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The Best of Service Strategy, Part 1

I've been hearing a lot lately about "going back to the basics" of ITIL and IT Service Management.  So for the first half of 2013, I'm going to package and republish the best of my blogs for each lifecycle stage.  As always, I welcome your comments and questions!   ~~ ITSM Professor

Utility and Warranty Equals Value
Originally published October, 2012

When a service provider is developing a service for a customer or group of customers the underlying goal is to ensure that the service has value for the customers by meeting a set of defined requirements.   The value is often defined by what the customer is willing to pay for this service rather than what it actually cost the service provider to produce the service or any other essential feature of the service itself.

Services themselves do not actually have intrinsic value.  That value is created by the outcome enabled by employing the service and therefore the value of the service is not determined by the provider of the service but by the customer who receives the service.  This is because they decide how to use it and the type of benefit they will achieve.   Services are only seen to contribute value to an organization if the value created is greater than the cost of procuring the service from the service provider.

From a customer’s perspective value is created by utilizing services to achieve business goals and objectives. This value is defined in terms of utility (fitness for purpose) and warranty (fitness for use).  Utility is the functionality that a service delivers to meet a specific need.  In other words this is what the service does to support desired outcomes.  The customers and the businesses perception of the service (value) is partially based on the ability of the service to consistently create these desired outcomes.

Warranty on the other hand refers to a services ability to be available when needed, provide the required capacity to meet the ever changing demand and insure that the service will be reliable in terms of continuity and security.  Warranty can be described as “how the service is delivered” (fitness for use).  Value gets created by combining these two elements of the value equation.  Customers can only benefit when both of these elements are present.

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