Financial management is an integrated component of service management. It provides vital information that the management needs to guarantee efficient and cost-effective service delivery. Efficient financial management enables the organization to provide a full justification of expenditures and allocate them directly to services.
Service Portfolio Management (SPM)
A Service Portfolio describes the services of a provider in terms of business value. It formulates the business need and the service provider's reaction to it. Business values correspond to marketing terms; they assure that the competitiveness of the service provider is measurable with regard to the competitors. With SPM, managers are better able to assess the quality requirements and accompanying costs. They can look for cost cutting action points, while at the same time maintaining the service quality.
Demand Management
Demand Management (DM) is a vital aspect of service management. It aligns supply with demand and aims to predict the sale of products as closely as possible and, if possible, even regulate it. Badly managed demand represents a risk for service providers. Too much capacity, for instance, results in costs that do not yield value. Inadequate capacity, however, affects the service quality and limits service growth. Service Level Agreements, demand prognosis, planning and strict coordination with the customer can reduce demand-related uncertainty, but they cannot eliminate it altogether.
Service management must deal with the additional problems of synchronous production and consumption. Service Operation is impossible without the existence of a demand that consumes the product. It is a pull-system, in which consumption cycles stimulate the production cycles.
