One of the principles of Service management as described by ITIL V3 is ‘encapsulation’ :  Customers /business are not interested in the technical/operational details and complexities of the service provider. They are interested in the outcomes. Hence a Service provider (like IT) should encapsulate all the low-level details and complexities and provide the outcome expected by and agreed with the customer/business.

Consider the context of IT Service management, where most of the stake holders involved are from technology, operations, people management or business background (but very rarely – if ever- from a financial background).

Going through the Financial management process section of ITIL Service Strategy book makes one feel:

  • Do we ITSM people need to get into all these complexities of finance management?
  • Why don’t we ‘encapsulate’ the financial management and govern the outcome from it?
  • Just like business doesn’t want to understand and manage the complexities of IT, isn’t it just fair for IT to stand up and say – ‘we don’t want to get into the complexities of financial management’?

It was much better scenario with the Service Delivery in ITIL V2. The bigger picture was provided by the three major activities : Budgeting, Accounting and Charging.

I agree, it missed quite few important concepts like ROI, Service valuation etc. But isn’t the good practices ‘described’ in ITIL V3 Service Strategy taking it a bit too much?

Btw- there is no ‘Budgeting’ in ITIL V3, though the word capital budgeting is used a few times – in a different context though. The term used more closely is Funding.

Do a Service manager really need to understand the details and complexities involved in the Financial management?

Even in the V2 days, I have witnessed quite a few ‘ITIL implementations’ (!) where they conveniently chose to ignore financial management module. I am sure you can see even more of them with V3.

Mind you, I am not at all saying knowledge on Financial management is not important for the Service management. On the contrary, I always argue fundamentals of financial management should be part of every professional education schemes at least.

The point of contention is the way it is addressed. The detailed complexities of Financial management is used, where a little more higher-level, big picture approach would have been more of value.

Knowing the big picture and fundamentals (predominantly ‘What’) is entirely different from understanding the details and low-level complexities (usually the ‘How’).

In a lay-man’s perspective:  When I buy a printer for my home use, I am interested in the features of it (what it does) and how I should use it for my requirements; and NOT how the printer works internally.

Hence thinking aloud here – won’t be a ‘encapsulation’ and ‘agency principle’ based approach towards financial management be more effective and efficient for Service management?

Or am I missing some fundamentals here?

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