Value, Products and Services
The core vocabulary of service management: value and how it is co-created, providers and consumers, products and services, outputs and outcomes, and how utility, warranty, experience, costs and risks decide whether something is worth it.
Value
In ITIL, value is the benefit, usefulness and importance that someone sees in something. The important word is sees: value is judged by the stakeholders, not by the people who built the thing. A new reporting dashboard that the IT team is proud of has no value to the billing department if nobody there uses it. The same service can also have different value for different people: a fast customer portal matters to customers, while lower operating costs matter more to Kestrel Energy's finance director.
Value co-creation
It is tempting to say that IT "delivers" value, as if it were a parcel. Service management uses a different picture: value co-creation, the idea that value only appears when the provider and the consumer both contribute. The provider offers something; the consumer has to use it, give information, follow agreed steps and report what does not work.
Kestrel's customer portal shows this clearly. IT provides the portal, keeps it running and fixes errors. The value — a correct bill and a customer who does not need to call — only exists if customers submit their meter readings in the portal, keep their contact details up to date and report a reading that was rejected. When customers keep phoning instead, the portal works perfectly and still creates little value. That is why feedback from consumers is part of the value story, not an afterthought.
Organizations and roles
Every service involves at least two organizations — where an organization can be a single person, a team, a department or a whole company. The roles are defined by what they do in a particular relationship, not by who they are.
- A service provider is the organization that offers and runs a service. Kestrel's IT department is a service provider to the rest of Kestrel; Kestrel itself is a service provider to its energy customers.
- A service consumer is the organization that receives and uses a service. Kestrel's billing department consumes IT services; IT in turn consumes services from its cloud provider and telecom carrier. Almost every organization is both a provider and a consumer.
- A digital product vendor is an organization that creates digital products and keeps improving them, together with what is offered around them. The company that sells Kestrel its billing software is a vendor. Kestrel's own app team is too, and because it also runs the app it combines the vendor and provider roles — a common situation.
Sponsor, customer and user
On the consumer side, three roles are usually distinguished:
| Role | What they do | Kestrel example |
|---|---|---|
| Sponsor | Authorizes the budget for using the service. | Margriet de Wit, the chief financial officer, who approves the billing budget. |
| Customer | Defines the requirements and is responsible for the outcomes of using the service. | Femke Jansen, head of billing, who agrees what the billing service must do. |
| User | Uses the service in daily work. | Lucía Romero and her colleagues in the billing team. |
One person can hold all three roles. When you pay for a music streaming subscription, you approve the money, decide which plan fits your needs and listen to the music. In a company the roles are usually spread over several people, and they often want different things: users want convenience, customers want specific results, sponsors want a sensible cost. A provider that only listens to one of them will disappoint the others.
Products and services
A product is a combination of an organization's resources — people, information, technology, partners — designed to offer value to consumers. A digital product is a product built mainly from digital technology: Kestrel's mobile app, the billing platform, the customer portal.
A service is what the consumer actually experiences: a way of helping them get outcomes they want without them having to manage specific costs and risks themselves. Kestrel's billing team does not want to buy servers, patch databases or worry about backups; the service takes those costs and risks off their hands. The product is what the provider has built; the service is how consumers get value from it.
An IT service is a service that an IT organization provides using information technology, such as email, the network, a laptop or a business application. A digital service is any service that depends entirely or largely on digital products — including services an organization offers to its own customers, like Kestrel's online meter-reading service. Every IT service is a digital service; "digital service" is the broader term ITIL (Version 5) uses for any service built on digital products, whoever its consumers are.
Service offerings
A provider rarely offers "a service" in the abstract. It makes a service offering: a description of what a particular group of consumers gets, made up of up to three kinds of components. Take Kestrel's workplace laptop service for new employees:
| Component | Meaning | In the laptop service |
|---|---|---|
| Goods | Physical items handed over; the receiver becomes responsible for them. | The laptop, charger and headset given to the employee. |
| Access to resources | The right to use something that stays with the provider. | The network, VPN, email mailbox and shared file storage. |
| Service actions | Things the provider does for the consumer. | Installing and configuring the laptop, support, repair and replacement. |
Different groups can get different offerings built on the same product: field engineers get a rugged laptop and a mobile data plan, office staff a standard model. Each moment where consumer and provider meet in an offering — a chat, a request in the portal, a technician on site — is a service interaction, and those moments shape how the service is experienced.
Service relationships
A service relationship is the cooperation between a provider and a consumer: everything they do together to create value, from agreeing what is needed to using the service and improving it. ITIL (Version 5) distinguishes three types, which differ in how closely the two sides work together and how much they share goals:
| Type | Character | Kestrel example |
|---|---|---|
| Basic | A standard offering used as it is; little interaction beyond buying and using. | An online diagramming tool bought with a credit card. |
| Cooperative | Agreed, partly tailored services with defined responsibilities and service levels; each side works with the other but pursues its own goals. | The colocation data center with its contract and response times. |
| Collaborative | Both sides share goals and work together closely, with high trust and joint decisions. | Kestrel's IT and the billing department redesigning billing together. |
None of these is better in itself. A basic relationship is perfectly right for a cheap, standard tool; insisting on a collaborative relationship with every supplier would cost far more than it returns.
The service journey
The service journey is the whole path a consumer follows with a provider: discovering what is on offer, agreeing what they need, being onboarded, using the service, giving feedback and eventually changing or ending the relationship. ITIL 4's advanced material described it with steps such as explore, engage, offer, agree, onboard, co-create and realize. Thinking in journeys helps a provider spot the moments where consumers get stuck. At Kestrel, new employees got their laptops on time, but their accounts were only created on day three — a gap in the journey that no single team had noticed.
Outputs, outcomes, costs and risks
An output is something an activity produces: a report, a configured laptop, a new software version. An outcome is the result a stakeholder achieves with the help of one or more outputs. Consumers care about outcomes; outputs are only a means.
| Output | Outcome |
|---|---|
| A password reset for Lucía in the billing team | Lucía can log in again and finishes the day's invoice corrections |
| A weekly report of unpaid invoices | Finance follows up late payers sooner and cash comes in faster |
| An app version that lets customers photograph their meter | Fewer estimated bills and fewer calls to customer service |
| A laptop configured before the start date | A new employee is productive from the first morning |
Costs and risks
Outcomes are only half of the picture. Using a service also changes the consumer's costs and risks, in two directions:
- Removed from the consumer: by using the hosted billing service, Kestrel's billing department no longer pays for its own servers or staff to run them, and no longer carries the risk of a disk failure losing invoices.
- Imposed on the consumer: the department now pays a monthly charge, spends time on onboarding and depends on the provider's availability and security.
A service has value for a consumer when the outcomes and the costs and risks it removes outweigh the costs and risks it imposes — in the eyes of that consumer.
Utility and warranty
Two questions decide whether a service can do its job. Utility is whether the service is fit for purpose: does it do what the consumer needs, by supporting the work or removing a limitation? Warranty is whether it is fit for use: does it perform as agreed, with enough availability, capacity, security and continuity?
Either one alone fails. A new self-service portal where customers can change their payment date has excellent utility, but if it is down every evening when customers are at home, the warranty is missing and customers call anyway. The reverse is just as useless: a portal with 99.99% availability that cannot do what customers came for. The levels of warranty a consumer can expect are usually written down in a service level agreement.
Experience and sustainability
A service can be useful and reliable and still be a pain to use. ITIL (Version 5) therefore treats experience as a factor in value next to utility and warranty. Experience is the sum of how interactions with a product or service feel — both the practical side (is it quick, is it clear) and the emotional side (do I trust it, am I frustrated).
- User experience (UX) is that experience as a user perceives it: how Lucía feels when she corrects an invoice in the billing system twenty times a day, or how a customer feels submitting a meter reading at 22:00.
- Customer experience (CX) is the experience of the customer across all interactions with the provider: how Femke, as head of billing, experiences the agreements, the reports, the service reviews and how IT responds when something goes wrong.
Providers increasingly agree targets for experience, not only for technical performance; that is the idea behind the experience level agreement (XLA), explained on Service Level Management.
Sustainability
Sustainability means meeting today's requirements in a way that also takes care of the environment, society and long-term economic health. In ITIL (Version 5) it is another factor in whether something is worth it. For Kestrel, an energy supplier with climate targets, that is concrete: the energy use of its data center space and cloud workloads, how long laptops are used before they are replaced, whether old devices are refurbished or recycled, and whether suppliers meet the same standards. A service that saves money by doubling energy use may no longer count as valuable.