SS

 Mission imperatives

 Compliance

 Trends

 Intangible benefits

 Strategic or business fit

 Social responsibilities

 Innovation.

For example, fulfilling a legal compliance issue may on its own generate a Value-to-Cost measure of greater than one. Government agencies may generate Value-to-Cost measures on public policy while military organizations may generate measures based on mission imperatives.

The other axes are based on topics covered in other chapters: market space s, customers and customer needs. Each is used as a guide for strategic intent. The desire of a Type I provider to serve a new business unit , for example, may take on less value because the customer needs are already over-served. If an axis is not relevant to the portfolio, disregard its guidance. If market spaces aren’t important, and a Value-to-Cost analysis isn’t necessary, simply ignore the two axes.

5.4.2 Analyse

This is where strategic intent is crafted. Begin with a set of top-down questions:

 What are the long-term goals of the service organization ?

 What services are required to meet those goals?

 What capabilities and resource s are required for the organization to achieve those services?

 How will we get there?

In other words, what are the perspective, position, plan and patterns? The answers to these questions guide not only the analysis but also the desired outcomes of SPM. The ability to satisfactorily answer these questions requires the involvement of senior leaders and subject matter experts.

5.4.2.1 Selecting options

Senior executives have constrained and limited resources. They must understand not only the risk s to the enterprise, but the impact and dependencies. Understanding these relationships allow them to make informed investment decisions in service initiatives with appropriate levels of risk and reward. These initiatives may cross business function s and may span short, medium and longer time frames. Moreover, the calculated value realization for each service investment should be commensurate with its level of risk.

Services investments are split between three strategic categories:

 Run the business (RTB) – RTB investments are centred on maintaining service operation s

 Grow the business (GTB) – GTB investments are intended to grow the organization’s scope of services

 Transform the business (TTB) – TTB investments are moves into new market spaces.

Figure 5.19 Investment categories and budget allocations

The investment categories are further divided into budget allocations (as shown in Figure 5.19):

 Venture – create services in a new market space .

 Growth – create new services in existing market space.

 Discretionary – provide enhancements to existing services.

 Non-discretionary – maintain existing services

 Core – maintain business critical services.

Retirement or divestiture

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By determining the allocation of budget into run-the-business, grow-the-business or transform-the-business service categories, executives are not only affirming their risk tolerance on SPM, but are directly affecting the modes of operations implemented by the operational staff. The distribution of services from RTB to TTB will reflect the nature of the organization: predominantly RTB if IT is a cost centre (back-office) (Figure 5.20), predominantly TTB if IT is an investment centre (commercial provider) (Figure 5.21).

Figure 5.20 Option space: focused on maintaining services (RTB)

Figure 5.21 Option space: focused on expanding the scope of services (TTB)

5.4.3 Approve

The previous phases have led to a well-understood future state (‘to be’). This is where deliberate approvals or disapprovals of that future state take place. With approvals, comes the corresponding authorization for new services and resource s.

The outcomes for existing services fall into six categories:

 Retain – largely self-contained, with well-defined asset , process and system boundaries, these services are aligned with and are relevant to the organization’s strategy .

 Replace – these services have unclear and overlapping business functionality.

 Rationalize – often organizations discover they are offering services that are composed of multiple releases of the same operating system, multiple version s of the same software and/or multiple versions of system platforms providing similar function s.

 Refactor – often services that meet the technical and functional criteria of the organization display fuzzy process or system boundaries. An example would be a service handling its own authentication or continuity function s. In these cases, the service can often be refactored to include only the core functionality, with common services used to provide the remainder. Refactoring is also useful when a service embeds potentially reusable business service s within itself.

 Renew – these services meet functional fitness criteria, but fail technical fitness. An example may be a service whose fulfilment elements include a mainframe system and frame relay network that still supports business-critical processes where the strategic direction of the organization is to retire the mainframe platform and source an MPLS (Multi-Protocol Label Switching) WAN.

 Retire – services that do not meet minimum levels of technical and functional fitness.

5.4.4 Charter

Begin with a list of decisions and action items. These are to be communicated to the organization clearly and unambiguously. These decisions should be correlated to budgetary decisions and financial plans. Budget allocations should enforce the allocation of resource s.

The expected value of each service should be built into financial forecasts and resource plans. Tracking both tracks the progress of service investments. Newly chartered services are promoted to Service Design . Existing services are refreshed in the Service Catalogue . Retired services begin their sunset to Service Transition .

5.4.4.1 Refreshing the portfolio

Conditions and markets change, invalidating prior ROI calculations. Some services may no longer be optimal due to compliance or regulatory concerns. Event s occur such as mergers and acquisitions, divestitures, new public legislation or redeployed missions. The CIO must then monitor, measure, reassess and rebalance these investments, making trade-offs as business needs change. Not all services need be low risk or high reward. Instead, by seeking an efficient portfolio with optimal levels of ROI and risk, the organization is maximizing the value realization on its constrained and limited resources and capabilities.

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