.
* Financial management for IT services secures an appropriate level of funding to _____, _____ and _____ services that meet the strategy of the organization in a cost-effective manner. Financial management for IT services secures an appropriate level of funding to design, develop and deliver services that meet the strategy of the organization in a cost-effective manner.
* Demand management is the process responsible for _____, _____ and _____ customer demand for services. Demand management is the process responsible for understanding, anticipating and influencing customer demand for services.
* Business relationship management is the process responsible for _____ by _____. Business relationship management is the process responsible for maintaining a positive relationship with customers by identifying customer needs and ensuring that the service provider is able to meet these needs with an appropriate catalog of services.
* Assets are any _____ or _____. Assets are any resource or capability.
* Resources include _____, _____, _____ or anything else that might help to deliver an IT service. Resources include IT infrastructure, people, money or anything else that might help to deliver an IT service.
* Capabilities are the abilities of an _____, _____, _____, _____, _____ or other configuration item to carry out an activity. Capabilities are the abilities of an organization, person, process, application, IT service or other configuration item to carry out an activity.
* A business case is the _____. The business case includes information about _____, _____, _____, _____, _____ and _____. A business case is the justification for a significant item of expenditure. The business case includes information about costs, benefits, options, issues, risks and possible problems.
* Customers _____. Users _____, but are distinct from customers, as some customers _____. Customers buy goods or services and define and agree to service level targets. Users use the IT service on a day-to-day basis, but are distinct from customers, as some customers do not use the IT service directly.
* Governance ensures that _____, and that _____. Governance includes _____, _____, and _____. Governance ensures that policies and strategy are actually implemented, and that required processes are correctly followed. Governance includes defining roles and responsibilities, measuring and reporting, and taking actions to resolve any issues identified.
* Outcomes are the result of _____, _____, or _____. Outcomes are the result of carrying out an activity, following a process, or delivering an IT service etc.
* Patterns of business activity show _____, and are used to help the IT service provider understand and plan for _____. Patterns of business activity show the workload profile of business activities, and are used to help the IT service provider understand and plan for different levels of business activity.
* Risk management is the process responsible for _____, _____ and _____ risks. Risk management is the process responsible for identifying, assessing and controlling risks.
* The service portfolio is _____, and includes three categories: _____, _____, and _____. The service portfolio is the complete set of services that is managed by a service provider, and includes three categories: service pipeline (proposed or in development), service catalog (live or available for deployment), and retired services.
* A service provider is _____. Type I service providers are _____. Type II service providers are _____. Type III service providers _____. A service provider is an organization supplying services to one or more internal customers or external customers. Type I service providers are internal and embedded within a business unit. Type II service providers are internal and provide shared services to more than one business unit. Type III service providers provide services to external customers.
* A supplier is a _____. A supplier is a third party responsible for supplying goods or services that are required to deliver IT services.
* Core services deliver_____. Customers may be offered a choice of _____ through one or more service options. Core services deliver the basic outcomes desired by one or more customers with a specific level of utility and warranty. Customers may be offered a choice of utility and warranty through one or more service options.
* Enabling services are _____. Enabling services may or may not be _____, but they are not _____. Enabling services are services that are needed in order to deliver a core service. Enabling services may or may not be visible to the customer, but they are not offered to customers in their own right.
* Enhancing services are _____. Enhancing services are not _____. Enhancing services are added to a core service to make it more attractive to the customer. Enhancing services are not essential to the delivery of a core service but are used to encourage customers to use the core services or to differentiate the service provider from its competitors.
* Utility is _____. Utility can be summarized as _____, and can be used to determine whether a service is _____. Utility is the functionality offered by a product or service to meet a particular need. Utility can be summarized as ‘what the service does’, and can be used to determine whether a service is able to meet its required outcomes, or is ‘fit for purpose’.
* Warranty is _____. This may be _____, or it may be _____. Warranty refers to the ability of a service to _____, to _____, and to _____. Warranty can be summarized as _____, and can be used to determine whether a service is _____. Warranty is assurance that a product or service will meet agreed requirements. This may be a formal agreement such as a service level agreement or contract, or it may be a marketing message or brand image. Warranty refers to the ability of a service to be available when needed, to provide the required capacity, and to provide the required reliability in terms of continuity and security. Warranty can be summarized as ‘how the service is delivered’, and can be used to determine whether a service is ‘fit for use’.

## Assessments

* Flashcards: Quizlet: IT Service Management - Service Strategy
* Quiz: Quizlet: IT Service Management - Service Strategy

## See Also

* BMC: ITIL Service Strategy
* IT Process Maps: ITIL Service Strategy