In This Chapter
If you've read the preceding five chapters of this book, you should have a good idea of what service management is and the role it can play in helping your organization respond to customers and manage change.
In this chapter, we delve into what it means to implement service management. We give you some examples of working across all aspects of business operations in an integrated way and show how you can use this approach to improve and extend the value of your company's brand.
A service, in many instances, is a way of delivering value to a customer by facilitating the customer's expected outcome. Effective service management is a way to ensure that outcome. It's also a way to prepare your company for disruptive change.
You're probably asking, "What does that mean−preparing your company for disruptive change?" Well, this isn't your father's (or mother's) service delivery world. In the old days, the service provider might count on minimal change in the services that it delivered. In today's markets, for most businesses, such market stability is absent. Consequently, service providers have to think differently. They have to think about how to leverage their assets and, perhaps, augment or integrate them to adapt for volatile market conditions and rising customer expectations. Service has become an area in which companies leapfrog competitors when they take new and innovative approaches to producing value from their existing assets. By enabling this services approach, they can help their customers get more value from their own assets. Service management is strategic.
Remember when video stores dominated the way customers watched movies? When you wanted to watch a movie, you went to a video-rental retail outlet; browsed the selection of movies on the shelves; and, if you were lucky, got to take home an enticing movie. This process was the normal process of video distribution for years. Companies that survived in that competitive market did the right things. These companies were pretty smart. They realized that they needed to have the right number of copies of the most popular releases. Some of them also offered guarantees: If a movie wasn't in stock, the customer could pick something else free of charge. They broadened their product range by renting related products such as videogames and even the game systems; they also sold candy, popcorn, soda, and other merchandise. In other words, they worked hard to improve the customer experience and to exceed customer expectations.
Then something unexpected happened. A company called Netflix introduced an alternative way of distributing movies, based on an innovative use of emerging IT that allowed the company to measure and optimize the customer experience. Rather than visiting a video store, Netflix customers can order their movies online for shipment within a few days. The company makes it simple to order, receive, and return movies. Netflix also provides a simple way to queue up for the most popular movies when they're first released. Needless to say, this company had a dramatic impact on customer expectations, although most competitors originally paid little attention and focused on business as usual.
Netflix didn't rest on its success; it built on it. In addition to sending physical discs through the mail, it decided to further leverage the Internet by giving customers the ability to watch movies on their computers or gaming systems in real time. Now customers don't have to wait for the mail or wait in line for the movies or TV shows they want to watch; those products are available on demand in the home.
How does this example relate to implementing service management? It shows that by monitoring and optimizing the services you provide your customers and stakeholders, you're in a position to make changes in your business model that set you ahead of the competition. By implementing service management techniques, you have more time and resources to devote to keeping up with market and technology changes. Also, if you've built a system that is flexible enough to allow for change, you should be able to respond to those market and technology changes by offering more innovative services.
The important thing to understand in this example is that the service that is ultimately delivered is the same in all distribution methods: The customer gets to enjoy watching a movie. The movie provider that was most successful, however, provided the service in the way that customers preferred.
When Netflix entered the market, it took an established idea and innovated on the delivery of the service. It replaced the traditional retail store with an online approach −an IT-enabled service. In many ways, the business service of getting movies into customers' hands requires similar business systems in the back office, whether the distribution is through traditional retail stores or online. Both types of organizations need systems to record customers' requests, both for billing and stocking purposes. They need an inventory system and quality control, along with the traditional set of back-office systems such as finance and human resources. When Internet technology evolved to the point at which streaming video to the household was possible, Netflix was able to change its business model again to take advantage of changing dynamics and technology evolution. Because of its ability to change dynamically, the company established strategic control of its service delivery.
To prevent confusion, we need to distinguish between a service strategy and a service management plan. For right now, we'll just say that a service strategy is your road map for the future, based on your business goals. After you figure out your strategy, you need a service management plan to execute that strategy on a tactical basis (see the following section). The two concepts may sound like they're the same thing, but they're just close friends.
When a company offers a distinctly new and different service or product, it can't know for sure whether its customers −or potential customers −will want it. If you start with a known desired outcome and work backward to determine how to achieve that outcome by better leveraging all existing assets, however, you have more assurance of success in the new service offering.
To continue the Netflix example, when the company decided to offer its customers a new service −streaming video −it went beyond trying to satisfy known customer demand for certain movies in certain formats and in certain capacities. The company moved to a plan to provide the desired outcome in a way that better leveraged all existing capabilities and resources. Many customers now have Internet connections with networked devices plugged into their TV sets at home, for example. Because the desired outcome is to enjoy a movie at home, the provider considers what assets it has and what assets the customer has, and then determines how to integrate everything in a new configuration to provide a new service.
Companies aren't always shooting in the dark. They leverage market research involving surveys and focus groups, and they have a pretty good idea of what customers think they want. Even so, it is entirely possible for any new product or service to be rejected −even by customers who, when asked, were convinced that they wanted or needed it.
Note
Be aware of the difference between what customers ask for and what they really want. Consider Henry Ford's experience in creating his horseless carriage. Ford's customers may have asked for horses that ran faster, ate less, and required less training and maintenance, but focusing on a desired outcome instead gave him more assurance of success. Customers really wanted to travel to certain destinations that were connected by roads or paths; they wanted to steer; they didn't want to walk; and they liked bringing other people and things with them. A good horse-and-cart combination was one route to the desired outcome, but a technology-enabled alternative was another.
Getting a plan wrong is expensive, and getting it right begins with a service strategy: a provider's plan for the services it will offer to customers and for delivering, marketing, and selling those services. One part of the Netflix service strategy, for example, is providing streaming video service to its customers.
In contrast to a service strategy, a service management plan defines how the provider will manage the services in the service strategy and road map. This plan is more complicated than it may sound. In the real world, companies typically work in silos (isolated implementations of services). IT operations in one division may have a separate service management implementation for a group of servers. Although silos and organization charts are convenient for internal order and control, they don't serve customers −and very often generate internal friction in the company that prevents customers from getting their desired outcomes.
Business management staffers use the data available to them to think great thoughts about the business and to formulate products and service strategies. They operate business units to provide −profitably and efficiently −products and services that will keep customer and stakeholder expectations satisfied. They plan for the future because they know that they'll need to innovate with new products and services. They also understand that they need to provide better management of the products and services they already offer. Their plans include how to get more value from all their capabilities and existing resources.
On another floor somewhere, IT management has its hands full operating the physical and virtual world of servers, applications, security, and the like. The typical IT organization sees itself as a systems support operation. (The same problem may occur in other aspects of enterprise operations.) But is this approach good enough? You probably anticipate at this point that the answer is no. Correct.
In the brave new world that has emerged, it isn't wise for business and the various flavors of enterprise and IT operations to operate as separate silos. They need to align better. Better alignment of all operations with the business always has a twofold meaning: Operations can help drive the cost out of business products and services, and it can help differentiate the business from its competitors. Technology-enabled services, for example, can reduce cost, improve quality, and help achieve specific business objectives. Technology improves a production line's efficiency and reduces costs at the same time that it helps the research-and-development department innovate. In fact, business and operations need to expand the scope of alignment to levels we've never seen before. Just look at the Netflix example. Is its business about enabling people to watch movies, or is it about service management? Is service management the supporting actor, or does it play a lead role? A business needs to provide new, innovative IT-enabled services, and at the same time, it needs to manage the cost and quality of those services so that the price and reliability provide a desirable outcome.
In many businesses nowadays, service management needs to have a leading role. Where would Netflix be as a company if it didn't monitor, measure, and optimize the way it offered its service to customers? Where would it be if it couldn't support its innovations? Probably out of business.
In the general sense, all service management plans should point in the same direction. The goal is for all facets of operations that play a contributing role in business services −IT, facilities, plant operations, network operations, and beyond −to align with the business more effectively.
You may think, "I've heard that cliché a million and one times. IT has been trying to align itself more effectively with the business since Adam got his first computer." So we'd probably better explain.
Figure 6-1 illustrates exactly what we mean. You start with managing the physical systems −be they systems of enterprise assets, smart assets, or IT assets. Then you focus on managing how all these systems relate to one another. Finally, you manage how these interconnected resources actually perform the series of processes required to satisfy the business goals.
In most organizations, the focus is on the management of systems −systems that individually don't serve customers. The services that customers value typically are complex configurations of capabilities and resources that span business and operational lines, all of which must work together to provide a desirable outcome before the customer sees sufficient value.
To fully align with the business, all flavors of operations must evolve to the point where all their respective activities focus on business performance management. The final goal is managing business performance effectively. Companies take different approaches to managing performance, depending on industry dynamics and potential innovation. To reach that goal, operations as a whole first has to evolve to the point where its activities can be accurately described as service management −where operations no longer focuses only on managing systems, but also focuses on managing the services that contribute to business performance.
That concept sounds simple −a two-step program from here to there. If that program were all that was involved, we could finish the book here. But service management is a little more complicated, as we describe in the rest of the chapter.
The scope of service management is broad and deep. Therefore, you need to have oversight of all the management processes and services, including how they work and what they actually do. You have to implement governance in the context of service management.
No matter how you organize a business, you end up with groups of people who have to collaborate and tools that have to integrate to serve the customer. Because these groups need to work together to serve customers, you need some mechanism beyond the internal controls within each group to provide the overall direction and control to ensure that the services meet customer and stakeholder requirements. You need to establish clear decision rights and accountability chains (who is allowed to make what decisions under what circumstances) for each management process and each service. Good service management requires clarity and transparency in the decision rights and accountability chains for directing, controlling, and executing each management process and service. Without this clarity and transparency, human behavior and decision-making within the service provider don't lead to outcomes that customers and stakeholders desire. The greatest risk that every service provider faces is human behavior and decisions that are out of alignment with stakeholder requirements.
We could continue to discuss the matter in this vein, but we can be a little simpler and refer to the models that we've already described. Service management is the set of management processes required to manage services. To explain what we mean, first we'll remind you what a service is and how it relates to service management.
Suppose that an organization creates a service that calculates the tax rate for an order. We'll call it the tax rate service. Service management is really the business manager, the controller, and the auditor combined. A piece of software ensures that the service calculates the order total according to company and government rules and then executes in an efficient manner. Although it would be nice to think that the company could use this automated program without any oversight or intervention, that scenario isn't possible. Service management, therefore, must involve people, standardized processes, and tools to manage the service across traditional operational boundaries to support a comprehensive business service and all its moving parts. Indeed, in discussing the Information Technology Infrastructure Library (ITIL) in Chapter 5, we outline a set of standardized IT-centric management processes that support one major operational constituent with a vested interest in business-aligned service management. On the road to success, however, all constituents −not just IT −must have a vested interest in the success of the business, and must govern and measure across operations to ensure the integrated management of business services.
Service management, like any other management discipline, requires measurement. The old axioms "What gets measured gets done," "Inspect what you expect," and "You can't manage what you don't know" still hold true. For every management process and every service, the provider needs management information. Key performance indicators (KPIs) track the agreed-to activities. Key goal indicators measure the progress made toward business objectives. Key cost and quality indicators also have to be measured; otherwise, the service provider is flying blind. Without some automation, managers would be up very late at night trying to figure out how everything is working!
Note
Effective automation is critical for managing service cost and quality, as well as for providing the information that you need for effective direction, control, and execution of services and service management. In most organizations, service management automation is poor; consequently, the management information just isn't available.
Figure 6-2 illustrates the service automation path that an operational department needs to traverse. It begins with automation, consisting of a set of fragmented services. Many IT departments find themselves in this situation. The next step from there is standardizing the foundations of service automation so that all service automation systems can talk to one another in a comprehensible way. That standardization establishes a basis for the integration of all services that contribute to the next step: overall service automation. The final step is optimizing across all those services.
That process seems to be simple: Assuming that you start with fragmented services, you simply follow a nice three-step process. If you're dealing with a tax collection service, you might make sure that it works effectively and does the right thing. So far, so simple. Don't forget, however, that this process becomes part of a service management plan, which complicates the matter.
Luckily, this situation translates into a pretty picture. Figure 6-3 illustrates the simple fact that the service management plan and service automation need to work together. The graph shows 12 areas of automation mapped against overall strategy. An organization can sit in any of those 12 areas. It may have highly developed service automation to the point of delivering an optimized service, yet any one operational team (such as facilities, plant operations, or network operations) may have limited vision in terms of its role in service management. The IT department may do nothing more than systems management, for example. Similarly, the company could have fragmented service automation but be fully focused on business performance management.
The usefulness of Figure 6-3 is that it helps with service management planning. It helps you define what management capability your organization needs to work on next.
Note
When we refer to service automation, we're referring directly to software. By contrast, service management also includes skilled staff members and standardized management processes. Both services and service management benefit from automation. Automation reduces human effort and labor costs. Reducing human effort also reduces human error that can hamper quality. Automation helps reduce cost and improve quality of service.
A service strategy needs to include a service management plan. The service strategy sets the business context for the service management plan, including the three interwoven strands: people, standardized processes, and tools that deliver automation.
When you're planning for implementation, here are five sets of questions that you should be able to answer about your road map:
With the changes happening in my industry, how agile is my approach to managing my physical and virtual assets? Can my company change quickly enough while protecting the integrity of oversight, if it needs to?
Can I manage my world if and when change comes? Does the organization see sufficient collaboration across groups and divisions? How is this collaboration exhibited in terms of people, processes, and automation?
Can I direct and control changes in my services if the inputs and outcomes are different? Do I have the right level of visibility and control?
Do I understand my management processes today? Can I adapt those processes to new business demands? Can I integrate those processes across the organization so that I get a complete view across my value chain? (A value chain is the sequence of business activities that links all important contributors to the company's success, such as suppliers and customers.)
Do I have a standards-based approach to service management to enable greater collaboration, not only across my own management domains, but also with my suppliers and customers? Do I have sufficient clarity and transparency in decision rights and accountability chains that I can change and innovate? Can I direct and control service management?
The vision of service management laid out in the service strategy can be daunting for many organizations. You have to worry not only about keeping the lights on and the processes operating efficiently, but also about keeping customers happy and preventing competitors from gaining an advantage. How ready are you to change, innovate, grow, and compete? This question isn't easy to answer, because it requires a certain level of assessment to determine the readiness of your organization. We lay out the framework for this assessment in Figure 6-3, earlier in this chapter, but the framework also includes the assessment of skills and standardized processes. As part of this assessment, you should ask the following sets of questions:
Where is the business value within my organization? Which assets (sets of capabilities and resources) produce my company's unique differentiation: my information, for example, or my distribution network? Can I measure these assets in terms of how they're designed to service customer needs?
Do I have a service management capability that enables my organization to change services quickly when the market demands innovation?
How well does my service management capability prepare me to control costs and quality while providing customers what they need? Do I have the technology in place to measure the customer's view of the value I'm offering and provide the detailed management information I need?
Do I understand both my service and service management gaps −areas where I lack the systems that can address problems but can't provide that capability? When I know where the business needs to be, can I direct and control the capabilities and resources required to get there?
This type of assessment is critical to your organization's ability to move forward. No organization should move to the adoption phase without a good, honest assessment of the current state of service management. The quickest route to ruin is acting without forethought.
Service management isn't a project or a product. You might say, "I really just want to go out and buy something and be done with it. I'm ready to manage change and become an agile company." If only life were that simple! Service management is a journey.
As we've discussed so far in this chapter, service management is a combination of vision, scope, and assessment. When you figure out where you are, you can begin to plan for where you want to be.
Unlike systems management, service management is about looking at business performance rather than just server or data center management. In a typical systems management scenario, you may look at an incident. You log the incident, work to figure out what caused that problem, and come up with either a work-around or a patch to repair the problem. You're done!
If you look at this same issue from a service management perspective, however, you're looking at the incident differently. You have to ask what the incident was all about: what type of incident it was, whether it was isolated to a particular piece of hardware, whether a critical service wasn't working properly, or whether the incident involved a network router or a potential disruption of a service.
Organizations need to think differently about how they deal with service disruptions. They need a combination of good tooling, skills, and information to manage services in context with the business problems that they're addressing.
To continue the Netflix example, suppose that the company is unable to stream a popular movie to its customers' computers or game boxes. The company needs to ask itself a variety of questions, such as what impact the incident will have on customer expectations; which services were affected (or potentially affected); and whether the organization has the process, skills, and tools required to manage this situation and others like it.
When planning a change, management needs to understand which services are potentially affected and what the business outcome will be, as well as whether the company has the service configuration information required to assess the effect of the change. All of a sudden, the challenge is very tangible and fundamental: How should these services be managed? In other words, the organization needs to look at manageability from many perspectives with the right business context. It needs well-constructed strategies for managing customer expectations in context with costs, competitive conditions, and operational effectiveness. All these issues require skills and good judgment.
To really understand service management, you also should understand service oriented architecture (SOA). We strongly recommend that you take a look at another book, Service Oriented Architecture For Dummies, 2nd Edition (Wiley Publishing, Inc.). (Yes, our team wrote that book too.) Why are we complicating things by bringing up SOA? We're not. We're trying to clarify the situation. We define service oriented architecture as a software architecture for building applications that implement business processes or services by using a set of loosely coupled, black-box components orchestrated to deliver a well-defined level of service.
Admittedly, this definition doesn't flow trippingly from the tongue, but from it springs a sustainable, reusable, extensible approach to business and technology that is already providing huge competitive advantages to organizations around the globe. Here are some of the principal characteristics of SOA that are important for service management:
SOA is a black-box component architecture. SOA deliberately hides complexity wherever possible, and the idea of the black box is integral to SOA. The black box enables the reuse of existing business applications by adding a fairly simple adapter to them, no matter how they were built.
SOA components are loosely coupled. One component passes data to another component and makes a request; the second component carries out the request and, if necessary, passes data back to the first. The emphasis is on simplicity and autonomy. Each component offers a small range of simple services to other components.
A set of loosely coupled components does the same work that tightly structured applications used to do, but you can combine and recombine the components in myriad ways to make the overall service infrastructure much more flexible.
SOA components are orchestrated to link through business processes to deliver a well-defined level of service. SOA creates a simple arrangement of components that collectively can deliver a very complex business service. Simultaneously, SOA must provide acceptable service levels. To that end, the architecture embodies components that ensure a dependable service level. Service level is tied directly to the best practices of conducting business, commonly referred to as business process management.
Because so many of the business applications that you have to manage are now built in this loosely coupled, modular fashion, service management needs to walk hand in hand with SOA. SOA becomes part of the architectural approach required to make the pieces of business services, processes, and operations work in coordination.
We've given you a lot to think about in this chapter. Your organization will have to take many steps in its journey toward a well-structured and well-managed service-based organization. Before you consider the goal of having a good handle on your managed services environment, however, you have to come up with a plan. You have to understand what makes your business and industry operate today and how those factors may change.
Achieving your goal of having a well-orchestrated, well-governed organization requires you to start with a vision of your end state and work backward. You have to understand what business you're in, how that business works today, and how it will change. You can start to understand your business as an ecosystem −more like biology than a series of steps. In biology, you work with sets of interconnected systems. Something that goes wrong in one system may affect the overall set. When you understand this philosophy, it's a lot easier to move away from looking at management as a set of independent steps.
In the next chapter, we provide some ideas for implementing a service management plan. Where you start depends largely on what you already have in place and how well coordinated you are on both the technical and management level. A service management plan has the potential to take your organization to a whole new level of sophistication. It requires some work in areas such as education, strategy, assessment, and design.