Service or Application? -Same difference! - Let’s Speak Value - - - - streams

On this blog a lively debate has been going on about whether using the term applications instead of services is an acceptable service management practice. Many may say we have reached the “How many angels can dance on the head of a pin?” stage here. But if service management is about managing services, would it not make sense to have some common understanding what these services are?


Reality is that neither Service nor Application are very well defined concepts. Most people agree they are related and often refer to the same thing. Development will call what they build an application while operations calls the same thing a service when they run it. But what is this “thing”?

The first question we face is granularity: Is Office the application or is Excel? And is the shared spell checker part of the application or not. And if we use the translation function, is that part of the application? ( while in reality it is a service running at either Microsoft’s or Google’s website?). And is the online training part of the application or is that only part of the service? Same for support, automatic patches and updates?

But more important than the answers to the above, is the fact that in reality nobody cares! Unless we are still trying to write down (defend) what we do, it makes no difference to anyone.

Is there an alternative that will make people care? I think there is.

It is the concept of value streams. Based on the concept of Value Chain as first described by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance (now we are talking), a value stream is an end-to-end business process which delivers a product or service to a customer or consumer.

Value Stream Mapping is a lean manufacturing technique used to analyze the flow of materials and information currently required to bring a product or service to a consumer. At Toyota, where the technique originated, it is known as "material and information flow mapping". Wikipedia details the concept of Value Streams in an IT context further under Lean IT.





So what is the big difference between using service/application versus Value Stream?

Well, I for one would be very hesitant to sit down with a user and ask him to 'define' the applications/services he uses in more detail. I would however be more than happy to sit down and together with him map out the value stream he uses to service his customers and figure out where IT adds or can add value and where we see waste that can be eliminated by, through or from IT. But the conversation will likely be 80% around what our company does for its customers and only 20% about IT (and I for one believe that would be a good thing).

Will IT in 2010 be seen as Cost or Investment?

Under the above title we started a discussion at the LinkedIn group that Gartner is hosting for attendees of the recent Gartner ITxpo’s in Orlando and Cannes. The discussion is getting quite lively, so thought it may be a good idea to invite a wider audience here.
To protect the innocent I won’t repeat all responses or the names of the senders here, but a particularly interesting response to "IT, cost or investment?" came in today and included the following observation:

“IT can help to optimize processes and therefore to reduce cost. So, you invest to reduce
the cost in any function, IT is not different to Finance, HR, Sales, etc. The question you should
ask is why does your C-Levels see IT as a cost at all. Do they see Marketing as a cost ?”

Being guilty of spending my days in a marketing role myself this reminded me of one my favorite marketing quotes (allegedly from the world’s largest advertisers):

“I’m positive we waste half the [marketing] money we spend, I just don’t know which half".

What do you think: Is IT better or worse off than marketing? 50% sounds outrages, but how many IT organizations can link 50% of their total budget (not just their project budget) back to increased profit, growth, increased marketshare.

In marketing this is no problem, we just call the part we cannot allocate directly “awareness building” or even better “strategic spend” or “corporate imaging”. I believe we need a similar bucket in IT. I am not kidding, bear with me.

In every business there is always some cost that cannot be allocated directly to results (no direct ROI), but still everyone agrees they are needed. Examples are providing a (desk) phone to every employee, having a corporate wide area network (soon to be called Cloud), providing an email system (well that last one probably has a demonstrable negative ROI given the time it consumes of our employees). No departmental manager with a P&L responsibility will agree to fund such infrastructure projects.

Yet in IT we tend to make no difference in how we treat these. Sure we distinguish between “keeping the lights on” and “new projects”. But keeping the lights on includes cost we probably could attribute directly to results, and some new projects (like migrating to IP6 or Windows7) can not.

Guess I am asking for cost categories comparable to “Demand Generation” and “Awareness Building” for IT. In marketing the first is treated as a cost (50 dollars per lead) and can be directly be linked back to increased revenue. The latter (awareness) is treated as an investment and cannot be linked back directly.

Interested in your all comments and thoughts.