Having a cost advantage over competition is one among many options. Being the lowest-cost provider is necessary but not always sufficient to support business strategies. There is a need to develop other strengths over and above efficiency in costs. Helping customers enter new markets and quickly scale up operation s, for example. An IT organization can better serve customers and outperform competition by better understanding the complexity, uncertainty, and trade-offs the customer is facing. The key is to decide on an objective or end-state that differentiates the value of what you offer, on what terms, and in what form so that it outperforms what customers consider to be alternatives. Strategy need not simply be an exercise in gathering requirements or the pursuit of operational effectiveness . It is a means to become not optional .
Formulating strategy has traditionally been in the hands of upper levels of management. Yet in the world of IT, where conditions change rapidly and the knowledge and expertise required for sound decisions are usually found on the front lines, IT leaders have an important role to play. From CIOs to front-line managers, each has the ability to shape and execute service strategies. The rigid ‘plan and deploy’ model is giving way to the dynamic ‘engage and collaborate’ model.
The ultimate success of service management is indicated by the strength of the relationship between customers and service provider s. The publications of the core ITIL library provide the necessary guidance to achieve such success. In addition to this publication, the volumes Service Design, Service Transition, Service Operation and Continual Service Improvement define a body of knowledge and set of good practices for successful service management. They provide guidance for:
Converting innovative ideas and concepts into services for customers
Solving problems with effective and enduring solutions
Controlling costs and risk s that can potentially destroy carefully created value
Learning from successes and failures to manage new challenges and opportunities.
The guidance can be applied by IT organization s in the public and private sectors; by for-profit and non-profit organizations; for internal service provider s with cost-recovery objectives; and commercial outfits with profitability targets. Terms such as profitability, income, pricing , revenue and competition can be interpreted or substituted to be meaningful in the context of all service providers with rare exceptions. As such they are used throughout this publication with minimal annotation or clarification to avoid interrupting the flow of text.
Finally, the frequently cited objective of ‘alignment with the business ’ characterizes a common problem faced by the leadership of IT organizations in general and CIOs in particular. Those who succeed in meeting this objective are those who understand the need to be business-minded. The increasing popularity of managed services and outsourcing places tremendous pressures on internal providers to adopt the structure and behaviour of a professionally managed business. A well-managed IT organization can act like a business within a business and deliver value that meets or exceeds the value proposition of commercial alternatives. For this reason, concepts such as utility , warranty , market space s, portfolios and playing fields, are introduced
1.2 Context
1.2.1 Information technology and services
Information technology (IT) is a commonly used term that changes meaning with context (Table 1.1). From the first perspective, IT system s, application s and infrastructure are component s or sub-assemblies of a larger product. They enable or are embedded in processes and services. From the second perspective, IT is an organization with its own set of capabilities and resource s. IT organizations can be of various types such as business function s, shared services units, and enterprise-level core units.
View
Visualization
Vernacular
IT/ Component
Components of systems and processes
‘Our billing system is IT-enabled.’
‘We use IT to improve interactions with our customer s through self-service terminals at key locations.’
‘IT touches every part of our business . Without appropriate control s, that in itself is a risk .’
IT/ Organization
Internal unit or function of the enterprise or commercial service provider
‘Our IT is headed by a CIO with tremendous experience in the transportation business.’
‘Our heavily centralized IT suits our business model which more than anything requires stability and Contract Portfolio over business operations .’
‘IT does not understand the language of our business. Much is lost in translation.’
IT/ Service
Type of shared service utilized by business unit s
‘I haven’t been able to access the internet since yesterday. When do you expect the service to be restored?’
‘Our remote-access service is very secure but it is also very difficult to set up and use.’
‘We decided not to build our own enterprise applications for administrative functions. We are better off utilizing IT Service s provided to us under a commercial contract .’
IT/ Asset
Capabilities and resource s that provide a dependable stream of benefits
‘IT is at the core of our business process . We use IT to create value for our customers. It is part of our core production process .’
‘Our IT investments are like Cost of Goods Sold (COGS). They are direct cost s, not overheads.’
‘IT is our business.’
Table 1.1 The multiple views of IT
From the third perspective, IT is a category of services utilized by business . These services are typically IT application s and infrastructure that are packaged and offered as services by internal IT organization s or external service provider s. IT costs are treated as business expenses. From the fourth perspective, IT is a category of business assets that provide a stream of benefits for their owners, including but not limited to revenue, income and profit. IT costs are treated as investments. It is important to be clear what the term means in a given context. It is often used with different meanings in the same sentence or paragraph, often exacerbating problems.
1.2.2 Good practice in the public domain
Organization s operate in dynamic environments with the need to learn and adapt. There is a need to improve performance while managing trade-offs. Under similar pressure, customers seek advantage from service provider s. They pursue sourcing strategies that best serve their own business interest. In many countries, government agencies and non-profit organization s have a similar propensity to outsource for the sake of operational effectiveness . This puts additional pressure on service providers to maintain a competitive advantage with respect to the alternatives that customers may have. The increase in outsourcing has exposed internal service provider s in particular to unusual competition.
To cope with the pressure, organizations benchmark themselves against peers and seek to close gaps in capabilities. One way to close such gaps is the adoption of good practices in wide industry use. There are several sources for good practices including public frameworks, standards, and the proprietary knowledge of organizations and individuals (Figure 1.1).
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