Service Work in Progress
From Ron B Palmer's Wiki Home > ITSM > Definitions > Service
Introduction
The term service in ITSM draws its definition from Economics and defines what we sell or deliver which determines how our organization organizes and manifests itself. There are only two things that can be sold or delivered, goods (products) and services. The culture, capabilities, and resources required to sell one versus the other are distinctly different, just ask any shrinkwrap software company struggling to move into software as a service.
The best way to think of the differences between a good and a service is by envisioning a continuum with pure good on one end and pure service on the other. Examples of pure goods are things like corn, wheat, gravel, lumber, gasoline, etc. These things have value enherent in them that does not require any interaction between the producer and the consumer. Farmers grow their crops and sell them on the open market. Price is typically set by supply and demand of any particular grade of product. Consumers who receive the good by whichever means do not need the help of the farmer to receive value from the corn they buy. Examples of pure services are therapy, education, brokerage, door opening, house cleaning, car washing, shoe shining, etc. The service value is highly dependent on the interaction between the service provider and the customer. In no case can value be provided without interaction between provider and consumer. There is also no tangible item of value for the consumer to retain. Even in a brokerage service the broker does not provide a tangible security. He simply facilitates the transaction between buyer and seller.
In the real world most businesses sell some combination of goods and services. For instance a restaurant sells you food but so does a grocery store. What is the difference? The former is a service business that prepares and serves goods. The latter is a product company that provides goods to consumers although with some services, e.g. location, packaging, etc. The difference gets to the heart of how a business is organized and operated. Even within market segments there is differentiation along the contunuum. For instance very high end restaurants focus their business on the experience of dining providing an environment and level of service that sets them apart. Contrast that with an all you can eat buffet with a basically functional eating area and a significant supply of food provided for no frills consumption. Both are restaurants and therefore categorized as service businesses but the former differentiates itself by service and the latter by product. For either restaurant to be successful they must understand their position on the continuum and structure their business to best meet the expectations of their particular customer.
Dictionary.com defines service as:
"An act or a variety of work done for others, especially for pay"
wikipedia defines service in Economic terms as:
"A service is the non-material equivalent of a good."
"A service is a set of benefits delivered from the accountable service provider, mostly in close coaction with his service suppliers, generated by the functions of technical systems and/or by distinct activities of individuals, respectively, commissioned according to the needs of his service consumers by the service customer from the accountable service provider, rendered individually to the authorized service consumers on their dedicated request, and, finally, utilized by the requesting service consumers for executing and/or supporting their day-to-day business tasks or private activities."
wikipedia goes on to define the term 'service provision' which is exceptionally helpful in the study of ITSM:
"A service provision is an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets."
Understanding Service
The differences are best identified by the priorities a company sets.
Product companies focus primarily on developing and delivering a product. Metrics are defined around product delivery. Production costs are typically minimized while product features or qualities are enhanced and marketed. The relationship with the customer is centered on the value proposition of the product that can be experienced without the producer's involvement and often there is no direct relationship between producer and consumer.
Service companies focus primarily on customer satisfaction and helping customers implement some kind of improvement to their persons or businesses. Metrics are defined around service delivery and customer satisfaction. Relationships are actively developed and marketing is based on successful relationships. The customer relationship is centered on providing intengible value that is heavily dependent on the service provider's involvement.
The reason it is vital to understand the concept of service in ITSM is that ITSM draws a line in the sand and states that IT departments deliver services. They are by definition service organizations and therefore must organize themselves to "deliver value to Customers by facilitating Outcomes Customers want to achieve without the ownership of specific Costs and Risks." This means that the processes through which IT departments deliver value must be based on the service concept. The structure that must be developed to facilitate the creation of value must be in line with service delivery concepts. The employees must have skills in line with delivery of service. Strategies, goals, tactics, metrics, and measures must support service delivery. Everything about the organization is driven by the simple statement that IT is a services organization. Just like a restaurant in the above example, IT organizations must understand what their customers want from them and provide the appropriate level of experience through direct collaboration with the customer.
ITIL's definition
" A means of delivering value to Customers by facilitating Outcomes Customers want to achieve without the ownership of specific Costs and Risks."
See Also
References
wikipedia
Dictionary.com
Business Marketing: Understand What Customers Value, James C. Anderson, James A. Narus, Reprint #98601
Working notes
Service Definition “Linked activities and
interactions provided as solutions
to customers’ problems”.
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