2Introduction to process strategy

This publication guides the user through the implementation of the service level management (SLM) process. Most chapters concentrate on a deliverable or an activity that will eventually create the design and deployment of the process. This chapter is different. It sets the stage and proposes basic principles for those of you who either own an existing SLM process or who are assigned to lead the implementation of the process.

The chapter takes more of a philosophical role than a practical one in order to set the stage for the upcoming activities that implement the SLM process.

2.1SERVICE LEVEL MANAGEMENT STRATEGY – OVERVIEW

This publication is divided into five main parts which follow the ITIL lifecycle. The first part of the service lifecycle (Part 1) relates to service strategy and contains three chapters (Chapters 2–4). The three chapters are organized as stages, opening with basic concepts and continuing with envisioning the process, which can then enable a maturity assessment for SLM:

• Process strategy This chapter takes us through the journey of establishing the strategy of the organization’s SLM process (see Figure 2.1). It discusses the issues and challenges that need to be considered, and this sets the stage for the subsequent activities that will execute the service strategy phase.

  

  Figure 2.1 SLM strategy activities – process strategy

• Process envisioning Chapter 3 provides guidance on aligning the SLM process with the business, to ensure SLM delivers the organization’s desired results. The chapter develops critical success factors (CSFs) and key performance indicators (KPIs), and it concludes with a sample process charter and job description for the service level manager.
• Maturity assessment Chapter 4 helps evaluate current process maturity compared with best practice. Although the envisioning exercise produced a roadmap, the suggested maturity assessment produces a more practical and tangible roadmap that will be used throughout the implementation of the process.

Both the maturity assessment and the process envisioning are inputs to the process charter, service level manager job description and roadmap. If all the steps are executed correctly, these deliverables will provide an excellent source for the next stage of the lifecycle, namely service design.

Like any other process or function in IT service management (ITSM), SLM must establish its strategy. Ideally, the process owner is assigned in the early stages, allowing the owner to participate in the critical formative activities such as establishing process vision and strategy, developing a process charter and then continuing with the development of process design documentation. However, in many cases an owner is already assigned to an existing process, where those critical activities are considered to be completed. The challenge in this situation is to step back, review the position and improve the capabilities of the process. Therefore, regardless of whether this is a new process or an existing one, our starting point continues to be strategy development.

The primary goal of any strategy activity is to provide guidance and give direction. The deliverables of SLM strategy include ITIL/SLM maturity assessment, envisioning the process, creating a process roadmap and establishing CSFs, all of which are detailed in the next two chapters. These deliverables will provide us with the guidance and direction needed to begin the process lifecycle.

This chapter addresses different matters to consider when it comes to defining the strategy of SLM, ITSM structure, organizational structure, and customer–provider relationship types. Let’s begin by reviewing the general approach to SLM strategy and how to implement it.

2.2POSITIONING SERVICE LEVEL MANAGEMENT IN THE ORGANIZATION

If SLM is new to your IT organization, it is important to decide where these new roles and responsibilities will be placed within the organizational structure. Your organization’s executive IT management must not only select an individual (or individuals) who will manage the process, but that person must decide where the process is positioned within the overall organization structure.

The IT executive management may need to carry out some restructuring in order to accommodate the SLM role. If this is the first step towards a higher ITIL maturity level, this could mean a major reorganization is required. Some chief information officers (CIOs) fully embrace the ITIL service lifecycle and organize IT into service strategy, service design, and service transition and service operations groups. Others are organized by the lines of business and the major classes of IT services. Still others are organized by technologies. All of these organizational options are viable as long as IT is well structured to meet the needs of the business.

Figure 2.2 is an example of IT organization within an enterprise that is organized in accordance with the ITIL service lifecycle. The CIO made a strategic decision to fully embrace ITIL and ensured his organization mirrored the service lifecycle. In this scenario there was a single service level manager, indicated by the darker box, who had a staff of two people to assist with the execution of the process on a daily basis.

There are other IT organizations with a similar structure but with multiple service level managers assigned to specific IT service portfolios which are large enough to warrant their own service level manager.

Figure 2.3 was taken from an IT organization that was organized around IT service portfolios instead of the five stages of the ITIL service lifecycle. The business it serviced happened to be part of the healthcare industry. The CIO had a group of direct reports, most of whom mapped directly to the service portfolio. The vice presidents of each portfolio, shown as shaded blocks, were appointed as service level managers for their portfolios of IT services. Although Figure 2.3 breaks down SLM into four areas, and in fact there is an acting service level manager per area, the organization utilized one of them to lead the SLM process to promote consistency and standardization. In this example, the service level manager for the financial services was acting as the global service level manager.

Figure 2.2 IT organization modelled on the ITIL service lifecycle

No matter what the size of the IT organization, it is critical to ensure the role of service level manager is well positioned for success within the IT organization and that the incumbent has the staff needed to execute the process. Furthermore, these service level managers need to have counterparts on the business side of the organization. In order to be successful, a service owner or advocate from the lines of business must be appointed on the customer side and given responsibility for interacting with the service level managers.

For more about the roles and responsibilities within SLM, refer to Chapter 6 on SLM functions and processes.

2.3ITSM GOVERNANCE AND THE SERVICE LEVEL MANAGEMENT DILEMMA

One of the main challenges during the strategy phase is to balance the SLM influence or authority in the ITSM environment. On the one hand, limiting the process to developing and reviewing service level agreement (SLA) reports will not suffice, but on the other hand we need to be careful not to over-extend the authority of SLM.

SLM has the tools to monitor performance and has the advantage over other ITIL processes in that it is integrated with other ITSM processes and functions. Given this scope, at times it is suggested that SLM should govern the entire ITSM process.

Figure 2.3 IT organization modelled on the IT service portfolio

Is that the right path to take? Should we consider SLM to be the umbrella process that coordinates and manages the other processes?

To answer these questions, let’s examine the objective of SLM. The primary objective of SLM is to ensure that an agreed level of service is provided to the customer. SLM focuses on the needs of the customer and interfaces with the customer periodically to review the performance of services and ensure improvements for those services which are lacking. The customer is interested in the result of service performance and is less interested in how its activities are undertaken. For example, configuration audits are performed to ensure that no discrepancies exist between what is recorded in the configuration management database (CMDB) and the actual environment. Should SLM follow up with configuration management and monitor the execution of the audits? The answer is no: SLM is only responsible for the performance of services that were agreed upon with the customer.

However, not all situations are as simple. Consider the following scenario. The average speed to answer (ASA) is a measurement of the service desk function that monitors time elapsed to answer all calls in a given period. Is SLM responsible for tracking the performance of the ASA measurement? If we go back to the guiding principle that SLM is responsible for service levels agreed to by the customer, it will provide us with the answer: if ASA is in the SLA, then yes; but if it is not a service that was negotiated and agreed upon with the customer, it is out of the scope of SLM.

No matter what the assessment results indicate or what the CSFs are, we must first define the very basic objective of the process, which is to ensure the provision of services according to the agreement that has been signed with the customer.

Eliminating SLM as the process that controls and monitors ITIL processes and functions raises the obvious question: who in fact undertakes such control and monitoring? In this connection there are three matters to be addressed that are seemingly not covered by any of the formal ITIL processes:

• Monitoring the performance of ITIL processes and functions
• Coordinating between ITIL processes and functions
• Aligning ITIL strategy with the business strategy.

Two other aspects of ITSM governance also need to be considered, as set out next: the possible existence of a service management office, and IT governance.

2.3.1Service management office

Although not defined in ITIL publications, many organizations that have adopted ITIL have created a service management office. Named differently in different organizations, this function acts as the link between the business and ITSM.

Secrets of the trade

The service management office takes many forms and labels, including IT management programme, project management office (PMO) and more. This function can be forced down by the CIO or developed naturally by IT operations. Organizations that have embraced systems of best practice such as ITIL, PRINCE2, PMBOK and COBIT have quickly realized that coordination between functions needs to be formalized to achieve maximum process efficiency.

The service management office optimizes the integration points between the processes and functions, thus assisting the individual processes to view the environment beyond their specific niche. In addition, allocating resources to monitor and coordinate processes allows the process owner to focus on completing operational activities.

2.3.2IT governance

All organizations perform some form of IT governance when they use IT to support their businesses. This type of practice can fulfil the activities discussed in this section.

Control OBjectives for Information and related Technology (COBIT), which is a set of best practices for IT and IT governance, states that for ITIL to be successful in an organization, management should put an internal control system or framework in place. This system contributes by:

• Making a link to the business requirements
• Organizing IT activities into a generally accepted process model
• Identifying the major IT resources to be leveraged
• Defining the management control objectives to be considered.

Traditionalists strongly believe that IT governance is better when focused more on control and less on execution and should remain on a strategy level as a decision maker, measuring the performance of ITSM only from a business point of view. Less conservative thought extends the scope of IT governance to monitor the efficiency of ITSM, not only by decision-making, but also by ensuring activities are done correctly and efficiently.

To conclude, every organization must establish a function that will align the objective of IT service management with the business objective. This governing function will monitor the performance of ITSM and coordinate its functions and processes. This function should free up resources for the process owners to complete tasks at hand. Thus, the incident manager can ensure quick resolutions of incidents and the service level manager can focus on achieving high customer satisfaction.

2.4SERVICE LEVEL MANAGEMENT STRATEGY FACTORS

By examining past SLM projects and practices, we learn that the process may have different forms, structures and impacts on the business environment. There are three factors that have an impact on the strategy of SLM:

• Service provider structure
• ITSM environment
• Service level manager.

2.4.1Service provider structure

ITIL describes three different types of service provider:

• Type I – Internal service provider The IT department provides services to internal business units and is funded by overheads. Type I providers have the benefit of tight coupling with their owner-customers, avoiding the costs and risks associated with conducting business with external parties.
• Type II – Shared services unit Shared services operate within organizations by providing services to internal clients. They operate on business principles and provide internal services at a cost and quality that is acceptable to clients, when assessed against external alternatives. They are referred to as shared services because their activities are shared by units across entire organizations, instead of duplicating similar services within each unit.
• Type III – External service provider Customers may pursue sourcing strategies requiring services from external providers. The motivation may be access to knowledge, experience, scale, scope, capabilities and resources that are beyond the reach of the organization.

Each type of service provider will establish an SLM process to ensure that the quality of services delivered is as agreed. However, the strategy of the process differs according to the service provider type.

From a strategy point of view, SLM considers the shared services unit to be essentially the same as an external service provider. Shared services units and external service providers share common elements such as market-based pricing, competition, legally binding contracts, and the fact that both are subjected to comparison with other service providers.

Although the extent of service provision type can differ from company to company, SLM defines its strategy based on two organizational structures (see Figure 2.4):

• Enterprise The IT department is an internal function that provides services to other internal functions.

  

  Figure 2.4 Service provision: enterprise versus outsourcing engagement

• Outsourcing engagement A company chooses to outsource IT services to an external service provider.

In the case of an enterprise, SLM regards the internal functions as customers: human resources, accounting, marketing, sales and so on. This is very different from the outsourcing engagement, where the customers are external to the organization.

While most aspects of SLM apply equally to all types of service providers – the requirements of the customers are collected, an SLA is signed and tracked, and over time a service improvement plan (SIP) is established to ensure that gaps in the service provision are resolved – there are still many variations we must consider. In the outsourcing engagement there is much at stake if services are not provided according to the SLA. For example, penalties can be executed, bonuses will not be paid, contracts might not be extended and, in the worst-case scenario, engagements might be terminated.

In an enterprise, SLM must ensure that the internal business units are satisfied with the level of services. SLAs will be signed with the customers, and operational level agreements (OLAs) and underpinning contracts (UCs) will be signed with internal and external providers. In a more mature environment, chargebacks are carried out to recover the cost of service provision.

2.4.2ITSM and service level management

There has been a shift in the SLM approach. Some organizations allocate a broader role for SLM in the IT service management environment, with SLM acting as the superior governor and coordinator of other service management processes and functions. Other organizations treat SLM as a process that maintains the SLA and reports on its results. ITIL SLM is very clear on the goal of the process, which is to ensure that an agreed level of IT service is provided for all current IT services, and that future services are delivered to agreed achievable targets.

When IT service management was implemented in organizations, the need to interface with the customers, obtain their service requirements and discuss service management matters was realized. As ITSM grew and ITIL V2 was introduced, SLM became very effective in relation to the coordination between customers and service providers, and governing their services naturally transitioned into doing the same between services, processes and functions.

Definitions aside, in reality the authority of SLM is determined by each organization and its politics. Many organizations that adopted ITIL still have SLM as the coordinator and integrator of their ITSM environment. The reason for this is simple: such organizations position SLM within service strategy, when it should be positioned within service design.

When you start developing the process strategy, you will need to define the relationships with other ITSM processes. The ITIL lifecycle approach helps with this exercise. If you previously defined the relationships for each process and function, you can now define the relationship with the five phases of the lifecycle:

• Service strategy SLM is one of the main links between service strategy and service design. The service strategy function passes decisions regarding services via the service portfolio and, together with the service catalogue manager, details the services going into the service catalogue and SLA. In reality, senior managers in charge of the service strategy process are in constant communication with SLM, particularly the service relationship management part of the process. In the example of an outsourcing engagement, the account management will continually enquire about customer satisfaction and service review meeting results, all under the authority of SLM.
• Service design There is a direct correlation between the maturity of the ITSM environment and the bond between processes within service design. Effective coordination between service catalogue management, financial management and SLM will produce high-quality outputs of service design. The catalogue and the cost model are dependent on inputs from SLM, and the disregarding of SLM needs will leave gaps in both.
  Nonetheless, the SLA is completely dependent on the outputs of service design. Organizations that produce service packages are ones in which SLM thrives.
• Service transition Best practice advises the involvement of SLM in the service transition activities, but in practice unfortunately we don’t do it. For example, change management suggests having the service level manager take part in change advisory board (CAB) meetings and, in some matters, the service level manager should even be involved in deployment plans. The list of service transition activities in which SLM should be involved is not written in stone. However, a mature ITIL environment should include SLM in certain subsequent service transition activities:
  • Defining/modifying change policy
  • Prioritizing a forward change schedule
  • Being present at CAB meetings for relevant matters
  • Post-implementation review.
• Service operation The objective of service operations is to provide services according to the level agreed with the customer. This means that the relationships between all processes and functions within service operations must remain tight and consistent. When a service desk operator logs an incident, the service level target should be communicated to the end user. For example, if a printer is down, the operator might tell the end user that the incident at hand is set to Priority 3 and ask the end user to allow six hours for restoring the service, as documented in the relevant SLA. When a decision is being made whether to initiate the problem management process, one of the primary considerations is the service level for responding and for restoring the service.
• Continual service improvement (CSI) ITIL considers SLM to be a crucial part of CSI, along with the seven-step process, reporting and measuring. While CSI addresses the overall health of the ITSM environment, along with services and their components, SLM provides important inputs to CSI, including the CSI register and customer satisfaction results.

2.4.3The unique skills of the service level manager

The service level manager is responsible for the SLM function and the process activities under its authority. They are responsible for implementing, maintaining and continually improving the process.

The service level manager is also responsible for the development of appropriate documentation, including an SLM charter and the service structure document, which defines the service providers, the services and the customers. They assist with the development of the service catalogue and cost modelling, which are both inputs to the SLA. The service level manager is the sole owner of the SLAs and is responsible for their lifecycles. They are also the owner of the SIP, and communicate its status between the customer and operations. The service level manager is responsible for the continual improvement of SLM processes and functions. However, they must possess and acquire other ‘soft skills’ to be successful in their mission.

A service level manager is required to have strong interpersonal skills and be respected by customers and service providers. They must have the authority as well as the ability to negotiate a balanced understanding and commitment between customer and service provider.

The service level manager communicates with the service provider and the customer and must adopt the role of a diplomat and ambassador. They strike a balance between customer requirements and the provider’s service delivery capabilities.

Throughout the lifecycle of the process, there are many touch points requiring the service level manager to develop these relationships. Some of the areas and activities that need particular awareness are as follows:

• Documentation When creating an SLM charter, you will work with senior management to scope the process. This is a great opportunity to develop the relationship with senior managers by helping them to understand the key features of the process and how it can benefit them.
• Contracting If you are lucky, you will be initiated early enough to take part in the contracting phase. Here, you will be introduced to the accounts team and, most importantly, the accounts manager. The SLA negotiations and future changes will go more smoothly if your relationship with the accounts manager is positive.
• Service level requirements (SLRs) Clearly defined and agreed SLRs will improve your position if it comes to further negotiation around pricing. By working openly with the customer, you can in effect agree on your pricing structure together. It is also the perfect opportunity to work with your customer and understand what their business need truly is.
• Service catalogue and cost model The service catalogue manager should be your best friend. Also, don’t forget to identify the financial manager, who will provide you with the most essential information to support the process.
• Negotiations Negotiating the SLA is a substantial part of the process, which will provide the opportunity to exercise your interpersonal skills. The service level manager should be prepared to drive the proactive maintenance of an SLA, also known as SLA audits, at regular intervals.
• Reporting Submitting reporting requirements for SLA and metric reports and communicating back to the reporting function in order to demonstrate the value of the reports for both the customer and service provider are valuable activities.
• Service review meetings The service review meetings are the primary execution of the communication plan between the service level manager and the customer.
• Service improvement plan Including your customer in a formal SIP process is critical to its success. Sharing the agreed plans is a positive and sensible strategy that ensures customer buy-in and support.

To summarize, the personality of the service level manager is crucial for the ITSM environment. Some service level managers will follow the ITIL process as suggested but still find that they have limited influence. One of the objectives of this publication is to encourage the manager to take a more proactive role in their ITSM environment by keeping the best interests of the customer in sight, and at the same time ensuring that the interests of the business are maintained, by promoting communication, creating data transparency, and presenting improvements in a timely and professional manner.

2.5INITIATING SERVICE LEVEL MANAGEMENT

There is a growing concern regarding the initiation of the process of SLM and transitioning it into the live environment, specifically in relation to outsourcing engagements. In many engagements, practitioners are required to assist with this issue and provide concrete recommendations on how to proceed.

To better understand this situation, let’s describe the lifecycle of an outsourcing procurement process. As shown in Figure 2.5, the bidding process starts with the request for proposal (RFP), followed by the development of the statement of work, proposal evaluation service provider selection, and then contract signature. After the commencement date is determined for the provision of the service, the engagement is on its way.

Figure 2.5 Typical introduction of SLM in outsourcing engagement

When should SLM be introduced? When do we allow the service level manager to meet the customer and understand the environment?

Unfortunately, in most cases the service level manager starts working on the day the services commence being provided. The services are already predefined by the engagement without the participation of the service level manager.

This is a common problem that needs to be addressed in outsourcing deals. This scenario forces the service level manager to manage an SLA and associated metrics that the service level manager did not work to define; instead, they were defined solely by the business. The contract, which details many of the service aspects, was completed by the contract team or by the accounts team, but the service level manager was not involved. This is far from an ideal situation for any service level manager.

The following are the primary problems created by late initiation of SLM:

• The SLA structure is not according to best practice.
• SLA metrics are not based on service management facts.
• Reporting requirements are not aligned with ITSM best practice or the SLA. The complete picture needs to be taken into account.
• Process definitions are not tailored to the specific engagement. In many contracts, definitions of SLM activities are copied from a previous contract. The SLM process must be designed and customized to the particular needs of the customer and the engagement.

The problem cannot be addressed by SLM alone. There is a need to review the procurement process. The service level manager should be introduced immediately after the first stages of the sale cycle; they must be involved in the contract and must own the SLA. The service level manager will build it with the vision of sub-processes, reporting, SLA reports and other systems in place.

Figure 2.6 Ideal time to introduce SLM in outsourcing engagement

Figure 2.6 shows the ideal time to introduce SLM in an outsourcing procurement process.

2.6 SUMMARY

This chapter’s objective was to smooth the transition into the practicality of SLM. The chapter has ideally helped you to realize that different organizational structures and types of service provision have an impact on the strategy of the process.

Before executing the strategic activities that are detailed later in this publication, the basic elements of the organization and how they impact on the process must first be understood.