SS

6 Strategy and organization 79

6.1 Organizational development 79

6.1.1 Stage-1: Network 80

6.1.2 Stage-2: Directive 80

6.1.3 Stage-3: Delegation 80

6.1.4 Stage-4: Coordination 80

6.1.5 Stage-5: Collaboration 81

6.1.6 Deciding on a structure 81

6.1.7 Organizational change 81

6.2 Organizational departmentalization 83

6.3 Organizational design 83

6.4 Organizational culture 85

6.5 Sourcing strategy 86

6.5.1 Deciding what to source 86

6.5.2 Sourcing structures 86

6.5.3 Multi-vendor sourcing 87

6.5.4 Service Provider Interfaces 88

6.5.5 Sourcing governance 88

6.5.6 Critical success factors 89

6.5.7 Sourcing roles and responsibilities 89

7 Strategy, tactics and operations 92

7.1 Implementation through the lifecycle 92

7.1.1 Top-down 92

7.2 Strategy and design 93

7.2.1 Service models 93

7.2.2 Design driven by outcomes 93

7.2.3 Design driven by constraints 95

7.2.4 Pricing as a design constraint 95

7.3 Strategy and transition 96

7.4 Strategy and operation 97

7.4.1 Deployment patterns 97

7.4.2 Hosting the Contract Portfolio 97

7.4.3 Managing demand 97

7.5 Strategy and improvement 98

7.5.1 Quality perspectives 98

7.5.2 Warranty factors 98

7.5.2.1 Intangibility factor 98

7.5.3 Reliability 99

7.5.3.1 Applications and infrastructure 99

7.5.3.2 People and processes 99

7.5.4 Maintainability 100

7.5.5 Redundancy 101

7.5.5.1 Active redundancy 101

7.5.5.2 Passive redundancy 101

7.5.5.3 Diverse redundancy 101

7.5.5.4 Homogeneous redundancy 101

7.5.6 Time between failures and accessibility 101

7.5.7 Interactions between factors of availability 101

8 Technology and strategy 103

8.1 Service automation 104

8.1.1 Preparing for automation 104

8.1.2 Service analytics and instrumentation 104

8.2 Service interfaces 107

8.2.1 Characteristics of good service interfaces 107

8.2.2 Types of service technology encounters 107

8.2.3 Self-service channels 107

8.2.4 Technology-mediated service recovery 108

8.3 Tools for service strategy 108

8.3.1 Simulation 108

8.3.2 Analytical models 108

9 Challenges, critical success factors and risks 110

9.1 Complexity 110

9.1.1 IT organizations are complex systems 110

9.2 Coordination and control 111

9.3 Preserving value 112

9.3.1 Deviations in performance 112

9.3.2 Operational effectiveness and efficiency 112

9.3.3 Reducing hidden costs 112

9.3.4 Substantiating hidden benefits 112

9.3.5 Leveraging intangible assets 112

9.4 Effectiveness in measurement 113

9.5 Risks 115

9.5.1 Definition of risk 115

9.5.2 Transfer of risks 115

9.5.3 Service provider risks 116

9.5.4 Contract risks 116

9.5.5 Design risks 116

9.5.6 Operational risks 116

9.5.7 Market risks 117

9.5.7.1 Reducing market risk through differentiation 117

9.5.7.2 Reducing market risk through consolidation 117

Afterword 118

Appendix A: Present value of an annuity 119

Appendix B: Supplementary guidance 129

B1 Description of asset types 129

B1.1 Management 129

B1.2 Organization 129

B1.3 Process 129

B1.4 Knowledge 129

B1.5 People 129

B1.6 Information 129

B1.7 Applications 129

B1.8 Infrastructure 129

B1.9 Financial capital 129

B2 Product managers 130

B2.1 Roles and responsibilities 130

B2.2 Critical knowledge, skills and experience 130

Further information 131

References 131

Further reading 133

Glossary 134

Acronyms list 134

Definitions list 141

Foreword

OGC’s foreword

Since its creation, ITIL has grown to become the most widely accepted approach to IT Service Management in the world. However, along with this success comes the responsibility to ensure that the guidance keeps pace with a changing global business environment. Service management requirements are inevitably shaped by the development of technology, revised business models and increasing customer expectations. Our latest version of ITIL has been created in response to these developments.

This publication is one of five core publications describing the IT Service Management practices that make up ITIL. They are the result of a two-year project to review and update the guidance. The number of service management professionals around the world who have helped to develop the content of these publications is impressive. Their experience and knowledge have contributed to the content to bring you a consistent set of high-quality guidance. This is supported by the ongoing development of a comprehensive qualifications scheme, along with accredited training and consultancy.

Whether you are part of a global company, a government department or a small business, ITIL gives you access to world-class service management expertise. Essentially, it puts IT Services where they belong – at the heart of successful business operations.

Peter Fanning

Acting Chief Executive

Office of Government Commerce

Chief Architect’s foreword

In 1997, Chinese manufacturers entered the motorcycle market with an unusual management strategy. Rather than preparing detailed model s and drawings of subsystems, the country simply defined best-practice structures and standards. The supplier community remained free to innovate and adapt components within these rough designs and broad parameters. The results were stunning – the Chinese motorcycle industry now accounts for half of all global production and is considered a hotbed of innovation.1

These results are emergent . They are the outcomes of following low-level and practical guidance and gave rise to an industry that moves in self-organizing coordination in a variety of conditions. Instead of rigid frameworks, preventing graceful adaptation under changing conditions, there remains room for self-optimization. This is the philosophy of ITIL : good practice structures with room for self-optimization.

What is exciting about emergent behaviour and self-optimization are the surprising outcomes. When the previous version of ITIL offered its service management framework, there did not exist such solutions as federated Configuration Management Databases (CMDB), Service-oriented Architectures (SOA) or the convergence of business process, virtualization and service management. ITIL reflects the dynamics of organizations, and their need to continually adapt in a world of changing conditions.

These and other significant lessons learned have been applied to create the improved framework described in this version of the library. ITIL also looks for the first time at some business fundamentals and the relationships between all the players in modern organizations using IT. This publication on Service Strategy covers much of this new ground by examining what exactly a service is, how both the provider and the customer can mutually benefit from one supplying a service to the other, and where each side has choices.

Perhaps the strongest single idea this publication brings to ITIL is the concept of competition. Every provider faces competition. As many internal service providers have found, they will inevitably be tested against the market. The key for providers is to understand how they provide value and differentiate themselves for their target customers. For customers, it is to understand where they should best be concentrating their efforts, and where shared or external service providers can do it better. There are many factors to consider and some unfamiliar concepts may be presented, but this is an exciting journey. Take this publication as your guide.

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