ITIL Service : In addition it ensures that services are clearly defined and….

ITILITIL Service : In addition it ensures that services are clearly defined and….

In many ways, the Service Portfolio Management is similar to Financial Portfolio Management performed within most business environments.

A Financial Manager’s primary responsibility is to maintain an optimum portfolio of investments that maximizes the client’s return at an acceptable risk level. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 68 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION 6.1.1 Purpose and Objectives The purpose of Service Portfolio Management as defined by ITIL is “to ensure that the service provider has the right mix of services to balance the investment in IT with the ability to meet business outcomes.

It tracks the investment in services throughout their lifecycle and works with other service management processes to ensure that the appropriate returns are being achieved.

In addition, it ensures that services are clearly defined and linked to the achievement of business outcomes, thus ensuring that all design, transition, and operation activities are aligned to the value of the services” (ITIL Service Strategy, page 170). A medium sized company, ABC Associates, has recently started the adoption of IT Service Management to the business.

They have identified the critical and non-critical objectives and outcomes of the business and approved the funding of several services.

What is required is a formal approach for managing the development and operation of these services to ensure that the business objectives and outcomes are achieved.

This approach is provided by the service portfolio management process and provides the following benefits: • • • • Tracks the services through the entire service lifecycle Ensures each service is well defined and associated to the business outcomes they support Ensures all service management processes are working together to provide business value Tracks the investment required to ensure each service reaches a level of value desired by the customer Service portfolio management does not manage any services, service management processes, or service assets.

Rather, service portfolio management provides a structure for collecting data and making decisions related to services, service management processes, and service assets.

The focus of the service portfolio is to describe IT services in terms of business value to the customer.

Fulfilling this focus requires the service portfolio to articulate the business needs and describe how the services will be used to respond to those needs. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 69 If a service provider supports multiple customer groups, they may create several service portfolios.

Each service portfolio is used to contain all service considerations related to the given customer groups.

This is especially important when distinguishing services between regulated industries, such as financial companies, pharmaceutical companies, and governments to name a few.

In these situations, the services must support the business outcomes as well as the regulated outcomes of the industry with investments being made in both. 6.1.2 Scope The service portfolio contains information about all the services being considered for delivery by the service provider, those services already being delivered to the customer, and those services no longer available to the customer for the purpose of continually generating value from the services. The restaurant menu is a perfect example of a service portfolio, using menu items as services.

The core menu comprises the food and drink items currently available to the customer.

These typically represent the most popular items ordered by the customer and make the core business for the restaurant.

To continually refresh the menu, certain menu items may be considered for possible inclusion in the menu.

These menu items may be introduced as daily specials or “limited time offers.” These specials are made to determine the actual value for the customer and, if found popular, may find themselves included in the core menu.

Seasonal menus are another form of “special” where the ingredients are restricted to a certain time of year because of growth or cost.

Some menu items may lose their popularity over time or become too expensive to continue offering.

They are taken off the menu, but the recipe may still exist in the kitchen.

At times, these retired menu items may return as “specials” because they have some level of value. — 90 • • • • • ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION unable to deliver services as agreed.

Change management – Ensures all changes are controlled and coordinated, as well as evaluates the resources required when introducing new or changed services.

Service asset and configuration management – Provides the data and information for service models and the tools, data, and information used to construct the service portfolio.

Service validation and testing – Verifies if each service will return the functionality and returns prescribed by the service portfolio.

Knowledge management – Promotes better decision making in applying service options to achieve desired objectives.

Continual service improvement – Provides information about actual use and return for service investments relative to its predicted use and return. 6.1.6 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Below is a list of sample critical success factors and key performance indicators to provide a sense of how Service Portfolio Management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in ITIL Service Strategy, page 198. • CSF: The existence of a formal process to investigate and decide which services to provide. • KPI: A formal service portfolio management process exists under the ownership of the service portfolio management process owner. • KPI: The service portfolio management process is audited and reviewed annually and meets its objectives. • CSF: A model to analyze the potential return on investment and acceptable level of risk for new services or changes to existing services. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 91 • KPI: Every service has a documented statement of the initial investment made in the service. • KPI: Accounting records are produced on a monthly or quarterly basis to show the ongoing investment in each service.

These are compared with the business outcomes that have been achieved and the return on investment is calculated. • KPI: Customer surveys indicate a high level of satisfaction with the value they are receiving. • KPI: Each service has documented risks associated with it.

The service portfolio will identify what mitigation or counter-measures have been taken and where the customer has decided to live with the risk. • CSF: The ability to document each service provided, together with the business need it meets and the business outcome it supports. • KPI: A service portfolio exists and is used as the basis for deciding which services to offer.

An audit shows that every service is documented in the service portfolio. • KPI: There is a documented process for defining the business need and business outcome, which is formally owned by the service portfolio management process owner. • KPI: Each service in the service portfolio is linked to at least one business outcome.

This is verified through a regular review of the service portfolio. • CSF: A formal process to review whether services are enabling the organization to achieve its strategy. • KPI: Service portfolio management provides regular and structured feedback to strategy management for IT services regarding the performance of each service and its ability to meet stated business outcomes. • KPI: An audit of strategy documents and the service portfolio shows that the business outcomes in the service portfolio are consistent with those stated in the relevant strategy. • CSF: The ability to change services in response to changes in the internal and external environments, where appropriate. • KPI: Every change to an external or internal environment identified in strategy management for IT services has a corresponding entry to service portfolio management, and each of these has been evaluated and a decision made about the need for change to the relevant services. • KPI: A review of the organization’s strategy shows that all changed business objectives and outcomes continue to be met by the services in the service portfolio. • KPI: Customer surveys show continued high levels of satisfaction. • CSF: Tools that enable the service provider to track the investment in services throughout their Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 92 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION lifecycle. • KPI: The investment in each service is quantified in the service portfolio. • KPI: Investment in each service is reported, starting with the initial investment and followed by monthly, quarterly, or annual reporting on ongoing investments. • KPI: The investments made are consistent with the projected return on investment forecasts. • CSF: A formal process exists to evaluate the viability of services and to retire them when they are no longer viable. • KPI: number of services retired. • KPI: number of services reinstated after being retired (this will indicate the level of accuracy of evaluating viability). 6.1.7 Designing the Service Portfolio The service portfolio is the most critical management information system used to support all processes and describes a provider’s services in terms of business value.

It articulates business needs and the provider’s response to those needs.

By definition, business value terms correspond to market terms, providing a means for comparing service competitiveness across alternative providers. — The inputs into Service Catalog Management are (Service Strategy, page 104): • • • • • • • Business information from the organization’s business and IT strategy, plans and financial plans, and information on their current and future requirements from the service portfolio BIA providing information on the impact, priority, and risk associated with each service or changes to service requirements Business requirements: details of any agreed, new, or changed business requirements from the service portfolio The service portfolio and all related data and documents The CMS RFCs Feedback from all other processes Outputs The process outputs of the service catalog management process are (Service Strategy, page 104): • • • • The documentation and agreement of a definition of the service Updates to the service portfolio: should contain the current status of all services and requirements for services Updates to RFCs The service catalog: should contain the details and the current status of every live service provided by the service provider or service being transitioned into the live environment, together with the interfaces and dependencies 6.2.6 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 105 Below is a list of sample critical success factors and key performance indicator to provide a sense of how Service Catalog management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in the ITIL Service Strategy volume, page 105. • CSF: An accurate service catalog • KPI: Increase in the number of services recorded and managed within the service catalog as a percentage of those being delivered and transitioned in the live environment • KPI: Percentage reduction in the number of variances detected between the information contained within the service catalog and the ‘real-world’ situation • CSF: Business users’ awareness of the services being provided • KPI: Percentage increase in completeness of the customer-facing views of the service catalog against operational services • KPI: Percentage increase in business user survey responses showing knowledge of services listed in the service catalog • KPI: Increase in measured business user access to intranet-based service catalog • CSF: IT staff awareness of the technology supporting the services • KPI: Percentage increase in completeness of supporting services against the IT components that make up those services • KPI: Increase in service desk and other IT staff having access to information to support all live services, measured by the percentage of incidents with the appropriate service-related information 6.3 Service Level Management While some organizations may continue to rely on a ‘best endeavors’ approach to service quality, the majority have realized that there needs to be a consistent, agreed, and understandable method used for defining and reporting of IT service quality.

As the modern IT organization has matured over time to be more akin to any other area of business, there has also been an increased requirement for more formal methods by which the value of funding and investments into IT are assessed and performance measured for services provided and capabilities supported.

In the context of Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 106 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION Service Offerings and Agreements, Service Level Management is the process that seeks to provide consistency in defining the requirements for services, documenting targets and responsibilities, and providing clarity as to the achievements for service quality delivered to customers. In effect, the process seeks to manage the gray areas that are formed between customers and the IT organization, as well as ensures that the activities performed by various IT groups are coordinated optimally to meet customer requirements.

The staff involved (service level management team) are fluent in both technical and business jargon; they resolve disputes between parties (but, as a result, are sometimes seen as a spy in both camps) and generally work to improve the relationship between the IT organization and the customers it supports. 6.3.1 Purpose and Objectives — Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 107 Care should be taken that SLM does get implemented in such a way that it becomes too focused on agreements and contracts being developed.

The underlying goal still remains to ensure consistency and clarity in the quality of IT service delivery and to provide an effective channel for customers to negotiate and communicate with the IT organization. 6.3.2 Scope Service Level Management provides regular communication to the customers and business managers of an organization in relation to service levels.

SLM represents the IT service provider to the business and the business to the IT service provider.

In this context, Service Level Management may seem to be in conflict with Business Relationship Management.

This is not the case because Business Relationship Management establishes the relationship framework in which Service Level Management works within.

Often times, the BRM will be involved in all customer discussions related to service levels.

Service Level Management is responsible for develop the warranty aspect of the service.

Business Relationship Management is responsible for both the utility and warranty aspects.

Lastly, Business Relationship Management is grounded in the strategic service, while Service Level Management is grounded in the operational service: both will connect tactically. The activities of Service Level Management are designed to manage the expectation and perception of the business, customers, and users and ensure those expectations and perceptions are matched by the quality (warranty) of service delivered by the service provider.

The primary tools for doing this is the documentation and negotiation of Service Level Requirements used to develop Service Level Agreements (SLAs) for all existing services and managing those SLAs to meet agreed targets and quality measurements. From ITIL 2011, the SLM process should include (ITIL Service Design, page 107): • Cooperation with the Business Relationship Management process – This includes development of relationships with the business as needed to achieve the SLM process objectives. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 108 • • • • • • • • • • ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION Negotiation and agreement of future Service Level Requirements and targets and the documentation and management of SLRs for all proposed new or changed services Negotiation and agreement of current Service Level Requirements and targets and the documentation and management of SLAs for all operational services Development and management of appropriate OLAs to ensure that targets are aligned with SLA targets Review of all supplier agreements and underpinning contracts with supplier management to ensure that targets are aligned with SLA targets Proactive prevention of service failures, reduction of service risks, and improvement in the quality of service, in conjunction with all other processes Reporting and management of all service level achievements and review of all SLA breaches Periodic review, renewal, and/or revision of SLAs, service scope, and OLAs as appropriate Identifying improvement opportunities for inclusion in the CSI register Reviewing and prioritizing improvements in the CSI register Instigating and coordinating SIPs for the management, planning, and implementation of service and process improvements 6.3.3 Value to the Business There are many benefits from both the customer and IT organization’s perspective to having an effective Service Level Management process in place.

Some of the tangible benefits include: • • • • In addition to these, here are some of the intangible benefits of Service Level Management: • Develops the trusted relationship between the IT organization with its customers and business Consistent interfaces to the business for all service-related issues Agreed service targets and required management information provided to business Mechanisms for providing feedback on the cause of any breach to the targets and detail the action taken to prevent the breach from recurring Reliable communication channels for customers Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 109 representatives • • • Improved understanding and insight as to the actual and potential offerings that can support business processes Improved customer satisfaction as a result on consistent communication and reporting methods Improved clarity and understanding as to the performance of IT services and how budgets and money are being utilized — activities Service improvement opportunities for inclusion in the CSI register and for later review and prioritization in conjunction with the CSI manager SIP: an overall program or plan of prioritized improvement actions, encompassing appropriate services and processes, together with associated impacts and risks The service quality plan: documenting and planning the overall improvement of service quality Document templates: standard document templates, format and content for SLAs, SLRs, and OLAs, aligned with corporate standards: • SLAs: a set of targets and responsibilities should be documented and agreed within an SLA for each operational service • SLRs: a set of targets and responsibilities should be documented and agreed within an SLR for each proposed new or changed service • OLAs: a set of targets and responsibilities should be documented and agreed within an OLA for each internal support team • • • • • Reports on OLAs and underpinning contracts Service review meeting minutes and actions: all meetings should be scheduled on a regular basis with planned agendas and their discussions and actions recorded and progressed SLA review and service scope review meeting minutes: summarizing agreed actions and revisions to SLAs and service scope Updated change information, including updates to RFCs Revised requirements for underpinning contracts: changes to SLAs or new SLRs may require existing underpinning contracts to be changed or new contracts to be negotiated and agreed 6.4.5 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Below is a list of sample critical success factors and key performance indicator to provide a sense of Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 145 how service level management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in ITIL Service Design, page 122. • CSF: Managing the overall quality of IT services required both in the number and level of services provided and managed • KPI: Percentage reduction in SLA targets threatened • KPI: Percentage increase in customer perception and satisfaction of SLA achievements, via service reviews and customer satisfaction survey responses • KPI: Percentage reduction in SLA breaches caused because of third-party support contracts (underpinning contracts) • KPI: Percentage reduction in SLA breaches caused because of internal OLAs • CSF: Deliver the service as previously agreed at affordable costs • KPI: Total number and percentage increase in fully documented SLAs in place • KPI: Percentage increase in SLAs agreed against operational services being run • KPI: Percentage reduction in the costs associated with service provision • KPI: Percentage reduction in the cost of monitoring and reporting of SLAs • KPI: Percentage increase in the speed and of developing and agreeing appropriate SLAs • KPI: Frequency of service review meetings • CSF: Manage the interface with the business and users • KPI: Increased percentage of services covered by SLAs • KPI: Documented and agreed SLM processes and procedures are in place • KPI: Reduction in the time taken to respond to and implement SLA requests • KPI: Increased percentage of SLA reviews completed on time • KPI: Reduction in the percentage of outstanding SLAs for annual renegotiation • KPI: Reduction in the percentage of SLAs requiring corrective changes (for example, targets not attainable, changes in usage levels) • KPI: Percentage increase in the coverage of OLAs and third-party contracts in place, while possibly reducing the actual number of agreements (consolidation and centralization) • KPI: Documentary evidence that issues raised at service and SLA reviews are being followed up and resolved • KPI: Reduction in the number and severity of SLA breaches Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 146 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION • KPI: Effective review and follow-up of all SLA, OLA, and underpinning contract breaches 6.4.6 Example Service Level Agreement The multi-level based SLA is usually preferred by IT as it allows a single document to cover a single service for all end users of that service.

It means less administration time spent in negotiating different documents with different customers and less time spent on worrying about accommodating different requirements among users. SLA Information Areas to Address Description of the “agreement” Comments/Examples Brief description of the contents of this SLA Note: the SLA will cover only ONE IT Service but end users from many areas.

Use this section simply as an Executive summary.

Unique identifying number for the SLA (for inclusion in the Configuration Management Data Base—CMDB) • Functional role description of who is responsible for this SLA (who would participate in a review of this document?) • Representatives from customer and IT (Special tip: Avoid using names as it dates the document quickly) — Interfaces The major interfaces with Demand Management in PPO activities are: • Capacity Management and Availability Management – utilize PBAs to determine and plan Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 167 service requirements based on demand • IT Service Continuity Management – uses PBAs and user profiles to perform business impact analysis in creating continuity plans 6.5.9 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Below is a list of sample critical success factors and key performance indicator to provide a sense of how demand management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in ITIL Service Strategy, page 254. • CSF: The service provider has identified and analyzed the patterns of business activity and is able to use these to understand the levels of demand that will be placed on a service. • KPI: Patterns of business activity are defined for each relevant service. • KPI: Patterns of business activity have been translated into workload information by capacity management. • CSF: The service provider has defined and analyzed user profiles and is able to use these to understand the typical profiles of demand for services from different types of user. • KPI: Documented user profiles exist and each contains a demand profile for the services used by that type of user. • CSF: A process exists whereby services are designed to meet the patterns of business activity and meet business outcomes. • KPI: Demand management activities are routinely included as part of defining the service portfolio. • CSF: An interface with capacity management to ensure that adequate resources are available at the appropriate levels of capacity to meet the demand for services Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 168 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION • KPI: Capacity plans include details of patterns of business activity and corresponding workloads. • KPI: Utilization monitors show balanced workloads.

Minimal over-utilization and a maximum amount of unused capacity (this is to prevent technical groups from over- investing in capacity to avoid being blamed for over-utilization). • CSF: There is a means to manage situations where demand for a service exceeds the capacity to deliver it. • KPI: Techniques to manage demand have been documented in capacity plans and, where appropriate, in service level agreements. • KPI: Differential charging (as an example of one such technique) has resulted in a more even demand on the service over time. 6.5.10 Challenges and Risks While integrating Demand Management appropriately with all other aspects is challenging in itself, some other specific challenges typically faced include: • • • • When little or no trend information regarding PBAs and demand is available.

It is not possible to produce and stock service output before demand actually materializes.

Aligning capacity production cycles to PBA, especially when funding of IT has not been adequately planned and synchronized with business plans Customer resistance to Demand Management restrictions, especially in the case of additional costs incurred Loss of user productivity and business growth by too much restriction applied when managing demand Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 — ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION These elements should always be agreed when forming the agreement with the supplier, but should be reviewed when a transition is being considered and executed. The critical success factors for Supplier Management include: • • • • Protecting the business from poor supplier performance of disruption of supplied services Supplied services and targets are aligned with current business needs and targets Supplier performance does not compromise service availability Supplier and contractual issues have clear ownership and awareness 6.6.4 Triggers The supplier management process can be invoked through several events, including (Service Design, page 222): • • • • • • • • • New or changed corporate governance guidelines New or changed business and IT strategies, policies, or plans New or changed business needs or new or changed services New or changed requirements within agreements, such as SLRs, SLAs, OLAs, or contracts Review and revision of designs and strategies Periodic activities such as reviewing, revising, or reporting, including review and revision of supplier management policies, reports, and plans Requests from other areas, particularly SLM and information security management, for assistance with supplier issues Requirements for new contracts, contract renewal, or contract termination Re-categorization of suppliers and/or contracts Inputs The inputs to Supplier Management are (ITIL Service Design, page 223): • Business information: from the organization’s business strategy, plans and financial plans, and Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 183 information on its current and future requirements • • Supplier and contracts strategy: this covers the sourcing policy of the service provider and the types of supplier and contract used.

It is produced by the service strategy processes.

Supplier plans and strategies: details of the business plans and strategies of suppliers, together with details of their technology developments, plans and statements, and information on their current financial status and projected business viability • • • • • Supplier contracts, agreements, and targets: of both existing and new contracts and agreements from suppliers Supplier and contract performance information: of both existing and new contracts and suppliers IT information: from the IT strategy and plans and current budgets Performance issues: the Incident and Problem Management processes, with incidents and problems relating to poor contract or supplier performance Financial information: from Financial Management for IT services, the cost of supplier service(s) and service provision, the cost of contracts and the resultant business benefit, and the financial plans and budgets, together with the costs associated with service and supplier failure • Service information: from the SLM process, with details of the services from the service portfolio and the service catalog, service level targets within SLAs and SLRs, and possibly from the monitoring of SLAs, service reviews, and breaches of the SLAs—also customer satisfaction data on service quality • CMS: containing information on the relationships between the business, the services, the supporting services, and the technology Outputs The outputs of Supplier Management are (ITIL Service Design, page 223): • SCMIS: This holds the information needed to execute the activities within Supplier Management— for example, the data monitored and collected as part of Supplier Management.

This is then invariably used as an input to all other parts of the Supplier Management process. • Supplier and contract performance information and reports: These are used as input to supplier and contract review meetings to manage the quality of service provided by suppliers and partners.

This should include information on shared risk, where appropriate. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 184 • • ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION Supplier and contract review meeting minutes: These are produced to record the minutes and actions of all review meetings with suppliers.

Supplier SIPs: These are used to record all improvement actions and plans agreed between service providers and their suppliers, wherever they are needed, and should be used to manage the progress of agreed improvement actions, including risk reduction measures. • Supplier survey reports: Often many people within a service provider organization have dealings with suppliers.

Feedback from these individuals should be collated to ensure consistency in the quality of service provided by suppliers in all areas.

These can be published as league tables to encourage competition between suppliers. • Change management: Supplier contracts and agreements are controlled documents and, therefore, subject to appropriate change management procedures.

When changes are proposed, the involvement of suppliers should be assessed and reflected in planning. — • ITSCM: This process works with supplier management with regard to the management of continuity service suppliers. 6.6.5 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 185 Below is a list of sample critical success factors and key performance indicator to provide a sense of how supplier management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in ITIL Service Design, page 224. • CSF: Business protected from poor supplier performance or disruption • KPI: Increase in the number of suppliers meeting the targets within the contract • KPI: Reduction in the number of breaches of contractual targets • CSF: Supporting services and their targets align with business needs and targets • KPI: Increase in the number of service and contractual reviews held with suppliers • KPI: Increase in the number of supplier and contractual targets aligned with SLA and SLR targets • CSF: Availability of services is not compromised by supplier performance • KPI: Reduction in the number of service breaches caused by suppliers • KPI: Reduction in the number of threatened service breaches caused by suppliers • CSF: Clear ownership and awareness of supplier and contractual issues • KPI: Increase in the number of suppliers with nominated supplier managers • KPI: Increase in the number of contracts with nominated contract managers 6.7 Financial Management for IT Services The discipline of financial management has, for many, been a challenging, complex, and sometimes controversial area of business, especially when it comes to managing the finances involved in the provision and support of IT services.

While arguments will always occur to debate the ‘best’ way in which money is apportioned and spent, particularly in the case of IT, difficulties arise in the effective identification of the true costs associated in designing, transitioning, operating, and supporting services.

As a result, many organizations have struggled to provide appropriate clarity regarding the way in which money is budgeted and accounted for, which, from a customer perspective, can lead to a lack of confidence and reputation in the service provider. Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 186 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION To counter this, financial management is focused on providing both the business and IT with improved insight (in financial terms) into the value of IT services, supporting assets, and operational management and support.

This translates into improved operational visibility, insight, and superior decision-making at all levels of the organization.

When implemented effectively, Financial Management provides the understanding and management of the distance and (sometimes) conflicting perspectives between the Business Desires/Opportunities and the Capabilities of the IT organization.

It enables the business to be more IT conscious and IT to become more business aligned. Typically, most organizations will incorporate two layers of financial management.

The top layer, enterprise financial management, is incorporated for the entire organization or business.

This top layer will usually set policies and procedures which must be used consistently across the enterprise.

Financial Management for IT focuses on the fiduciary duties within the IT service organization and is typically required to adopt the policies and procedures of enterprise financial management.

The responsibilities of Financial Management for IT encompass those activities for budgeting, accounting, and charging for IT services. The IT services identified and delivered to the customer are in place to ensure that the strategic business objectives of the organization are met.

For this to happen, the IT services must be designed, developed, and transitioned into an operational environment.

Additionally, optimization of the IT service to provide greater value requires improvements to be identified, designed, developed, and implemented.

All these activities require one fundamental necessity: money.

Usually referred to as funding, investment, or budgeting, Financial Management for IT is responsible for securing the necessary money to provide the service to the customer. — ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION Business Cases Business cases are used to support planning and decision making activities regarding the attractiveness of a business action.

Central to most business cases is a financial analysis that defines the consequences, expectations, and requirements of the business action from a financial perspective.

Most business cases will start with a business objective that must be achieved and a proposed business action for achieving the objective.

The business case is a detailed analysis of the benefits and impact of the business action in meeting the business objective and disrupting the delivery of other IT services. The structure of the business case will vary from one organization to the next, but some common sections include: • • Introduction – provides the context for the business case, providing the business objective in question and defining clearly the business action being proposed.

Methods and assumptions – describes the analysis being performed, often in terms of the business, finances, and technology.

The assumptions are inputs into the analysis that will be used to determine the value of the business actions, while methods are the techniques used in the analysis.

This portion of the business case establishes the scope or boundaries of the business case. • Business impact – describes the results of the analysis performed in terms of financial and nonfinancial benefits and impact.

The non-financial results of business case are just as important as the financial results since service value and service costs are not always equal. • Risks and contingencies – every business action will have some form of risk; this section provides an opportunity to communicate those risks and provide contingencies for addressing those risks. • Recommendations – provides the means to sanction the proposed business action and communicate any conditions or guarantees that should be placed on the proposal before acceptance. While the business case is generally recognized as a tool to define the financial aspects of a proposed investment, they are used to communicate the business and technological benefits of Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 207 a proposed solution.

Because of this, the business case is also a component of service portfolio management and business relationship management.

Inputs The major inputs to Financial Management for IT services include (ITIL Service Strategy, page 240): • • • Policies, standards, and practices defined by legislation, regulators, and enterprise financial managers Generally Accepted Accounting Practices (GAAP) and local variations All data sources where financial information is stored, including the supplier database, configuration management system, the service portfolio, customer agreement portfolio, application portfolio, and project portfolio, which together comprise the elements of the service knowledge management system • The service portfolio provides the structure of services that will be provided, which, in turn, will be the basis for the accounting system—since all costs (and returns) will ultimately be expressed in terms of the services provided • The service management processes provides information about how money is spent, what services are provided and any additional commitments made to the customer.

Outputs The major outputs of Financial Management for IT services include (ITIL Service Strategy page 240). • • Service valuation: This is the ability to understand the costs of a service relative to its business value.

Service investment analysis: Financial management for IT services provides the information and history to enable the service provider to determine the value of an investment in a service.

This information is used by the business to demonstrate the value they have realized in using the service to achieve their desired outcomes. • Compliance: Regardless of the location of a service provider, or whether they are internal or external, financial data is subject to regulation and legislation.

Financial management for IT services helps implement and enforce policies that ensure the organization is able to store and archive financial data, secure and control it, and make sure that it is reported to the appropriate people.

IT Financial Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 208 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION Management data specifically allows the executives of the organization to track the levels of investment in IT and ensure that the money is being used to achieve the overall organizational strategy, mitigate risks, and achieve the appropriate returns in a legal and ethical manner. • Cost optimization: Cost optimization should not always be equated with cost savings.

The goal of cost optimization is to make sure that investments are appropriate for the level of service that the customers demand and the level of returns that are being projected. • Business impact analysis (BIA): Business impact analysis (BIA) involves understanding the effect on the business if a service were not available.

This enables the business to prioritize investments in services and service continuity.

Financial management for IT services contributes to BIA by providing financial data and information to quantify the potential effect on the business.

It also helps to quantify and prioritize the actions that need to be taken to prevent the impact from becoming reality. • Planning confidence: Planning confidence is not a tangible output or plan—rather it refers to the level of confidence that service stakeholders have in the service provider being able to accurately forecast costs and returns.

A lack of planning confidence will result in a lack of confidence in the service provider, and, in many cases, an unwillingness by the business to invest in IT unless absolutely necessary. 6.7.9 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Below is a list of sample critical success factors and key performance indicators to provide a sense of how Financial Management for IT Services can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in ITIL Service Strategy, page 242. • CSF: There is an enterprise-wide framework to identify, manage, and communicate financial Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 209 information, and this includes the cost and associated return of services. • KPI: Enterprise financial management has established standards, policies, and charts of accounts, which it requires all business units to use and comply with.

Audits will indicate the extent of compliance. • KPI: The financial management for IT services framework specifies how services will • be accounted for, and regular reports are submitted and used as a basis for measuring the service provider’s performance. • KPI: Timely and accurate submission of financial reports by each organizational unit. • CSF: Financial management for IT services is a key component of evaluating strategies. • KPI: All strategies have a comprehensive analysis of investment and returns, conducted with information from financial management for IT services. • KPI: Review of strategies indicates that financial forecasts were accurate to within an acceptable percentage. • KPI: Timely and accurate provision of financial information for service analysis during service portfolio management. • CSF: Funding is available to support the provision of services. • KPI: Internal service providers receive the funding required to provide the agreed services— showing a break-even at the end of the financial planning period. • KPI: External service providers are able to sell services at the required levels of profitability. • KPI: Funding is made available for research and development of new services or improvements to existing services. • CSF: Service asset and configuration management work together with financial management for IT services to ensure good stewardship of service and customer assets. • KPI: Customer and service assets are recorded in the configuration management system, and all required financial information is complete. • KPI: Regular reports are produced on the costs and utilization of customer and service assets and action plans are targeted for any deviations from required performance or utilization. • CSF: The service provider must understand the relationship between expenses and income and ensure that the two are balanced according to the organization’s financial policies. • KPI: For internal service providers: the expenditure of the service provider is recorded in a timely and accurate fashion, according to enterprise financial management requirements. • KPI: For external service providers: the expenditure and income of each business unit is Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 210 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION reported in a timely and accurate fashion, according to enterprise financial management requirements. • KPI: The cost of each service is reported on a monthly, quarterly, and/or annual basis and compared with the return achieved by that service (either in terms of income or in terms of meeting some other business objective). • CSF: Financial management for IT services must provide reporting to the organization’s stakeholders that enables them to make sound decisions and to comply with regulatory reporting requirements. • KPI: Standard financial reports (as determined by policy or regulation) are produced on time and provided to the appropriate stakeholder. • KPI: Deviations in expenditure or income above a specified percentage must be reported to the appropriate level of management, together with an action plan to rectify the situation.

Action plans will be measured by whether they achieved the result agreed. • KPI: No penalties or fines are incurred due to non-compliance of regulatory or legislative requirements. • KPI: Each major decision will be reviewed in terms of the accuracy of the outcome compared to what was forecast. • CSF: The service provider must be able to account for the money spent on the creation, delivery, and support of services. • KPI: The service provider uses an accounting system, and this is configured to report on its costs by service. • KPI: Regular reports are provided on the costs of services in design, transition, and operation. • CSF: Financial management for IT services is able to report on, and accurately forecast, the financial requirements to meet service commitments to customers. • KPI: Financial reports are structured according to the service in the service portfolio. • KPI: Financial forecasts are accurate to within an agreed percentage of the forecast amount. • CSF: The service provider is able to charge for services where appropriate. • KPI: Charging for IT services is conducted as agreed with customers (accurately and on time). • KPI: Complaints or queries about charges raised occur below an agreed percentage and are resolved within an agreed time. • KPI: Charges are calculated so as to allow the service provider to meet its recovery targets (break-even or profitability). Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 211 — Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 220 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION 6.8.6 Triggers Triggers of business relationship management include (Service Strategy, page 227): • • • • • • • • A new strategic initiative A new service or a change to an existing service has been initiated A new opportunity has been identified A service has been chartered by service portfolio management Customer requests or suggestions Customer complaints A customer meeting has been scheduled A customer satisfaction survey has been scheduled Inputs The activities above require the following inputs to Business Relationship Management (ITIL Service Strategy, page 277): • • • • • • • • • Customer requirements Customer requests, complaints, escalations, or compliments The service strategy Where possible, the customer’s strategy The service portfolio The project portfolio to ensure that requirements are gathered in a timely fashion and that all projects include Business Relationship Management activity where appropriate Service Level Agreements Requests for change Patterns of business activity and user profiles defined by Demand Management and that need to be validated through Business Relationship Management Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 221 Outputs The activities will produce the following outputs of Business Relationship Management (ITIL Service Strategy, page 278): • • • • • • • • • Stakeholder definitions Defined business outcomes Agreement to fund (internal) or pay for (external) services The customer portfolio Service requirements for strategy, design, and transition Customer satisfaction surveys and the published results of these surveys Schedules of customer activity in various service management process activities Schedule of training and awareness events Reports on the customer perception of service performance 6.8.7 Critical Success Factors and Key Performance Indicators Critical Success Factors are a function of the organization’s objectives for the process.

Key Performance Indicators are designed to support the Critical Success Factors.

KPIs should be monitored and used as evidence in supporting opportunities for improvement. Below is a list of sample critical success factors and key performance indicators to provide a sense of how Business Relationship management can be measured.

The actual development of CSRs and KPIs by the organization should be performed with careful consideration on the organization’s needs.

These examples can be found in the ITIL Service Strategy volume, page 279. • CSF: The ability to document and understand customer requirements of services and the business outcomes they wish to achieve • KPI: Business outcomes and customer requirements are documented and signed off by the customer as input into service portfolio management and Service Design processes. • CSF: The ability to measure customer satisfaction levels and to know what action to take with the Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 222 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION results • KPI: Customer satisfaction levels are consistently high and are used as feedback into service portfolio management and strategy management for IT services.

Any score lower than a defined level results in an investigation into the cause and corrective action, involving service level management, problem management, capacity management, etc. • CSF: The ability to identify changes to the customer environment that could potentially impact the type, level, or utilization of services provided • KPI: Customer satisfaction and customer retention rates are consistently high. • KPI: Business relationship management provides input about changes to the customer environment that result in changes to services and strategy, resulting in improved customer satisfaction scores (and for external service providers, increased revenue). • CSF: The ability to identify technology trends that could potentially impact the type, level, or utilization of services provided (this will be done together with capacity management) • KPI: Opportunities leveraging new technologies have been identified with the business and included in the service portfolio.

Each opportunity’s return on investment has been measured and a decision made to keep or retire the service based on how effectively it met its objectives. • CSF: The ability to establish and articulate business requirements for new services or changes to existing services • KPI: Every new service has a comprehensive set of requirements defined by business managers and staff, and these have been signed off by both business and IT leadership at the strategy, design, and transition stages. • KPI: The reasons for, expected results, and detailed requirements for changes to services are documented and signed off at the strategy, design, and transition stages. • CSF: Business relationship management must be able to measure that the service provider is meeting the business needs of the customer • KPI: The service provider is consistently rated above a defined minimum level in a structured customer satisfaction survey. • KPI: Service performance is matched to business outcomes and reported to the customer.

Deviations from expected achievements are documented and an improvement opportunity is logged in the CSI register or a change to the service portfolio is initiated as appropriate. • CSF: Formal complaints and escalation processes are available to customers • KPI: Number of complaints and escalations are measured and trended over time and by Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 223 customer.

Escalations must reduce over time.

Number of complaints will vary, but care should be taken to investigate changes in trends—services are getting worse (more complaints), services are improving (fewer complaints), or the process is not being used (fewer complaints). Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 Chapter 7 — 328 H ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION hardware 26, 34, 64, 72, 192, 198, 285, 290-1, 295 human resources 50, 111, 157, 175, 193, 260-1 I IEC 11, 247, 275, 284, 301, 309, 319 implementation 14, 50, 55, 82, 108, 203, 226, 242, 244, 246, 249-50, 259-60, 268, 271, 289, 292 improvement actions 28, 119, 134, 184, 250-1 improvements 1, 21, 50-1, 76, 88, 90, 104, 106, 130, 143-4, 208-9, 224-5, 240-1, 245-6, 248-51, 25860 incident management 19, 36, 40, 58, 132, 134, 141, 143, 225, 235-6, 244, 306 incidents 41, 50-1, 72, 101, 105, 117, 132, 142, 158, 173, 180, 183, 218-19, 235, 270, 285 income 152, 188, 204, 209-10, 240, 281 industry 1, 13, 15, 20, 69, 71, 78 information 1-2, 34-5, 51-2, 60, 62-3, 69-73, 75-6, 89-90, 94-9, 101-5, 142-3, 159-60, 183, 207-9, 290-3, 298 accurate 49, 98, 134 information security management 89, 182, 256, 302-3 information technology 14, 290-2, 316 inputs 7, 9, 60-1, 88, 94, 102-4, 115, 125, 143, 165-6, 182-3, 192-3, 206-7, 220-2, 254-5, 272 instructions 2, 4, 172, 314 interact 74-6, 214 interactions 74-5, 248, 269, 299, 305 Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 329 interfaces 7, 9, 37, 53, 60, 63, 89, 98, 103-4, 145, 165-7, 170, 202, 226-7, 230, 272 internal service providers 25-6, 46, 48, 73, 166, 187, 189, 205, 209, 215, 238, 281, 290-1, 312 investments 21, 29, 47-9, 52, 67-8, 73-4, 79-81, 83-6, 88-92, 97, 105, 151, 189-90, 206-9, 240, 291 initial 91-2, 187 ISG (IT steering group) 94, 292, 316 ISO 11, 20, 247, 275, 284, 291, 301, 309, 319 ISPs (Internet Service Providers) 32-4, 291 IT Service Management (ITSM) 1, 6, 13-17, 19-20, 25-6, 35, 46-7, 66, 68, 82, 128-9, 242-4, 274-5, 292-3, 304-5, 316 items 72, 96-9, 173, 189, 192, 234 ITIL Service Design 107, 145, 182-3, 185 ITIL Service Strategy 68, 90, 167, 207-8, 220-1 K KED (Known Error database) 48, 50-1 Key Performance Indicators 7-10, 90, 104-5, 122, 132-3, 144, 167, 184-5, 208, 221, 248, 285, 305 know 96, 120, 123, 169, 214, 221, 238, 265-70 knowledge 15, 64, 94, 96, 101, 105, 130, 219, 225, 239, 249, 267, 274, 280, 298, 313 KPI (key performance indicators) 7-10, 66, 90-2, 104-5, 122, 132-3, 141, 144-6, 167-8, 184-5, 208-10, 221-2, 248, 285, 305 L layers 16-17, 112, 129, 186 Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055 330 ITIL® SERVICE OFFERINGS AND AGREEMENTS CERTIFICATION KIT—THIRD EDITION levels 46-7, 50, 67, 72, 76-7, 81, 89, 92, 106, 112, 127-9, 201, 208, 213-14, 222, 234-5 agreed 106, 289, 306 component 136, 138, 142 license 28-31, 37, 60, 70, 80, 84, 102, 125-6, 128, 131, 155, 158, 170, 174, 177, 237 lifecycle 6, 34-5, 43, 58, 64, 68, 71, 73, 92-4, 175, 216, 239, 284-5, 297-8, 303, 305-8 M maintenance 98, 115, 123, 178, 192-4, 228, 235, 289 management 14, 26, 41, 59, 61-3, 67, 74, 92, 108, 130, 134, 235-6, 239-40, 249-50, 263, 280-1 market spaces 25, 46, 56, 76-80, 86-7, 254, 267, 270, 293 existing 76, 80-1 new 77, 80-1 markets 74, 79, 82, 84, 87, 114, 181, 226, 238, 241, 252 maturity 20, 247-9 meal 27, 75, 96, 195, 284-5, 288 Mean Time to Restore Service (MTRS) 50-1, 316 Measurement Frameworks 8, 138-42 measurements 21, 51, 78, 122, 124, 129, 132, 136-40, 142, 232, 245-6, 248, 250, 268, 300, 308 medium 68, 71, 160, 163-4, 243 meeting 16, 47, 88-9, 118-21, 124, 131, 133-5, 144, 206, 210, 222, 226, 261, 263, 289, 299 menu 69, 96, 195 Metric Trees 8, 141-2 metrics 54, 61, 117, 138, 142, 149, 152, 245, 248, 250, 271, 281, 286, 288, 297, 319 Copyright The Art of Service I Brisbane, Australia I Email: service@theartofservice.com Web: http://store.theartofservice.com I eLearning: http://theartofservice.org I Phone: +61 (0) 7 3252 2055

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