The ITIL 4 Foundation Certification exam study guide starts with this chapter. While Chapter 1 went into the nuances and history of ITIL, Chapter 2 provided an insight into the world of DevOps and its practices.
From this point on, I will not be referring to ITIL 4 but just ITIL. I will try and avoid comparing ITIL concepts against the incumbent version. All the comparisons and commentary are in Chapter 1.
In this chapter, you will learn about the underlying concepts of service management, which includes services and roles that are pivotal. I will further delve into value, outcomes, costs, and risks. The evergreen concept of marrying services with value is done under the banner of utility and warranty. Finally, I will talk about service relationships.
Beginning with this chapter, you can expect to see a few questions at the end of the chapter. These are the typical questions you can expect to see on your ITIL Foundation exam. Answer keys to the questions are provided at the end of the book.
Service Management
When you buy a product, say a smartphone, what are some of the things that you will consider? You would look at the features, brand, and price for sure. But what else comes up on the list? Perhaps service-related options such as cost of servicing, warranty, availability of service centers, parts covered under the service, and turnaround times are important. In fact, today, a brand gets its value not only from the products it has on the market but also on the service factor. Apple makes the most popular phone today in iPhone. What else makes the iPhone click? The international warranty, proximity to Apple stores across the globe, professional approach to fixing problems, and the no nonsense approach to keeping the customer happy are of foremost importance.
ITIL Definition of Service Management
A set of specialized organizational capabilities for enabling value for customers in the form of services.
The specialized organizational capabilities point to the technical maturity, experience, customer service, and management frameworks that the service provider brings to the table in servicing the customers, meeting their needs, and creating value.
In the ITIL Foundation examination, understanding the definition in verbatim is essential. Questions appear on the exam asking you to identify the correct definition of, say, service management. You will be in a position to do it only if you have memorized the definitions. Although I am not a big fan of memorizing anything, I would recommend that you do it from an examination standpoint.
The specialized organizational capabilities do not come easy. It is a long and arduous process to gain knowledge from past experiences, capabilities (skills), and a clear direction to move forward. Leadership in service management starts with identifying the nature of true value, reading the stakeholders accurately, and drawing boundaries of support and improvement.
Although service management is the core of the ITIL framework, it is very much a part of the complete framework of product management. We cannot look at service management without the context of a product. A product drives the service’s success. A lousy product, for example, clubbed with exemplary service does not influence the customer’s perception. Both need to walk hand in hand and tango like an Argentine.
Products and Services
The gulf between a product and a service has been closing since the dawn of the digital age. While we all know the basic difference between the two, such as a product being tangible and something that a customer can buy and potentially snap all ties with the manufacturer, a service is more about the relationship between a customer and a service provider. Services are generally intangible and time-bound.
The digital age has seen a trend where products are camouflaged and sold as services. In other words, products are no longer products—they are products in services’ form and shape—like a wolf in sheep’s clothing. Take for example the ever popular MS Office application. In my college days, I used to pay a certain sum and buy the application. I used it for a number of years until a new version came in and I discarded the old for the new. Today, this product from yesteryear is not sold as a product anymore. Well, you can buy it as a product but it is no longer a knight in shining armor. Office is sold in the garb of Office 365, where I pay a fraction of the money that I normally pay for the product, and I pay every month (or annually). The benefits (although over a period of time, I end up paying a whole lot more than the product itself) are the free upgrades and the number of licenses that I get with a single subscription— plus humongous amount of space on OneDrive. All that Microsoft had to do was repackage the product with some glitters and lollipops and they came out on the other side with a constant flow of revenue and substantial profits. Welcome to the digital age!
ITIL Definition of a Product
A configuration of an organization’s resources designed to offer value for a consumer.
It could be sold at a one-time price.
It can be leased or rented for a certain period of time.
The customer could use the product on a subscription basis.
People in an organization could work as contractors in a staff augmentation role.
No matter how the company offers its products, the end goal is to provide value through the resources that it has at its disposal.
ITIL Definition of a Service
A means of enabling value co-creation by facilitating outcomes that customers want to achieve, without the customer having to manage specific costs and risks.
The definition of a service is a wonderful reflection of how a service is created—not in isolation. No organization can claim to create value through a service without active involvement of the customer who is leveraging the service. In the preceding definition, a service enables value that is co-created by the service provider, the customer, and perhaps other parties as well.
Going back to the example of Office 365, how did it outweigh the benefits that the Office product offered? Office 365, although expensive with continuous usage over a period, is successful. It offers free product updates, and in the world we live in where people jump into upgrading to the latest wiz, this is a fairly good magnet. To top it off, multiple licenses are offered depending on the type of subscription. And in the age of cloud, an additional feature of 1TB of space on OneDrive is salivating. I have stopped buying hard drives since I bumped into Office 365 and several hundreds of GB is there at my disposal wherever I go. Imagine how I had to carry it with me on hard drives whenever my life as a management consultant required travel.
While I enjoy the service by paying a certain fee, I, as a customer, do not have the weight on my shoulders of bearing the risks that come with the service. The service provider owns the risks completely and does not expose the customer to it. Let us say a document was corrupted while being stored on OneDrive. It is the responsibility of Microsoft to take frequent backups to ensure that a customer does not end up losing it. What good is a service if it is not reliable, right? Likewise, a service consumes various individual costs—like costs for servers, specific licenses, developers, support personnel, etc. The service provider does not ask the customer to pay a certain percentage for each of these elements but rather a service cost for enjoying the services. In other words, the service provider works with their expenses and capital investments and identifies a fair value that the customer needs to shell out that is competitive, as well as ensuring that costs do not break the service provider’s bank. The second half of the service definition is about the service provider owning the risks and specific costs and not passing them directly to the customer.
Understanding what a service means is extremely critical to further progressing in the ITIL Foundation Certification study. If you still have lingering doubts, read the service definition again. Without a proper understanding of it, you will not be well placed to grasp the remaining concepts.
Organization
I mentioned earlier that value cannot be created in isolation. I meant that an organization creating value on its own is not possible; rather, with the support and feedback of other entities that consume the service, it is possible to create value. In this section let’s try to understand what an organization is.
An organization is an entity that is either made up of a single person or multiple people. It can be made up of a simple flat structure with numbers in tens and hundreds or be humongous multinationals in hundreds of thousands.
ITIL Definition of an Organization
A person or a group of people that has its own functions with responsibilities, authorities, and relationships to achieve its objectives.
An organization has its own set of objectives and they work toward a common goal, no matter how big and complex they are. Larger organizations tend to have multiple hierarchies, and with that comes the authorities and chain of command. Nevertheless, the objective they are trying to achieve does not change.
Service provider
Service consumer
A service provider is an organization that offers services to customers. Microsoft is the service provider and since I am paying for the services, I am the customer; and because I consume the services offered, I can also take on the role of a service consumer. On the other hand, when I take up a freelance job to conduct a DevOps feasibility assessment for Company Alpha, I put on the hat of a service provider while Company Alpha becomes the service consumer. To summarize, the organizational roles, service provider and service consumer, are contextual. The same organization plays the role of a service provider for a customer and can be the customer or a service consumer for another service provider. It is even possible that two organizations can play both service provider and service consumer roles for different sets of services. Say, for example, Microsoft provides Office 365 service for a telecom company like Verizon and could end up consuming Verizon’s fiber connectivity between two Microsoft offices. In this example, Microsoft and Verizon put on different hats for different sets of services.
Service provider and service consumer mutual relationship illustration
People Roles
Customer
Sponsor
User
ITIL Definition of a Customer
A person who defines the requirements for a service and takes responsibility for the outcomes of service consumption.
The customer is able to define the requirements because he/she knows how the outcome of the service is going to be leveraged to meet the business’ goals and objectives. Therefore, a lot of weight falls on the customer’s shoulder to give the right direction to the service development teams.
ITIL Definition of a Sponsor
A person who authorizes budget for service consumption.
ITIL Definition of a User
A person who uses services.
- 1.
A user leverages the service for the job that needs to be done.
- 2.
Most importantly, the user provides feedback on the service, which will be used as an input for improving the service. Remember the definition of a service where value is co-created. Users play their part in providing valuable feedback on the service and thereby help the customer in shaping the service.
Consider an example where a multinational organization decides to buy laptops to replace its aging fleet. Requirements for the laptop for the sake of this example will be defined by the CTO, who in this case is a customer. The sponsor, or the person who holds the budgetary approval, is the CFO. Based on the requirements, the cost of laptops varies and the CFO tallies the budget set aside for capital investment and decides if he can sponsor the laptops. When the laptops are procured, they are distributed to several employees who are the users. They don’t generally have a deciding say in the requirements, nor do they hold the keys to the money locker.
Tweaking this example to a mom and pop grocery shop, the convenience store owner has a desire to replace his laptop. He decides on a certain configuration. He knows exactly whether he can afford the laptop (although generally the authorization comes from the wife) that matches his needs. Finally, after buying it, he is the one who uses it. In this case the same person plays the role of a customer, sponsor, and user.
From this section (Service Management), you can expect a minimum of one question and a maximum of two questions to appear in your ITIL Foundation Certification exam.
Defining Value
How do you know that you have created value for the customer through IT services? There is no easy answer for this. Perhaps, if you were running a courier company, you could have confidently claimed that you delivered the tendered papers to a government organization, there were no delays, you charged economically, and you have quantified value to your customer.
What if you are running a service whose value cannot be quantified, like an insurance company where customers have not yet filed claims? How will the customer know that you have created value? You could say that you have given your customers peace of mind by covering all eventualities. But the reality is that you don’t know if the customer has perceived your definition of value.
Elements of value
ITIL Definition of Value
The perceived benefits, usefulness, and importance of something.
At the end of the day, what stands out when it comes to weighing value is perception, because as a wise man once said: “always deliver more in perceived value than you take in cash value.”
Although the actual business outcome that a customer gets and their preferences play a significant part in determining the value of a service, the perception of it trumps more often than not. Read the definition again. It says that rather than actual benefits, usefulness and importance of a service is secondary; how a customer sees it along with the inherent biases play a rather crucial role in determining the value of a service.
As I mentioned earlier in the chapter, value is not created in isolation. It is co-created between the service provider and the customer. There were days when the service provider developed services that perhaps could benefit the customer. It did in some cases and didn’t in the rest. This became a game of hit or miss. Today, it’s about surety. If a service provider is going to invest a certain amount of money, then it needs to know it is going to pull it off. So it becomes a partner with the customer rather than a service provider. This mere perception of seeing the service provider not as a service provider but as a partner (in crime!) does a world of difference in building trust that is the bedrock of value creation. The customer openly asks for what he wants and seeks advice where he needs. The service provider is no longer looking over his shoulder and opens up with ideas and sparks creating value. Thus value is born not from one entity but through the natural process of co-creation, like all of us are.
Here’s a real-life example of co-creating value. Nokia made some of the best and greatest cell phones during the 90s and early 2000s. With other players jumping into the market with innovations and Nokia sticking to its successful guns, it lost the market dearly. Then we know the story of Microsoft buying it out and plugging the Windows operating system into the Nokia infrastructure. These phones were terrible— not because of the hardware but due to a failed operating system.
Then the unthinkable happened. In a quest to reconquer the market, Nokia had to create value to its consumers. The hardware was great, so changing it was out of the question. Although Microsoft is defined through the Windows operating system, they decided to switch the Windows operating system with Android, a giant that was ruling the market in its clique and was and is a serious competitor to iOS.
By bringing two disparate entities together, Microsoft hoped to create value for its consumers. The end result although not chest thumping was better than its former experience. Value is about co-creating and with the customer playing a centric role.
Outcomes
ITIL Definition of Output
A tangible or intangible deliverable of an activity.
ITIL Definition of Outcome
A result for a stakeholder enabled by one or more outputs.
The customer bases their judgement on the outcomes that they can derive from a service. The objective that the customer can achieve because of the service is more important and pertinent compared to the actual output.
What is the difference between outcome and output you might ask!
Netflix is an entertainment service that provides on-demand video in the form of movies, TV shows, and documentaries. The outputs are these videos per se. Each of these movies or episodes of a TV show can be considered as outputs.
While outputs are tangible or measurable, outcomes are intangible. An outcome is generally a result based on one or more outputs. In this Netflix example, the outcome is whether you were thoroughly entertained or not, or whether you were able to bond with your kids over a family movie. This outcome could be because of one episode of a TV show such as “Anne with an E” or the entire season consisting of multiple episodes. Your entertainment taste is yours alone. You might have a wonderful time with this show, while the family next door hates the concept of a show that is based in the mid-1900s and prefers something scientific like “Star Trek: Picard.” You see that the same show that one customer loves might just not be a winner for another.
Remember that the services facilitate outcome through one or more outputs. The difference between an outcome and an output is a probable question on the exam. If you have any lingering doubts, read the section again.
Another aspect to remember with respect to outcomes is that the value proposition changes when the underlying or surrounding factors come into play. On a Sunday morning with the Wimbledon final being aired on live TV, the same “Star Trek: Picard” family will prefer to tune into the live TV rather than the recorded show. At that moment, due to the factors involved (a sport that they like), their preference has changed. Their perception of a service that is of value has changed.
While I end this section, regarding setting up of metrics—define metrics for the outcomes and not for the outputs. Nobody cares if Netflix has more than 10,000 movies on their shelf but what matters is its popularity with its viewers. Remember that unless you measure an outcome, you will never feel the true pulse of a customer.
Costs
ITIL Definition of Costs
The amount of money spent on a specific activity or resource.
As per the service definition, the customer purchases services for a certain price. This topic focuses on the elements that determine the cost of a service.
In any service organization, most expenses go toward employing people. People costs are calculated either on a monthly or a quarterly basis, and along with the other direct and indirect costs, the overall cost of a service is determined. A common terminology we employ in the IT industry for people is FTE, which stands for full time effort. A person’s FTE for a certain period is the factor that determines the cost of a service. For example, if we are calculating the costs for a monthly period, we use the term man months . The number of man months needed to deliver a service to a consumer plus the added direct and indirect costs determines the cost of a service.
- 1.
Direct costs that are imposed on the customer. The cost of the service itself comes under the direct costs, plus the consumer might be provided other bells and whistles like add-ons such as priority support and training that will be charged extra.
- 2.
Indirect costs are those costs that are generally behind the price of a service. This could include the cost of infrastructure, man hours, resources, or any of the other costs that are not directly imposed on the customer but rather charged under the guise of a service charge.
This is a competitive world. The service provider is wary of the service costs and more often than not, the costs are derived not only on the internal factors but also based on their competitors. While they try to keep the prices competitive, it is important for service providers and service consumers to be in a win-win service relationship. The service provider should not be in a position where he breaks his bank while he provides services. Think about Uber, which offered cheap rides to quickly gain market but in the process, they bled quite badly. The service consumer on the other hand should not feel that costs paid toward services are a burden but rather should view it as a necessary investment. This happens when the consumer perceives that the price paid is justified. So, to summarize on this, the costing of services must be commensurate with the market, the service expenses, and customers’ expectations.
From a consumer’s perspective, they need to analyze the service offered based on their needs. This will give them grounds to choose a service that is beneficial to them. I subscribe to the HP Instant Ink program wherein I do not pay directly for ink cartridges but pay on the number of pages that I print. When I started the program, I used to subscribe to 100 pages a month; after a couple of months, going through the reports available on their website, it was apparent to me that I was not even meeting half the target that I was paying for. So, I switched to a lower band where I paid a fraction of the costs for printing 50 pages a month. As a consumer, keeping tabs on the numbers helped me make a decision that saves me from unnecessary bills that I can avoid .
Risks
Risks are inherent in every business, including the business of providing IT services. The world’s most popular entrepreneurs would not have reached peaking heights if they had not taken risks at various instances. An IT service provider must take risks to come out on top.
ITIL Definition of Risk
A possible event that could cause harm or loss or make it more difficult to achieve objectives.
- 1.
There are risks that the service provider reduces or removes from a service. Let us consider the example of a cab-hailing service such as Uber. They reduce the risks and hazards of driving and parking in cities by providing point to point rides for a certain cost. Yet there are risks that a consumer might face: say, for example, the consumer’s data connection is lost. The consumer will lose the ability to book taxis. To mitigate it, an Indian company called Ola has a risk mitigator in booking taxis using the short messaging system.
- 2.
There are risks that are inherent with the service provider for which the impact on services would be felt by the service consumer. Considering the same example, say there are not any available cabs in the area. Although the cellphone and the Internet are working fine, the lack of cabs will render the service unusable.
Risk-Related Conversations
- 1.
Defining the requirements is an art. Customer organizations employ professional requirement consultants to define the requirements, including spelling out the risk appetite. When the desired outcomes are drafted, the risks that can possibly be defined and managed are also identified, discussed, and agreed by the customer and the service provider.
- 2.
While defining requirements and the desired outcomes, the customer needs to spell out what the critical success factors are and the constraints that are in place. For example, a customer employing an auditing agency might list timely delivery of audit reports as a critical success factor, and the government regulations that apply are identified as the constraints in place. The auditing agency (service provider) will have to work around the constraint rather than finding a solution to mitigate the constraint.
- 3.
It comes back to the customer and the service provider working hand in hand. Unless a customer trusts the service provider to have the best interests behind their actions, the mitigation of risks will not be entirely possible. The customer must come clean by stating all factors and providing accesses to all possible resources to make the service delivery successful. If a service provider is expected to work with a part of a business, the customer has to provide all the pertinent information such as stakeholder list, the underlying architecture, et al.
A critical success factor (CSF) is something that must happen if an IT service, process, plan, project, or other activity is to succeed.
Risk Mitigation Options
- 1.
Risk avoidance : In some cases, risks can be avoided or removed from the system. Either a risk can be removed or the probability of it happening can be negated. Example: The risk of infrastructure and connectivity uncertainties of service staff can be avoided by cancelling the work from home policy.
- 2.
Risk transfer : Where risks cannot be avoided, try to transfer it to a different party. Example: When you rent a car, it is possible that a minor windshield crack might result while traveling on motorways. Instead of coughing up outrageous sums to the rental company, you could buy excess insurance and transfer the risks of a windshield crack or any other damages to the insurance company. By paying a small amount, you are no longer liable for the damages and you have successfully transferred the risks to the insurance company.
- 3.
Risk mitigation : For an identified risk, it is possible to find a solution to counter it when it materializes. Example: Although servers are stable, there is always a risk one might freeze or crash. The application that is hosted on it will become unavailable. To mitigate this risk, you can either load balance the server between multiple servers or build a blue-green auto failover mechanism for a passive server to take over in case of active server failure.
- 4.
Risk acceptance : Suppose a risk cannot be mitigated or avoided, and no other party is ready for transferring it to them; you are left with no choice but to accept it. When the risk materializes, you will be ready to face the music. Example: The government announcing a lockdown of all businesses due to pandemics is unprecedented. Although disaster management mechanisms exist, such a global crisis does not spare any plans in place. In such cases, companies accept the risk and face the consequences .
Utility and Warranty
Utility and warranty logic diagram
Value creation logic gate
Fit for purpose refers to a service’s functionality. Does the service come with all the features and functions that it is supposed to carry? Does the service meet all the functional requirements? If yes, then one of the inputs into the AND gate will be True, and that takes us one step closer to creating value. A mobile service provider’s core service is to provide the ability to talk over cellular phones. If this is achieved, then we can consider it fit for purpose.
On the other hand, fit for use refers to the ability to make use of the service functionality. Through the service functionality, you are given the capability to achieve certain outcomes. But can you make use of the service? If you can, this input to the AND gate will be True. If fit for purpose is also True, then you create value. If any one of the inputs is False, then value cannot be created. It’s like having a mobile network and a capable mobile instrument but lacking sufficient bandwidth to allow you to slot your calls through. It’s like having a top-notch, state-of-the-art television set but no electricity to run it.
Value Creation Matrix
Fit for Purpose | Fit for Use | Value Created? |
|---|---|---|
TRUE | TRUE | YES |
TRUE | FALSE | NO |
FALSE | FALSE | NO |
FALSE | TRUE | NO |
Utility of a Service
ITIL Definition of Utility of a Service
The utility is the functionality offered by a product or a service to meet a particular need.
Utility of a service
- 1.
Performance supported
- 2.
Constraints removed
Conditions for a Service to be Fit for Purpose
Performance Supported? | Constraints Removed? | Fit for Purpose? |
|---|---|---|
TRUE | TRUE | YES |
TRUE | FALSE | YES |
FALSE | FALSE | NO |
FALSE | TRUE | YES |
For a service to create value, it needs to meet certain criteria. One such case is its performance. A service must inherently improve the performance of the business outcomes that the customer desires. For example, a mobile phone service must provide the customer efficiency to enable better communication.
The second criterion for which fit for purpose is applicable is the constraints that can be removed through the service. If the service can remove barricades for a customer, it might fulfill the terms of the service m being fit for the purpose. The mobile service provider, by providing the ability to make calls while you golf, removes the constraints that usually would exist if you had to stop midgame, head back to your office, and make the call. In this instance, the constraints have been removed through the service the mobile phone offers.
For a service to be fit for purpose, it should boost performance or remove the constraints. If it can do both, even better.
Warranty of a Service
ITIL Definition of Warranty of a Service
Warranty provides assurance that a product or a service will meet its agreed requirements.
- 1.
Is the service available when needed?
- 2.
Is there sufficient capacity available?
- 3.
Is the service continuous?
- 4.
Is the service secure?
Warranty of a service
Conditions for a Service to be Fit for Use
Available Enough? | Capacity Enough? | Continuous Enough? | Secure Enough? | Fit for Use? |
|---|---|---|---|---|
TRUE | TRUE | TRUE | TRUE | YES |
TRUE | TRUE | TRUE | FALSE | NO |
TRUE | TRUE | FALSE | TRUE | NO |
TRUE | FALSE | TRUE | TRUE | NO |
FALSE | TRUE | TRUE | TRUE | NO |
The following illustrations provide examples for each criterion that needs to be met for the service to be fit for use.
Available Enough?
You subscribe to a cell phone service and pay a premium for that service. You are now heading out on holiday. When you reach your resort, you are flabbergasted to see that the mobile service provider does not have coverage inside the resort. Is the service providing you any value, although the provider claimed to provide many features? Definitely not!
Capacity Enough?
You are stuck in a traffic jam. You want to call your partner to inform him that you won’t be joining him for dinner, thanks to the awful city traffic. You have service coverage, but the call does not go through. The service provider does not have sufficient capacity to handle calls from that particular cell tower. Even though there is coverage, if you are not able to make calls, is the service adding value? Nope.
Continuous Enough?
You are in the midst of the telephone round of an interview for a company based overseas. The call drops every few minutes, distracting you from the ideas you want to state and thereby causing you to lose your train of thought. The service has coverage and sufficient capacity, but is it giving you the value you perceive? Heck no!
Secure Enough?
You are calling your human resources department to discuss the appraisal your manager has given you. How would you feel if the conversation you are having from the confines of your home, with the HR person on a different continent, is accessible over the cloud by your manager? Is the service giving you value? You know the answer.
When we do service assessments, we typically look at the various aspects of service utility and service warranty and the risks that they are exposed to. Of course, the costs of a service are also considered during assessments.
To sum up from these examples, for the cell phone service warranty conditions to be met, the service must be available, have sufficient capacity, must be continuous, and must be secure. With any one of these elements not in place, the cell phone service is not fit for use and does not add value.
If you are not comfortable with logic gates and tables, from an examination standpoint, you are still safe. On the exam, your knowledge on the value creation formula will not be tested. But rather, the elements that make up a service and the meanings around a service being fit for purpose and fit for use are put up for scrutiny.
From this section (Value), you can expect a minimum of two questions and a maximum of three questions to appear in your ITIL Foundation Certification exam.
Service Offerings
Like a platter of dishes on a menu card, a service provider has a list of service offerings that is made available to customers. The service offerings are designed to provide options for a customer, keep the service provider’s service range attractive, and most importantly, it is meant to cater to all quarters of the customer’s needs.
ITIL Definition of a Service Offering
A formal description of one or more services, designed to address the needs of a target consumer group.
- 1.
The service provider’s products can be sold to the customer as goods, meaning it’s a one-time transaction where the goods are transferred from the service provider to the customer. When the transfer takes place, the responsibility of the upkeep of the product falls into the lap of the customer. Take, for example, when you purchase a laptop: the moment the product is handed over to you, you become responsible for how it’s maintained and used.
This option soon loses momentum, as the service provider has potentially seen the end of a service relationship and there is nothing holding the customer back. Take another example of car sales. It is becoming more and more apparent that dealerships are giving lucrative options to customers to lease a car rather than buying it outright.
- 2.
The second type of an offering is where the service provider provides access to customers to the service resources to be used under certain stated agreements. The management of the services still remains with the service provider, but the customer is free to use it under a set of terms and limitations.
Netflix and Amazon Prime are classic examples. The streaming services own the digital content and they allow customers to watch it anytime for a monthly fee. Likewise, the car leasing agreement is a type of subscription service where the customer shells out periodic costs for using the car. The customer is also relieved of servicing and other expensive responsibilities. By opting for it, the customer enjoys the car at a small fraction of a cost that is paid periodically (monthly generally) and does not have to worry about maintaining it. On the flip side, the customer will never become the (proud) owner of the automobile.
Using the same product, different variants of services can be offered by a service provider to embellish the service list. Using the same example, Netflix offers their entire list of streaming offerings in standard definition, which is the cheapest service offering, followed by HD and UHD at a higher price. Amazon Prime, apart from offering videos for streaming, offers movies and TV shows to rent and also to buy at a one-time price. Providing variants is beneficial for the service provider to aim at different customer sectors with focused content and add-ons. It is beneficial for customers because they only pay for what they need and not for all the bells and whistles that they don’t make use of.
- 3.
The last in the list of service offerings are service actions. They are the maintenance bit of the service offerings, such as providing product and warranty support.
Almost all products and services sold today come bagged with support and warranty. Without the added service actions, the product (goods) or service is not as valuable. Most service providers add the costs pertaining to service actions in the overall goods and services price to ensure that the customer does not feel the burden of purchasing service support and warranty separately.
The service support and warranty too come in variants. A customer could buy basic support where he ends up never talking to another human on the other side or pay more for phone support and even a field engineer to visit the home. Warranty likewise can be extended over additional periods of time for an extra cost.
The best way to understand the different types of service offerings is through the illustrations that I have offered. To reiterate, the first is purchasing a product such as a laptop, second is subscription based such as Netflix, and finally the third is service support and warranty.
Service Relationships
A service cannot flourish if it is developed in one organization and used by another. Service can only improve and meet the desired outcomes if it is a joint effort between the two entities. We have called this value getting co-created between the service provider and service consumer. For this value generation joint venture to happen, there must be trust between the two entities. The trust is built through a formidable partnership or service relationship where the service consumer is transparent about the needs, wants, and the constraints that are in place.
ITIL Definition of Service Relationships
A cooperation between a service provider and service consumer. Service relationships include service provision, service consumption, and service relationship management.
Service Provision
The service provider provisions services . In this section, I will list out the responsibilities of a service provider in service provisioning.
A service provider manages all the resources that are used in the delivery of services. This could include infrastructure, software, and facilities. Management of resources refers to the configuration management and the lifecycle of these assets.
Example: Netflix is responsible for maintaining a catalog of its content, managing the infrastructure that is used to host the content, the software behind it, the people who maintain it, and everything else that goes into the making of the video streaming service. The service provider is wholly responsible for this.
Based on the agreement with the customer, the service provider must provide accesses and has to ensure that the accesses remain active throughout the agreement term.
Example: Netflix has the responsibility to provide access to their video content based on the subscription that a customer chooses.
The service provider needs to keep a finger on the service’s pulse to check its performance and whether it is meeting the outcomes that the customer intends. The service provider also has to ensure that the service is improving on a regular basis and does not become stagnant.
Example: Netflix collects all the statistics that it can gather through its software and web interface. It knows which of its video content is popular and in which geography. This information is pertinent for the company to make business decisions—whether to axe or renew shows and the genre of content a majority would prefer. From a continuous improvement perspective, Netflix has to feed its customers with new content every week, improve the speeds through its content delivery networks, and improve the software’s navigation and cataloging system if it is to keep its flock together. Today there are several such services and Netflix does not have the luxury of taking its customers for granted.
Service actions such as service support must be made an inherent part of the service (based on the service agreement, that is). This could include email, phone, and chat support options. In case of goods procurement, it could also come with warranty and returning of goods.
The makeup of a service company is seen through the lens of its support. So any service provider that is in the business of service management needs to ensure that the service provided is top of the line. Good service actions will lead to continued business from its customers and good word of mouth will give them more sales.
Finally, the service provider is responsible for the supply (delivery) of the goods that are purchased by the customer. It is possible that the service provider might charge delivery charges from the customers. Yet, the responsibility of delivering it to the customer lies with the service provider.
Service Consumption
The service consumer/customer is expected to ensure that the resources necessary for users to enjoy the service are made available. For instance, let’s go with the Netflix example where the service provider offers millions of video content choices and the user from his end needs to ensure at a minimum that a working Internet and a smart TV/cell phone/computer is in place to enjoy the service.
When the service offered does not work as expected or if a new request needs to be placed, the service consumer is expected to utilize the service actions part of the service to get the request fulfilled or to get the service restored.
If dealing with goods, after the service provider ships out the goods, they need to be received to complete the service transaction. This is similar to receiving a package from Amazon .
Service Relationship Model
At the beginning of this section I spoke about service relationship. These are the activities that can be performed together for co-creating value and for both parties to be able to gain benefits from the business transaction.
Service relationship model
Each of the set of gears refers to the cog wheels that make a service happen, either in provision or consumption. Let us start from the right with the illustration that I have used so far on this topic—Netflix service for video streaming. The viewer is a service consumer in this example, and has a service relationship with Netflix as a video streaming provider.
While Netflix plays service provider to the viewer, it consumes content delivery network services offered by Akamai. In this relationship, Netflix is a service consumer while Akamai is a service provider.
Moving on, Akamai consumes services from Microsoft Azure for its datacenter needs. So in this relationship, Akamai, which played service provider to Netflix, is putting on the hat of a service consumer and Microsoft Azure as a service provider. It is also possible that the viewer is a DevOps consultant who is hired by Microsoft to conduct a feasibility check. If this is the case, then Microsoft Azure becomes a service consumer for the viewer who becomes a service provider.
From this section (Service Offerings and Service Relationships), you can expect one question to appear in your ITIL Foundation Certification exam.
Knowledge Check
- 3-1.
Which definition is this referring to?
A person or a group of people that has its own functions with responsibilities, authorities, and relationships to achieve its objectives.- A.
Sponsor
- B.
Service Provider
- C.
Organization
- D.
Customer
- A.
- 3-2.Which of the following factors matter for a service to be fit for purpose?
- A.
Warranty
- B.
Utility
- C.
Value
- D.
Continuity
- A.
- 3-3.Who am I if I am transparent about my needs, wants, and the constraints that are in place?
- A.
Service Provider
- B.
Service Consumer
- C.
Service Organization
- D.
Service Requester
- A.
- 3-4.Which of these are related to results for a stakeholder?
- A.
Output
- B.
Risks
- C.
Outcome
- D.
Warranty
- A.
- 3-5.Which of these is not an example of a service offering?
- A.
Providing access to service provider’s resources
- B.
Goods receivable
- C.
Service actions like raising incidents
- D.
Amount of money spent on a specific activity
- A.