Wednesday, October 3, 2012

01-6 Define and explain the concept of service management

2.1.2 Service management 

When we turn on a water tap, we expect to see water flow from it. When we turn on a light switch, we expect to see light fill the room. Not so many years ago, these very basic things were not as reliable as they are today. We know instinctively that the advances in technology have made them reliable enough to be considered a utility. But it isn’t just the technology that makes the services reliable. It is how they are managed.

The use of IT today has become the utility of business. Business today wants IT services that behave like other utilities such as water, electricity or the telephone. Simply having the best technology will not ensure that IT provides utility-like reliability. Professional, responsive, value-driven service management is what brings this quality of service to the business.

Service management is a set of specialized organizational capabilities for providing value to customers in the form of services. The more mature a service provider’s capabilities are, the greater is their ability to consistently produce quality services that meet the needs of the customer in a timely and cost-effective manner. The act of transforming capabilities and resources into valuable services is at the core of service management. Without these capabilities, a service organization is merely a bundle of resources that by itself has relatively low intrinsic value for customers.


Service management: A set of specialized organizational capabilities for providing value to customers in the form of services.

Service provider: An organization supplying services to one or more internal or external customers.

Organizational capabilities are shaped by the challenges they are expected to overcome. An example of this is provided by Toyota in the 1950s when it developed unique capabilities to overcome the challenge of smaller scale and financial capital compared to its American rivals. Toyota developed new capabilities in production engineering,operations management and managing suppliers to compensate for its inability to afford large inventories, make components, produce raw materials or own the companies that produced them (Magretta, 2002).

Service management capabilities are similarly influenced by the following challenges that distinguish services from other systems of value creation, such as manufacturing, mining and agriculture:

  •  Intangible nature of the output and intermediate products of service processes: they are difficult to measure, control and validate (or prove) 

  • Demand is tightly coupled with the customer’s assets: users and other customer assets such as processes, applications, documents and transactions arrive with demand and stimulate service production
  • High level of contact for producers and consumers of services: there is little or no buffer between the service provider’s creation of the service and the customer’s consumption of that service 
  •  The perishable nature of service output and service capacity: there is value for the customer from assurance on the continued supply of consistent quality. Providers need to secure a steady supply of demand from customers.
Service management is more than just a set of capabilities. It is also a professional practice supported by an extensive body of knowledge, experience and skills. A global community of individuals and organizations in the public and private sectors fosters its growth and maturity. Formal schemes exist for the education, training and certification of practicing organizations, and individuals influence its quality. Industry best practices, academic research and formal standards contribute to and draw from its intellectual capital.

The origins of service management are in traditional service businesses such as airlines, banks, hotels and phone companies. Its practice has grown with the adoption by IT organizations of a service-oriented approach to managing IT applications, infrastructure and processes. Solutions to business problems and support for business models, strategies and operations are increasingly in the form of services. The popularity of shared services and outsourcing has contributed to the increase in the number of organizations that behave as service providers, including internal IT organizations. This in turn has strengthened the practice of service management while at the same time imposed greater challenges.

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