IT Cost Transparency: Why the Service Portfolio is a Pre-Requisite for the Service Catalog

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IT Service Management Professionals

IT Cost Transparency: Why the Service Portfolio is a Pre-Requisite for the Service Catalog

Posted by Phil Hellerman

Mon, Jul 29, 2013

The Service Portfolio is a critical element when IT Organizations have a strategic plan to deliver services identified in the Service Catalog. IT Organizations who truly desire a robust actionable Service Catalog must first define the Services in the Service Portfolio.

By itself, the Service Portfolio provides IT Organizations with several value propositions, including:

  • Identifying Services that maximize return on investment at an acceptable risk level

  • Providing the means to evaluate and determine if Services are aligned with the overall business strategy

  • Confirming that Services are comprised of components that can technically evolve based upon the ever-changing landscape of IT and business customer demands

  • Determining which Services have reached end-of-life and need to be retired

  • Tracking resources that are engaged in and responsible for delivering the Services

  • Orchestrating the entry and exit of Services based upon the funding model and cost recovery plans

However, when IT organizations create a Service Catalog without the Portfolio, the result is a simple service request mechanism and cannot provide cost transparency to the customers. While creating a simpler request method is laudable, the effort does little to promote and provide cost transparency to the business. Without first creating the Service Portfolio, IT organizations have no idea of the true costs of the delivered Services and will fall short of showing the Business Customers true value and cost transparency.

How Can IT Deliver to Meet the Challenge?

Creating the Service Portfolio must be the first step in creating the Service Catalog. When the Service Portfolio is used as the enabler to the Service Catalog, IT organizations will benefit and improve their position to strategically adapt to future IT conditions in the following ways:

  • Capability to provide IT cost transparency for the Service and answer user questions like why the laptop costs so much from the internal IT organization when the big box electronics store has them for hundreds of dollars less.

  • Using the outcomes of the Service Portfolio initiatives to create services that use price as an economic lever to influence behavior. For example, pricing a virtual environment far below that of a dedicated server has the potential to influence the adoption of virtualization as the primary solution.

  • Clearly identifies all components of a Service. This includes critical infrastructure components that are maintained at a higher cost or identification of identical activities performed by other departments in support of the Service.

  • Supports a road map for future delivery of IT Services. By knowing all the components of the Service, IT Organizations can strategically position its Services to exploit future IT trends and technologies, including increased mobility, virtualization, IaaS, PaaS, SaaS, Web 3.0 and many others.

  • Create an actionable Service Catalog that includes prices and details rich service level information.

The Root of the Problem

Many IT Organizations view the effort of creating a Service Catalog as a resolution to the issue of providing end users with a self-service method for requesting IT services. By eliminating many forms, emails and phone calls previously required to obtain services from IT, the logical answer for IT organizations was to create an easy-to-use web portal with minimal back-end notifications. And calling it a "Service Catalog" would dispel the issues surrounding general user dissatisfaction with IT unresponsiveness.

But the Service Catalog produced by the IT Organization is simply a better mouse trap. It does not meet the IT strategic and operational goals nor put the IT Organization on a path to: 

  • Showing value for the services

  • Identifying the true cost of providing the service

  • Promoting the capability for any type of charge-backs

Unfortunately the Service Catalog request approach leaves the IT Organization in the position as an "order fulfiller." What it should be is an innovator and broker of technological services providing Services that reduce operational costs, influence the bottom line and improve productivity and quality of service.


A Service Portfolio approach to the Service Catalog focuses on the complete service delivered and identifies all of the component costs for supporting and delivering the service. The Service Portfolio should not just be a listing of services in the pipeline, the catalog or retired. Rather, the Service Portfolio's core functionality should include the detail and cost of "everything you do" in support of a service.

A clear distinction of the attributes should be made between the Service Portfolio and Service Catalog. The Table below highlights important differences.

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Without a clear understanding of the components and the effort required in support of a service, it will be impossible to properly show value for the service or adequately allocate a price for the service in the Service Catalog.

The outcome of a strategic exercise to create the Service Portfolio prior to the Service Catalog will allow IT Organizations to:

  • Identify labor costs associated with tasks supporting the service

  • Identify redundant or irrelevant tasks

  • Identify and cost additional software or tools required to support the service

  • Allocate a portion of an external supplier charges to the Service

Implementing a Solution

IT Organizations that want to create a fully functioning Service Catalog that meets its Strategic Delivery Model and includes prices and optional components should perform the following steps.

  1. Create a "Taxonomy of Services" for the IT Organization. A taxonomy is simply a division into ordered groups or categories. An example Service Portfolio Taxonomy is shown below. 

    describe the image 

  2. Choose a single service within a particular family of the Service Portfolio taxonomy; then add additional Services. A good place to start is a basic Service such as email. It is a member of the Collaboration Family and has a variety of components and requirements, including licenses, network connectivity, EUI software, optional chat, mobility, LDAP, single sign-on, etc. And its ubiquitous nature within the enterprise makes it a prime candidate.

  3. Dissect the service components by identifying the following:

    a.  All activities and tasks associated with the Service

    b.  Labor cost for each activity and task performed

    c.  Cost allocation for any required software or infrastructure component

    d.  Cost allocation for any external supplier relationships required to deliver the Service

    e.  Cost allocation for any Service Desk activity required 

  4. Summarize and total all relevant costs. Add a markup or margin if desired.

  5. You are now ready to combine the components and costs for the entry in the Service Catalog.

It is important to note that since the Service Portfolio contains the components and costs of all IT Services, it is a source of technical and financial information and not Business Customer consumables.

It might look something like this.

IT Portfolio- IT Service Catalog mapping

Learn More...

Want to know more? Learn how to create your IT organization's Service Portfolio as the enabler to your Service Catalog effort with our one-day, on-site private Service Catalog workshop.


About the Author:

Philip J. Hellerman, Principal Consultant 
Evergreen Systems 

Philip has served in a variety of leadership, strategic and tactical positions during his 30-year IT career. In addition to his ITSM and ITIL involvement for the past 15 years, his experience includes service delivery management, infrastructure management, application development and program/project management. He is certified in ITIL, ISO20000 and ServiceNow Administration and experienced in delivering a variety of ITSM/ITIL solutions to Fortune Global 50/100/500 enterprises. He holds a BSBA degree from Valparaiso University.


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