ITIL Service Strategy: What and Why of ITSM

Service Strategy is the most thoroughly rewritten book in the 2011 edition. From the start it had its problems: ambiguity, poor logic, lack of structure. It was a very boring book even for a mature IT Manager. In 2011 it is still not much more entertaining; in the evening, it has the magic power to put most service managers to sleep in minutes.

Nevertheless, it is a very important book, and we appreciate the 2011 improvements.

What is ITIL Service Strategy?

It is the first step in the ITIL lifecycle model. It holds the central position in the ITIL basic schema.

Service Strategy is a PLAN created by the IT Service Organization to reach its objectives.

What is the most important objective? Simply put, it is to define the competitors within the market and to set basic conditions to create services better than theirs. In the end, our service organization needs to find a way to deliver best value to the customer.

Service Strategy basically deals with things interesting to the CIO and his friends:

  • Service market development
  • Types of service providers
  • Service portfolio
  • Finances in SM
  • Business relationships

Strategy tells the organization how to focus on the big picture, far from the day-to-day fight in the trenches, and to consider services through costs, risks and service performance.

In essence, Service Strategy wants to say Why this service, not How. Cause, not effects.

Key principles

What are the key principles of Service Strategy?

  • Utility and warranty – a powerful concept called upon from all other lifecycle stages.
    • Utility or fit for purpose: it says what the service is.
    • Warranty or fit for use: explains how it works.
  • Value Creation – how the customer perceives what the service does for him.
  • Assets – Assets are resources or capabilities – stuff that helps us to deliver the service.
    • Resource – physical assets: infrastructure elements, people, capital, applications.
    • Capabilities – intangible assets: usually the ability to create value.
  • Patterns of Business Activity (PBA) – customer has activities generating demand for services.
  • Governance – we need to define strategy, policies, and processes. Governance deals with how we implement and follow them.

Service Strategy defines five processes, three of them being new in ITIL 2011 edition:

Strategy Management for IT services

This is a new process in ITIL 2011, derived from strategic assessments and service strategy development activities in V3. It lives through three sub-processes: Strategic Service Assessment, Service Strategy Definition and Service Strategy Execution.

Service Portfolio Management

A business needs to know what Services are available and how they are going to improve the business process. IT needs to know what is important to the business. These are the two premises around which the Service Portfolio Management process is built.

Service Portfolio Management (SPM) enables the business to understand what services are available, why we should use them and what the costs will be.


SPM enables a service organization to determine the weaknesses and strengths of their portfolio, the priorities of their investment and how to allocate resources according to these risks and priorities.

Service Portfolio Management covers most of the service lifecycle:

  • Planned services – pipeline
  • Services in production – catalogue
  • Services being withdrawn – retired

Financial Management for IT services

For a hardcore service professional, here is a road less travelled. It is common that IT Service people evade the Financial Management process at all costs (pun intended). Therefore, it resides in the Service Strategy book, intended for higher-ranked service managers interested in governance.

Financial Management deals with measuring the value of IT services, in order to keep the organization’s Service Management domain cost effective. At the end of the day, it enables the organization to make better decisions, enable faster changes, maintain control and retain a feeling of service value.

Key activities of Financial Management for IT Services in ITIL 2011 are:

  • Accounting
  • Budgeting
  • Charging

Business Relationship Management

This process emerged in ITIL 2011. It is probably a result of the influence of ISO20000, since it plays an important role in the 20k Service Management System. Business Relationship Management (BRM) is heavily referenced in other ITIL lifecycle stages, especially in Service Design and Continual Service Improvement.

By enabling the communication and mutual understanding of IT and business, BRM underpins most other ITIL processes and functions.

Demand Management

From previously being part of the Capacity Management process in V3, Demand Management evolved into yet another new process in ITIL 2011.

It was a logical thing, since demand is an essential driver for Strategy and Service Design. A service organization has to anticipate capacity and availability for future demand. In order to be able to predict the demand, the provider has to understand clearly the Patterns of Business Activity (PBA) for every customer.

The Value of Service Strategy

Service Strategy is intended for a higher-level reader, thinking about governance, effectiveness, competition, and market spaces. It provides guidance on how to recognize and choose opportunities, keeping in mind the risks and costs.

Strategy guidelines reach far out in all four lifecycle stages, where the WHAT and WHY will be transformed into HOW.

Service Strategy provides guidance for a service organization to operate and grow successfully in the long term, to think and act in a strategic manner while transforming Service Management capabilities into a strategic asset.

This stage provides the tools for the organization to follow the service lifecycle in a natural and effective order, thinking about the reasons and causes first, and then about the effects. Even service organizations of firefighting origins (companies which started doing ITSM from Incident Management) will benefit greatly from Service Strategy best practices. It will allow them to take a step back and see the big picture. It will enable the organization to align its service solutions to the customer’s business needs and requirements – not just for the sake of efficiency, but in order to create a truly distinct service.

Service Strategy is full of interesting new concepts, sure to turn on a light bulb in the heads of experienced IT Service professionals. Bottom line: highly recommended read.

Download free preview templates of  Strategy Plan to get an overview of activities, roles, and responsibilities.