Service Management and Delivery

IT Delivery Models Orchestrate the Right Capabilities to Deliver the Right IT Services at the Right Price and Quality in a Cloud World
Steve Bittinger

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At Least Half of All IT Service Management Initiatives Aren't

Not here!
Governance

EA

ITSM

ITSM lives here!

Not here!
What is IT Service Managements purpose? ITSM is the collective body of competencies, roles and practices that ensure IT offers the right services at the right price and quality levels.

IT Organizational Change Activities Are Often Confused With ITSM

Initiative or Investment
An IT Service Catalog Project

Intersection
A, itsm*

Governance B EA

An IT Infrastructure Rationalization Project

A Reorganization or Centralization Investment in a Demand Mgmt. Function

A
D D

D
A

C ITSM

Data Center Consolidation

The Creation of New, Customer-Facing Roles

D
C B

Confusion occurs at the intersections

Creation of a PPM Competency Center

Re-engineered Chargeback Mechanisms

An ITIL implementation Configuration Mgmt. Tool Implementation

C
itsm* itsm*

Start at the Top to Get IT Service Management Right

Business Expectations of IT
Utility-Oriented Supports the Institution IT Efficiency

Enhancement-Oriented Enables the Institution

IT Effectiveness

Transformation-Oriented Drives the Institution IT Value

IT Operating Model
Centralized Hybrid (Federated) Decentralized

IT Delivery Model
Silo
A

Process
B

Service
C

Value
D

IT Organization Architecture
Tools Sourcing Structure Process Money People

The Four IT Service Delivery Models and Their Maturation Path

50%

Approximate Adoption 25% Rates

Acts Like Cost Center

The Right Model For You Depends on Business Expectations

Acts Like ESP Acts Like Profit Center Value

0%

Silo

Process Service Value

InternalCustomerFocused ExternalMarketFocused

IT-Focused

Maturation Path

Delivery Model Constructs by IT Role

IT Role Supporter

Enabler

Driver

Behavior
Operating Model Delivery Model

Cost Centre
Centralized Asset/price model

Service Provider
Federated Service Model

Revenue, or Top-line Business Partner

Decentralized (or increasingly centralized) Value model

Contribution

Asset utilization or process outcome optimization

Supply-driven Technology-centric Functionally and technically siloed Insulated and monopolistic Cost-obsessed

Service performance to contract (SLAs)

Demand-driven Internal customer-centric Process-based back office Competitive and engaged Service-obsessed

Competitive advantage

Attributes

Opportunity-driven External customer-centric Process-based front-office Market-driven Value-obsesses

The Delivery Model Dictates IT Organization Architecture

Process

Service

Value

Money

Fixed IT infrastructure allocation; possibly zerobased budget for projects

Process/function matrix with functional silos dominating

Fee for service; zero-based budgeting, selective cost plus pricing

Process/function matrix with multidisciplinary teams dominating. Some competency centers Process improvements correlated to required service outcomes; outcomes measured per IT SLAs Solution, relationship and business expertise Strategic multisourcing based on explicit competitiveness of internal capabilities

Profit/loss-based budget with discretionary revenue stream

IT-business matrix around core business processes or value centers IT process improvements correlated to business processes; outcomes measured in business process terms Business and innovation expertise Multisourcing based on IT core competencies and strategic intent. Outsourcing as last resort

Structure

Process

ITIL/CMM-I/CobiT compliant

People Sourcing

Process expertise Mostly internal, selective outsourcing based on "commodity" services

Bottom Line: Choice of models has specific implications for transformational requirements and road maps

Where Do You Need to Transform? An Example

Required End State
A B C D

C
Present

Silo

Process

Service

Value

Services
Processes Structure

X X X X X X X 7

X
Future

People
Relationships Sourcing

Financial Mgmt.

Know Specifically What Needs to Change for Each Attribute

A
Silo Service None

B
Process Application services portfolio

C
Service Solution, relationship, consulting, asset, application services portfolio

D
Value R&D, intellectual property, CRM, business process, innovation, BI core capabilities and portfolio IT process improvements correlated to business processes; outcomes measured in business process terms IT-business matrix around core business processes or value centers

Process

None

ITIL/CMM-I/Cobitcompliant

Process improvements correlated to required service outcomes; outcomes measured per IT SLAs Process/function matrix with multidisciplinary teams dominating; some competency centers Solution, relationship and business expertise

Structure

Functional silos

Process/function matrix with functional silos dominating

People

Technical expertise

Process expertise

Business expertise and innovation expertise

Know Specifically What Needs to Change for Each Attribute

A
Silo Relationships IT-to-IT

B
Process IT-to-IT

C
Service IT-to-IT

D
Value IT-to-CxOs

IT-to-user
IT-to-ESP

IT-to-mid. mgmt.
IT-to-ESP Mostly internal, some selective outsourcing based on "commodity" services

IT-to-BU leaders
IT-to-co-providers Strategic multisourcing based on explicit competitiveness of internal capabilities

IT-to-board
IT-to-ext. customers Strategic multisourcing based on business core competencies and strategic intent for IT; outsourcing as last resort Profit/Loss-based budget with discretionary revenue stream and/or top-line revenue responsibility

Sourcing

Mostly internal, some external staff augmentation

Financial Mgmt.

Fixed annual allocation to IT

Fixed annual allocation to IT for infrastructure; possibly zero-based budget for projects

Fee for service; zero-based budgeting, selective cost plus pricing

A Crucial Decision Point Between Process and Service-Based Delivery Models

High

Service optimizing trajectory

Maturity and Contribution

Med

D = widening gap C = rework

Low Asset

B = cap A = Decision Point

Process IT-Focused Service InternalCustomerFocused Value ExternalMarket Focused

Process optimizing trajectory

A - Crucial decision point between process and service delivery model destination B - Pure play process optimizing delivery model caps ITs value contribution C - Transformations from the asset optimizing to process optimizing delivery models that do not accelerate service optimizing attributes result in significant subsequent rework. D - The gap between the service optimizing and process optimizing models widens.

10

Four Key IT Service Management Supporting Frameworks

Service Consumer
"The Business" Contract Negotiator
Business leader (s) who authorize and ultimately pay for services

Service Provider
"IT" Service Executor Technology Caretaker

Transaction Initiator

End users who request things on a day-to-day basis

IT personnel who execute processes in order to fulfill a request or transaction

IT personnel who provision or administer the technological components associated with a service

Key Stakeholders

Service Portfolio

Service Catalog

Process-toService Map

Configuration Management Data Base

The Front Office

The Back Office

11

Service Portfolios and Service Catalogs

Service Portfolio
Chargeback and SLAs happen here

Service Portfolio
Description
What it is and what it does

Differentiation
Multiple offerings for different price/SLA trade-offs

Value Proposition
Why should they buy it?

Competitive Advantage
Why should they buy it from you?

not here

Supported Products/Versions

Service Catalog

Escalation Procedures Transaction and Workflow Management Benchmark Data

12

Organize Around Services, Not Processes

Relationship Mgmt. Product Management

Delivery Management

Quality Assurance Service A Outcome

Cust. 1

Service A

Process "Red"

Cust. 2

Service B

Process "Blue"

Service B Outcome

Cust. 3
Sales, etc.

Service C Product Development

Process "Green"

Service C Outcome

Process Engineering

Measurement

13

Building an IT Process-to-Service Map

Services Processes
Demand management Disaster recovery Procurement Resource brokering Etc. Total 3 X 4 2 Workplace services X X X Application hosting services X X X X Project management services X Total 3 2 2 1 1 9

1. 2. 3.

Which processes are foundational? Understand dependencies, to avoid breaking one service while fixing another Insight into service complexity, and sequencing of continuous improvements

4.
5.

Basis for SLA monitoring and activity-based service costing

Facilitates service bundling or unbundling for apples to apples comparisons with ESPs

14

Service Delivery and Performance Reporting

Performance Reports to CXO Executives
Scorecard or Dashboard Customers Financial Service Customers Innovation

Processes SLA Service

Process A Step1 Process A Step 2 Process A Step 3

Outcome A Outcome B

SLA

Process B Step1

Process B Step 2

Process B Step 3

Performance Reports to Bus. Unit Managers

Performance Reports For Internal IT Use Only

15

Pay Attention to Managerial Capability Gaps

Capabilities
Needed Financial and Business Management
Competitive Analysis, Financial Management, Product Development, Product/Service Bundling, Pricing Strategies

Demand Management

Skills Gap

Business Development, Relationship Management, Sales, Marketing, Communications, Market Research

Resource Management
Strategic Sourcing, Capability Management, Skills Management, Recruitment/Retention, Continuous Development, Compensation/Rewards

Process Management
Process Engineering, Measurement, Quality Assurance

Current 16

Evolve Financial Management Capabilities

Phase 1
"If we were to charge at or near market rates, would we cover our costs?"

Phase 2
"How will fee for service financially impact the business units?"

Phase 3
"Where will enhanced service performance most positively impact the business, and how do we make it happen?"

Business Intelligence

Dialogue & Reporting

Implementation
Time

Produce an auditable mock P&L

Perform a dry chargeback run for at least one budget cycle

Demonstrate and report year-over-year efficiency improvements

17

Establishing Competitive Positions

Market Based Service Portfolio
Expresses service in customer relevant terms; Enables market comparisons; facilitates chargeback Market Comparisons Competitive Position

Enable P&L based financial performance reporting and provide quantifiable measures of IT's business contribution; illustrates for internal IT how competitive providers position and market services

Facilitates sourcing and process improvement decisions

Service
Workplace Services Application Hosting Project Management Application Development

Revenue
$350,000 $733,500 $129,800 $633,500 $1,846,800

Cost
$345,279 $814,200 $98,375 $633,400 $1,891,254

Profit
$4,721 close to par; competitive ($80,700) non-competitive $31,425 significant competency $100 par; competitive ($44,454)

18

Balance Supply and Demand

Continuous Services Discreet Services

Demand Predictable; Supply Stable; Performance from Reactive to Repeatable

1. 2. 3. 4. 5. 6. 7. Service Level Commitments Product/Service Catalogs Release and Version Control Portfolio Management Self Service, Self healing, Self Diagnosis Process improvement Skill and Cross Training

Demand from Bursty to Smooth; Supply Constrained; Performance Reliable

1. 2. 3. Investment Governance Strategic Partnerships & Flex Staffing Enterprise Architecture & Reuse

4.
5. 6. 7.

Relationship Management
Flexible Funding Resource and Skill Management Project Management Standard Practices/Process (CMM-I)

19

Cloud Computing and Shared Services: Natural Evolution or Collision Course?

Every Bus. Unit is on its own IT.

A shared-services provider is created.

It is turned into a centralized service provider.

It decides its own sourcing strategy.

External services become commoditized.

What's the purpose of a shared/centralized service provider?

"Cloud"

Bus. Units

Shared or centralized service provider

External service provider

20

Essential Insights
Insight
IT Service Management practices are dictated by the organization's IT delivery model Shared services is but one choice of IT delivery model, each of which optimizes something different The right IT delivery model depends on what you are trying to optimize Nothing can be optimized that is not first identified

Implication
IT Leaders must be able to describe their as-is/to-be state in terms of delivery models IT Leaders must understand their range of choices, as well as the dependencies and differences between delivery models IT Leaders must know what contribution the enterprise expects IT to optimize IT Leaders must drive performance criteria that ensures optimization goals are met

21

Plan For A Journey of Organizational Transformation

Phase 1 Plan Define Portfolio Service Acquire Prod. Mgrs. Phase 2 Pilot Add Products Self-Serve Portal Benchmark Services Process & Structure Map to Services ITIL/CMM-I Segment Market Relationship As is/to be Reorganize Repeat (svc. mgmt. & bus. processes) Retool Process Measurement Repeat Phase 3 Execute Add Prices, SLAs, Rpts. Chargeback

Acquire RMs

Formal Sales Mgmt., Service Mgmt., Mktg., Communication

Change Management

Financial Mgmt.

Costs by Service Market Price Preliminary P&L

Solidify Profit & Loss Introduce P&L to Bus. Pilot Pricing & Chgbck. Outsource Weak

Full Chargeback Market Price Manage by Profit & Loss Market Core

Sourcing

Improve Par

Sourcing Strategy Teach and Coach Process People Team-Based Performance Mgmt. Self-Empowerment Adjust Skill/Talent Portfolio

22

Recommendations
A thorough understanding of IT Service Management
fundamentals is the critical first step in creating an organization that consistently delivers against expectations.

Move away from asset-optimizing models as fast as you can. Know what value propositions are expected from IT, and
choose the delivery model that optimizes that value.

Explicitly state and communicate your ITSM vision and

strategy in terms of operating and service delivery model.

As institutional expectations of IT mature, ensure that the IT

delivery model evolves to be able to deliver on those expectations.

23

Recommended Reading
Strategic Decisions for Optimal IT Service Management and Shared Services Colleen Young (G00213187) The Traditional Asset-Optimizing IT Delivery Model Is Obsolete, Colleen Young (G00213239)

Service Management, ITIL and the ProcessOptimizing IT Delivery Model, C.Young (G00213536)
Running IT Like a Business 2.0: The ServiceOptimizing IT Delivery Model Colleen Young (G00213856) Four Key IT Service Management Frameworks Colleen Young (G00210322) 24