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Service Management Understanding Demand and Supply to Be Effective

September 25, 2008

In related entries I identified the building blocks for strong service relationship management: perspectives, processes, roles and a governance framework. Here, I identify the critical areas you must focus on to build those relationships.

Key Findings

• The different players — end-user clients, the IT organization and the service provider
(SP) — have different perspectives on services. It is necessary to understand those
perspectives to be able to optimize service objectives for all parties. Service relationship
management is the only tool that can level perspectives and their respective objectives
over services.

• A series of activities throughout the service life cycle depends intrinsically on strong
relationships to be successful. The activities will be targeted by service relationship
management practices for that objective. Those practices will establish the appropriate
processes, roles and governance framework, optimizing service results for all parties.

• Through 2010, new and evolving service delivery models will require that service
management focus relationship management practices between SPs and clients as the
key tool to enable agile and flexible service delivery.

• By 2010, successful clients and SPs will have well-developed, relationship-focused,
service management practices, supported by the appropriate governance framework, as
a cornerstone of their service delivery processes.


• Understand how different players — end users, the IT organization and SPs — have
different perspectives and objectives with regard to services. Understand the different
demand perspectives over each type of engagement (efficiency, enhancement and
transformation), and the different supply perspective over each class of service — IT
outsourcing (ITO), business process outsourcing (BPO), product support, application
outsourcing and projects.

• Support each service engagement by developing the appropriate relationship
management components (processes and roles, supported by the appropriate
governance framework). There are permanent relationship components that are used for
all service engagements and specific components, developed for each one of them.
Integrate those specific components to the permanent components you already have in

Different Perspectives in Services

All service contracts have a relationship framework involving SPs, the end-user client, the IT area
and communication processes. They may not be the best possible frameworks, but they exist.
Our research indicates that they are generally appropriate from an operations perspective, but
deficient in important areas involving the relationships between the two sides.
The first reason why frameworks are deficient is simply because the parties consider the
exchange of formal documents as sufficient communication. They are essential, but they are not
enough. They must be supplemented by other means of communication, characterizing frequent,
rich relationships where both parties develop a deeper understanding of each other. The second
reason is that the parties fail to appreciate the difference between demand and supply
perspectives over services, and appropriately apply those different perspectives to critical
relationship actions and decisions in the service life cycle.

There are three main players in service management. The end users have naturally a demand
perspective about services, with specific expectations regarding outcomes. On the other side,
SPs have naturally a supply perspective, with specific delivery objectives. The IT organization, as
the area ultimately responsible for bringing internal or external services to the business user,
must deal with the demand and supply perspectives.

A failure to appreciate the different perspectives will prevent the engagement from optimizing the
achievement of expected objectives of all parties involved. To appreciate the different
perspectives, the parties involved have to engage in relationship activities that go beyond controlling delivery.

The Demand Perspective

From the demand perspective, the problem of a deficient relationship framework is more or less
severe depending on the type of engagement and the respective client’s expectation.
Types of service engagement define relationship expectations.
• Efficiency-type engagements can be more objectively specified, measured and
managed. Clients have objective expectations about them.
• Enhancement-type engagements are in an intermediary position and require a
relationship-dependent understanding of what expectations are.
• Transformation-type engagements have elusive objectives and follow unpredictable
paths. Clients have abstract expectations, and success depends on continuous
interaction between the two sides.

The Supply Perspective

From the supply perspective, different classes of service depend on different interaction patterns
with the client. Classes of service define relationship patterns. It is important to notice that there is a difference
between operational interaction, required by the very nature of the service, and service
management interaction, which is the object of relationship management practices

ITO depends heavily on an initial interaction between the two sides that can then be
gradually reduced as the SP reaches expected performance levels.
• BPO depends even more on a heavy initial interaction, at the business process level,
involving all people currently doing it. Operational-level relationships can be gradually
reduced (for stable processes, at least), but process-steering relationships will be
important for the life of the process.
• Product support services practically do not depend on initial interaction, and although
continuous interaction afterward is the actual “delivery” of that service, little is required in
terms of relationship management.
• Application outsourcing depends on a good initial interaction to understand context and
objectives and on a continuous interaction throughout the execution of the service.
• Project services depend on relationship management practices as an integral part of
project methodology.

Activities in the Service Life Cycle

Throughout the service life cycle, relationship management practices will be essential elements to
answer important questions that will align services with the end user’s business objectives, with
the SP’s efficiency objectives and with the IT organization’s service management objectives,
under changing environment constraints (such as economic drivers, geopolitical concerns and
regulatory issues). Those practices apply in different ways to the client company and to the SP,
but they have to be built on both sides.
The following activities depend on effective relationships to answer critical questions (the
examples below, among others). Service relationship management practices will establish the
appropriate roles, processes and governance framework that will drive the optimal answer to
those questions, optimizing the objectives the parties have for the services.
Understand business objectives and strategy: How can the service support the achievement
of business objectives? What are the best service configuration and the best delivery model to
support business objectives and strategy?

* Collect requirements: What are the relevant perspectives regarding the service? What client
* areas and what people should the SP interview to determine service requirements?
* Express expectations: Who are the service owners? What are their expectations, and how can
* the SP elicit them? What is the business case for the service?
* Increase agility and flexibility: How can we simplify and accelerate decision processes? How
* can we identify convenient or required changes in resource allocation? How can we make
* resource allocation more flexible?
* Incorporate innovation: What are the business drivers for innovation? What available
* technologies can improve the achievement of service objectives and expectations? What is the
* potential effect of innovation on service outcome and on client expectations?

Manage transitions: What are the roles and responsibilities that should be overtaken by the SP
in the transition? How can the SP guarantee continuity? How should responsibilities be shared
among the end-user client, the IT organization and the SP?

Manage organizational change: How will the end-user client, the IT organization and the SP
participate in the change management program? How can they anticipate change and its impact?

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