The Service Management Office: Driving IT performance in the face of rising complexity

Governance, Operations

Delivering IT services efficiently and effectively while managing a multi-vendor environment requires planning, coordination and a high degree of service management expertise. Establishing a Service Management Office (SMO) provides the single point of focus to achieve this.

Businesses are constantly striving to gain maximum value from their IT services. These services should not only be well aligned to support the strategic direction of the business but also be modified, added to, or made redundant as efficiently and effectively as possible. This quest for greater efficiency, business alignment and agility in delivering change has presented the added challenge of managing increasingly sophisticated IT supplier environments.

Consequently, many IT organisations today require an IT service management capability, which not only ensures that IT services are fit for purpose but are also being delivered at optimal cost within a multi-sourced environment. However, there are a number of challenges facing IT organisations that will impact their ability to acheive this:

  • Poor IT service management capability
  • Managing requirements from multiple vendors
  • Maintaining balance between satisfying increasing demand and meeting cost constraints
  • Increased frequency of change while maintaining stable operations
  • Operational and process silos hindering collaboration
  • Misaligned expectations between the IT organisation and the business

This whitepaper looks at how establishing an SMO can address these challenges, what the main catalysts for establishing an SMO are, and its core composition. In addition, we will highlight key considerations that must be assessed before initiating an SMO implementation.

The shift from managing technology domains to a service oriented IT delivery

Managing an IT environment as stacks of individual hardware and software components has often led to unexpected investments, high operational costs and all too often failed IT deliveries. The associated frustration of businesses with their IT solutions and the often negative relationship between the business side and IT has compelled many organisations to rethink their approach to delivering IT solutions.

As a result, many IT organisations started to define and package their solutions as services from a business needs perspective – identifying all underpinning components, suppliers, processes, data and functions required to deliver the expected end-user value. To support this approach, IT service management has developed as a process-based methodology to align the delivery of IT services with the needs of the organisation that uses them. Best practice frameworks such as ITIL, CobiT and ISO20000 have been designed to assist IT organisations in establishing, managing, developing and governing IT service management practices. Of course, these best practice frameworks need to be tailored to suit individual organisations and situations. Within a service management framework, all processes only have one goal: to plan for, deliver and support IT services. For companies at a stage of organisational development where there are few or no services defined, these processes have limited value.

In order to be successful with IT service management, it is critical that the concept of service is firmly embedded in the IT organisation. IT service management requires common processes, collaboration and governance between the business, IT and increasingly external suppliers. However, a lack of service management awareness, process expertise, coordination, integration and development has meant that the frustration with IT persists and has even been accentuated by the move towards multi-sourcing.

Invariably, outsourcing has meant that retained organisations are being driven by suppliers to develop their IT service management capabilities to integrate services and enable the suppliers to deliver on their contractual obligations. In a direct response to issues of contractual oversight and service integration, the concept of service integration and management (SIAM) has emerged. Service integration with multiple suppliers is one of the core capabilities of an SMO.

What is an SMO and what are its core capabilities and responsibilities?

An SMO is a group or function accountable for defining, maintaining and managing processes, standards and services for IT service management. It provides the necessary organisational structure, expertise, coordination and control to facilitate the implementation of IT service management process activities and to provide the necessary focus on business goals and objectives.

Imagine a service delivery organisation as an orchestra where each musician represents a piece in the service delivery chain – from service strategy and demand all the way through to operational support. The SMO would then be the conductor, ensuring that each musician plays their part to perfection and is in sync with all the other musicians to deliver music that at least meets the audiences’ expectations.

An SMO provides a central point of focus for driving efficiency and effectiveness in the delivery of IT services through sharing common resources, process expertise and a central improvement programme providing education, techniques and tools. For many IT organisations, an SMO offers the necessary expertise and drive to speed up the evolution from simply managing technology domains to managing IT services that are aligned with business services.

The focus of the SMO function is on the capabilities and supporting tools needed to define, design and deliver IT services. The following figure illustrates the core capabilities of an SMO that are necessary to ensure effective and efficient service delivery:

Figure 1: SMO Core Capabilities

Figure 1: SMO Core Capabilities

Each core capability plays an integral part in the performance of an SMO and all capabilities are inter-dependent. For instance, ITSM ownership and expertise means the SMO owns and maintains the long-term roadmap for the development and establishment of ITSM capabilities. This is dependent on process architecture, which is responsible for common models, standards and collaboration between processes. To what extent each of these capabilities is engaged depends on the size and scope of the SMO. How to determine the size and scope of an SMO will be discussed later in this white paper but it is important to understand that this is not a ‘one-size-fits-all’ approach.

A fully implemented and operational SMO will have several responsibilities including:

  • Ownership and accountability for IT service management
  • Ensuring coordination and quality assurance of cross-functional capabilities
  • Measuring performance and driving improvements in service management
  • Defining and maintaining standards for IT service management
  • Implementation, management and improvement of service management processes
  • Ensuring that governance, legal and financial interests are met in continuous operations
  • Be the escalation and management point of IT services in daily operations
  • Ensuring that services are defined, that continuous service operation processes work in practice and that vendors are managed according to defined policies

What are the main benefits of an SMO?

When advocating the creation of any function within an organisation it is imperative to understand its purpose, objectives and benefits. Some of the key benefits of establishing an SMO include:

  • Optimized cost and quality of IT services
  • Reduction in overall IT risk
  • Improved agility and time-to-market for new and improved services
  • Better alignment between business needs and IT capabilities
  • Clear escalation point for cross-functional issues
  • Ensured service integration with external suppliers
  • Consistency in methods, documentation and deliverables
  • Facilitated and strengthened cross-functional collaboration
  • Improved perception of the IT organisation within the company

The main purpose of the SMO is to take ownership of and be accountable for IT service management delivery and performance. The objective being to optimize service delivery capabilities aligned with business requirements and to help create an IT organisation that is perceived as professional and value-adding by the business.

Key drivers for establishing an SMO

Although most IT organisations agree that effective and efficient IT service management is critical in achieving a high degree of operational excellence, this is all too often not the reality. There are many reasons as to why this may be so, all of which act as drivers for the establishment of an SMO. For example, IT organisations with inadequate service management process quality and coverage. Processes to manage service strategy including demand and portfolio management, as well as service design including service level management, availability, capacity and continuity are all too often overlooked. This invariably results in poorly designed services that do not meet customer expectations, transitioned into operations without adequate quality or support readiness.

Poor IT service management implementation

In spite of the development and deployment of best practice service management frameworks, many IT organisations still struggle with establishing an effective service delivery capability. After devoting large amounts of resources, the perception is often that not much has been delivered and that the few processes that have been defined either have design issues or compliance is low (or both). In addition, no structure exists for continual process improvement and the effectiveness and efficiency of IT delivery deteriorates further as the status of processes remains static despite changing circumstances. A multitude of contributing factors lies behind this including: no understanding of business impact, exclusive attention to process with insufficient focus on people, poor governance model, inadequate training and skills, insufficient management buy-in, inadequate funding and no continuous improvement process.

An SMO that has adequate management support, is staffed with expert ITSM process skills and is focused on delivering value rather than only process frameworks will enable any IT organisation to improve and develop their IT service management capabilities.

Managing requirements from multi-sourcing

While outsourcing continues to grow and the trend towards multi-sourcing with shorter contract durations is seen as a way to deliver greater flexibility and speed in delivery, many IT organisations are struggling with the demands of contractual oversight and service integration. This has made it even more challenging to successfully implement IT strategies that require a set of well integrated and managed services ranging from outsourced through internal to cloud-based services.

This has increased the need for more maturity and sophistication in IT organisations’ ways of working. While the goal has always been to align IT services with the needs of the business at optimal cost, multi-sourcing has added an additional layer of complexity.

Managing any outsourced environment is all about governance and oversight, establishing end-to-end visibility, performance reporting and accountability for services delivered by suppliers. It requires an appropriate operating model as well as common processes and resources with the requisite skill set.

All too often, application and infrastructure outsourcing projects fail to deliver and struggle during the early periods of their contract life due to inadequate planning. For example, when designing the composition of the retained IT organisation, not enough consideration is given to ensure it contains the requisite skills and competence needed to govern an outsourced environment. In addition, processes that were not considered essential, and therefore not implemented when everything was handled internally, are all necessary to ensure that major suppliers are able to deliver real value rather than simply ‘keep the lights on’. This may include service portfolio and demand management, service level management, capacity and availability, as well as service transition processes (e.g. release and deployment, and asset management)

The SMO should be a key consideration when planning for any significant outsourcing. It should be designed as part of the retained organisation with the view of driving the delivery and ensuring service integration between the IT organisation and the supplier(s) as well as between multiple suppliers.

Maintaining balance between satisfying increasing demand and meeting cost constraints

In today’s increasingly competitive world, the ability to adjust to changes in customer demand or to a shift in the competitive landscape have translated into greater demand for new and improved IT services at a faster rate. This increase in demand must be balanced against cost constraints as organisations strive to improve efficiency. While demand for IT services may be infinite, IT budgets are not.

An effective SMO can assist in ensuring that the focus of the IT organisation is to – through effective demand and portfolio management – deliver the right services that are fit for purpose, well designed, and transitioned into operations in a cost optimal way. Cost optimization should be a key driver for any IT organisation; inefficiencies resulting from poorly designed services that are inadequately tested and deployed into operations resulting in serious incidents, significantly increase costs.

Increased frequency of change while maintaining stable operations

Maintaining operational stability is a key business requirement as tolerance to IT risk continues to decline while regulatory pressure and customer expectations increase. Moreover, increased frequency of changes has shortened the period of stability between changes while increased pressure on time-to-market for new changes has meant less time for planning, building, testing and deployment.

In response, many IT organisations have adopted lean and agile methodologies in their development processes as a way to keep up. Development cycles are shorter and more frequent, and in some instances continuous. IT service management processes must be able to accommodate these lean, agile approaches to development and deployment. This requires both the requisite process skills as well as an ITSM tool that can support the necessary process automation. With a well-functioning SMO, the transition to leaner and more agile processes becomes a lot easier to coordinate.

Operational and process silos hinder collaboration

Cross-functional collaboration is critical to organisational performance and achieving desired business outcomes. Failure of collaboration reduces effective use of the organisation’s capabilities and resources – leading to inefficiency and inflexibility in the delivery and support of services.

There are many examples of gaps between different development teams – as well as between development teams and operations teams. Processes are intended to bridge those gaps and ensure that different functions interact seamlessly. In addition to functional silos, poorly integrated processes can lead to the creation of process silos, which further dilute the ability of the IT organisation to improve performance and business outcomes.

A key focus for the SMO is ensuring functional integration as well as managing and developing well integrated processes.

Misaligned expectations

Misalignment between delivered IT services and user expectations from the business is likely to increase the costs and risks for the IT organisation delivering these services. Avoiding this requires alignment of the IT strategy with the business strategy, and maintaining this through ongoing operational alignment in the strategy roll-out – as well as fulfilling ongoing demands from the business. Naturally, this alignment must be done in conjunction with improving the overall effectiveness and efficiency of IT.

An SMO with full ITSM process coverage will oversee the management and development of the service strategy processes. Rather than focus merely on the operational processes such as incident, problem and change – an SMO can be established to take responsibility for the entire IT service management lifecycle; from service strategy to service operations.

Considerations before establishing an SMO

Before establishing an SMO, there has to be a clear mandate at strategic level with support from top IT management. Without this it will be very difficult to achieve the necessary motivation in the organisation when driving such an initiative from the bottom up.

Assuming there is buy-in from top level IT management, a number of fundamental considerations require deeper analysis before deciding on establishing the SMO. This exercise is essential in determining the size, scope and make-up of the SMO.

  1. Analyse organisation type and maturity
The type and maturity of the organisation (technology, consumer, manufacturing) helps determine the process focus and the functional requirements and capabilities.

  • For example, a new technology start-up has a very different organisational structure and separate process requirements than a mature manufacturing company.
  1. Analyse service management maturity
Understanding the service management maturity of an IT organisation is necessary to establish a baseline.

  • How far has the IT organisation evolved from simply managing technology domains to defining and managing IT services?
  • The more service oriented the IT organisation is, the greater is the need for service management processes to ensure consistent delivery and support for its services.
  1. Determine process utilisation
Understanding process utilisation facilitates identifying process gaps and determining the initial process scope and capability of the SMO.

  • Number of processes defined and implemented
  • Process maturity from a quality and compliance perspective
  • Process governance with regards to coordination, control and integration
  1. Review organisation’s capability and structure
Understanding the organisation’s capability and structure is necessary to ensure the right SMO competence and make-up.

  • Organisation’s current needs and capabilities
  • Requires people with appropriate skills and level of expertise
  • Will likely require some degree of organisational change
  1. Evaluate IT strategy and sourcing strategy
IT and sourcing strategies provide insight into the focus and direction of an IT organisation and thus the focus and direction of the SMO.

  • SMO is particularly relevant when parts or all of IT delivery is outsourced
  • SMO ensures integration between suppliers and between IT and business
  • SMO should be considered as part of the design of the retained organisation during the planning phase of an any outsourcing project

SMO Size and Scope

The number of areas under SMO ownership and the level of responsibility needs to be carefully considered in relation to the organisation’s capability and structure, and must be ’fit for purpose’. The following is an example of an SMO model in a multi-sourced environment:

Figure 2: Example of an SMO in a multi-sourced environment

Figure 2: Example of an SMO in a multi-sourced environment

There is a wide range of possible SMO models, much like the range of scenarios for a PMO. When considering establishing an SMO it is wise to take a pragmatic and practical approach to ensure that the proposed solution is not over-engineered and can easily be implemented and established. The scope of the SMO will determine the types of roles and responsibilities and where the SMO function will fit in the organisation (absorbed into existing functions or operating as separate unit).

The following table provides a summary of the potential size and scope of an SMO when fully implemented:

  • Setting policies & guidelines
  • Owner of ITSM processes and development, leads continual improvement
  • ITSM process execution on operational level
  • Assuring compliance of ITSM processes by internal and external suppliers
  • The main point of contact between the business and IT
  • Process governance and architecture (policy, process map, strategy, models)
  • Managing the service portfolio and service catalogue
  • Process competence, methods, templates
  • Supplier integration
  • ITSM tool ownership
  • Performance reporting
  • Creation and maintenance of the ITSM documentation structure
  • Process coverage can include all or part of the service management lifecycle – from service strategy through service design and service transition to service operations
Functions Incorporation (or not) of existing coordination and quality assurance of services, for example:

  • Service desk service management
  • Service catalogue management
  • Service level management
  • Supplier management (integration)
  • Business relationship management

To secure success, an SMO solution must match the IT organisation’s capability. It is better to start small and evolve the SMO over time.

Example of Key Roles and Responsibilities within an SMO

  • SMO Director – Head of SMO function (often process owner)
  • Process Architect – Coordination and integration of processes. Adviser and expert in ITSM
  • CSI Manager – Drives continual improvement towards processes and services
  • Service Manager Tools – Responsible for performance and development of supporting tools
  • Process Lead – Responsible for process management, development and performance
  • Process Manager – Support to Process Lead. Responsible for daily process operations
  • Reporting Analyst – Performance measurement

Be pragmatic and practical – there is no one-size fits all

It is essential that an IT organisation considering an SMO implementation begins by analysing certain fundamental considerations (e.g. organisation type and maturity, and service management maturity). The results of this analysis will, as highlighted earlier, assist in determining the size and scope of the SMO as well as provide input for future development. At this point it may be determined that an SMO is inappropriate given the size of the organisation or the low level of IT service management maturity.

An SMO implementation can range from:

  • Large manufacturing IT organisation that delivers many IT services and manages multiple suppliers
    The SMO manages the full end-to-end service life cycle from service strategy to service operations and all associated ITSM processes. This includes responsibility for the staff performing the service management, the service catalogue and SLAs, service level monitoring and reporting, and the service desk. It can also own the service desk tool, the CMDB and other tools provided centrally to all business units needing them.
  • Small consumer services start-up
    An IT department with few IT services that are outsourced or in a public cloud may perform service management activities as part of their day to day work without the need for a formal SMO function. Instead, a virtual SMO provides assurance and expertise to functional units such as the service desk and process coordination and assistance.

Final Note

If delivering several IT services is your core business, an SMO will benefit your organisation – ensuring efficiency, business alignment and agility in delivering change. This is especially true if your organisation is struggling to meet service levels or other business goals and objectives while managing a multi-vendor environment. If this is the case – you can’t afford not to have one.

About the author

Luke Croome is a senior IT management consultant at 3gamma, with 18 years of experience from a wide variety of leadership roles and management disciplines within IT and finance.

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