This paper defines a basic relation between service provider and client in environment of closed market. Paper also provides guidelines to Service Level Management in military chain of value. Principles of Service are illuminated with examples from the Defence Forces of Finland.
Closed market needs special drivers since money does not talk that loud
A market may be closed or open. Open market is typical for private sector where providers are competing and clients may freely choose what service and provider they use to create more value. Money is changed when value is created. Closed market is typical public sector, where one service provider adds value to clients that lack freedom of choice. There is seldom money changed for value but costs may be projected in the accounts of closed markets units by the end of year. Closed market needs artificial drivers to function efficiently. These drivers may be called Management of Service Agreements as described in Figure 1.
Figure 1: Drivers of closed market in Military Organisation
Client is a military force or unit with mission. It requires the support of a Service Provider, which is not under clients command structure. The Service Provider may utilize several sub service providers either within closed market or from open market. Together with client service provider and its sub providers create a value chain. Customer is responsible of managing the closed market. In military organization it is normally the highest Commander and his supporting Headquarters.
The commander is issuing a mission to Force and support objectives to Service Provider. In order to build efficient relationship between client and provider, there is a need to establish Service Catalogue and Service Level Agreement. The Command Intent (=Strategy) needs to be communicated to all parties of the value chain.
The following chapters will study some basic features of closed market and give examples of their failures.
Service is not what provider offers but what client values
Service is something that Client values and Service Provider produces. If there is no feedback to service provider, service does not get improved. Further Client’s feeling of value decreases since service becomes granted. Service is created mostly by the Value Chain as complex services are made up from sub services. There is a challenge to manage the value chain and project the client’s appreciation of value all the way through chain.
Service flows along value chain and its quality, level or value should be measurable in conjunction points. In open markets the value of service is measured against monetary value. In closed markets there needs to be other means to measure the value and provide drive through the chain. If there is no free choice for client to get more value by changing provider or service, a Service Level Management authority should be in place. Authority is needed to create favourable conditions to improve service provider – client relations, to create feeling of value in each conjunction and, in the end, to produce business benefits. A basic service relationship and value chain is described in Figure 2.
Figure 2: Basic relationships of value creating chain
Sometimes it is difficult for military organisations to understand value chains if they are recognising only traditional command chains. It these cases it is sometimes fruitful to recall how field artillery functions. The fire controller (=Client) is causing losses to enemy troops by using services (= fire) provided by artillery battalion (=Service Provider). Requirement for service equals fire command. Report of service quality equals correction orders of fire. The plan for combined fires that aligns both units and the supporting artillery battalions equals Service Level Agreement.
Service with no value to client
The Electronic Workshop of Finnish Defence Forces was ahead of time in implementing quality management and defining its services back 1990’s. Electronic maintenance services were defined according to best industrial practices but the clients of Workshop were at different level of maturity. Clients took services as granted since there was no feeling of value in transaction. The superiors preferred line command over governance of closed market. Whole intent dried up as there were no maturity in the whole value chain, just one provider trying to change alone.
Only added value is recognised as service
The C4I Centre of Finnish Defence Forces was built incrementally and Service Catalogue matured step by step through 2005 – 2008. The Services of C4I Centre was estimated to be at Service Production maturity level 4 (= business benefit). Then the focus of management shifted. The mature Service Catalogue was changed by the engineers of C4I Centre. Within one round ICT service descriptions, terms and conditions were reversed to maturity level 1 (= devices). With only a small change in the governance of closed markets and the interest of clients was missed as services lost appearance of value.
Service Level Agreement is not just a paper
Service Level Agreement (SLA) is an agreed way between provider and client to deliver valued services to create business benefits to client. There are some key issues in service level agreements like: lines of demarcation, regular communication, persistent improvement, enforcement and linkage to business value.Agreement is to create base of trust between provider and client. There should be clear roles of responsibility and procedures to follow when incidents occur. Contract should mitigate the effect of possible political and personal conflicts in problem identification and resolution. If contract does not serve the purpose of trust, it becomes only a part of bureaucratic margin.
Agreement will wither if there are no regular meetings to foster communication between parties. It does not need any problems or great new ideas to have a meeting. Meeting is main tool to extend and exchange the understanding of the business between both parties. Meetings should improve the insight of business through the whole chain of value creation. All parties of chain are learning by fusing tacit knowledge and creating new mind models. This creates new insights whether tacit or explicit.
Longer the service is creating value, more important is to tune and improve it to meet the evolving expectations of client. Constant feedback to service provider is an enabler for service improvement. Service Provider should listen their clients and take action based on feedback. There is no hierarchical line command that can replace the direct feedback from client and a lean development of services.
Client is dependent on services of the designated provider in closed markets. There should be a sanction in place if provider fails to meet agreed levels of service. Client’s loss of value due service defect should be projected to the outcome of service provider.
The main driver for entire value chain should be the business value or benefit of client. If client’s organisation is not aware of this value chain, there is a tendency to take service as granted. If client does not value service or see its benefit to business, service should be cancelled. The integrity and understanding of value chain is compulsory for lean improvement through the whole chain of value creation.
Service promise without delivery
The CIS Agency of Finnish Defence Forces was created 1997 to develop ICT products and provide them to regional ICT service providers. It took two years to stabilise service agreement process between centralised developer and regional operators. The SLA was taken as the main driver for whole CIS Agency. Then the management of CIS Agency changed, and within a year, the trust and policy between parties was gone. Management turned to listen more the hierarchical line command and development units failed to deliver what they had promised in SLA. There is no trust from clients if service provider does not take agreement as binding contract.
Responsibility without transparency and sanctions
After setting up measured, reported and sanctioned Service Level Agreement between Joint Service Provider and all forces, the J6 of Finnish Defence Forces changed their focus. The J6 neglected to require timely reports based on transactions direct from client-provider contact. Reporting was downgraded to traditional line of command procedure. Since the levels of hierarchy through reporting line exceeded four, the facts were lost in process. The culture of Service Provider did reverse to previous behaviour. The unfocused J6 was getting general reports from the line of Service Provider. These reports were countered with feelings based feedback from clients. One opinion was arguing against another opinion based on everything else but facts. The dearly gained trust was lost in friction caused by miscommunication and lack of transparent information.
Is there real client driven approach without sanctions in SLA?
The J6 of Finnish Defence Forces fixed a controlled relationship between provider and client and sealed it with sanctions in the SLA template. Sanction chapter did effect the performance measures of unit and personal levels. After the first full year all measures were collected and time for personal performance assessment came. The metrics evidenced intermediate success at most, since service levels were not met according to goals set by the J6. The first attempt to build direct cause between actions of client, service and provider failed because of loud opposition from managers and evading support from Human Resources Management. Transformation of culture did not happen since communication was not delivering clear understanding of new responsibilities and measures of success.
Service agreement is nothing without the Service Agreements Management
In closed market it is important to have Service Agreements Management process in place to compensate the lack of the choice of open market. There is a process of managing service agreements described in COBIT5 framework . It includes five steps: 1. Service Identification, 2. Service catalogue, 3. Service Level Agreement preparing, 4. Monitoring and reporting and 5. Reviewing. Process is showed in Figure 3.
Figure 3: Service Agreement Management
The client’s business requirements needs to be analysed and ways to add value to core business needs to be identified. Client is responsible to identify possible new services that may create value. Service provider is accountable to find and propose new possibilities to clients. Together they could experiment and test the opportunities in finding most valuable combination. Service Provider collects requirements and describes possible new services to Chief Information Officer (CIO) of Enterprise.
In closed market CIO own a process that define, maintain and publish Service Catalogues for relevant client groups. Service agreement is defined and prepared on base of the options in service catalogue. Agreement process is established by Enterprise level CIO. Responsibility of agreeing falls into the business manager of client and the chief of operation officer (COO) of provider. The CIO of client and service manager of Provider are accountable for executing this agreement.
Monitoring and reporting the level of services provides important feedback to all parties of closed market, since there is no natural financial driver present. Providers service manager together with clients CIO are accountable to create service reports. The responsibility to review, analyse and adjust accordingly the relationship falls to business process owners and COO of the provider.
Reviewing service agreements and contracts also helps to keep them aligned with business operation and strategic goals. When business or its environment changes, agreements should not hinder the change in otherwise flexible chain of value. Responsibility falls to enterprise CIO and his staff, where as both clients CIO’s and service provider’s management are accountable of this process. SLA templates should be reviewed as a part of annual business planning process.
Misunderstanding of service level agreement
A Chief of Staff of one unit in Finnish Defence Forces did not understand the nature of the SLA template offered to him. With support of his CIO he came up requiring further tailoring the agreement to meet his personal preferences. He was questioning the standardized services and their terms and conditions. The Service Provider forwarded these reclamations to the J6. After studying the case, the J6 communicated to the unit of higher strategy of Defence Forces. The strategy required standard services for two reasons: 1. to achieve interoperability between units and 2. to have more available services in crises time. The unit understood that the need of whole Defence Force was more important than their own peace time optimized requirements.
Losing the control of closed ICT market
The J6 of Finnish Defence Forces lost their focus in managing closed ICT market. They made a mistake in delegating the Enterprise ICT Service Catalogue responsibility to the Joint Service Provider. Without link to strategy ICT Services started to evolve towards to the preferences of Service Provider. Clients were put in a position where they had mission to implement strategy but Joint Service Provider did not support them with appropriate ICT services. It did not take long from clients to implement their own service production to bypass the short comings of the designed Joint Service Provider.
