ITIL Foundation ITIL 4 Edition PDF

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P002959377 c10 02/19 4 Contents Welcome to ITIL 4 About this publication 1 Introduction 1.1 IT service management in the modern world 1.2 About ITIL 4 1.3 The structure and benefits of the ITIL 4 framework 1.3.1 The ITIL SVS 1.3.2 The four dimensions model 2 Key concepts of service management 2.1 Value and value co-creation 2.1.1 Value co-creation 2.2 Organizations, service providers, service consumers, and other stakeholders 2.2.1 Service providers 2.2.2 Service consumers 2.2.3 Other stakeholders 2.3 Products and services 2.3.1 Configuring resources for value creation 2.3.2 Service offerings 2.4 Service relationships 2.4.1 The service relationship model 2.5 Value: outcomes, costs, and risks 2.5.1 Outcomes 2.5.2 Costs 2.5.3 Risks 2.5.4 Utility and warranty 2.6 Summary 3 The four dimensions of service management 3.1 Organizations and people 3.2 Information and technology 3.3 Partners and suppliers 3.4 Value streams and processes 3.4.1 Value streams for service management 5 3.4.2 Processes 3.5 External factors 3.6 Summary 4 The ITIL service value system 4.1 Service value system overview 4.2 Opportunity, demand, and value 4.3 The ITIL guiding principles 4.3.1 Focus on value 4.3.2 Start where you are 4.3.3 Progress iteratively with feedback 4.3.4 Collaborate and promote visibility 4.3.5 Think and work holistically 4.3.6 Keep it simple and practical 4.3.7 Optimize and automate 4.3.8 Principle interaction 4.4 Governance 4.4.1 Governing bodies and governance 4.4.2 Governance in the SVS 4.5 Service value chain 4.5.1 Plan 4.5.2 Improve 4.5.3 Engage 4.5.4 Design and transition 4.5.5 Obtain/build 4.5.6 Deliver and support 4.6 Continual improvement 4.6.1 Steps of the continual improvement model 4.6.2 Continual improvement and the guiding principles 4.7 Practices 4.8 Summary 5 ITIL management practices 5.1 General management practices 5.1.1 Architecture management 5.1.2 Continual improvement 5.1.3 Information security management 5.1.4 Knowledge management 5.1.5 Measurement and reporting 5.1.6 Organizational change management 6 5.1.7 Portfolio management 5.1.8 Project management 5.1.9 Relationship management 5.1.10 Risk management 5.1.11 Service financial management 5.1.12 Strategy management 5.1.13 Supplier management 5.1.14 Workforce and talent management 5.2 Service management practices 5.2.1 Availability management 5.2.2 Business analysis 5.2.3 Capacity and performance management 5.2.4 Change control 5.2.5 Incident management 5.2.6 IT asset management 5.2.7 Monitoring and event management 5.2.8 Problem management 5.2.9 Release management 5.2.10 Service catalogue management 5.2.11 Service configuration management 5.2.12 Service continuity management 5.2.13 Service design 5.2.14 Service desk 5.2.15 Service level management 5.2.16 Service request management 5.2.17 Service validation and testing 5.3 Technical management practices 5.3.1 Deployment management 5.3.2 Infrastructure and platform management 5.3.3 Software development and management End note: The ITIL story, one year on Appendix A: Examples of value streams Further research Glossary Acknowledgements 7 Welcome to ITIL 4 At this new stage in the development of the IT industry, AXELOS is delighted to present ITIL 4, the latest step in the evolution of IT best practice. By building on our experience and bringing fresh and forward-looking thinking to the marketplace, ITIL 4 equips your business to deal with the challenges currently faced by the industry. The adoption of ITIL as the most widely used guidance in the world on IT service management (ITSM) will continue with ITIL 4. It ensures continuity with existing ways of working (where service management is already successful) by integrating modern and emerging practices with established and proven know-how. ITIL 4 also provides guidance on these new methods to help individuals and organizations to see their benefits and move towards using them with confidence, focus, and minimal disruption. ITIL 4’s holistic approach raises the profile of service management in organizations and industries, setting it within a more strategic context. Its focus tends to be on end-to-end product and service management, from demand to value. ITIL 4 is the result of a great amount of global research and development work across the IT and service management industries; this work has involved active practitioners, trainers, consultants, vendors, technicians, and business customers. The architect team has collaborated with the wider stakeholders and users of ITIL to ensure that the content meets the modern requirements of continuity, innovation, flexibility, and value. ITIL training provides individuals with a structured approach for developing their competencies in the current and future workplace. The accompanying guidance also helps organizations to take advantage of the new and upcoming technologies, succeed in making their digital transformations, and create value as needed for themselves and their customers. ITIL Foundation is the beginning of your ITIL 4 journey. It will open your mind to the wider, more advanced guidance provided in the other ITIL publications and training that will support your growth and development. Welcome to the new generation of IT best practice! 8 Mark Basham CEO AXELOS Global Best Practice 9 About this publication ITIL Foundation is the first publication of ITIL 4, the latest evolution of the most widely adopted guidance for ITSM. Its audience ranges from IT and business students taking their first steps in service management to seasoned professionals familiar with earlier versions of ITIL and other sources of industry best practice. ITIL 4 Foundation will: provide readers with an understanding of the ITIL 4 service management framework and how it has evolved to adopt modern technologies and ways of working explain the concepts of the service management framework to support candidates studying for the ITIL 4 Foundation exam act as a reference guide that practitioners can use in their work, further studies, and professional development. We hope you will find it useful. About the ITIL story The guidance provided in this publication can be adopted and adapted for all types of organization and service. To show how the concepts of ITIL can be practically applied to an organization’s activities, ITIL Foundation follows the exploits of a fictional company on its ITIL journey. This company, Axle Car Hire, is undergoing a transformation to modernize its services and improve its customer satisfaction and retention levels, and is using ITIL to do this. In each chapter of the text, the employees of Axle will describe how the company is improving its services, and explain how they are using ITIL best practice to do this. ITIL storyline sections appear throughout the text, separated by a distinct border. Axle Car Hire Axle Car Hire is a global company, with its headquarters based in Seattle. Axle was formed 10 years ago, and currently employs approximately 400 staff across Europe, the US, and Asia-Pacific. Initially, the company experienced strong growth and consistently high customer satisfaction ratings. For the first six years, repeat business accounted for around 30 10 per cent of all bookings. Shareholders could expect handsome quarterly dividends. However, over the past four years, the company has experienced a downturn. Customer satisfaction ratings have consistently declined and repeat bookings are rare. Competitors are offering new and innovative options to traditional vehicle hire. Car-pooling, ride-share, and driverless cars are big draws. Customers have also come to expect online and app interfaces as standard for the company’s services. In this evolving market, Axle Car Hire faces an uncertain future. The board is keen to improve customer satisfaction levels. They want to attract and retain customers, and improve the company’s bottom line. They’ve appointed a new CIO, Henri. Henri was chosen for his experience in digitalized services and his track record in successful, large-scale IT transformations. He understands the impact of digital service offerings, not only for customer satisfaction levels, but also for employee retention rates. Henri’s strong background in ITIL and ITSM means that he values ITIL certification, and his hiring policy reflects this. Having worked with Design Thinking, DevOps, and Agile methodologies, he believes sustainable business requires a blended approach to ITSM. Henri is keen to see how his team can redefine the car-hire experience and ensure that Axle Car Hire is the first choice for new and existing customers. Meet the Axle employees Here are four key employees of Axle Car Hire: Henri Is the new CIO of Axle Car Hire. He is a successful business executive who’s prepared to shake things up. He believes in an integrated approach to ITSM. Su Is the Axle Car Hire product manager for travel experience, and has worked for Axle for the past five years. Su is smart, meticulous, and passionate about the environment. Radhika Is the Axle Car Hire IT business analyst, and it is her job to understand the user requirements of Axle Car Hire staff and customers. She is inquisitive and energetic, and strives to maintain a positive relationship with all her customers, both internal and external. Radhika works mostly on discovery and planning activities, rather than in IT operations. She asks a lot of questions and is great at spotting patterns and trends. Marco Is the Axle Car Hire IT delivery manager. He is process-driven and continually references the ITIL framework to help him manage positive service relationships. However, Marco has had little exposure to a blended or collaborative approach to service management. 11 CHAPTER 1 INTRODUCTION 12 1 Introduction 1.1 IT service management in the modern world According to the World Trade Organization,1 services comprise the largest and most dynamic component of both developed and developing economies. Services are the main way that organizations create value for themselves and their customers. Almost all services today are IT-enabled, which means there is tremendous benefit for organizations in creating, expanding, and improving their IT service management capability. Technology is advancing faster today than ever before. Developments such as cloud computing, infrastructure as a service (IaaS), machine learning, and blockchain have opened fresh opportunities for value creation, and led to IT becoming an important business driver and source of competitive advantage. In turn, this positions IT service management as a key strategic capability. To ensure that they remain relevant and successful, many organizations are embarking on major transformational programmes to exploit these opportunities. While these transformations are often referred to as ‘digital’, they are about more than technology. They are an evolution in the way organizations work, so that they can flourish in the face of significant and ongoing change. Organizations must balance the need for stability and predictability with the rising need for operational agility and increased velocity. Information and technology are becoming more thoroughly integrated with other organizational capabilities, silos are breaking down, and cross-functional teams are being utilized more widely. Service management is changing to address and support this organizational shift and ensure opportunities from new technologies, and new ways of working, are maximized. Service management is evolving, and so is ITIL, the most widely adopted guidance on IT service management (ITSM) in the world. 1.2 About ITIL 4 ITIL has led the ITSM industry with guidance, training, and certification programmes for more than 30 years. ITIL 4 brings ITIL up to date by re-shaping much of the established ITSM practices in the wider context of customer experience, value streams, and digital transformation, as well as embracing new ways of working, such as Lean, Agile, and DevOps. 13 ITIL 4 provides the guidance organizations need to address new service management challenges and utilize the potential of modern technology. It is designed to ensure a flexible, coordinated and integrated system for the effective governance and management of IT-enabled services. 1.3 The structure and benefits of the ITIL 4 framework The key components of the ITIL 4 framework are the ITIL service value system (SVS) and the four dimensions model. 1.3.1 The ITIL SVS The ITIL SVS represents how the various components and activities of the organization work together to facilitate value creation through IT-enabled services. These can be combined in a flexible way, which requires integration and coordination to keep the organization consistent. The ITIL SVS facilitates this integration and coordination and provides a strong, unified, value-focused direction for the organization. The structure of the ITIL SVS is shown in Figure 1.1, and is repeated in Chapter 4, where it is described in more detail. The core components of the ITIL SVS are: the ITIL service value chain the ITIL practices the ITIL guiding principles governance continual improvement. The ITIL service value chain provides an operating model for the creation, delivery, and continual improvement of services. It is a flexible model that defines six key activities that can be combined in many ways, forming multiple value streams. The service value chain is flexible enough to be adapted to multiple approaches, including DevOps and centralized IT, to address the need for multimodal service management. The adaptability of the value chain enables organizations to react to changing demands from their stakeholders in the most effective and efficient ways. The flexibility of the service value chain is further enhanced by the ITIL practices. Each ITIL practice supports multiple service value chain activities, providing a comprehensive and versatile toolset for ITSM practitioners. 14 Figure 1.1 The service value system The ITIL guiding principles can be used to guide an organization’s decisions and actions and ensure a shared understanding and common approach to service management across the organization. The ITIL guiding principles create the foundation for an organization’s culture and behaviour from strategic decision- making to day-to-day operations. The ITIL SVS also includes governance activities that enable organizations to continually align their operations with the strategic direction set by the governing body. Every component of the ITIL SVS is supported by continual improvement. ITIL provides organizations with a simple and practical improvement model to maintain their resilience and agility in a constantly changing environment. 1.3.2 The four dimensions model To ensure a holistic approach to service management, ITIL 4 outlines four dimensions of service management, from which each component of the SVS should be considered. The four dimensions are: organizations and people information and technology partners and suppliers value streams and processes. By giving each of the four dimensions an appropriate amount of focus, an organization ensures its SVS remains balanced and effective. The four dimensions are described in Chapter 3. 15 The ITIL story: The CIO’s vision for Axle Henri: These days, the pace of industry change is rapid, with the term ‘Fourth Industrial Revolution’ now widely used. Companies such as Axle are competing with disruptors that include driverless cars and car share. Service expectations have changed since Axle was created 10 years ago. Customers want immediate access to services via apps and online services. Axle’s booking app is out of date, and our technology isn’t keeping pace with changes in our service offerings. My vision for Axle is that we become the most recognized car-hire brand in the world. We’ll continue to offer outstanding customer service while maintaining competitive car-hire rates. After all, Axle is now about more than just hiring a vehicle. We must focus on our customers’ whole travel experience. Footnote: 1 https://www.wto.org/english/tratop_e/serv_e/serv_e.htm 16 CHAPTER 2 KEY CONCEPTS OF SERVICE MANAGEMENT 17 2 Key concepts of service management A shared understanding of the key concepts and terminology of ITIL by organizations and individuals is critical to the effective use of this guidance to address real-world service management challenges. To that end, this chapter explains some of the most important concepts of service management, including: the nature of value and value co-creation organizations, service providers, service consumers, and other stakeholders products and services service relationships value: outcomes, costs, and risks. These concepts apply to all organizations and services, regardless of their nature and underpinning technology. But the first thing that must be outlined is the most fundamental question of all: What is ‘service management’? Definition: Service management A set of specialized organizational capabilities for enabling value for customers in the form of services. Developing the specialized organizational capabilities mentioned in the definition requires an understanding of: the nature of value the nature and scope of the stakeholders involved how value creation is enabled through services. The ITIL story: Axle’s services Su: At Axle, our service is travel experience. We provide this service to our customers to create value both for them and for Axle. Service management helps us to realize this value. 18 The ITIL story: Axle’s customers Here are three of Axle Car Hire’s frequent customers, whom you will meet as the story unfolds: Ichika Is a university student on holiday with no fixed plans. She hopes to visit music festivals as part of her travel experience. Apart from that, her travel is flexible. She is tech-savvy and quickly adapts to new applications and solutions. She is interested in trying new and exciting digital services. Faruq Is recently retired and typically holidays alone. He is thoughtful and enjoys learning about and adopting new technology. Faruq often makes his travel plans on the go, as his needs can change, based on personal or health considerations. Amelia Is the facilities manager at an organic food distribution company called Food for Fuel. Their head office is in central London, but many Food for Fuel consumers are in regional areas. This means access by public transport is typically infrequent, unreliable, and expensive. Consequently, Food for Fuel provides its sales staff with vehicles to enable them to conveniently and reliably visit existing and potential customers. 2.1 Value and value co-creation Key message The purpose of an organization is to create value for stakeholders. The term ‘value’ is used regularly in service management, and it is a key focus of ITIL 4; it must therefore be clearly defined. Definition: Value 19 The perceived benefits, usefulness, and importance of something. Inherent in this definition is the understanding that value is subject to the perception of the stakeholders, whether they be the customers or consumers of a service, or part of the service provider organization(s). Value can be subjective. 2.1.1 Value co-creation There was a time when organizations self-identifying as ‘service providers’ saw their role as delivering value to their customers in much the same way that a package is delivered to a building by a delivery company. This view treated the relationship between the service provider and the service consumer as mono-directional and distant. The provider delivers the service and the consumer receives value; the consumer plays no role in the creation of value for themselves. This fails to take into consideration the highly complex and interdependent service relationships that exist in reality. Increasingly, organizations recognize that value is co-created through an active collaboration between providers and consumers, as well as other organizations that are part of the relevant service relationships. Providers should no longer attempt to work in isolation to define what will be of value to their customers and users, but actively seek to establish mutually beneficial, interactive relationships with their consumers, empowering them to be creative collaborators in the service value chain. Stakeholders across the service value chain contribute to the definition of requirements, the design of service solutions and even to the service creation and/or provisioning itself (see section 4.5). The ITIL story: Value Marco: We’re planning to release a generous new offering, giving an extra day of car hire with every booking. Henri: However, we must remember that value means different things for different people. Axle has a broad range of customers, and each of them has their own requirements for car hire. We need to make sure that any changes to our services are actually providing some type of value to our customers. Ichika: To me, ‘value’ means freedom of movement. I want my travel to be easy, hassle-free, and flexible. I opt in to mailing lists and subscriptions when it suits me. I take frequent short trips and rarely visit the same location twice. An extra day of car hire won’t always suit my plans. Faruq: I don’t travel often, so I don’t have my own car. The value of a car-hire 20 service for me is the on-demand availability of a car that suits my needs. I spend less money on car hire each year than it would cost me to maintain and run my own car. Value means it meets my budget. Being retired means I’m flexible, with very few commitments or deadlines. When I’m on holiday, I only plan a few days ahead. An extra day of car hire offers real value to me. Amelia: The value of car hire for my organization, Food for Fuel, is two-fold. First, we need the ability to reach our customers. Second, we’re keen to lower our costs and risks by hiring cars instead of running our own fleet. As a regular customer who books car hire on behalf of my sales reps and staff, I value a consistent and reliable standard of service. Travel and car hire at Food for Fuel is pre-planned and typically only requires daily hire. There’s not much value in an extra day of car hire for my organization. Henri: We also have to think about how value is created for Axle. The most obvious value we receive when we hire out our cars is revenue. For our service consumers, value includes easy access to a vehicle when they need it, without the overall expense of car ownership. In both cases, we need a combination of the two for the value to be realized. In that way, we co-create value through our service relationships. Value will be explored in greater depth later in this chapter. Before that, however, it is important to outline the various stakeholders who are involved in value co- creation and the language used in ITIL to describe them. 2.2 Organizations, service providers, service consumers, and other stakeholders In service management there are many different kinds of stakeholder, each of which must be understood in the context of the creation of value in the form of services. First, the term ‘organization’ needs to be defined. Definition: Organization A person or a group of people that has its own functions with responsibilities, authorities, and relationships to achieve its objectives. 21 Organizations vary in size and complexity, and in their relation to legal entities, from a single person or a team to a complex network of legal entities united by common objectives, relationships, and authorities. As societies and economies evolve, the relationships between and within organizations become more complex. Each organization depends on others in its operation and development. Organizations may hold different roles, depending on the perspective under discussion. For example, an organization that coordinates adventure vacations can fill the role of a service provider to a travel agent when it sells a vacation, while simultaneously filling the role of service consumer when it purchases airport transfers to add to their vacation packages. 2.2.1 Service providers Key message When provisioning services, an organization takes on the role of the service provider. The provider can be external to the consumer’s organization, or they can both be part of the same organization. In the most traditional views of ITSM, the provider organization is seen as the IT department of a company, and the other departments or other functional units in the company are regarded as the consumers. This is, however, only one very simple provider-consumer model. A provider could be selling services on the open market to other businesses, to individual consumers, or it could be part of a service alliance, collaborating to provide services to consumer organizations. The key is that the organization in the provider role has a clear understanding of who its consumers are in a given situation and who the other stakeholders are in the associated service relationships. The ITIL story: Service providers Henri: Axle Car Hire acts as a service provider. We provide cars for hire. At the same time, other organizations, such as mechanics and the companies that we buy our cars from, act as service providers for Axle. 22 2.2.2 Service consumers Key message When receiving services, an organization takes on the role of the service consumer. Service consumer is a generic role that is used to simplify the definition and description of the structure of service relationships. In practice, there are more specific roles involved in service consumption, such as customers, users, and sponsors. These roles can be separate or combined. Definitions Customer A person who defines the requirements for a service and takes responsibility for the outcomes of service consumption. User A person who uses services. Sponsor A person who authorizes budget for service consumption. For example, if a company wishes to purchase mobile phone services for its employees from a wireless carrier (the service provider), the various consumer roles may be distributed as follows: The chief information officer (CIO) and key communications team members fill the role of customer when they analyse the mobile communications requirements of the company’s employees, negotiate the contract with the wireless carrier and monitor the carrier’s performance against the contracted requirements. The chief financial officer (CFO) fills the role of the sponsor when they review the proposed service arrangement and approve the cost of the contract as negotiated. The employees (including the CIO, CFO, and communications team members) fill the role of users when they order, receive, and use the mobile phone services as 23 per the agreed contract. In another example, an individual private consumer of the same wireless carrier (a person using the mobile network) simultaneously acts as a user, customer, and sponsor. The ITIL story: Axle’s service consumers Su: Our most obvious service consumers are the people and organizations who hire our cars, visit our offices, and use our website and booking app. For example, Ichika and Faruq are service consumers, and so is Food for Fuel. They are also our customers. Radhika: Users are the people who make use of our services. Our car-hire users are the drivers and passengers in our vehicles. Marco: Sponsors are the people who authorize budgets. For Axle Car Hire, our sponsors include Amelia from Food for Fuel, who approves the travel budget even if she doesn’t travel herself. Henri: Individual service consumers such as Ichika and Faruq approve their own budgets, define their requirements for car hire, and drive the cars. Therefore, Ichika and Faruq act as sponsors, customers, and users. Sometimes, though, they may share the trip with fellow drivers (friends or family members). In this case, their contracts will include other users. It is important to identify these roles in service relationships to ensure effective communication and stakeholder management. Each of these roles may have different, and sometimes even conflicting, expectations from services, and different definitions of value. 2.2.3 Other stakeholders A key focus of service management, and of ITIL, is the way that organizations co- create value with their consumers through service relationships. Beyond the consumer and provider roles, there are usually many other stakeholders that are important to value creation. Examples include individual employees of the provider organization, partners and suppliers, investors and shareholders, government organizations such as regulators, and social groups. For the success, and even the continued existence of an organization, it is important that relationships with all key stakeholders are understood and managed. If stakeholders are unhappy with what the organization does or how it does it, the provider’s relationships with its consumers can be in jeopardy. 24 Products and services create value for stakeholders in a number of ways. Some are quite direct such as the generation of revenue, while others are more indirect such as employee experience. Table 2.1 provides examples of value for several different types of stakeholder. Detailed recommendations on the management of value for different stakeholders can be found in other ITIL 4 publications and supplementary materials. Table 2.1 Examples of value for different types of stakeholder Stakeholder Example of value for stakeholder Service consumers Benefits achieved; costs and risks optimized Service provider Funding from the consumer; business development; image improvement Service provider employees Financial and non-financial incentives; career and professional development; sense of purpose Society and community Employment; taxes; organizations’ contribution to the development of the community Charity organizations Financial and non-financial contributions from other organizations Shareholders Financial benefits, such as dividends; sense of assurance and stability 2.3 Products and services The central component of service management is, of course, the service. The nature of services will now be considered, and an outline given of the relationship between a service and a product. 2.3.1 Configuring resources for value creation Key message The services that an organization provides are based on one or more of its products. Organizations own or have access to a variety of resources, including people, information and technology, value streams and processes, and partners and suppliers. Products are configurations of these resources, created by the organization, that will potentially be valuable for its customers. 25 Definitions Services 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. Product A configuration of an organization’s resources designed to offer value for a consumer. Each product that an organization offers is created with a number of target consumer groups in mind, and the products will be tailored to appeal to, and meet the needs of, these groups. A product is not exclusive to one consumer group, and can be used to address the needs of several different groups. For example, a software service can be offered as a ‘lite’ version, for individual users, or as a more comprehensive corporate version. Products are typically complex and are not fully visible to the consumer. The portion of a product that the consumer actually sees does not always represent all of the components that comprise the product and support its delivery. Organizations define which product components their consumers see, and tailor them to suit their target consumer groups. 2.3.2 Service offerings Key message Service providers present their services to consumers in the form of service offerings, which describe one or more services based on one or more products. 26 Definition: Service offering A formal description of one or more services, designed to address the needs of a target consumer group. A service offering may include goods, access to resources, and service actions. Service offerings may include: goods to be supplied to a consumer (for example, a mobile phone). Goods are supposed to be transferred from the provider to the consumer, with the consumer taking the responsibility for their future use access to resources granted or licensed to a consumer under agreed terms and conditions (for example, to the mobile network, or to the network storage). The resources remain under the provider’s control and can be accessed by the consumer only during the agreed service consumption period service actions performed to address a consumer’s needs (for example, user support). These actions are performed by the service provider according to the agreement with the consumer. Examples of different types of service offering are shown in Table 2.2. Services are offered to target consumer groups, and those groups may be either internal or external to the service provider organization. Different offerings can be created based on the same product, which allows it to be used in multiple ways to address the needs of different consumer groups. For example, a software service can be offered as a limited free version, or as a comprehensive paid-for version, based on one product of the service provider. Table 2.2 Components of a service offering Component Description Examples Goods Supplied to the consumer A mobile phone Ownership is transferred to the consumer A physical server Consumer takes responsibility for future use Access to resources Ownership is not transferred to the Access to the mobile network, consumer or to network storage Access is granted or licensed to the consumer under agreed terms and conditions The consumer can only access the resources during the agreed consumption period and according to other agreed service terms Service actions Performed by the service provider to User support address a consumer’s needs Replacement of a piece of Performed according to an agreement equipment with the consumer 27 The ITIL story: Axle’s service offerings Su: Axle’s service offerings include car hire and the various options we provide to address different travel needs. These offerings include discounted insurance, a loyalty programme, and complimentary travel products which include bottled water, tissues, badge holders for parking permits, and baby seats. Our consumers are a diverse group and expect different travel experiences. For example, our corporate consumers don’t usually need baby seats or weekend rates. At the same time, some individual customers aren’t interested in free airport car collection if they’re only travelling locally. All our service offerings include access to our website and booking app. 2.4 Service relationships To create value, an organization must do more than simply provide a service. It must also cooperate with the consumers in service relationships. Key message Service relationships are established between two or more organizations to co-create value. In a service relationship, organizations will take on the roles of service providers or service consumers. The two roles are not mutually exclusive, and organizations typically both provide and consume a number of services at any given time. 2.4.1 The service relationship model When services are delivered by the provider, they create new resources for service consumers, or modify their existing ones. For example: a training service improves the skills of the consumer’s employees a broadband service allows the consumer’s computers to communicate a car-hire service enables the consumer’s staff to visit clients a software development service creates a new application for the service 28 consumer. Figure 2.1 The service relationship model The service consumer can use its new or modified resources to create its own products to address the needs of another target consumer group, thus becoming a service provider. These interactions are shown in Figure 2.1. Definitions Service relationship A cooperation between a service provider and service consumer. Service relationships include service provision, service consumption, and service relationship management. Service provision Activities performed by an organization to provide services. Service provision includes: management of the provider’s resources, configured to deliver the service ensuring access to these resources for users fulfilment of the agreed service actions service level management and continual improvement. Service provision may also include the supplying of goods. Service consumption Activities performed by an organization to consume services. Service consumption includes: management of the consumer’s resources needed to use the service service actions performed by users, including utilizing the provider’s resources, and requesting service actions to be fulfilled. Service consumption may also include the receiving (acquiring) of goods. Service relationship management Joint activities performed by a service provider and a service consumer to ensure continual value co-creation based on agreed and available service offerings. 29 The ITIL story: Axle’s service relationships Henri: Axle has service relationships with many service providers and consumers, both internal and external. Some services provided to Axle create new resources for the business, such as car manufacturers selling cars to us. Other services, such as the work done for us by our internal car cleaning team, and mechanics outside of Axle, change our existing resources by ensuring that our cars are clean and functional. Axle can use these resources in other relationships to provide its own services, in the form of car hire, to consumers, i.e. our customers. These are just a few examples of the service relationships that Axle has. The organization as a whole has many more. 2.5 Value: outcomes, costs, and risks This section will focus on how an organization in the role of service provider should evaluate what its services should do and how its services should be provided to meet the needs of consumers. Key message Achieving desired outcomes requires resources (and therefore costs) and is often associated with risks. Service providers help their consumers to achieve outcomes, and in doing so, take on some of the associated risks and costs (see the definition of service in section 2.3.1). On the other hand, service relationships can introduce new risks and costs, and in some cases, can negatively affect some of the intended outcomes, while supporting others. Service relationships are perceived as valuable only when they have more positive effects than negative, as depicted in Figure 2.2. Outcomes, and how they influence and are influenced by the other elements, will now be discussed. 2.5.1 Outcomes Acting as a service provider, an organization produces outputs that help its 30 consumers to achieve certain outcomes. Definitions Output A tangible or intangible deliverable of an activity. Outcome A result for a stakeholder enabled by one or more outputs. Figure 2.2 Achieving value: outcomes, costs, and risks It is important to be clear about the difference between outputs and outcomes. For example, one output of a wedding photography service may be an album in which selected photos are artfully arranged. The outcome of the service, however, is the preservation of memories and the ability of the couple and their family and friends to easily recall those memories by looking at the album. Depending on the relationship between the provider and the consumer, it can be difficult for the provider to fully understand the outcomes that the consumer wants to achieve. In some cases they will work together to define the desired outcomes. For example, business relationship managers (BRMs) in internal IT or HR departments may regularly talk with customers and discuss their needs and expectations. In other cases, the consumers articulate their expectations quite clearly, and the provider expects them to do so, such as when standardized services 31 are offered to a wide consumer group. This is how mobile operators, broadband service providers, and transport companies usually operate. Finally, some service providers predict or even create demand for certain outcomes, forming a target group for their services. This may happen with innovative services addressing needs that consumers were not even aware of before. Examples of this include social networks or smart home solutions. The ITIL story: Outputs and outcomes Henri: At Axle, our key output is a car that is clean, roadworthy, and well maintained. Su: For our service consumers, outcomes include travel that is convenient and affordable, and meets a range of needs. This includes self-drive holidays, client site visits, and travel to see family and friends. 2.5.2 Costs Definition: Cost The amount of money spent on a specific activity or resource. From the service consumer’s perspective, there are two types of cost involved in service relationships: costs removed from the consumer by the service (a part of the value proposition). This may include costs of staff, technology, and other resources, which the consumer does not need to provide costs imposed on the consumer by the service (the costs of service consumption). The total cost of consuming a service includes the price charged by the service provider (if applicable), plus other costs such as staff training, costs of network utilization, procurement, etc. Some consumers describe this as what they have to ‘invest’ to consume the service. Both types of cost are considered when the consumer assesses the value which they expect the service to create. To ensure that the correct decisions are made about 32 the service relationship, it is important that both types of cost are fully understood. From the provider’s perspective, a full and correct understanding of the cost of service provision is essential. Providers need to ensure that services are delivered within budget constraints and meet the financial expectations of the organization (see section 5.1.11). 2.5.3 Risks Definition: Risk A possible event that could cause harm or loss, or make it more difficult to achieve objectives. Can also be defined as uncertainty of outcome, and can be used in the context of measuring the probability of positive outcomes as well as negative outcomes. As with costs, there are two types of risk that are of concern to service consumers: risks removed from a consumer by the service (part of the value proposition). These may include failure of the consumer’s server hardware or lack of staff availability. In some cases, a service may only reduce a consumer’s risks, but the consumer may determine that this reduction is sufficient to support the value proposition risks imposed on a consumer by the service (risks of service consumption). An example of this would be a service provider ceasing to trade, or experiencing a security breach. It is the duty of the provider to manage the detailed level of risk on behalf of the consumer (see section 5.1.10). This should be handled based on a balance of what matters most to the consumer and to the provider. The consumer contributes to the reduction of risk through: actively participating in the definition of the requirements of the service and the clarification of its required outcomes clearly communicating the critical success factors (CSFs) and constraints that apply to the service ensuring the provider has access to the necessary resources of the consumer throughout the service relationship. 33 2.5.4 Utility and warranty To evaluate whether a service or service offering will facilitate the outcomes desired by the consumers and therefore create value for them, the overall utility and warranty of the service should be assessed. Definitions Utility The functionality offered by a product or service to meet a particular need. Utility can be summarized as ‘what the service does’ and can be used to determine whether a service is ‘fit for purpose’. To have utility, a service must either support the performance of the consumer or remove constraints from the consumer. Many services do both. Warranty Assurance that a product or service will meet agreed requirements. Warranty can be summarized as ‘how the service performs’ and can be used to determine whether a service is ‘fit for use’. Warranty often relates to service levels aligned with the needs of service consumers. This may be based on a formal agreement, or it may be a marketing message or brand image. Warranty typically addresses such areas as the availability of the service, its capacity, levels of security and continuity. A service may be said to provide acceptable assurance, or ‘warranty’, if all defined and agreed conditions are met. The assessment of a service must take into consideration the impact of costs and risks on utility and warranty to generate a complete picture of the viability of a service. Both utility and warranty are essential for a service to facilitate its desired outcomes and therefore help create value. For example, a recreational theme park may offer many exciting rides designed to deliver thrilling experiences for park visitors (utility), but if a significant number of the rides are frequently unavailable due to mechanical difficulties, the park is not fulfilling the warranty (it is not fit for use) and the consumers will not receive their expected value. Likewise, if the rides are always up and running during advertised hours, but they do not have features that provide the levels of excitement expected by visitors, the utility is not fulfilled, even though the warranty is sufficient. Again, consumers would not receive the expected value. The ITIL story: A new supplier (Craig’s Cleaning) 34 Su: Axle’s recent customer satisfaction surveys consistently revealed low ratings for car cleanliness. This hampered our customers’ travel experience and was a contributing factor for low repeat bookings. Henri: Axle Car Hire made the decision to outsource the cleaning of all vehicles to a service provider. Previously, cleaning of our vehicle fleet was performed by an internal department. The cost and effort to maintain equipment, update rosters, and manage an inflexible workforce were unsustainable. It is important to understand that the risk of outsourcing any task or service is that an organization loses skills and capabilities. However, car cleaning is a service requiring specialized equipment as well as a flexible and motivated workforce. Continual investment in this service is something that is not beneficial for Axle. At face value, outsourcing may appear to cost an organization more than using internal resources. Initially this may be true; however, over time and correctly managed, outsourcing services should be beneficial to both the organization and supplier. The benefit for Axle is that we can concentrate on our core business. After all, we’re not a cleaning company. Marco: There are always pros and cons to outsourcing. Let’s have a look at the outcomes, costs, and risks that are introduced and removed. Pros Cons Users will be happy with our cars’ cleanliness Axle will lose an opportunity to offer car cleaning Axle will no longer need to maintain its own as a service cleaning facilities Axle will need to pay the cleaning company The risk of cars being damaged during cleaning Axle will have a heavy dependency on the will be removed from Axle. This risk will now be external cleaning company, and their staff will with the supplier and their insurance company have wide access to our premises Su: By partnering with a specialist cleaning organization, Axle can focus its resources on providing a better service for our users. It will also help to optimize our costs, increasing value for the organization. Craig is the owner of Craig’s Cleaning. Craig is methodical, reliable, and well respected by his staff. With his team, Craig is keen to contribute to the Axle vision of offering a high-standard travel experience. Craig: Axle Car Hire decided to outsource its car cleaning service, and Craig’s Cleaning was chosen to take this on. My organization is now responsible for the cleanliness of the entire Axle vehicle fleet. Henri: The service Craig’s Cleaning is providing is only one component of the Axle customer experience. Clean cars are one output of our overall service, and they contribute directly to the customers’ travel experience. This helps Axle’s clients to achieve their outcomes. 35 Su: Craig’s Cleaning is doing a great job! The cars have never been cleaner, and our customer satisfaction ratings for car cleanliness are steadily on the increase. Axle and Craig’s Cleaning have worked on a cleaning schedule together, with focus on car cleaning turnaround times during peak hours. Axle is responsible for providing Craig and his team with timely notice of any changes that can impact this schedule. For example, Axle may need to expand its cleaning requirements in the light of new service offerings, such as the one Marco is developing. Marco: Axle has a goal to become a greener company and help the environment. We would like Craig’s Cleaning to support us in this goal and aim for the same sustainable growth as us. 2.6 Summary This chapter has covered the key concepts in service management, in particular the nature of value and value co-creation, organizations, products, and services. It has explored the often complex relationships between service providers and consumers, and the various stakeholders involved. The chapter has also covered the key components of consumer value: benefits, costs, and risks, and how important it is to understand the needs of the customer when designing and delivering services. These concepts will be built upon over the next few chapters, and guidance provided on applying them in practical and flexible ways. 36 CHAPTER 3 THE FOUR DIMENSIONS OF SERVICE MANAGEMENT 37 3 The four dimensions of service management The previous chapter outlined the concepts that are key to service management. The objective of an organization is to create value for its stakeholders, and this is achieved through the provision and consumption of services. The ways in which the various components and activities of an organization work together to create this value is described by the ITIL SVS. However, before this is explored further, the four dimensions of service management must be introduced. These dimensions are relevant to, and impact upon, all elements of the SVS. To achieve their desired outcomes and work as effectively as possible, organizations should consider all aspects of their behaviour. In practice, however, organizations often become too focused on one area of their initiatives and neglect the others. For example, process improvements may be planned without proper consideration for the people, partners, and technology involved, or technology solutions can be implemented without due care for the processes or people they are supposed to support. There are multiple aspects to service management, and none of these are sufficient to produce the required outcomes when considered in isolation. Key message To support a holistic approach to service management, ITIL defines four dimensions that collectively are critical to the effective and efficient facilitation of value for customers and other stakeholders in the form of products and services. These are: organizations and people information and technology partners and suppliers value streams and processes. These four dimensions represent perspectives which are relevant to the whole SVS, including the entirety of the service value chain and all ITIL practices. The four dimensions are constrained or influenced by several external factors that are often beyond the control of the SVS. 38 The four dimensions, and the relationships between them, are represented in Figure 3.1. Failing to address all four dimensions properly may result in services becoming undeliverable, or not meeting expectations of quality or efficiency. For example, failing to consider the value streams and processes dimension holistically can lead to wasteful work, duplication of efforts, or worse, work that conflicts with what is being done elsewhere in the organization. Equally, ignoring the partners and suppliers dimension could mean that outsourced services are misaligned with the needs of the organization. The four dimensions do not have sharp boundaries and may overlap. They will sometimes interact in unpredictable ways, depending on the level of complexity and uncertainty in which an organization operates. Figure 3.1 The four dimensions of service management It is important to note that the four dimensions of service management apply to all services being managed, as well as to the SVS in general. It is therefore essential that these perspectives should be considered for every service, and that each one should be addressed when managing and improving the SVS at all levels. An overview of the four dimensions is provided below, and more detailed guidance on addressing the dimensions in practice can be found in other ITIL 4 publications. The ITIL story: The four dimensions of service management Henri: As an IT team, we are responsible for the information and technology at Axle Car Hire. However, effective IT management is much more than just managing technology. We must also consider the wider organization and people involved in Axle’s car-hire service, our relationships with partners and 39 suppliers, and the value streams, processes, and technologies that we use. 3.1 Organizations and people The first dimension of service management is organizations and people. The effectiveness of an organization cannot be assured by a formally established structure or system of authority alone. The organization also needs a culture that supports its objectives, and the right level of capacity and competency among its workforce. It is vital that the leaders of the organization champion and advocate values which motivate people to work in desirable ways. Ultimately, however, it is the way in which an organization carries out its work that creates shared values and attitudes, which over time are considered the organization’s culture. Key message The complexity of organizations is growing, and it is important to ensure that the way an organization is structured and managed, as well as its roles, responsibilities, and systems of authority and communication, is well defined and supports its overall strategy and operating model. As an example, it is useful to promote a culture of trust and transparency in an organization that encourages its members to raise and escalate issues and facilitates corrective actions before any issues have an impact on customers. Adopting the ITIL guiding principles can be a good starting point for establishing a healthy organizational culture (see section 4.3). People (whether customers, employees of suppliers, employees of the service provider, or any other stakeholder in the service relationship) are a key element in this dimension. Attention should be paid not only to the skills and competencies of teams or individual members, but also to management and leadership styles, and to communication and collaboration skills. As practices evolve, people also need to update their skills and competencies. It is becoming increasingly important for people to understand the interfaces between their specializations and roles and those of others in the organization, to ensure proper levels of collaboration and coordination. For example, in some areas of IT (such as software development or user support), there is a growing acknowledgement that everyone should have a broad general knowledge of the other areas of the organization, combined with a 40 deep specialization in certain fields. Every person in the organization should have a clear understanding of their contribution towards creating value for the organization, its customers, and other stakeholders. Promoting a focus on value creation is an effective method of breaking down organizational silos. The organizations and people dimension of a service covers roles and responsibilities, formal organizational structures, culture, and required staffing and competencies, all of which are related to the creation, delivery, and improvement of a service. The ITIL story: Axle’s organization and people Henri: The organizations and people dimension of Axle’s car-hire services includes my IT team and other teams within the organization, such as procurement, HR, and facilities. 3.2 Information and technology The second dimension of service management is information and technology. As with the other three dimensions, information and technology applies both to service management and to the services being managed. Detailed guidance on the role of information and technology in service management can be found in other ITIL publications. Key message When applied to the SVS, the information and technology dimension includes the information and knowledge necessary for the management of services, as well as the technologies required. It also incorporates the relationships between different components of the SVS, such as the inputs and outputs of activities and practices. The technologies that support service management include, but are not limited to, workflow management systems, knowledge bases, inventory systems, 41 communication systems, and analytical tools. Service management increasingly benefits from developments in technology. Artificial intelligence, machine learning, and other cognitive computing solutions are used at all levels, from strategic planning and portfolio optimization to system monitoring and user support. The use of mobile platforms, cloud solutions, remote collaboration tools, automated testing, and deployment solutions has become common practice among service providers. In the context of a specific IT service, this dimension includes the information created, managed, and used in the course of service provision and consumption, and the technologies that support and enable that service. The specific information and technologies depend on the nature of the services being provided and usually cover all levels of IT architecture, including applications, databases, communication systems, and their integrations. In many areas, IT services use the latest technology developments, such as blockchain, artificial intelligence, and cognitive computing. These services provide a business differentiation potential to early adopters, especially in highly competitive industries. Other technology solutions, such as cloud computing or mobile apps, have become common practice across many industries globally. In relation to the information component of this dimension, organizations should consider the following questions: What information is managed by the services? What supporting information and knowledge are needed to deliver and manage the services? How will the information and knowledge assets be protected, managed, archived, and disposed of? For many services, information management is the primary means of enabling customer value. For example, an HR service facilitates value creation for its customers by enabling the organization to access and maintain accurate information about its employees, their employment, and their benefits, without exposure of private information to unauthorized parties. A network management service facilitates value creation for its users by maintaining and providing accurate information about an organization’s active network connections and utilization, allowing it to adjust its network bandwidth capacity. Information is generally the key output of the majority of IT services which are consumed by business customers. Another key consideration in this dimension is how information is exchanged between different services and service components. The information architecture of the various services needs to be well understood and continually optimized, taking into account such criteria as the availability, reliability, accessibility, timeliness, accuracy, and relevance of the information provided to users and exchanged between services. The challenges of information management, such as those presented by security 42 and regulatory compliance requirements, are also a focus of this dimension. For example, an organization may be subject to the European Union’s General Data Protection Regulation (GDPR), which influences its information management policies and practices. Other industries or countries may have regulations that impose constraints on the collection and management of data of multinational corporations. For example, in the US the Health Insurance Portability and Accountability Act of 1996 provides data privacy and security provisions for safeguarding medical information. Most services nowadays are based on IT, and are heavily dependent on it. When considering a technology for use in the planning, design, transition, or operation of a product or service, questions an organization may ask include: Is this technology compatible with the current architecture of the organization and its customers? Do the different technology products used by the organization and its stakeholders work together? How are emerging technologies (such as machine learning, artificial intelligence, and Internet of Things) likely to disrupt the service or the organization? Does this technology raise any regulatory or other compliance issues with the organization’s policies and information security controls, or those of its customers? Is this a technology that will continue to be viable in the foreseeable future? Is the organization willing to accept the risk of using aging technology, or of embracing emerging or unproven technology? Does this technology align with the strategy of the service provider, or its service consumers? Does the organization have the right skills across its staff and suppliers to support and maintain the technology? Does this technology have sufficient automation capabilities to ensure it can be efficiently developed, deployed, and operated? Does this technology offer additional capabilities that might be leveraged for other products or services? Does this technology introduce new risks or constraints to the organization (for example, locking it into a specific vendor)? The culture of an organization may have a significant impact on the technologies it chooses to use. Some organizations may have more of an interest in being at the cutting edge of technological advances than others. Equally the culture of some organizations may be more traditional. One company may be keen to take advantage of artificial intelligence, while another may barely be ready for advanced data analysis tools. The nature of the business will also affect the technology it makes use of. For example, a company that does significant business with government clients may 43 have restrictions on the use of some technologies, or have significantly higher security concerns that must be addressed. Other industries, such as finance or life sciences, are also subject to restrictions around their use of technology. For example, they usually cannot use open source and public services when dealing with sensitive data. The ITIL story: Axle’s information and technology Henri: The information and technology dimension of Axle Car Hire represents the information created and managed by teams. It also includes the technologies that support and enable our services. Applications and databases such as our booking app and financial system are part of the information and technology dimension as well. Definition: Cloud computing A model for enabling on-demand network access to a shared pool of configurable computing resources that can be rapidly provided with minimal management effort or provider interaction. ITSM in the modern world: cloud computing ITSM has been focusing on value for users and customers for years, and this focus is usually technology-agnostic: what matters is not the technology, but the opportunities it creates for the customers. Although for the most part this is a perfectly acceptable approach, organizations cannot ignore new architectural solutions and the evolution of technology in general. Cloud computing has become an architectural shift in IT, introducing new opportunities and risks, and organizations have had to react to it in ways that are most beneficial for themselves, their customers, and other stakeholders. Key characteristics of cloud computing include: on-demand availability (often self-service) network access (often internet access) resource pooling (often among multiple organizations) rapid elasticity (often automatic) 44 measured service (often from service consumer’s perspective). In the context of ITSM, cloud computing changes service architecture and the distribution of responsibilities between service consumers, service providers, and their partners. It especially applies to in-house service providers, i.e. the organization’s internal IT departments. In a typical situation, adoption of the cloud computing model: replaces some infrastructure, previously managed by the service provider, with a partner’s cloud service decreases or removes the need for infrastructure management expertise and the resources of the service provider shifts the focus of service monitoring and control from the in-house infrastructure to a partner’s services changes the cost structure of the service provider, removing specific capital expenditures and introducing new operating expenditures and the need to manage them appropriately introduces higher requirements for network availability and security introduces new security and compliance risks and requirements, applicable to both the service provider and its partner providing the cloud service provides users with opportunities to scale service consumption using self- service via simple standard requests, or even without any requests. All these affect multiple service providers’ practices, including, but not limited to: service level management measurement and reporting information security management service continuity management supplier management incident management problem management service request management service configuration management. Another important effect of cloud computing, resulting from the computing resources’ elasticity, is that the cloud infrastructure may enable significantly faster deployment of new and changed services, thus supporting high-velocity service delivery. The ability to configure and deploy computing resources with the same speed as new applications is an important prerequisite for the success of DevOps and similar initiatives. This supports modern organizations 45 in their need for faster time to market and digitalization of their services. Considering the influence of cloud computing on organizations, it is important to make decisions about the use of this model at the strategic level of the organization, involving all levels of stakeholders, from governance to operations. 3.3 Partners and suppliers The third dimension of service management is partners and suppliers. Every organization and every service depend to some extent on services provided by other organizations. Key message The partners and suppliers dimension encompasses an organization’s relationships with other organizations that are involved in the design, development, deployment, delivery, support, and/or continual improvement of services. It also incorporates contracts and other agreements between the organization and its partners or suppliers. Relationships between organizations may involve various levels of integration and formality. This ranges from formal contracts with clear separation of responsibilities, to flexible partnerships where parties share common goals and risks, and collaborate to achieve desired outcomes. Some relationship examples are shown in Table 3.1. Note that the forms of cooperation described are not fixed but exist as a spectrum. An organization acting as a service provider will have a position on this spectrum, which will vary depending on its strategy and objectives for customer relationships. Likewise, when an organization acts as a service consumer, the role it takes on will depend on its strategy and objectives for sourcing and supplier management. When it comes to using partners and suppliers, an organization’s strategy should be based on its goals, culture, and business environment. For example, some organizations may believe that they will be best served by focusing their attention on developing certain core competencies, using partners and suppliers to provide other needs. Other organizations may choose to rely as much as possible on their own resources, using partners and suppliers as little as possible. There are, of course, many variations between these two opposite approaches. 46 Table 3.1 Relationships between organizations One method an organization may use to address the partners and suppliers dimension is service integration and management. This involves the use of a specially established integrator to ensure that service relationships are properly coordinated. Service integration and management may be kept within the organization, but can also be delegated to a trusted partner. Factors that may influence an organization’s strategy when using suppliers include: Strategic focus Some organizations may prefer to focus on their core competency and to outsource non-core supporting functions to third parties; others may prefer to stay as self-sufficient as possible, retaining full control over all important functions. Corporate culture Some organizations have a historical preference for one approach over another. Long-standing cultural bias is difficult to change without compelling reasons. Resource scarcity If a required resource or skillset is in short supply, it may be difficult for the service provider to acquire what is needed without engaging a supplier. Cost concerns A decision may be influenced by whether the service provider believes that it is more economical to source a particular requirement from a supplier. Subject matter expertise The service provider may believe that it is less risky to use a supplier that already has expertise in a required area, rather than trying to develop and maintain the subject matter expertise in house. External constraints Government regulation or policy, industry codes of conduct, and social, political or legal constraints may impact an organization’s supplier strategy. Demand patterns Customer activity or demand for services may be seasonal or demonstrate high degrees of variability. These patterns may impact the extent to which organizations use external service providers to cope with variable demand. The last decade has seen an explosion in companies that offer technical resources (infrastructure) or capabilities (platforms, software) ‘as a service’. These companies 47 bundle goods and services into a single product offering that can be consumed as a utility, and is typically accounted for as operating expenditure. This frees companies from investing in costly infrastructure and software assets that need to be accounted for as capital expenditure. The ITIL story: Axle’s partners and suppliers Henri: The partners and suppliers dimension for Axle includes suppliers such as Go Go Gas and Craig’s Cleaning, as well as internet service providers and developers. 3.4 Value streams and processes The fourth dimension of service management is value streams and processes. Like the other dimensions, this dimension is applicable to both the SVS in general, and to specific products and services. In both contexts it defines the activities, workflows, controls, and procedures needed to achieve agreed objectives. Key message Applied to the organization and its SVS, the value streams and processes dimension is concerned with how the various parts of the organization work in an integrated and coordinated way to enable value creation through products and services. The dimension focuses on what activities the organization undertakes and how they are organized, as well as how the organization ensures that it is enabling value creation for all stakeholders efficiently and effectively. ITIL gives organizations acting as service providers an operating model that covers all the key activities required to manage products and services effectively. This is referred to as the ITIL service value chain (see section 4.5). The service value chain operating model is generic and in practice it can follow different patterns. These patterns within the value chain operation are called value streams. 48 3.4.1 Value streams for service management Key message A value stream is a series of steps that an organization uses to create and deliver products and services to a service consumer. A value stream is a combination of the organization’s value chain activities (see section 4.5 for more details on value chain activities and Appendix A for examples of value streams). Definition: Value stream A series of steps an organization undertakes to create and deliver products and services to consumers. Identifying and understanding the various value streams an organization has is critical to improving its overall performance. Structuring the organization’s activities in the form of value streams allows it to have a clear picture of what it delivers and how, and to make continual improvements to its services. Organizations should examine how they perform work and map all the value streams they can identify. This will enable them to analyse their current state and identify any barriers to workflow and non-value-adding activities, i.e. waste. Wasteful activities should be eliminated to increase productivity. Opportunities to increase value-adding activities can be found across the service value chain. These may be new activities or modifications to existing ones, which can make the organization more productive. Value stream optimization may include process automation or adoption of emerging technologies and ways of working to gain efficiencies or enhance user experience. Value streams should be defined by organizations for each of their products and services. Depending on the organization’s strategy, value streams can be redefined to react to changing demand and other circumstances, or remain stable for a 49 significant amount of time. In any case, they should be continually improved to ensure that the organization achieves its objectives in an optimal way. Value stream mapping is described in more detail in other ITIL 4 publications. 3.4.2 Processes Key message A process is a set of activities that transform inputs to outputs. Processes describe what is done to accomplish an objective, and well-defined processes can improve productivity within and across organizations. They are usually detailed in procedures, which outline who is involved in the process, and work instructions, which explain how they are carried out. Definition: Process A set of interrelated or interacting activities that transform inputs into outputs. A process takes one or more defined inputs and turns them into defined outputs. Processes define the sequence of actions and their dependencies. When applied to products and services, this dimension helps to answer the following questions, critical to service design, delivery, and improvement: What is the generic delivery model for the service, and how does the service work? What are the value streams involved in delivering the agreed outputs of the service? Who, or what, performs the required service actions? Specific answers to these questions will vary depending on the nature and architecture of the service. 50 The ITIL story: Axle’s value streams and processes Radhika: The value streams and processes dimension represents the series of activities that are carried out within Axle. Value streams help Axle to identify wasteful activity and remove obstacles that hinder the organization’s productivity. 3.5 External factors Service providers do not operate in isolation. They are affected by many external factors, and work in dynamic and complex environments that can exhibit high degrees of volatility and uncertainty and impose constraints on how the service provider can work. To analyse these external factors, frameworks such as the PESTLE (or PESTEL) model are used. PESTLE is an acronym for the political, economic, social, technological, legal, and environmental factors that constrain or influence how a service provider operates. Collectively, these factors influence how organizations configure their resources and address the four dimensions of service management. For example: Government and societal attitudes towards environmentally friendly products and services may result in the organization investing more in tools and technologies that meet external expectations. An organization may choose to partner with other organizations (or source services from external providers) who can demonstrate environmentally friendly credentials. For example, some companies publish product environmental reports that describe their products’ performance against their policies around climate change, safer materials, and other resources. Economic and societal factors may influence organizations to create several versions of the same product to address various consumer groups that show different buying patterns. One example is music and video streaming services, many of which have a free tier (with advertising), a premium tier (without advertising), and in some cases a ‘family plan’ that allows multiple individual profiles under one paid-for account. Data protection laws or regulations (like GDPR) have changed how companies must collect, process, access, and store customer data, as well as how they work with external partners and suppliers. 3.6 Summary The four dimensions represent a holistic approach to service management, and organizations should ensure that there is a balance of focus between each 51 dimension. The impact of external factors on the four dimensions should also be considered. All four dimensions and the external factors that affect them should be addressed as they evolve, considering emerging trends and opportunities. It is essential that an organization’s SVS is considered from all four dimensions, as the failure to adequately address or account for one dimension, or an external factor, can lead to sub-optimal products and services. The ITIL story: Balancing the four dimensions Marco: To make Axle’s services as effective as possible, we use the best combination of our people, our teams, our value streams, and our ways of working. We now engage a blended approach to service management, incorporating DevOps, Design Thinking, and Agile into product development. We also use new technologies such as robotics, AI, and machine learning, striving to be efficient and Lean, and to automate wherever possible. 52 CHAPTER 4 THE ITIL SERVICE VALUE SYSTEM 53 4 The ITIL service valuesystem 4.1 Service value system overview For service management to function properly, it needs to work as a system. The ITIL SVS describes the inputs to this system (opportunity and demand), the elements of this system (organizational governance, service management, continual improvement, and the organization’s capabilities and resources), and the outputs (achievement of organizational objectives and value for the organization, its customers, and other stakeholders). Key message The ITIL SVS describes how all the components and activities of the organization work together as a system to enable value creation. Each organization’s SVS has interfaces with other organizations, forming an ecosystem that can in turn facilitate value for those organizations, their customers, and other stakeholders. The key inputs to the SVS are opportunity and demand. Opportunities represent options or possibilities to add value for stakeholders or otherwise improve the organization. Demand is the need or desire for products and services among internal and external consumers. The outcome of the SVS is value, that is, the perceived benefits, usefulness, and importance of something. The ITIL SVS can enable the creation of many different types of value for a wide group of stakeholders. The ITIL SVS includes the following components: Guiding principles Recommendations that can guide an organization in all circumstances, regardless of changes in its goals, strategies, type of work, or management structure. Governance The means by which an organization is directed and controlled. Service value chain A set of interconnected activities that an organization performs to deliver a valuable product or service to its consumers and to 54 facilitate value realization. Practices Sets of organizational resources designed for performing work or accomplishing an objective. Continual improvement A recurring organizational activity performed at all levels to ensure that an organization’s performance continually meets stakeholders’ expectations. ITIL 4 supports continual improvement with the ITIL continual improvement model. The purpose of the SVS is to ensure that the organization continually co-creates value with all stakeholders through the use and management of products and services. The structure of the SVS is shown in Figure 4.1. The left side of the figure shows opportunity and demand feeding into the SVS from both internal and external sources. The right side shows value created for the organization, its customers, and other stakeholders. Figure 4.1 The ITIL service value system The ITIL SVS describes how all the components and activities of the organization work together as a system to enable value creation. These components and activities, together with the organization’s resources, can be configured and reconfigured in multiple combinations in a flexible way as circumstances change, but this requires the integration and coordination of activities, practices, teams, authorities and responsibilities, and all parties to be truly effective. One of the biggest challenges an organization can face when trying to work effectively and efficiently with a shared vision, or to become more Agile and resilient, is the presence of organizational silos. Organizational silos can form in many ways and for many different reasons. Silos can be resistant to change and can prevent easy access to the information and specialized expertise that exists across the organization, which can in turn reduce efficiency and increase both cost and risk. Silos also make it more difficult for communication or collaboration to occur across different groups. 55 A siloed organization cannot act quickly to take advantage of opportunities or to optimize the use of resources across the organization. It is often unable to make effective decisions about changes, due to limited visibility and many hidden agendas. Practices can also become silos. Many organizations have implemented practices such as organizational change management or incident management without clear interfaces with other practices. All practices should have multiple interfaces with one another. The exchange of information between practices should be triggered at key points in the workflow, and is essential to the proper functioning of the organization. The architecture of the ITIL SVS specifically enables flexibility and discourages siloed working. The service value chain activities and the practices in the SVS do not form a fixed, rigid structure. Rather, they can be combined in multiple value streams to address the needs of the organization in a variety of scenarios. This publication provides examples of service value streams, but none of them are definite or prescriptive. Organizations should be able to define and redefine their value streams in a flexible, yet safe and efficient manner. This requires continual improvement activity to be carried out at all levels of the organization; the ITIL continual improvement model helps to structure this activity. Finally, the continual improvement and overall operation of an organization are shaped by the ITIL guiding principles. The guiding principles create a foundation for a shared culture across the organization, thus supporting collaboration and cooperation within and between the teams, and removing the need for constraints and controls previously provided by silos. With these components, the ITIL SVS supports many work approaches, such as Agile, DevOps and Lean (see Glossary), as well as traditional process and project management, with a flexible value-oriented operating model. An organization can take any number of forms, including, but not limited to, sole trader, company, corporation, firm, enterprise, authority, partnership, charity or institution, or any part or combination thereof, whether incorporated or not, and be either public or private. This means that the scope of the SVS can be a whole organization or a smaller subset of that organization. To achieve the maximum value from the SVS and to properly address the issue of organizational silos, it is preferable to include the whole organization in the scope rather than a subset. The rest of this chapter will explore each element of the SVS. Organizational agility and organizational resilience For an organization to be successful, it must achieve organizational agility to support internal changes, and organizational resilience to withstand and even thrive in changing external circumstances. The organization must also be considered as part of a larger ecosystem of organizations, all delivering, 56 coordinating, and consuming products and services. Organizational agility is the ability of an organization to move and adapt quickly, flexibly, and decisively to support internal changes. These might include changes to the scope of the organization, mergers and acquisitions, changing organizational practices, or technologies requiring different skills or organizational structure and changes to relationships with partners and suppliers. Organizational resilience is the ability of an organization to anticipate, prepare for, respond to, and adapt to both incremental changes and sudden disruptions from an external perspective. External influences could be political, economic, social, technological, legal or environmental. Resilience cannot be achieved without a common understanding of the organization’s priorities and objectives, which sets the direction and promotes alignment even as external circumstances change. The ITIL SVS provides the means to achieve organizational agility and resilience and to facilitate the adoption of a strong unified direction, focused on value and understood by everyone in the organization. It also enables continual improvement throughout the organization. 4.2 Opportunity, demand, and value Key message Opportunity and demand trigger activities within the ITIL SVS, and these activities lead to the creation of value. Opportunity and demand are always entering into the system, but the organization does not automatically accept all opportunities or satisfy all demand. Opportunity represents options or possibilities to add value for stakeholders or otherwise improve the organization. There may not be demand for these opportunities yet, but they can still trigger work within the system. Organizations should prioritize new or changed services with opportunities for improvement to ensure their resources are correctly allocated. Demand represents the need or desire for products and services from internal and 57 external customers. A definition of value, and what constitutes value for different stakeholders, can be found in Chapter 2. 4.3 The ITIL guiding principles Key message A guiding principle is a recommendation that guides an organization in all circumstances, regardless of changes in its goals, strategies, type of work, or management structure. A guiding principle is universal and enduring. Table 4.1 Overview of the guiding principles Guiding principle Description Focus on value Everything that the organization does needs to map, directly or indirectly, to value for the stakeholders. The focus on value principle encompasses many perspectives, including the experience of customers and users. Start where you are Do not start from scratch and build something new without considering what is already available to be leveraged. There is likely to be a great deal in the current services, processes, programmes, projects, and people that can be used to create the desired outcome. The current state should be investigated and observed directly to make sure it is fully understood. Progress iteratively with Do not attempt to do everything at once. Even huge initiatives must be feedback accomplished iteratively. By organizing work into smaller, manageable sections that can be executed and completed in a timely manner, it is easier to maintain a sharper focus on each effort. Using feedback before, throughout, and after each iteration will ensure that actions are focused and appropriate, even if circumstances change. Collaborate and promote Working together across boundaries produces results that have greater visibility buy-in, more relevance to objectives, and increased likelihood of long-term success. Achieving objectives requires information, understanding, and trust. Work and consequences should be made visible, hidden agendas avoided, and information shared to the greatest degree possible. Think and work holistically No service, or element used to provide a service, stands alone. The outcomes achieved by the service provider and service consumer will suffer unless the organization works on the service as a whole, not just on its parts.

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