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Monday, December 19, 2011

Service Value

In the previous chapters where we learnt about Service & Service management, you would have figured out by now that the primary focus is on delivering value to the service consumer. Value is created through providing the right service under the right conditions.

Customers value an IT service when they see a clear relationship between that IT service and the business value that they need to generate. In the past, both IT and business management have been very poor at understanding this link. IT has often known all about the costs of components, but not the cost of providing a service that the business understands, and the business has been unable to make value-based decisions about the worth of such solutions.

Value is created through two components:
Utility - Value in the form of what the customer gets from the service. This will either be from providing new business lines or from the relaxation of existing constraints on the customer’s ability to achieve their desired outcomes. Utility is about what the product or service does, determining whether it is ‘Fit for purpose’.
Warranty: Value in the form of how this ‘utility’ is delivered to the customer. This is seen as the positive effect of the service being available when and where it is required, in sufficient capacity to meet the business needs, and being sufficiently reliable in terms of continuity and security for it to be depended on (i.e. it is ‘Fit for use’).

1. Utility can be summarized as “What this Service Does”
2. Warranty can be summarized as “A Promise that the product or service will do what it is supposed to do and most importantly do it correctly”

Neither Utility nor Warranty can deliver full value on its own. A product or service may do exactly what the customer requires, but if it performs poorly, or is unavailable, insecure or unreliable, it cannot deliver maximum value. Conversely, a service will not deliver value if it does not provide the functionality needed, even though it may be highly available, reliable and secure and offer high levels of performance.

A service that seems potentially attractive on paper to a customer in terms of the Utility that it offers won’t be perceived as providing real value if the way it is delivered is highly unreliable or it is delivered in an insecure manner. A customer’s ability to realize value from an IT service is dependent on both the Utility associated with the service and the degree to which they can rely on the consistent delivery of that service (the service Warranty).

A Real Life Example:

Banking Industry has evolved greatly over the past decade or so and is offering a suite of products to help the customer satisfy his banking needs, that too without having to go through the hassle of visiting the bank branch everytime he needs something. The ATM Machine, Internet Banking, Phone Banking are all excellent examples of the Value the Banks provide to us as Customers.
If, the ATM or the Internet Banking website doesn’t work, will there be any value in these services being available? Definitely Not.

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Next: Service Assets

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