As organizations multisource their IT services, push services to the cloud, and consolidate services into enterprise-shared services to reduce costs, their success increasingly depends on relationship management rather than the deep systems expertise that has traditionally been their core competency.
The typical enterprise IT organization now has multiple internal and external suppliers of products and services. In turn, they have at least one (often more than one) customer or business unit to whom/which they provide services. Since they are no longer providing everything in the service supply chain, their success as a cloud broker, service integrator, or shared-services provider depends on how well they manage their relationships.
The purpose of a business relationship management process is to establish and maintain mutually satisfying relationships between the service provider and the business based on an understanding of the business and its drivers. This includes managing relationships with customers, stakeholders, and the business or mission enterprise. If you have built good relationships, these are some of the objective outcomes you can expect:
- Business needs are understood and drive changes;
- There is a collaborative relationship;
- Demand is influenced in a mutually beneficial way;
- Complaints and compliments are managed; and
- Communication with stakeholders is routine and mutually valuable.
The first thing that needs to happen when managing any relationship is understanding what the other party wants from the relationship. Most organizations want “IT for less.” The problem is that just cutting IT costs does not help the enterprise. If IT spending represents five percent of the enterprise’s operational expense, then cutting IT in half will result in only a small reduction (2.5%). The problem is that it puts the other 95 percent of the business, which depends on IT services, at greater risk for reduced productivity, increased costs, compliance incidents, and competitive disadvantage.
Since basically every organization in the world has budget pressures, the best thing savvy IT service leaders can do is improve their relationships with the various business leaders they serve. When the demand for budget cuts come around, IT could retire services or reduce service quality, but a better approach would be to collaborate with the other business units to determine how IT might help the other 95 percent of the business be more productive with fewer resources, without increasing everyone’s risk and undermining IT’s service quality and reliability. Innovative use of technology or consolidation to enterprise-shared services could help the business cut three to five percent across the board, netting a much more significant result.
For the most part, that is what commercial organizations have been doing throughout the economic downturn. While corporate operating budgets were cut by 30 percent or more, IT budgets were flat or increased 90 percent of the time. (Federal budgets are now experiencing their own downturn and, with congressional committees deciding who gets the cut, it remains to be seen if government agencies will leverage the lessons learned from their large-scale commercial brethren).
Of course, if IT can reduce costs while maintaining or improving quality, they should pursue that. This typically involves establishing enterprise standards for processes, information, and systems and then consolidating data centers, services, and systems. “Cyberasset reduction” mitigates risk by removing multiple points of threat or vulnerability and decreasing costs. The enterprise-shared services created during this process further improve the organization’s relationship management capabilities.
Once you get past the “IT for less” issue, service leaders need to understand how to improve the economic value of the relationship between a service provider and its customers. One key is understanding the different types of value relationships a service provider might establish:
- A commodity value exchange is where the service provided is not unique to the customer in any way. Speed of access, deployment, and delivery, as well as low price, are important for commodity services. If an internal IT service provider is offering commodities, it should seriously consider outsourcing to lower-cost providers.
- A commodity plus value-added service exchange is one where the provider delivers a commodity service along with additional characteristics that are critical to the environment; for instance, providing commodity email communications services in secure environments. It is not necessarily true that large external providers are automatically more secure. They may have stronger security practices, but they are also a larger target. Thus, the net change may not be a more secure result. Customers may be willing to pay more for a commodity exchange because of the value derived from the enhanced security.
- A specialized value exchange is based on providing a differentiating business outcome. Here the provider collaborates with the customer to define delivery of the business outcome. The IT organization does not perform as a system provider, but as an enabler of a critical business activity. In this scenario, the service provider engineers, deploys, and operates IT-enabled supply chain activities, IT-enabled business processes, and IT-enabled business services. In the DoD, for example, this includes ITenabled war activities. This is really where all internal IT organizations should strive to be.
- A unique value exchange is formed with the specific purpose of fundamentally altering the competitive capability of both organizations. In this case, the service provider participates in strategic planning, aggressively pursues understanding the business’s mission and needs, performs research, and develops plans and strategies to find new and unique ways of enabling the customer organization to outperform its competitors. This type of relationship is rare in IT, due to the lack of service and relationship management skills within many IT organizations. For the most part, too many organizations are too focused on populating their service catalogs with the systems they manage, “leaning out” their systems maintenance procedures, and perfecting their ITIL process descriptions. Some organizations have even established plans for “agile service management,” effectively ensuring an almost-endless cycle of ITIL assessments and process-description attempts.
When relationships are not working well, a relationship “intervention” can be instructive. Successful interventions focus on collaborative assessment of the problem, interviews and multiple sessions to facilitate each party’s understanding of the desired outcomes and issues that are preventing success, speculation about causes, and, ultimately, joint forums to plan for remediation. This is called service outage analysis (SOA).
There have been cases where providers were clearly delivering everything described in their SLAs, but their customers were so dissatisfied that they began exploring alternate sourcing options. In these cases, the customers and their providers were operating off of different goals. Maybe the business was clear on its goals, but the SLA was not. Maybe the provider was so focused on the terms of the SLA that it was missing the main points the customer cared about. In other words, the provider was not managing the relationship. Once the customer’s real goals are clear, the solutions will become apparent. Perhaps the solution involves making improvements to knowledge management and planning for predictable business events and patterns, like seasonal changes in service level requirements. For example, any US-based retail organization needs higher levels of service quality during the peak sales period between Thanksgiving and Christmas. When both parties are operating off the same set of goals, planning and preparation became more straightforward.
The best relationships, however, are partner relationships. Partners know that when they respond to “I want this solution” requests with “Okay, let’s document the requirements and build it” responses, they create unnecessary complexity, cost, and compliance problems. Because this untenable and unmanageable environment ultimately reduces quality, customers are typically dissatisfied with ordertaker relationships and highly satisfied with partner relationships. The best partner relationships are those where partners collaborate with the organization to identify the best solution and approach for the enterprise. Partners are very conscious of not merely taking orders, but of collaborating with their customers to find the best approach to producing the desired outcomes.
Part of managing relationships is ensuring that the customer understands what services are available. Many internal IT organizations do not actively market their services. This actually creates a problem for customers. If a large enterprise customer does not know about all of the services as their disposal, they may pursue alternate sources for services they already have. So, because the relationship between the provider and the customer is poor and the services are not marketed, the enterprise ends up paying for overlapping and redundant services. Overpaying for services also reduces available funding for improving the quality and reliability of existing services, which is particularly important when dealing with limited budgets. This further erodes confidence in the provider-customer relationship.
Another benefit of adopting service marketing strategies is that it requires a shift in focus from internal operational and technical issues to the needs and wants of customers and strategies for how IT will provide value. In The Prime Solution: Close the Value Gap, Increase Margins, and Win the Complex Sale (Kaplan, 2005), Jeff Thull identifies the five barriers to delivering value, which are directly relevant to the provisioning of complex enterprise ITenabled services. Service marketing activities can play a key role in overcoming five barriers:
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The Relevancy Barrier: This barrier relates to understanding why the customer would use the service, but ignoring the reasons why they would not. Organizations must articulate their value in language that is relevant to the customer. Relationship management and marketing should be an indispensable part of service planning and development.
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The Inflation Barrier: This barrier relates to actually using the service and finding that getting value from it requires more resources than initially expected; for example, maybe users need additional training or their business processes need adjustment. Again, as part of relationship management and marketing, you should educate your customers about these potential pitfalls. Some common errors include avoiding communicating perceived negatives, ignoring the broader implications of a solution, and focusing only on product or system attributes/benefits and product superiority.
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The Comprehension Barrier: This barrier and the relevancy barrier are related. Customers usually understand only one-quarter of what someone is saying. Again, as is true of value, be sure to describe solutions and concepts in terms that are relevant to the customer.
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The Dilution Barrier: Customers may make product- or systems-acquisition decisions without considering the value IT could provide. Relationship management and marketing should provide the collaboration and information the customer needs to enhance the decision-making process and choose truly valuable solutions.
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The Implementation Barrier: All failures are ultimately the provider’s problem. Relationship management and marketing sets realistic expectations surrounding implementation (i.e., what it will look and feel like).
When developing relationships and marketing enterprise IT services, service leaders should be sure to avoid purely proactive or reactive approaches, and focus instead on interactive approaches. Do not wait for the customer to say, “I want this, do you have it?” or “I know what problem is and how to solve it. Can you build it?” When service leaders blindly comply with customer requests, without questioning or probing, the relationship spirals down into a toxic mess of complexity, high costs, and compliance and quality problems. Conversely, do not rely on the “I have something, do you want it?” approach. Do not rely on canned responses and superficial questions. Stick to the facts when communicating with your customers about available services, processes, and procedures.
Instead, take a collaborative, interactive approach to enabling the customer to make the right decisions. Focus on expanding your understanding of the business’s problems and their available solutions. Provide support for high-quality decision making in the best interests of the enterprise. Avoid “delusional optimism” and enable confidence based on reality. Focus on the customer’s success, rather than the success of a particular solution. Finally, focus on solving situations in the present rather than making promises for a better tomorrow. Remember, the provider’s approach to the relationship shapes the customer’s perception of the relationship.
Bill Powell is an ITSM executive at ZeNETeX with more than twenty years of ITSM experience, which includes serving as the global ITSM strategy leader for a Fortune 50 technology services provider and the senior VP of technology services for a midsize company. He was a member of the OGC’s ITIL v3 Advisory Group and a mentor to the ITIL v3 Service Strategy team. In addition to being a founding member of itSMF USA’s Management Advisory Board, he advises ISO/IEC on its ITSM and governance standards and was a contributing author to
Service Management for Dummies (Wiley, 2009). Bill is also a Distinguished Professional in Service Management, an ITIL Service Manager and V3 Expert, and Certified in the Governance of Enterprise IT (CGEIT). He is a visiting scholar at a number of universities.