PART 3: use the service portfolio to plan and forecast your service investments
In Part 1 and Part 2 of this series, we have been discussing how to change the conversation with your customers to focus on their value instead of focusing on what you do. There is an intrinsic connection between selling services through use of a Service Portfolio capability and managing budgets based on “service” investment decisions. Understanding and aligning your services with a market orientation that resonates with your customers is the key. If you are not talking to your customers about the services they need, you are missing a great opportunity to engage in value conversations that elevate IT’s role as valued partner in business discussions.
Once you understand what services you sell, you can align them into a Service Portfolio that includes a planning and forecasting capability. The portfolio becomes your mechanism for communicating value and selling services. As a manager of services, you now define value to your customers in terms of the services you provide. The conversations and discussions with your customers are now focused on what you sell and what they want to buy. This enables more effective business planning where IT has a seat at the table as a service provider that understands what customers want and has services they need.
The Service Portfolio further helps you manage supply and demand and enables you to move to an investment based approach to managing your budget. Investment decisions are made based on the services you sell; no need to defend monolithic technology tower spend, arbitrary allocations or specific training, travel and compensation budgets. Because you now understand and are tracking cost drivers for your products and services, you can translate that into pricing for your business and customer facing services. You may not need to actually charge them, but you should know how the services are consumed, what the costs are, including overhead to cover the investments you need to make.
Customers make buy decisions based on service value (how much they need, what it costs, quality, etc.). You make spend decisions based on supply and demand and how you want to invest in your services. For example, some services may need larger investments in training and others services less. In an investment based budgeting model, those are your decisions to make based on the service offering dynamics. Innovation is funded based on service value to the customer and your business – customers will be more willing to fund innovation if they understand how it will impact their business and the value it provides.
In our next article we will discuss how to leverage your new Service Portfolio and investment planning capabilities with financial management to provide better budgeting and business planning.