IT Services and the Value Chain Concept

Service Defined

Services are means of delivering value to customers by facilitating outcomes customers want to achieve, without the ownership of specific costs and risks.
• Facilitate outcomes by enhancing the performance of associated tasks and reducing the effects of constraints.
• Result is an increase in the probability of desired outcomes.

Services are generic structures useful to make an idea work in a wide range of environments and situations.

The above is from the ITIL v3 Service Strategy volume. At first glance it can be a bit much to take in; but it does make sense.

In the early days of e-mail it was popular for 'everyone' to have their own email servcer. It was easy to set up on any Microsoft or Unix box and separate organizational departments would run their own email. Now, this is rarely the case. Security issues, redundancy and other costs and risks increased. The atomization of email in separate departments became too costely and risky and was centralized in an enterprise wide email service managed by the IT department. This trend in email as a service continues, as many organizations are 'outsourcing' their email to Google or other such carriers.

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Service Management Defined

Service Management Defined
Service Management is a set of specialized organizational capabilities for providing value to customers in the form of services.
• Service Management takes the form of a set of Functions and Processes for managing Services over their Lifecycle.
• Service Management is also a professional practice supported by an extensive body of knowledge, experience and skills.

The Concept of the IT Value Chain

 

Modern Business operates according to the concept of the value chain. The value chain identifies those activities, in a sequence, that add value to the final product or service.

If an activity adds value to the final product, or service, it is on the primary value chain.

Activities that do not add value to the final product, necessary though they may be, are NOT on the primary value chain. They are supplementary or secondary activities. (E.g.- HR processes, IT Security)

Applying this concept to IT, at a very high level- we get a primary Value Chain of Plan, Build, Run. This is the large scale chain of activities that enables the delivery and operation of IT services.

Each of these high-level sections of the chain will have its own set of processes defined that allow that portion of the chain to deliver its necessary value.

The first thing to notice, however, is that the value chain of any business is necessarily interconnected. This should be true for an IT organization as well.

In reality, in many IT shops, there is less than seamless integration between these different high level parts of the value chain. At one level, these are the silos that you see referred to on various ITSM presentations. The Build portion of the operation may use meticulous project management methodology to manage the construction of IT services without preparing or costing the operational costs of the delivered service. And, the Help Desk may learn they are supporting the new service when they get the first question from an end user of the service.

One point of the value chain concept applied to IT is to look at the larger picture. IT, like other modern business, needs to be managed as a complete, inter-related, interconnected system.

The graphic above places some frameworks in their approximate place on the value chain. No framework (not even ITIL v3) provides comprehensive coverage for the primary IT value chain. They do provide best practices for structuring and managing activities within various phases of the value chain.

It is up to management to understand the concept of the value chain and manage in order to optimize and integrate it.

In IT, this can be done by a focus on Services and Processes.

IT Service LifeCycle

ITIL v3 extends the concept of the Value Chain (perhaps not consciously) to a LifeCycle approach.

Of course, feedback is an important part of the Value Chain concept- but the ITIL v3 standard, with its LifeCycle approach, make this much more explicit.

Services and Processes

From an IT perspective – Services are what the end-users consume. Let’s clarify with an example.

The boardwalk in Ocean City Maryland is home to, among many other things- Thrasher’s French Fries.

Thrasher’s is about the simplest restaurant I can think of, with a very simple business model- and therefore a fairly simple value chain.

Thrasher’s French Fries, since 1929, has one service (actually it’s a product- but let’s ignore that distinction for now):
Thrasher’s serves – french fries – small, medium, large and tub.
(OK, they also serve soda; but let’s ignore that- that’s a commodity you can get anywhere).

No one cares about the fryers (e.g. the Exchange System); the customers only care about the fries (e.g. email).

Now, let’s say you are lucky enough to inherit Thrasher’s. How are you going to manage the delivery of these fries? All you serve are french fries- how do you manage this? What do you have to do?
(the real question is- for this very simple simple business- what are the business processes you have to manage?)

There is no real correct answer- because you can look at any business, and its business processes, in a variety of ways. But let’s start, at a relatively high level, with the value chain.
The primary value chain for Thrashers:
– Potatoes--> Cut (slice) the Potatoes --> Fry the Potato slices--> Put the fried slices in the containers --> Take orders --> hand customer proper container --> Collect money

This value chain can be broken down in a variety of ways to define the business processes to manage the Thrasher’s business.

It probably goes something like this:
BP: Wash and cut (slice) the potatoes.
BP: Fry the slices and package
BP: Take and fill customer orders

This is just an example, breaking down the Thrasher’s value chain into three Business Processes:
Wash and Cut
Fry and Package
Take and Fill Orders

The point is- we have a service and we use business processes to break down the value chain so that we can manage the activities to deliver that service. This can be done in a variety of ways, we could have 5 processes defined and managed separately rather than the three outlined above. But the approach is clear:
1. Define your service(s) – for Thrasher’s this is French Fries
2. Define your value chain
3. Define the processes you will manage to deliver the service.


This was an easy example, but most restaurants have more than one service. Most businesses, and IT shops too, will have multiple services.

What this means is that the concept of the value chain has to expand to cover multiple services. So will many of the business processes that support the delivery and operation of those services.

Imagine you are managing Thrasher’s and the decision has come to add onion rings to the product mix. A second service.

Would you integrate business processes where you could to support this new service and its added steps to the overall value chain? Or, would you create entirely new business processes, some operating in parallel with the existing french fry business processes?

Would you buy new infrastructure to support the new processes and service; ending up with onion ring fryers as well as french fry fryers?

How does IT often operate?