Kollaborative Klassroom Template

Business Information Systems
Service Management

Prithwis Mukerjee, Ph.D.

The Importance of Services

446433 3 1.4Germany 30261163 2.2Bangladesh 30201070 2.2Nigeria 407025 5 2.4Japan 38652312 2.5Russia 20532423 3.0Brazil 35391645 3.9Indonesia 217027 3 4.8U.S. 2823176017.0India 19135155021.0China25 yr %delta S%S%G% A% WWLaborNation

Top Ten Nations by Labor Force Size(about 50% of world labor in just 10 nations)A = Agriculture, G = Goods, S = Services

20042004

United States

.Ref : Emergence of Service Science : James SpohrerServices:Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things.Agriculture:Value from harvesting natureGoods:Value from making productsSo why this workshop. Well,m for one reason the world needs service innovations like never before. In the US alone, the last two hundred years have seen an almost complete reversal in agriculture and services with manufacturing peaking around WW II. And quickly looking at the top ten nations by size of labor force we see they are just time delayed versions of the US economy. Interestingly, Adam Smith and Karl Marx both agreed one thing services were a parasite on the rest of the economy. Nevertheless the rise of the information economy and the rise of the service economy have come hand and hand and so now we ask, since we need service innovations, do we need a service science. I will argue, yes. If we are to understand the connection between innovation and productivity, we need a service science. Innovation is more than technology, it can be business model innovation, organizational culture innovation, process innovation ,and even demand innovation. All of these types of innovation can drive productivity, and a service science, properly defined, will shed light on the causal connection of innovation to productivity.

Why service science? Growing dominance of all world economies. Service science may ultimately be about understanding how to boost human-technology productivity via four types of innovation.

Source:http://www.nationmaster.comOECD reports

Services Marketing : A new paradigm ?

Servicesbroadly defined as acts, deeds, performances, or effortshave different characteristics from goodsdefined as articles, devices, materials, objects or thingss

These characteristics pose an array of vexing marketing problems not faced by goods marketers (many citations)

Developing marketing strategies to address these problems based on knowledge accumulated from goods marketing is often insufficient and even inappropriate

A new paradigm began to emerge: Services are different from goods

Outsourcing : The Boom in Services

Procurement

Perform salesProduction

Customer servicePerformMarketingManage logistics

Develop products

Supplier networkCustomer networkI T Services

Information Systems Engineering
Software Services

Prithwis Mukerjee, Ph.D.

In search of customer satisfaction

Too many things to juggle

Price

Quality

Timeliness

Budget

Fit for use

Value

confusion

Conflict of perceptions

Customer wants

Bare minimum value of services to be

Delivered at fair cost and

In reasonable time frame

Service Provider believes

That he is delivering a vast array of services

At an economic point where

Prices are low

Costs are high

ProviderPerception CustomerPerception Value

Money

Price / valuePrice / value Signing of contract

Conflict of perceptions

Customer wants

Bare minimum value of services to be

Delivered at fair cost and

In reasonable time frame

Service Provider believes

That he is delivering a vast array of services

At an economic point where

Prices are low

Costs are high

ProviderPerception CustomerPerception Value recdValue delvd

Cheated !!Exploited !!Price paidPrice recd At & After delivery

Value

Money

Defining Satisfaction

Satisfaction

Is the product of two factors

Fitment of the product vis--vis their real or perceived benefit

Quality of service in terms of meeting the service level agreements

Requirements

Are inherently fuzzy

Users may not know what they want

Service Level Agreements

Timeliness of delivery

Number of errors detected OR quantum of rework required

Value

Money

Utility X Quality

Price

=Quality expressed as SLA on

defects

schedule

Functionality

Relevance

Importance

etc

Utility

Utility is a broad word

Utility, like beauty, is in the eye of the beholder

Utility can be decomposed into a set of features that need to be supported

Ability to Add / View / Modify / Delete a record : customer, product, whatever

Do far more complex activities like compare, trigger

Any feature can be represented as a deliverable component

Any feature can be supported but with effort

Effort is associated with a cost and hence price !

Utility

Price

=

Utility

Component

X

Component

Effort

X

Effort

Price

To be Increased

To be Decreased

Utility & Features : the beneficial impact

From Intangibles to Tangibles

Utility is sometimes intangible

Components are generally more tangible

Utility

What does a client really need ?

Does he know what he needs ?

What if he is not sure ?

Is there a quantifiable definition of utility ?

MOST LIKELY NOT

Components

Do we have sufficient clarity in terms of what the component is supposed to do ?

Utility

Component

Utility

LowHighLowHighClarity of UtilityBeneficial Impact of Incremental Effort

Save a life

Implementation of an Immunization program

Order Tracking system

HR welfare system

Advertising Programme

Community Welfare Programme

Utility

Component

Effort

Price

Components

LowHighLowHighClarity of Features / Specs / ComponentsBeneficial Impact of Incremental Effort

Custom DevelopmentNew ProductDevelopment

Zero error program

Create a work of Fine Art

Smart Algorithm

ERP PackageImplementation

User Friendly system

Utility

Component

Effort

Price

Service Level Agreements

Quality can be expressed in terms of service levels

There are many kinds of service levels

Number of bugs in the code, number of defects in the service

Time required to deliver the service

The initial product / service

Subsequent bug fixes

Time required to respond to a request

Service levels can in general be met with additional effort

Effort is associated with a cost and price.

QSLA

Price

=

QSLA

Effort

X

Effort

Price

Big Picture

Utility

Component

X

Component

Effort

X

QSLA

Effort

X

Effort

Price

Value

Money

Utility X Quality

Price

==Contract Efficiency

Process Efficiency

RealFuzzyBit

Process Efficiency

How to reduce effort ?

Better skills

Sharing scarce skils

What if you dont have the right kind of skills ?

Better processes

Better governance

Quality Processes

QSLA

Effort

Component

Effort

Methodology

Functional Specification

Program Review ChecklistComplexityDetermination / EstimateTechnicalSpecification

Test

SupportUnit Test PlanProgram Source CodeCode Bundle / DemoUnit Test ResultsSupport(optional)Pre-Production Support

Remote Team ReviewClient
Review Client
Review Remote Team(s)Landed TeamFunctional
Design EstimateTechnical
DesignDeliverTestSupportDevelopMethodology ComponentCommunication & Coordination
(all teams)

Technical Design WalkthroughCode ReviewClient Sign Off

LegendTask With DeliverableTask Without DeliverableOptional Service AreaProcess Checkpoint

Processes SEI CMMi Level 5 Standards

Level 3 - Defined

Processes in place and understood by all

Level 4 - Managed

Processes under measurement & control

Level 5 - Optimising

Processed under measurable improvement

Contract Efficiency

Effort (orCost ) is a fact but Price is determined by the market

Fixed Price

Most beneficial for the client as he is assured of a cap on his exposure

Not so beneficial when service provider is unable to deliver the service because of cost over-runs.

Penalties are fine but the overall objective was NOT to collect penalties

Time & Material

Most beneficial for the service provider as his exposure is limited

Client will have to pay for the inefficiency and faulty analysis techniques

Is there a middle way ?

Effort

Price

Effort

Effort X Rate

Nature of Services

Development Project

Implementation of certain services

System development

System upgrade

Short(er) duration

6 24 months

Higher degree of uncertainty

Dependence on other factors

Dependence on other system

More demand on flexibility

SLAs are in terms of

Number of errors

Time schedule of completion

Maintenance Project

Support of certain applications

Bug fixes

Enhancements to meet business needs

Longer duration

3 5 years, extending to 10 years

More predictable in terms

People requirements

Time schedules

SLAs in terms of

Turnaround on multiple small transactions

Pricing Strategy

Two stage-pricing strategy

Fixed Price for analysis and design

Fixed price for development and deployment determined AFTER the first stage

Quasi Flexible Pricing Strategy

Unit cost for labour

Determine number of components

Share effort for each component with client and get agreement on overall effort

Fixed price based on this effort

Significant scope change after design phase would be paid for at time and material rates

Contract Negotiations

Ethics and Honesty

Soft Skills

Creativity

Contract should be fair to customer and service provider

Contracts should be fair to both parties otherwise project will never succeed

New, gullible customers can be initially fooled by escape clauses but does not work in the long run.

Many contracts are too biased towards customer and allow scope of significant corruption

Two Stage Contracts

Master Services Agreement : focusing on the various legal aspects

Appendices that are more technical and focus on actual project requirements, deliverables, timelines and cost

Master Services Agreement

Appendix - I

Appendix - II

Structure of the Contract

Master Services Agreement

Definition of Terms

Services to be performed

Compensation, taxes etc

Warranties

Indemnities

Limitation of liability

Ownership of Intellectual property

Confidentiality

Deliverables and Time Schedule

Scope Change Management

Force Majeure

Suspension & Termination of Project

Arbitration

General Provisions

Binding Nature of Agreement

Choice of Law

Designated Contact Points

Appendices / SOW

Overwiew

Scope of Work

Components of the solution

Methodology to be used

Deliverables

Work Plan / Schedule

Cost / Price

Fixed Part

Variable Part ( if any )

Payment Milestones

Out of pocket Expenses

Project Specific Assumptions

Exclusions

To Sum Up .

Requirements

Need to be defined, articulated

Value and utility has to be defined

Process Efficiency

Is the key to striking a balance between

Client Satisfaction

Vendor Profitability

Pricing Strategy

Has to be such that it is fair to both parties and is seen to be fair to both sides as well

Client Satisfaction

Can be only achieved if we can demonstrate value for money

Utility

Component

QSLA

Effort

Component

Effort

Effort

Price

Value

Money

The Devil is in the Detail

Process Efficiency

Development Projects

Maintenance Projects

Project Governance Models

Contract Efficiency

Market Drivers

Estimation Techniques

Creative Contracting

Thank You

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Prithwis Mukerjee

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