In other words, in line with the teachings of the ITIL® v3 Strategy book, as an IT organization, you will be more likely to earn yourself a seat at the organization’s strategic table if you first define who your customers are and what you should be providing to your customers (your "services") in order to help them achieve their objectives. After that, improving your processes for how you support and deliver those IT services will be much more likely to deliver the results you desire due to the focus you’ll bring to the end result: the quality of the services you deliver to your customers. You can tweak your Change Management process again and again, but if you aren’t focused on ensuring that these improvements result in better overall transitioning of new or changed services into operation, then you’ll miss an opportunity to truly improve both your standing in the eyes of your customers and the cost effectiveness of your operation.

Service Portfolio and the Service Catalog

The recommended place to start your ITIL® journey is to define your Service Portfolio.  The Service Portfolio is an executive-level view for mapping services to business needs.  It documents the services under development (a.k.a. Service Pipeline), services that are in production or available for deployment (a.k.a. Service Catalog), and the retired services.  The Service Portfolio is useful for analyzing where to invest, prioritizing and allocating resources, risk management and financial modeling.

The Service Catalog is the published orderable subset of the Service Portfolio (i.e. the live services).  It contains information on deliverables, contact points, request procedures, terms and conditions, pricing, etc.

Figure 1 illustrates how the Service Portfolio and Service Catalog map to the ITIL® Service Lifecycle.

 Figure 1: Service Portfolio and Service Catalog in context of the Service Lifecycle© 2007 Third Sky, Inc

There are two aspects to the Service Catalog: the Business Service Catalog and the Technical Service Catalog.

The Business Service Catalog describes the relationship between the services and the business processes that they support.  A business process may be supported by more than one service, and a service may support multiple business processes.  For example, an ERP service may support the business processes of planning and logistics, procurement, accounting, budgeting, etc.

The Technical Service Catalog contains the relationships between the services and the supporting services, components and configuration items.  The Technical Service Catalog is useful for developing Operational Level Agreements and Underpinning Agreements and components.

Financial and Demand Management

Historically, IT organizations have presented their budget and their costs to the customer based on the Technical Service Catalog (e.g., hosting costs, network infrastructure costs, etc).  The business was then (unreasonably) expected to translate these technical costs into their operating model.  This disconnect between the technical perspective and the business perspective resulted in poor IT governance.

The Business Service Catalog in ITIL® v3 provides a mechanism for mapping the technical perspective into business terms that the customer understands.  Once financial management is presented to the customer is the context of the business service, transparency is achieved and the business can better manage their own IT costs.

Determining the unit basis for a business service and allocating General Ledger costs from the Accounting System to a service cost model is a complex endeavor.  Cost mapping models range from activity based (from time keeping systems), organization based (e.g. number of employees), asset based (information from the CMDB), to other metric based approaches (e.g. number of Incident tickets).

With the service cost model defined, the customer gets an accurate view of how much of a service was consumed and the cost of those services; and, the transparency results in better IT governance.

Without that cost transparency, the customer will always choose the best service rather than the service optimized for cost.  Hence, describing different service level options with different prices in the Service Catalog can help empower the business to manage demand.

Since the Business Service Catalog gives the customer a better understanding of how IT costs maps into their business operations, customers now accurately forecast demand.  This allows IT to better manage capacity from a financial resource, human resource and technical capacity perspectives.  Furthermore, IT can shape demand by fluctuating pricing.

Conclusion

ITIL® v3 service portfolio users such as Kwantlen University College, Los Angeles Unified School District, International Flavors and Fragrances all came to the topic of the defining their Services with the goal of using that knowledge to better:

• communicate with their customers about what they actually do offer, including the conditions and customer responsibilities that must be met to ensure quality service delivery, creating a shared understanding of what is offered by IT, and what is the “normal” quality of each service
• determine what they should no longer be offering, for reasons such as: the high cost of delivery of “quasi-custom” or ad hoc services and the recognition of how this drains resources away from delivering and supporting the services that should be offered
• create a foundation for budgeting and reporting on the cost of delivering and supporting each service, providing more transparency for customers into the costs of IT and enabling IT to finally run like a business in support of their business customers
• enable the application of demand shaping principles: influencing the demand services - or their specific components, options, or configurations - through intelligent design and costing of the service elements

About the Authors:
Michael Robinson and Reg Lo are Vice Presidents at Third Sky, Inc. and are trusted advisors to large- and medium-sized organizations, helping them realize the business benefits from better quality IT services.  Third Sky provides the full breadth of IT Service Management consulting services, from: ITIL® education, ITIL® assessments, service catalog workshops, process consulting, to technology solutions for automating and facilitating IT Service Management.


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