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Steve Bittinger
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
1
At Least Half of All IT Service Management Initiatives — Aren't
Governance
ITSM EA
ITSM lives here!
Not here!
What is IT Service Management’s 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.
Not here!
2
IT Organizational Change Activities Are Often Confused With ITSM
Confusion occurs at the intersections
Governance
ITSM EA A
B C
Initiative or Investment Intersection
An IT Service Catalog Project A, itsm*
An IT Infrastructure Rationalization Project A
A Reorganization or Centralization D
Investment in a Demand Mgmt. Function D
Data Center Consolidation D
The Creation of New, Customer-Facing Roles C
Creation of a PPM Competency Center B
Re-engineered Chargeback Mechanisms C
An ITIL implementation itsm*
Configuration Mgmt. Tool Implementation itsm*
D
3
Business Expectations of IT
Utility-Oriented Enhancement-Oriented Transformation-Oriented Supports the Institution Enables the Institution Drives the Institution
IT Operating Model
Centralized Hybrid
(Federated) Decentralized
IT Delivery Model
Silo Process Service Value
Sourcing Process People Structure Tools
IT Organization Architecture
Money
Start at the Top to Get IT Service Management Right
IT Efficiency IT Effectiveness IT Value
A B D C
4
The Four IT Service Delivery Models and Their Maturation Path
Value
Acts Like Cost Center
Acts Like ESP Acts Like
Profit Center
The Right Model For
You Depends on
Business
Expectations
IT-Focused Internal-Customer-Focused
External-Market-
Focused
Approximate
Adoption
Rates
Silo Process Service Value
Maturation Path
25%
50%
0%
A B D C
5
IT Role Supporter Enabler Driver
Behavior Cost Centre Service Provider Revenue, or Top-line Business Partner
Operating Model
Centralized Federated Decentralized (or increasingly centralized)
Delivery Model
Asset/price model Service Model Value model
Contribution Asset utilization or process outcome optimization
Service performance to contract (SLAs)
Competitive advantage
Attributes • Supply-driven • Technology-centric • Functionally and
technically siloed • Insulated and
monopolistic • Cost-obsessed
• Demand-driven • Internal customer-centric • Process-based back office • Competitive and engaged • Service-obsessed
• Opportunity-driven • External customer-centric • Process-based front-office • Market-driven • Value-obsesses
B D C
Delivery Model Constructs by IT Role
6 Bottom Line: Choice of models has specific implications for
transformational requirements and road maps
Process Service Value
Money Fixed IT infrastructure allocation; possibly zero-based budget for projects
Fee for service; zero-based budgeting, selective cost plus pricing
Profit/loss-based budget with discretionary revenue stream
Structure Process/function matrix with functional silos dominating
Process/function matrix with multidisciplinary teams dominating. Some competency centers
IT-business matrix around core business processes or value centers
Process ITIL/CMM-I/CobiT compliant Process improvements correlated to required service outcomes; outcomes measured per IT SLAs
IT process improvements correlated to business processes; outcomes measured in business process terms
People Process expertise Solution, relationship and business expertise
Business and innovation expertise
Sourcing Mostly internal, selective outsourcing based on "commodity" services
Strategic multisourcing based on explicit competitiveness of internal capabilities
Multisourcing based on IT core competencies and strategic intent. Outsourcing as last resort
B D C
The Delivery Model Dictates IT Organization Architecture
7
Where Do You Need to Transform? An Example
Required
End State
C
Present
Future
Silo Process Service Value
Services
Processes
Structure
People
Relationships
Sourcing
Financial Mgmt.
A B D C
X
X
X
X
X
X
X
X
8
Know Specifically What Needs to Change for Each Attribute
Silo Process Service Value
Service None Application services portfolio
Solution, relationship, consulting, asset, application services portfolio
R&D, intellectual property, CRM, business process, innovation, BI core capabilities and portfolio
Process None ITIL/CMM-I/Cobit-compliant
Process improvements correlated to required service outcomes; outcomes measured per IT SLAs
IT process improvements correlated to business processes; outcomes measured in business process terms
Structure Functional silos Process/function matrix with functional silos dominating
Process/function matrix with multidisciplinary teams dominating; some competency centers
IT-business matrix around core business processes or value centers
People Technical expertise Process expertise Solution, relationship and business expertise
Business expertise and innovation expertise
A B D C
9
Know Specifically What Needs to Change for Each Attribute
Silo Process Service Value
Relation- ships
IT-to-IT
IT-to-user
IT-to-ESP
IT-to-IT
IT-to-mid. mgmt.
IT-to-ESP
IT-to-IT
IT-to-BU leaders
IT-to-co-providers
IT-to-CxOs
IT-to-board
IT-to-ext. customers
Sourcing Mostly internal, some external staff augmentation
Mostly internal, some selective outsourcing based on "commodity" services
Strategic multisourcing based on explicit competitiveness of internal capabilities
Strategic multisourcing based on business core competencies and strategic intent for IT; outsourcing as last resort
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
Profit/Loss-based budget with discretionary revenue stream and/or top-line revenue responsibility
A B D C
10
A Crucial Decision Point Between Process and Service-Based Delivery Models
A - Crucial decision point between process and service delivery model destination
B - Pure play process optimizing delivery model caps IT’s 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.
Process
IT-Focused Internal- Customer- Focused
External- Market Focused
Maturity and Contribution
Asset Service Value
Med
High
Low
B = cap
C = rework
D = widening gap
A = Decision Point
Service optimizing trajectory
Process optimizing trajectory
11
Key
Sta
keh
old
ers
Transaction Initiator
Service Provider Service Consumer
Contract Negotiator
"The Business" "IT"
Business leader (s)
who authorize
and ultimately
pay for services
End users who request things on a day-to-day
basis
Technology Caretaker
Service Executor
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
Service Catalog
Service Portfolio
Configuration Management
Data Base
Process-to-Service Map
The Front Office The Back Office
Four Key IT Service Management Supporting Frameworks
12
Service Portfolios and Service Catalogs
Service
Catalog
Supported Products/Versions
Escalation Procedures
Transaction and Workflow Management
Benchmark Data
Service Portfolio
Differentiation Multiple offerings for different
price/SLA trade-offs
Competitive Advantage Why should they buy it from you?
Description What it is and what it does
Value Proposition Why should they buy it?
Service
Portfolio
Chargeback and SLAs happen
here
… not here
13
Organize Around Services, Not Processes
Process "Blue"
Process "Green"
Cust. 2
Cust. 3
Service B Outcome
Service C Outcome
Process "Red"
Cust. 1
Service A Outcome
Relation-ship
Mgmt.
Product Management Delivery Management
Quality Assurance
Measurement Process Engineering Product
Development Sales, etc.
Service B
Service C
Service A
14
Building an IT Process-to-Service Map
Services
Processes Workplace services
Application hosting services
Project management
services Total
Demand management X X X 3
Disaster recovery X X 2
Procurement X X 2
Resource brokering X 1
Etc. X 1
Total 3 4 2 9
1. Which processes are foundational?
2. Understand dependencies, to avoid “breaking” one service while “fixing” another
3. Insight into service complexity, and sequencing of continuous improvements
4. Basis for SLA monitoring and activity-based service costing
5. Facilitates service bundling or unbundling for “apples to apples” comparisons with ESPs
15
Customers
Process
A Step1
Process
A Step 2
Process
A Step 3
Outcome
B
Service
Outcome
A
Performance Reports
to Bus. Unit Managers
Performance Reports For
Internal IT Use Only
Scorecard or Dashboard
Financial
Service
Customers
Innovation
Performance Reports
to CXO Executives
Service Delivery and Performance Reporting
SLA
SLA Process
B Step1
Process
B Step 2 Process
B Step 3
Processes
16
Pay Attention to Managerial Capability Gaps
Capabilities
Skills Gap
Financial and Business Management
Demand Management
Process Management
Resource Management
Competitive Analysis, Financial Management, Product
Development, Product/Service Bundling,
Pricing Strategies
Business Development, Relationship Management, Sales,
Marketing, Communications, Market Research
Strategic Sourcing, Capability Management, Skills
Management, Recruitment/Retention, Continuous
Development, Compensation/Rewards
Process Engineering, Measurement, Quality Assurance
Needed
Current
17
Evolve Financial Management Capabilities
Implementation Dialogue & Reporting Business Intelligence
Time
"If we were to charge at or near
market rates, would we cover our
costs?"
"How will fee for service financially
impact the business units?"
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
"Where will enhanced service performance most positively impact the business, and how do we make
it happen?"
Phase 3 Phase 2 Phase 1
18
Establishing Competitive Positions
Service Revenue Cost Profit
Workplace Services $350,000 $345,279 $4,721 close to par; competitive
Application Hosting $733,500 $814,200 ($80,700) non-competitive
Project Management $129,800 $98,375 $31,425 significant competency
Application Development $633,500 $633,400 $100 par; competitive
$1,846,800 $1,891,254 ($44,454)
Market Based
Service Portfolio
Expresses service
in customer relevant
terms; Enables
market
comparisons;
facilitates
chargeback
Competitive
Position
Facilitates sourcing
and process
improvement
decisions
Market
Comparisons
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
19
Balance Supply and Demand
Continuous Services Discreet Services
1. Service Level Commitments
2. Product/Service Catalogs
3. Release and Version Control
4. Portfolio Management
5. Self Service, Self healing, Self
Diagnosis
6. Process improvement
7. Skill and Cross Training
Demand Predictable; Supply Stable;
Performance from Reactive to
Repeatable
Demand from Bursty to Smooth;
Supply Constrained; Performance
Reliable
1. Investment Governance
2. Strategic Partnerships & Flex Staffing
3. Enterprise Architecture & Reuse
4. Relationship Management
5. Flexible Funding
6. Resource and Skill Management
7. Project Management Standard
Practices/Process (CMM-I)
20
Cloud Computing and Shared Services: Natural Evolution or Collision Course?
Bus. Units Shared or centralized service provider
External service provider
A shared-services provider is created.
It is turned into a centralized service provider.
What's the purpose of a shared/centralized service provider?
External services become commoditized. It decides its own
sourcing strategy.
Every Bus. Unit
is on its own IT.
"Cloud"
21
Essential Insights
Insight Implication
IT Service Management practices are
dictated by the organization's IT
delivery model
IT Leaders must be able to describe
their as-is/to-be state in terms of
delivery models
Shared services is but one choice of
IT delivery model, each of which
optimizes something different
IT Leaders must understand their
range of choices, as well as the
dependencies and differences
between delivery models
The right IT delivery model depends
on what you are trying to optimize
IT Leaders must know what
contribution the enterprise
expects IT to optimize
Nothing can be optimized that is not
first identified
IT Leaders must drive performance
criteria that ensures optimization
goals are met
22
Plan For A Journey of Organizational Transformation
Define Portfolio
Benchmark Services
Acquire Prod. Mgrs.
Add Products
Self-Serve Portal
Add Prices, SLAs, Rpts.
Chargeback
Map to Services
ITIL/CMM-I
As is/to be
Reorganize Retool
Repeat (svc. mgmt. & bus. processes)
Repeat
Acquire RMs
Change Management
Formal Sales Mgmt., Service Mgmt., Mktg., Communication
Costs by Service
Market Price
Preliminary P&L
Sourcing Strategy
Solidify Profit & Loss
Outsource Weak Improve Par Market Core
Introduce P&L to Bus.
Pilot Pricing & Chgbck.
Full Chargeback
Market Price
Manage by Profit & Loss
Phase 1 — Plan Phase 2 — Pilot Phase 3 — Execute
Segment Market Process Measurement
Service
Process &
Structure
Relationship
Financial
Mgmt.
Sourcing
People Teach and Coach Process
Team-Based Performance Mgmt.
Self-Empowerment
Adjust Skill/Talent Portfolio
23
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.
24
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 Process-Optimizing IT Delivery Model, C.Young (G00213536)
Running IT Like a Business 2.0: The Service-Optimizing IT Delivery Model Colleen Young (G00213856)
Four Key IT Service Management Frameworks Colleen Young (G00210322)
