Embed Size (px)
Citation preview
SOCA (2008) 2:1–14DOI 10.1007/s11761-008-0020-9
ORIGINAL RESEARCH PAPER
Relooking at services science and services innovation
Hong Cai · Jen-Yao Chung · Hui Su
Received: 31 July 2007 / Accepted: 8 January 2008 / Published online: 5 March 2008© Springer-Verlag London Limited 2008
Abstract In lots of countries, service economy has becomethe dominant economy. Modern services industries requiretalents skillful at multidiscipline subjects including IT ser-vices, business models, management skills, psychology, etc.There is the rise of services science, service-oriented com-puting, and services computing. The multidiscipline featuresbring new challenges for services science. In this paper, we gobeyond the traditional view of services and propose a three-layer framework for services science and services innovation.The framework covers service needs, service competencies,and service resources. We believe that these are the commonbuilding blocks and foundations for modern services indus-tries. We use Amazon as an example to show the relevant ofthe framework for analyzing patterns of services innovation.We also use this framework to derive a set of service curriculafor training talents for modern services.
Keywords Services science · Services innovation ·Service needs · Service competency · Service resources ·Service curricula
1 Introduction
Service economy has become the dominant economy indeveloped countries. In those countries, both the proportion
H. Cai (B) · H. SuIBM China Research Laboratory, Shangdi, Beijing, Chinae-mail: [email protected]
H. Sue-mail: [email protected]
J.-Y. ChungIBM TJ Watson Research Center, Hawthrone, NY, USAe-mail: [email protected]
of service economy in GDP and proportion of labors involvedin service economy have been grown over 70% or even higher.In some developing countries, the percentage of service econ-omy is also growing very fast. The contents of services havealso undergone significant changes.
From service customer point of view, there are servicesserving different groups of customers. First, there are ser-vices serving individual service consumers, e.g., educationservice, telecommunication service, banking service, enter-tainment service, etc. Second, there are services serving largeenterprises, e.g., advanced financing service, HR outsourcingservice, data center outsourcing service, etc. Third, sitting inthe middle, there are services serving small and medium busi-ness (SMB) such as online customer relationship manage-ment (CRM) service, import/export service, etc. These threeservice types have some overlap but at the same time havetheir own unique features. One of the key reasons influencingthe adoption of those service types is their business afford-ability. For large enterprise they would build in-house ser-vices which can be customized to their special needs, whilefor SMB they will rent services from others and pay by usage.The development of technologies has significantly loweredthe cost of services and broadened the access to traditionalexpensive services for SMB.
The development of Web-based technologies and modernmanagement methods has significant impacts on the devel-opment of modern services industries in recent decade.
First, there is the impact on forming of service ecosystemin new modern services industries. The development of mod-ern services industry totally changed the overall service eco-system from a peer to peer model (e.g., one service providerservicing service consumers by itself) to the value chain andopen community model (e.g., IT services are bid in an opensource community, and the payment service is provided by athird party service provider). Besides the traditional service
123
2 SOCA (2008) 2:1–14
industry such as hotel, cleaning, etc., there come the newtypes of services with the development of Web. Example ofnew services including online gaming, free email service,free search service, RFID-based shipment tracking service,social community service, etc. The new services have com-mon features including intensive leverage of Web technol-ogies, intensive leverage of service knowledge, leverage ofhuman behavior under networked community environment,innovation through new business models especially businesspartnership on Web, etc.
Second, there is the impact on talent education and theirjob opportunities in the market. The market requires differentlevels of talents in modern services industries such as CIOlevel person who understand the overall aspects of IT ser-vices, service designers who understand how to apply newtechnologies to service business, and specific service opera-tion staffs who know how to leverage computing technologiesto serve the customers.
In the academia, there are similar progresses on buildingthe foundations of modern services industries. Some of themhave more IT flavor while others have more business fla-vor. For example, there is service-oriented computing (SOC)[1–3] focusing on leveraging the power of standard Web ser-vices technologies and service-oriented architecture (SOA)[4,5]. There is services computing from IEEE which tar-gets for leveraging all possible technology innovations topromote modern services [6]. There are also services sci-ence and SSME (services science, management, engineer-ing) [7] which propose to establish inter-discipline servicecurricula across all parts of services including technology,psychology, social, and business perspectives. Recent pro-gress of exploration on modern services triggered the newlyestablished IEEE Transaction on Services Computing, ACMspecial issue on SSME [8–17], and IEEE Computer articlesrelated to SSME [18,19]. The discussions on services scienceare becoming very hot [20]. However, the current contentsthat have been layout are mostly related to aggregation ofexisting subjects or courses from technical point of view.From business and career point of view, what are more inter-esting are how to leverage all possible service resources torespond to service consumers’ needs. This is because withthe development of services computing innovations, there arenew ways to generate, manage, and use service resources. Inthat way, service providers can make themselves differentnot only based on unique services functions (competencies)but also based on service resources they own or leverage.This is the angle of this paper that is different with existingstudies.
This paper proposes and centers on a three-layer servicesscience framework. We introduce the framework includingservice needs layer, service competency layer, and serviceresource layer in Sect. 2. In Sect. 3, we apply the frame-work to study the case of Amazon. In Sect. 4, we derive a
new curriculum design framework. We conclude the paperin Sect. 5.
2 Service and the three-layer services scienceframework
James Fitzimmons defines a service as A service is a time-perishable, intangible experience performed for a customeracting in the role of co-producer. [21]
Christian Gronroos defines a service from the perspectiveof management and marketing as A service is an activity orseries of activities of more or less intangible nature that nor-mally, but not necessarily, take place in interactions betweencustomer and service employees and/or physical resourcesor goods and/or systems of the service provider, which areprovided as solutions to customer problems. [22]
Every service has its own lifecycle which covers servicerequirements from service consumers, capabilities ofservice providers, interactions among the service roles in aservice project, service delivery process, and service oper-ation. This business driven view could facilitate the sys-tem thinking of modern services industries. Our frameworkbelow is based on our experiences and studies of modernservices industry over the past 10 years. It is a three-layerframework as depicted in Fig. 1.
The three layers from top to bottom are service needslayer, service competencies layer, and service resourceslayer. Besides the key factors in each layer, there are directedcausal links pointing from service resource to servicecompetency layer and from service competency layer toservice needs layer. We call this map service map to empha-size that it is a map representing concerns in the servicefield, and it shows the relationship among different typesof service concerns. The representation borrows ideas fromthe strategy map by Kaplan et al. in the general businessdomain [23,24].
In our service map, service competencies in the middleusually make up the bottleneck. It is because services require-ment can be very rich and the demands are always grow-ing. The coverage of service resources is very wide. It is alldepending on services providers’ competencies to leveragethose service resources and develop their service capabili-ties to acquire, serve, and retain the service consumers. Thebottleneck is usually in the middle where it is also often thesource for services innovation.
As an example, we consider two types of service needsfrom service customers’ point of view. One service need isthe wish of having more attractive user experience at the ser-vice front stage, either through service front desk or throughself-service mechanism such as Web portal, mobile phone,or Automatic Transaction Machine (ATM). Another serviceneed is the wish to get lower price without sacrificing the
123
SOCA (2008) 2:1–14 3
Fig. 1 The three-layerframework for servicesscience—service map
Service Consumer
Service Provider
Different by information, people, and ecosystem resources
Different by service marketing, delivery, and operation capabilities
Different by people, geography, etc.
Stakeholders
Service Needs
Service Competencies
Service Resources
Attractive user
experiences
at front stage
Lower cost
Horizontal competencies (service stakeholder oriented)
Vertical competencies (service process oriented)
Service
support
Service
product
Service
fulfillment
Service
billing
Managing
employee
Managing
customer
Managing
infrastructure
Managing
Supplier/partner
Service delivery
(platform)
resources
Service
contents
Customers’
Static/dynamic
data
Channel/
distribution
resource
service quality. Service needs are different by people’s age,gender, geography, culture, etc.
As shown in Fig. 1, Service needs are fulfilled throughService competencies of service providers.Service compe-tencies can further be decomposed into vertical competen-cies which are oriented to providing efficient service process,and horizontal competencies which are oriented to satisfy-ing different stakeholder in the whole lifecycle of services.To be successful in the market, every service enterprise hasto think of efficient and unique ways to attract service cus-tomers, e.g., through unique service marketing, delivering,and operation capabilities. Each unique service competencyrequires special knowledge and service delivery platform. Itis impossible for a single service enterprise to own all theservice competencies because holding each service compe-tency requires certain cost. This is the reason service provid-ers often seek collaborations to win a market. From Fig. 1,we could see that in order to achieve improved index of userexperience at front stage, the enterprise should own some ver-tical service competencies such as service support, serviceproduction, service fulfillment, and service billing. To achievethis index, some horizontal service competencies are alsocritical such as managing customer and managing supplier/partner.
Now turn to service resources layer, we could find thatthe service competency called managing customer highlydepends on two types of service resources, namely servicecontents and customers’ static/dynamic data.
The benefit of using service map as a way to depict ser-vice needs, service competencies, and service resources fora service provider is that it could give a clear picture for allinternal stakeholders how indices in each layer are relatedand support by other indices. It makes service indices mea-surable and such giving an opportunity to improve the overallquality of the service and identifying new service resources
to be used to offer innovative services to service customers.We will give the details of each layer below.
2.1 Service needs
Abraham Maslow developed the theory now known asMaslow’s hierarchy of needs [25]. He divided those needsinto five layers, from most urgent and basic (bottom layer)to most advanced (top layer). They are physiological need,safety need, belonging/love need, esteem need, and self-actualization need respectively. Service technologies inno-vations have great opportunities in the space of satisfyingdifferent layers of needs. In Fig. 2, we show the hierarchicalneeds structure together with their analogues in the servicefield.
Maslow’s Hierarchy of needs represents people’s needsin the society. In the field of services, there are also differ-ent levels of needs from different customers. It is already acommon sense to understand needs of customers in differentsegmentations and then provide them with different portfolioof service products.
Maslow’s model represents the needs of one person, whilein modern services industries service needs may originatefrom a community of service customers. With the develop-ment of new technologies such as Web 2.0 [26], Virtual World[27], there come the new opportunities of virtual services[28] to satisfy customers’ more advanced needs in 3D virtualworlds [28,29].
Comparing with traditional needs in Maslow’s hierarchy,in the service fields, the service needs may include basicneeds that currently have been considered such as availabil-ity of service system, service delivery and billing, and servicecustomization. There are also service needs only possiblewith Web technologies such as digitized service encounter,e.g., using ATM machines to replace service staffs as bank
123
4 SOCA (2008) 2:1–14
Fig. 2 Maslow’s hierarchyneeds in the middle, serviceanalogues on the right
security of body, of employment, of resources, etc.
friendship, family, etc.
self-esteem, confidence,
respect by others, etc.
breathing, food, water, sleep, etc.
morality,
Creativity,
problem solving,
lack of prejudice, etc.
Physiological Needs
Safety Needs
Love/Belonging Needs
Esteem Needs
Self-actualization Needs
Maslow’s hierarchy of needs, represented as a pyramid with basic needs at the bottom.
Maslow’s original needs.Resembles in the service fields.
Availability of
service system
Service delivery &
billing
Service customization
User contribution
(community based)
Web + 3D services
Digitized
Service encounter
tellers in the case of simple banking transactions. Above that,there are some emerging service needs such as community-based services through user contribution, and new servicetypes enabled by 3D/virtual services.
Besides the layered view of different (including new) ser-vice needs, one helpful way of analyzing service needs isto categorize the service needs according to their potentials,i.e., possibility of new transactions brought by the new ser-vice needs if a service provider can provide. It may further begrouped according to how often the service customers willreturn to the service provider because of the new type of ser-vice and the possible volume per new transaction. This willgive the service provider an idea how important a serviceneed could be. On the other hand, the service provider mayneed to analyze the cost of providing such a new service. Theservice need and service provisioning are always a pair thatshould be balanced in both near term and long term. In thenear term, the service provider has to think about the tradeoff between new functions attracting service customers andthe investment. In the long term, it should also think aboutwhether the new construction supporting the service needcould become a new strategic service competency. If so, itmeans that the investment cannot be measured in the tacticway but in a strategic way.
The calculation is different with goods/manufacturing. Ingoods industry, a product consumer may not buy goods veryfrequently even though the new goods have some good fea-tures. In contrast, a service consumer may well be attractedby continuous new offerings of a service provider and returnto the service again and again which may trigger more servicetransactions.
Further, the service needs can also be categorizedinto needs of service providers and needs of end service
consumers. Those two types of needs require balancing toenable a sustainable growth of the service business.
2.2 Service competencies
Service competencies are capabilities of a service providerto provide high-quality services to its service consumers. Inthis part, we analyze the service competencies from differentangles including cybernetic, system engineering, and servicecomponentization. Here we discuss elements and operationsof service competencies with the service as a multi-layer net-worked system.
For multi-layers, we mean that in a service system theremay be information flow, cash flow, materials flow, andknowledge flow. Compared with the goods industry, in a ser-vice industry what are more important are information flowand knowledge flow. In service industries, both service cus-tomers and service providers need to get information relatedto the whole lifecycle of the service. Beyond that, servicesinnovations are often followed by transfer of service knowl-edge that influence the service process and service quality.
For networked system, we mean that in a service sys-tem there exist complex relationships between any items inany two layers, e.g., there are complex relationship betweenservice staff and service process, between service staff andservice information, between service staff and service part-ner, etc. What makes it even more complex is that serviceis a continuous process of interactions and exchanges ofvalue between service providers and service consumers. Dif-ferent factors are correlated here such as information flow,physical media/materials flow, cash flow, etc. Multiple rolesare involved here such as clients, client manager, projectmanager, back-office staffs, call center operators, and so on.
123
SOCA (2008) 2:1–14 5
Service Needs
Service ConsumerInteractions
Service Quality and Performance
[KPIs] Service Feedback and Optimization
Internal Goals:Revenue , Cost
External Goals:Service Level Agreement
Service Supplier/Partner
Service Processes
Service Staffs
ServiceManagement and Control
Service
Information
Hub
Fig. 3 A service system from the view point of cybernetic and systemengineering
It should also be noted that unlike manufacturing industrywhere customer will not be involved in the manufacturingprocess, in a service industry it is highly likely that a servicecustomer involve in all phases of the service lifecycle. Some-times, service customers are not aware that they are bothservice consumer and part of service provisioning system.An example is the Amazon recommendation system wherea user of Amazon will read other people’s recommendationon a specific book while at the same time the user may alsogive its own review and rating for a specific book or item.
As a networked system, modern services are also differ-ent with traditional services in different ways. One of theexamples is that in traditional service systems, the problemto be solved is often balancing the service clients and servers,e.g., using Queuing network theory to analyze how to allo-cate servers to satisfy different group of service clients. It isbecause in traditional services the bottleneck is usually theserver. In modern services, there are no limit on generatingnew type of services, there do exist limit on providing therelevant service information such as interesting items to aspecific service consumer. So the main problems in modernservices are often providing and managing options/selectionsfor service customers besides other challenges.
Two views could be leveraged here to better understandthe service systems. The first view is a structured and abstractview of a service system for service research, while the sec-ond view is a more engineering view for service operationand engineering.
2.2.1 Structured view of service competencies
One view of a service system is based on cybernetic andsystem engineering as shown in Fig. 3.
A service system has its building blocks but should serveas a complete system to the outside world. A service systemshould be measurable. In the real cases, a successful servicecompany like Amazon as we will study later should alwaysdefine a set of measurable business KPIs (key performance
indicators) (and Amazon really do so in their practice, andthey do it very well), otherwise it will be very difficult toimprove the system. One of the critical KPIs is customersatisfaction index [30].
The building blocks of a service system include serviceprocesses, service staffs, service partners, etc. In the center,there is the service information hub. The overall objective ofa service system is to achieve predefined service level agree-ment with acceptable cost and maximized revenue. Besidesthat, the service system should has its loop of feedback so thatit could monitor the service performance and make adjust-ments accordingly during execution in respond to the changeof service environment and let service customers aware of theimproved service quality. Both a service and a service systemhave their lifecycles.
System engineering is a method of design of a complexinterrelation of many elements of a system to maximize anagreed-upon measure of system performance, taking intoconsideration all of the elements related in any way to thesystem so that as Aristotle said, “The whole is more thanthe sum of its parts.” It is highly related to cognitive systemsengineering, control systems design, interface design, opera-tions research, reliability engineering, and of course softwareengineering, etc. Without a system engineering method, eachcomponent in the service system tends to seek behaviors thatsatisfy its local interest. This may bring controversy in a ser-vice company and degrade its customers’ experience. With asystematic thinking, each business unit will know its positionin the overall customer-centric service value chain.
2.2.2 Engineering view of service competencies
Another view of a service system is componentization-basedengineering view. Since most service systems are complexsystems while cognition and capability of people are alwayslimited, there must be a way of decomposing the systeminto controllable pieces, so that within a service organiza-tion different roles have clear view of their working scopeand they could collaborate efficiently as one body. A typicalcomponentized view within a service organization is eTOM(enhanced telecommunication operation map) [31] frame-work from the telecommunication forum.
Telecommunication industry is an open industry that lever-age a lot of IT services innovations. Figure 4 depicts thewhole realm of telecommunication industry which includesthree parts namely enterprise management which is notunique, strategy, infrastructure and product which is uniquein service product management, and service operation whichis quite unique all across the whole service lifecycle. TheeTOM view looks at services in an enterprise from twodimensions as shown in Fig. 4. One dimension is from ser-vice customer point of view (along the top-down arrow in thediagram) such as operation support and readiness, service
123
6 SOCA (2008) 2:1–14
Fig. 4 The eTOM Map (enhanced telecommunication operation map)
fulfillment, service assurance, and service billing. The otherdimension is from management point of view (along the left-right arrow in the diagram) such as customer relationshipmanagement, service management and operation, resourcemanagement and operation, and supplier/partner relationshipmanagement.
In a service business such as telecommunication, a specialservice team may only be responsible for one of the businesscomponents. But modern services industries require that allbusiness components be integrated vertically along the cus-tomer view, and be integrated horizontally along the oper-ation view. This characteristic also comes from the factorthat we mentioned earlier that in the service industry, serviceneeds and service provisioning are often a pair of concernsto be balanced.
As we can see from Fig. 4, operations support and read-iness column is responsible for aligning all service dimen-sions such as CRM team, service management team, resourcemanagement team, and partner management team to preparethe necessary service resources before a service customerapply for a service. Fulfillment column is responsible foraligning all service dimensions to respond to service cus-tomers’ request and delivery the services they need. Assur-ance column is responsible for assuring the service qualitythrough the whole service lifecycle that the service customersubscribe and avoid any possible service fraud. Anyway, inorder to be sustainable, a service provider has to make profit
to support its routine operation, so Billing column is respon-sible for correctly collect the service fees from service cus-tomers as described in a contract they signed.
From operation point of view, a service system can bedecomposed into business components. Depending on thecompany’s business strategy and available service providers/partners in the market, it can build some of the businesscomponents in-house, and can outsource some of other busi-ness components. The overall objective is to build a healthyservice system that satisfies its business strategy with lowestcost.
Service identification, realization, and implementationunder SOA [32] are often helpful to analyze the facts of aservice operation system and improve it with appropriate ser-vice technologies.
2.2.3 Service-oriented enterprise architecture
Enterprise architecture (EA) [33] is an industry adopted plan-ning method for designing business architecture and IT archi-tecture of an enterprise. It consists of five key elements: theprinciples designing the overall business components, theinterfaces among those business components, the design ofutility infrastructure, the rules of grouping/decoupling thebusiness components, and the governance of managing theoverall changes.
123
SOCA (2008) 2:1–14 7
Fig. 5 Service-orientedenterprise architecture
Service Readiness
Service Fulfillment
Service Assurance
Service Billing
EnterpriseCapability
BusinessArchitecture
IT Architecture
GapAnalysis
Transition Management
Different Areas
Portfolio Prioritization Project ManagementResource allocation
Vision
Common Building Blocks (crossing all dimensions)
Principles and Architecture Board (Governance Model)
EA starts far earlier than SOA, but now with service-oriented enterprise architecture (SOEA), a systematic busi-ness and IT architecture design method could be leveraged tohelp fitting SOA design rules into the real business needs of aservice provider. On the other side, SOA provides solid “land-ing” method for realizing EA in a modern service enterprise.
An example of applying the SOEA method in telecom-munication industry (and other similar service industry) isshown in Fig. 5. It is a continuous service architecturing pro-cess. After a vision for a service enterprise has been defined,an SOEA method helps realizing the vision through fivephases. They are analyzing the enterprise capability, ana-lyzing the business architecture, analyzing the IT architec-ture, analyzing the gap, and finally managing the transitionprocess.
Within each phase, the analyst should carefully go througheach significant service dimensions including servicereadiness, service fulfillment, service assurance, and servicebilling. As the results of SOEA design, at the end of eachphase there should be accumulated common service buildingblocks to be reused so that the overall system can be built ina clean way.
2.3 Service resources
Service resources cover whatever items service providers useduring service processes. Service resources include infor-mation resources, people resources, process resources, andphysical resource, etc. From a service provider point of view,service resources could be categorized into internal resourcesand external resources that correspond to different policiesfor resource management.
Internal resources are those resources that a service pro-vider could use to win the market such as low cost or extra-ordinary service products. As an example, a service-orientedpub-sub system could integrate customer information with
shipment information and provide instant messaging servicesto the customer notifying them of the change of shipment sta-tus. It could greatly improve the customers’ satisfaction andincrease the possibility of more business opportunities withthe customer.
External resources are those resources that are outside thescope of the service provider. They include the relationshipwith business partners, options of service vendors, etc. Anexample of good external resources enabled by IT innova-tion could be integrated cross region supply chains coveringmultiple sub-service providers so that the main service pro-viders could always choose the best sub-service provider withlowest cost.
Good service resources could be used by a service com-pany to provide service customers with better service expe-riences and more service products, while at the same timeimprove the quality of the service system, lower the ser-vice cost, and make the service business scale out. Exam-ples of important service resources include content resource(e.g., contents of books on Amazon Web site), infrastructureresource (e.g., the underground cables in the telecommuni-cation industry, or scalable server platform in the Amazonscenario), channel resource (e.g., different ways to approachservice customers), distribution resource (e.g., low cost ser-vice product delivery channels including online and physicaldistribution approach). Below, we will prove that more valu-able service resources mean better service system.
Theorem 1 Assume that m>n>0 are natural numbers, aservice system built upon service resources �m will performbetter than a service system built upon service resources �n.
Proof Denote a service system which is built upon �n as Xn
,
and the performance of it as Pn
and cost of a service system
as �n
. Denote another service system which is built upon �m
as Xm
, and the performance of it as Pm
and cost of a service
123
8 SOCA (2008) 2:1–14
system as �m
.
Pn
and �n
satisfy, {∀(P,�) in Xn
| Pn
> P, and �n
< �}.By extending the supporting vectors of �n to �m , it is
obvious that the previous optimization problem in state space�n is equivalent to assigning constant to vectors in �m thatare out of the dimensions of �n . This means that the optimumsolution in �n is a sub-optimum solution in �m . So a servicesystem built upon service resources �m will perform betterthan a service system built upon service resources �n .
This completes the proof. ��Some traditional service researches such as service
composition methods focus too much on functional parts ofservice competencies and under-estimate the potential inno-vations from service resources. Service practices show thatWeb has made available many service resources that are notavailable in the past. So there are great potential of servicesinnovation in this field. An example of service innovationthrough service resources is establishing and representingthe relationship among service resources with XLink [34]and make it a service hyperchain [34] which is an extendedversion of the Hyperlink concept with XML.
Besides that, with development of Web/Web services/SOAtechnologies, service delivery platform has become a criticalsuccess factor of a service system which is also a valuable ser-vice resource for any service business. The debut of scalableservice delivery platform makes up one of the key sourcesof services innovation and makes the service business fromlabor based to asset based. The scalable IT service platformsuch as provided by Amazon is also one type of importantservice resource.
3 Application of the framework on studying the realcases
Amazon.com [35], previously a recognized online bookseller, has evolved its business model from an online retailerto a online service provider for the retail industry—enabledby SOA and Web services technologies. Its marketplace part-ner model is highly successful, with tens of thousands ofsubscribers to its Web services-enabled back-end interfaces.Now Amazon.com is providing end-to-end services to otherretailers, running their entire online operations (includingWeb sites, orders, and fulfillments).
3.1 The Amazon case study
3.1.1 The needs for online business that influence Amazon
When customers come to Web, they are certain seekingmore options and more convenient ways of purchasing more
goods, in an approach that is more cheap than buying instores. Amazon is good at understanding customers’ needsand offer the services in efficient approach. The needs almostcover all aspect of service needs depicted in Fig. 2.
For availability of service system and service delivery andbilling, after Amazon realized that depending on third partyfulfillment vendors cannot guarantee high quality and on timebook delivery, they established they own fulfillment cen-ter. For service customization, users that have registered onAmazon Web site could enjoy customized Web pages show-ing their interested good and providing recommendations forthem, using the famous collaborative filtering recommenda-tion system [36] like “Users buy product X also buy productY ”. The “review” feature on Amazon’s Web site providesend user contribution for ranking the popular books and othergoods.
3.1.2 Core competencies of Amazon influence the successof new service business models
Because Amazon’s service system has both broad customerset and very efficient and scalable service platform, it canserve the needs of different types of customers. We summa-rize it in Table 1.
3.1.3 Amazon’s service resources form the foundationof Amazon competencies
If we look into more detail of Amazon’s core competencies,we would find that most of them are related to Amazon’sunique service resources, including platform resources, oper-ation resources, standard interface resources, etc. We sum-marize how Amazon leverages those key service resourceschronically in Table 2.
3.1.4 The Amazon service ecosystem
With core and unique service competencies, Amazon notonly satisfies customers’ needs but also accumulated valu-able service resources. Amazon’s core platform is built foradapting to changes based on its business models. There arethree major partnership business models: associate partner,marketplace partner, and Web Service (platform) partner.Amazon’s ecosystem includes these Amazon Partners (APs)supported by the Amazon platform. The following four typesof role players are the active users of Amazon’s platform:
Buyers. There are over 39 million active customeraccounts, this is Amazon’s base for partnership;
Sellers. They are merchants who sell on the Amazon’splatform. There are over 600,000 active seller accounts, thenumber of buyers and sellers constitutes positive feedback;
123
SOCA (2008) 2:1–14 9
Table 1 Amazon’s innovative service business models and linkage with their core competencies
Target customers Amazon’s offering Description Linkage with Amazon’s corecompetency
1. Customers not havetheir own Web storeand want to sell onAmazon
1.1 Sell on Amazon marketplace By joining Amazon Pro-MerchantServices program.
Partnership through standardinterfaces
1.2 Fulfullment by Amazon Let Amazon Pick, Pack and Shipcustomer’s Amazon and non-Amazon orders
Industry leading fulfillment capa-bility and scale
1.3 Advantage for books/medias The Advantage program wasdesigned to provide the toolsand framework to ensure thatall titles appear frequently andprominently throughoutAmazon.com before booksreach critical mass
Service as software
2. Customers own ormaintain a Web site
2.1 Associates The Amazon.com Associatesprogram allows customers tochoose any items from the mil-lions listed in Amazon’s onlinecatalog and promote them oncustomers’ Web site. Associatesare paid commisson fee
Customer managementStandard billing interfaceProduct management
2.2 WebStore by Amazon (beta asthe time of writing)
WebStore by Amazon is a com-prehensive eCommerce solu-tion that allows customers toleverage the power of Ama-zon.com technology to growtheir branded business
Embed online store knowledgeinto software application designand make it industry bestpractice
3. Customers use Ama-zon platform capa-bility through Webservices interfaces
Amazon Web services (AWS)
3.1 Amazon elastic computecloud
Provide computing on demand Large-scale service computingplatform
3.2 Amazon simple storageservice
Provide storage on demand Large-scale service computingplatform
Other AWS Large-scale service computingplatform
Associates (Web Site owners). They are people who owntheir Web sites and link to Amazon with referral fees. Thereare hundreds of thousands of associates;
Developers. They are people who use Amazon Web Ser-vices (AWS) to create applications and tools. There are over100,000 registered developers.
The implicationofAmazon’ssuccess is that tobea industrylead, you have to grasp unique and core competencies that notonly satisfies customer’s current needs but also can influencecustomers’ usage and purchasing behavior. On the other hand,core competencies highly depend on IT services innovationsand available service resources. Good content resources mayattract more customers, good people and process resourcesmay improve service operation, and good channel resourceswith customers and partners and greatly broaden your serviceecosystem to generate more transactions.
A good service system like Amazon not only covers thewhole service lifecycle but also highly improves the expe-rience of front stage and back stage of a service operationsystem.
This flexible enablement platform for introducing newbusiness models has demonstrated the value of SOA andWeb services technology in building an adaptive service eco-system for Amazon.com. It is a typical embodiment of thethree-layer service model to realize service needs for differ-ent service consumers and partners.
3.2 The oversea tax preparation outsourcing case study
The famous book by Friedman title “The World is Flat”introduced such an example [39]. At tax preparation season,US citizens often go to a CPA (Certified Public Accountant)
123
10 SOCA (2008) 2:1–14
Table 2 Chronically invented new service resources from Amazon.com ([37] and other Web resources)
Years and events Impact on service needs Impact on Amazon service com-petencies
Impact on Amazon serviceresources
September 1997,1-Click� technology
Easy check out Block competitors such as Barnesand Noble to achieve the sameeasy user experience
A unique resource that set up bar-rier in the industry
2000, item-based collab-orative filtering (userswho bought x alsobought y) [38]
Provide community based (rating)information service
Provide a trust-based selling,increased selling possibility
Recommendation data
July 2002, Amazon Webservices
Provide industry lead IT infra-structure service
Channels for customers and part-ners. Standard platform fordevelopers
IT service resources now becomestandardized
October 2003, SearchInside the Book
First taste, and then buy Improved customer relationshipthrough better customer experi-ence
Enriched content, now books notonly have meta data but alsosample pages
2004, A9.com Easy selection Search engine Search function provides easyaccess to service resources
2005, Amazon Connect Another way of community-basedcontent contribution
Enables authors to post remarksthat appear at the bottom of thedetail pages
The contents now not only includethe meta data, review from usersbut now also information fromauthors
March 2006, Amazon S3 Provide IT storage services onlineand on demand
Online storage service Storage as on demand ITresources
August 2006, (EC2)Amazon elastic com-pute cloud
Provide IT computing servicesonline and on demand
Provide virtual site farm, allowingusers to use the Amazon infra-structure with its high reliabilityto run diverse applications rang-ing from running simulations toweb hosting
CPU as on demand IT resources
January 2007, Amapedia Everybody is fair to show its idea Community capability a collab-orative wiki for user-generatedcontent related to “the productsyou like the most”
More community data, now vot-ing like comment and recom-mendation information
consulting company to help them work on the taxreturn files. The price is around $150–$200 dollars perdeal. (The middle class client may some time get a $1000tax return from this process.) Now some India outsourc-ing companies have used work flow software programs toprocess tax returns with standardized format that make theoutsourcing of tax returns (from US to India) cheap andeasy. They call it “Web based Virtual Tax Room (VTR)”.Now the cost may be only $30 dollars per deal for an Indiacompany.
So with this new service model created, everybody ishappy. The client can pay lower price. The outsourcing com-pany has stable and growing business. The hired accountantsin India have higher salary paid because they indirectly workfor US clients. The US local CPA consulting companies arealso happy because they can now put more effort on value-add services such as discussing US clients with creative andcomplex tax strategies like tax avoidance, tax sheltering,managing customer relationships, etc. The overall picture isshown in Fig. 6.
3.2.1 Globalization fuses the service providers and serviceconsumers
The evolution of Web technologies and debut of Web (ser-vices) standards makes the IT infrastructures ready for glob-alization. The low cost labors in countries like India andChina enter the global stream of service human resource andconstitute the foundation of global service innovation. Thesetwo factors bring new opportunities for meeting the needs ofimprovement for service encounters with better experienceand lower cost that traditionally people would never think ofbecause the service providers cannot afford.
So when thinking about the needs in services, weshould not only think of what happening in the same physicalenvironment, but also think more about the opportunities(originated from relative opportunity cost) globally. Fromservice providers’ point of view, in this way, no longer onlylarge enterprise’s needs are met, but small and medium busi-nesses’ needs are met, because the playing ground are nowleveled by technology innovation.
123
SOCA (2008) 2:1–14 11
Fig. 6 Process of tax returnsoutsourcing
US CPA Firm (SMB) Outsourcing company at India Accountant Partner at India
WebWeb
1. Obtain client documents (last year tax returns, W-2, W-4, 1099, bonuses, stock statements, etc.) and scan into electronic files
2. Upload files to US (local) server
5. Download completed returns
6. Deliver to client
3. Information hiding and encryption (e.g.,remove surname and Social Security Number)
4. Prepare and review returns at India
(Web based Virtual Tax Room)
3.2.2 Competency is related to market positioningand partnership strategy
When studying this case, we could see that the first key suc-cess factors of services innovation comes from understand-ing the trend of evolution of world wide service ecosystem,rebuild the service value chain and then find the best position(value-added service or scalable platform service) as shownin Fig. 4.
Then we could see the company leverages service tech-nology innovation especially makes the human processesstreamlined and makes the tax preparation experiences intothe workflow system, and then makes the input process stan-dardized and digitized. These are the basics of accomplishingthe tax return outsourcing service.
With the technology innovation, the company not onlyreinvented its business process and made it very competitivein the market compared with large companies but also allowhiring more low cost labors to do the routine work at backoffice. Beyond that, the innovative platform (VTR) shouldallow more small and medium tax return agencies to collab-orate with the outsourcing company and outsource their workto India. This is a good illustration of Fig. 3.
3.2.3 Web based platform makes it happen—resourceredistribution
This case is also a good example of how the connection withinternal resources and external resourced could be strength-ened through the innovative VTR platform.
The platform optimized the internal resources. First, bystandardizing the routine input process through scanned (dig-itized) files, the low skills input work can be outsourced any-where and be done by very low cost labor. Second, India hasplenty of graduate students who got CPA certification, and
have good knowledge of US tax return processes, and canimmediately be connected to the system.
The platform also optimized the external resources bystreamline the process with its suppliers (small and mediumagencies in US) such greatly improve its reach in US market.
3.3 Other similar cases that leverage Web platform to“flatten” or rebuild the service ecosystem
There are other examples. For example, also in [39] anotherexample is mentioned that in many small and some medium-size hospitals in US, radiologists are outsourcing reading ofCAT scans to doctors in India and Australia. Of course, thedoctors there need to have relevant skills and be certified.Most of the work is done at weekend where hospitals do nothave enough staff.
Yet another example is from China. HangzhouADICON Clinical Laboratories Co., LTD(http://www.adicon.com.cn/AdiconWebEn/About.aspx?id=44) is the first independent chained clinical referencelaboratory in mainland China, founded by a group of Chinesefrom western practice with preeminent management system,performs a wide-variety of diagnostic testing, clinical trialsand health care management services. Through a strong sup-port from ACON Laboratories, one of the leading diagnosticcompanies in the US, ADICON also has formed powerfulrelationships with Johns Hopkins Medical Institute, Depart-ment of Clinical Pathology Core Lab. Its quality assuranceis based on CNAL requirements ISO/IEC 17025 “GeneralRequirements for the Competence of Calibration and testingLaboratories” license and Logical Metrology certificate. Itsyearly growth rate is 1116.56% which shows the marketrecognition for the new service business model.
These are good examples showing that distance doesnot matter but knowledge and certification do. During the
123
12 SOCA (2008) 2:1–14
Fig. 7 Grouping of SSMEcurriculum based on thethree-layer service framework
Service
framework
Service
Need
Service
Competency
Service
Resource
Standardinformation model of
customer and product
Semantic Informationintegration & analysis
Business insight
StandardIT infrastructure,
and portals
Integrated and scalableinfrastructure and
operations
Service optimization,quality control
Unified enterprise metadata model
Integratedproduct resources, partner resources
Dynamic partnership
FoundationalPillar
Technology Pillar
BusinessPillar
Standard Integration Dynamic
Marketresearch
Service encounterService back office
Business plan
GloballyIntegratedEnterprises
Service marketingAnd
Service CRM
Service & Project
management
ServiceResource
management
Missions
Service Staffing Service design, implementation, operation, monitoring, technology innovation Service management &
Business innovation
services transformation, services science and services inno-vation could help a lot to grasp the global service transformopportunities.
4 Related work
Strategy management tools such as balanced scorecard andstrategy map [23,24] have been used in traditional business.Our proposed service map is constructed upon the three-layerservice framework, and at the same time takes the benefit ofcausal link between neighboring layers which fits into thenature of modern services industries.
The current marching toward service-oriented computing[1–3] or services computing [6,40] have put a lot of effortson technology standardization, integration, and service com-position which fit into the service competencies layer of ourframework. The current technology evolution of Web 2.0[26] partly fits into the service resources layer. Our proposedmethod is not only sitting at the IT level but also linkingall service resources (including business resources and ITresources) with service competencies and then to service cus-tomers’ needs.
The service competencies have close relationship withbusiness process integration and modeling (BPIM). Tradi-tional BPIM methods mainly focus on process reengineeringand integration based on existing service resources and mayunderestimate the opportunities from new service resourcessuch as new resources based on user community.
Our proposed service map and related analysis method isbuilt upon existing technologies including Web, SOA, andWeb 2.0 and provides a new system thinking approach.
5 Application of the framework on curricula design
Unlike pure research, the design of services curricula is foreducating talents for the service economy. Along the threelayers of service map, we further analyze the foundationalskills, technology skills, and business skills required for mod-ern services industries. We depict the results of such analysisin Fig. 7. From Fig. 7, we could see that rows (correspondingto the three layers in the framework) could be used to anal-ysis and group courses into the potential services jobs in themarket. The technology columns could be used to analysisand design courses from basic needs (static technologies),advanced needs (integration technologies), and finally supe-rior needs and research topics (dynamic technologies).
The service skills in foundational pillar may be needed forall kinds of service staffs. The skills in technology pillar willbe especially helpful for people focusing on service design,implementation, operation, monitoring, and other innova-tions. The service skills in business pillar will be very usefulfor those people focusing on service management, and busi-ness innovation such as defining new business models.
Finally, it should be pointed out that a lot of services inno-vation originated from understanding the trend of a specificbusiness domain. These courses are closely related to man-agement school and are especially useful for students alreadyhave some experiences in certain industries.
Curricula for Bachelor degrees could be designed to givean overview of the three layers of services plus some softskills needed for modern services such as negotiation skill,presentation skill, etc. The standard and integration columnscould be used for designing master curricula, while thedynamic column could be used for advanced research for
123
SOCA (2008) 2:1–14 13
Ph.D. degrees. Part of the work here has been submitted forIEEE/ACM Services Computing curricula design which tar-gets for extending the 2001 version of Computing Curricula[41].
6 Conclusions
In this paper, we analyzed the characteristics of modernservices industries. We proposed a three-layer service mapand show how the service map could be leveraged to guideservices science research and services innovation. Existingresearches on SOC, SC, Web 2.0 could be well leveraged butwe show that the service map analysis method could over-come the problem of too much focusing on service compe-tencies and under-estimating the power of service resources.Our proposed three-layer service map not only covers ser-vice needs and service competencies but also covers serviceresources. The service needs layer extends Maslow’s Hier-archy of needs to the field of services. The service compe-tencies layer leverages the concept of cybernetic and systemthinking to study a service system. The service resourceslayer leverages the observations from service economy andservice management; they have opportunities for using moremodern service resources triggered by technology innova-tions. We then use the Amazon case as an example to seehow the three-layer service map may well illustrate the mod-ern service enterprises. Both our past experiences in servicesand the study on Amazon’s services innovation models showthat this three-layer model could provide holistic views forservice systems. The three-layer framework could serve asthe foundation for services innovation, and design of servicecurricula.
Acknowledgment The authors would like to show their sincere appre-ciation for anonymous reviewers to give the valuable comments.
References
1. Singh M, Huhns M (2005) Service-oriented computing: semantics,processes, agents. Wiley, New York
2. Huhns M, Singh M (2005) Service-oriented computing: key con-cepts and principles. IEEE Internet Comput 9: 75–81
3. Papazoglou M, Georgakopoulos D (2003) Service-oriented com-puting. Commun ACM 46: 24–28
4. Erl T (2004) Service-oriented architecture (SOA): concepts, tech-nology, and design. Prentice-Hall, Englewood Cliffs
5. Chung J, Chao K (2007) A view on service-oriented architecture.Service Oriented Comput Appl 1: 93–95
6. IEEE Services Computing Community. https://www.ieeecommunities.org/services
7. IBM Research: Services Sciences, Management and Engineering.http://www.research.ibm.com/ssme/
8. Maglio PP, Srinivasan S, Kreulen JT, Spohrer J (2006) Service sys-tems, service scientists, SSME, and innovation. Commun ACM 49:81–85
9. Chesbrough H, Spohrer J (2006) A research manifesto for servicesscience. Commun ACM 49: 35–40
10. Sheehan J (2006) Understanding service sector innovation. Com-mun ACM 49: 42–47
11. Zysman J (2006) The algorithmic revolution—the fourth servicetransformation. Commun ACM 49:48
12. Rust RT, Miu C (2006) What academic research tells us about ser-vice. Commun ACM 49: 49–54
13. Sheth A, Verma K, Gomadam K (2006) Semantics to energize thefull services spectrum. Commun ACM 49: 55–61
14. Dietrich B (2006) Resource planning for business services. Com-mun ACM 49: 62–64
15. Rouse WB, Baba ML (2006) Enterprise transformation. CommunACM 49: 66–72
16. Bitner MJ, Brown SW (2006) The evolution and discovery of ser-vices science in business schools. Commun ACM 49: 73–78
17. Feldman SI, Nathan KS, Li T, Hidaka K, Schulze C (2006) TheClarion Call for modern services: China, Japan, Europe, and theU.S. Commun ACM 49: 86–87
18. Paulson LD (2006) Services science: a new field for today’s econ-omy. IEEE Comput 39: 18–21
19. Spohrer J, Maglio Paul P, Bailey J, Gruhl D (2007) Steps toward ascience of service systems. IEEE Comput 40: 71–77
20. SSME: Education for the 21st Century. http://www.almaden.ibm.com/asr/summit/papers.shtml
21. Fitzimmons J (2005) Service management: operations, strategy,information. McGraw-Hill/Irwin, New York
22. Gronroos C (2000) Service management and marketing: a cus-tomer relationship management approach. Wiley, New York
23. Kaplan RS, Norton DP (2004) Strategy maps: converting intangi-ble assets into tangible outcomes, 1st edn. Harvard Business SchoolPress, Boston
24. Kaplan RS, Norton DP (1996) The balanced scorecard: translatingstrategy into action. Harvard Business School Press, Boston
25. Maslow AH (1970) Motivation and personality, 2nd edn. Harperand Row, New York
26. O’Reilly: What is Web 2.0. http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html
27. Virtual World. http://en.wikipedia.org/wiki/Virtual_world28. Cai H, Yeh J, Su H (2007) From web services to virtual services.
In: Proceedings of 2007 IEEE international conference on servicescomputing, pp 690–693
29. Cai H (2007) Scale-free web services. In: Proceedings of 2007IEEE international conference on web services, pp 288–295
30. Amazon.com E-commerce case study. http://www.davechaffey.com/E-commerce-Internet-marketing-case-studies/Amazon-case-study/
31. eTOM (enhanced Telecommunication Opeation Map). http://tmforum.org/
32. Service-oriented modeling and architecture. http://www-128.ibm.com/developerworks/webservices/library/ws-soa-design1/
33. The Open Group Architecture Framework (TOGAF). http://www.opengroup.org/togaf/
34. Zhang L, Cai H (2007) Services hyperChain architecture of webX.o and a case study. In: Proceedings of 2007 IEEE internationalconference on services computing, pp 968–975
35. http://www.amazon.com/,Amazon36. Linden G, Smith B, York J (2003) Amazon.com recommendations:
item-to-item collaborative filtering. IEEE Internet Comput 7:76–8037. Amazon.com (wikipedia.org). http://en.wikipedia.org/wiki/
Amazon.com38. Collaborative Filtering. http://en.wikipedia.org/wiki/
Collaborative_filtering39. Friedman TL (2006) The world is flat: a brief history of the twenty-
first century. Farrar Straus Giroux
123
14 SOCA (2008) 2:1–14
40. Zhang L, Zhang J, Cai H (2007) Services computing, core enablingtechnology of the modern services industry. Springer, Berlin
41. Computer Science Volume (2001). http://www.sigcse.org/cc2001/,ComputingCurricula2001
Author Biographies
Dr. Hong Cai is a Senior Research Staff Member at IBMChina Research Laboratory. He has been working in theIT service industry for 10 years. He has published about40 papers and 14 patents. He is one of the co-authors of abook “Services Computing”. He has been serving as ProgramCommittee member for several IEEE international confer-ence, local arrangement chair and student workshop chair forIEEE ICEBE, and Editorial Review Board of InternationalJournal of Web Services Research. He has been promotingServices Science in Great China Area since 2005 and hastaught “IT Services” courses at Tsinghua University, and hasbeen invited to talk about Services Science at various con-ferences. He got his Ph.D. degree from Tsinghua Universityat 1997. Dr. Cai is a senior member of IEEE and a memberof ACM.
Dr. Jen-Yao Chung is a researcher at IBM T.J. WatsonResearch Center. He has been involved in research, develop-ment, and customer engagements in business process
integration and management, electronic commerce, electro-nic marketplaces and web application systems. He is theco-chair of the IEEE Technical Committee on E-Commerce(TCEC). He received his MS and Ph.D. in Computer Sciencefrom the University of Illinois at Urbana-Champaign. He isa senior member of the IEEE and a member of ACM.
Dr. Hui Su is an IBM Senior Technical Staff Member andSenior Manager of Service Production Ecosystem ResearchGroup in IBM China Research Laboratory. He is now respon-sible for research work on the enabling technologies for nextgeneration services, to enable a new open collaborative ser-vice ecosystem with collaborative solution engagement anddelivery, SOA solution asset development, etc. The researchareas include collaboration and Web 2.0 technology, solutionengineering, services science, etc. Besides current researchwork in China Research Lab, he is also responsible for devel-oping IBM worldwide research strategy in the related areas.Hui Su received the bachelor and Ph.D. degrees in TsinghuaUniversity in 1992 and 1996. He joined IBM in 1996.
123
