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Chapter 2 of 13

Core Service Management Concepts and Value Co‑Creation

Behind every ticket, change, or dashboard lies a simple question: what value are we actually creating? This chapter unpacks the fundamental ITIL 5 concepts that turn IT operations into value-focused services for customers and stakeholders.

15 min readen

From IT Operations to Value: Setting the Scene

Why This Module Matters

In ITIL 5, everything starts from one question: what value are we creating, and for whom? This module links everyday IT work with the core concepts that the exam, and real jobs, care about.

Key Concepts Ahead

We will unpack: service and service relationships; customer, user, sponsor, stakeholder; utility and warranty; outcomes, costs, risks; products, services, and service offerings; and value co-creation.

From ITIL 4 to ITIL 5

ITIL Foundation (Version 5), current as of 2026, builds on ITIL 4 but sharpens language for a digital, AI-enabled world. The main shift is from delivering outputs to co-creating outcomes.

Your Running Scenario

Imagine you are in a university IT team rolling out a new online exam platform. We will use this to explore: who is the customer, who are the users, what makes this a service, and what value means in practice.

Core ITIL 5 Actors: Customer, User, Sponsor, Stakeholder

What Is a Service?

A service is a way for a provider to help customers achieve desired outcomes, without the customer managing all the costs and risks. It is about outcomes, not just technology.

Customer

The customer defines requirements and accepts responsibility for outcomes. For the online exam platform, the university exams office is the customer: they decide what the platform must do.

User

A user is anyone who actually uses the service. For the exam platform, students taking exams and lecturers creating exams are users. They experience the service directly.

Sponsor

The sponsor authorizes and pays for the service. For the exam platform, this might be the Dean or CIO who approves funding and signs off on the business case.

Stakeholder

A stakeholder is anyone who has an interest in, or can affect or be affected by, the service. This includes customers, users, sponsors, IT security, regulators, and more.

Key Relationship

All customers, users, and sponsors are stakeholders, but not all stakeholders are customers, users, or sponsors. Knowing who is who is the first step to understanding value.

Identify Roles in a Simple Scenario

Use this thought exercise to practice distinguishing customer, user, sponsor, and other stakeholders.

Scenario

A company introduces a cloud-based time-tracking app so staff can log working hours from anywhere.

Think for 1–2 minutes and write down your answers (mentally or on paper).

  1. Who is most likely the customer?
  • Hint: Who defines the requirements and is accountable for how time data is used?
  1. Who are the users?
  • Hint: Who logs in and interacts with the app daily or weekly?
  1. Who is the sponsor?
  • Hint: Who approves the budget and signs off on the project?
  1. Name at least three other stakeholders and why they care.
  • Hint: Think about HR, finance, unions, or external auditors.

Self-check (compare with your notes)

  • A typical answer might be:
  • Customer: HR department (defines rules for time tracking)
  • Users: All employees who log hours; maybe team leaders approving time
  • Sponsor: HR Director or CFO who funds the solution
  • Other stakeholders: Payroll team (uses data for salaries), IT security (concerned about access control), works council or union (concerned about monitoring of staff)

Where did your answers differ? Differences are fine, but you should be able to justify each role using the ITIL 5 definitions.

Utility and Warranty: The Two Sides of Value

Utility: Fit for Purpose

Utility is what the service does. It is about functionality and "fit for purpose". For the exam platform, this means creating, scheduling, delivering, and marking exams.

Warranty: Fit for Use

Warranty is how well the service works. It is about reliability, availability, security, and capacity. For the exam platform, this includes 99.9% uptime and strong authentication.

Why Both Matter

High utility but low warranty gives crashes and frustration. High warranty but low utility gives a stable but useless tool. Value appears only when both utility and warranty support outcomes.

Link to Outcomes

In ITIL 5, value is created when utility and warranty together support the customer's desired outcomes, such as fair, secure, and stress-free online exams.

Utility vs Warranty: Quick Comparison Table

Video Conferencing Example

For a video conferencing service, utility is things like screen sharing, chat, recording. Warranty is uptime, low latency, encryption, and capacity for many participants.

Failure Scenarios

If features are missing (no breakout rooms), utility fails. If calls constantly drop, warranty fails. In both cases, the service does not deliver the expected value.

Venn Diagram in Your Head

Imagine two circles: utility (functions) and warranty (performance and assurance). Where they overlap, customers experience real value from the service.

Exam Tip

In questions: features and capabilities usually point to utility; availability, capacity, security, and continuity usually point to warranty.

Outcomes, Costs, and Risks: What Value Really Balances

Outcomes vs Outputs

Outputs are what the service produces; outcomes are what changes for stakeholders. An exam results file is an output; faster, fairer grading is an outcome.

Understanding Costs

Costs include money, time, and effort needed to obtain and use the service. Subscriptions, training, and support work are all costs linked to the exam platform.

Understanding Risks

Risks are possible events that could cause harm or block outcomes. Services both introduce and reduce risks, such as outages vs reduced human errors.

Value as a Balance

In ITIL 5, value is co-created when outcomes improve, costs are acceptable, and risks are kept within agreed limits. It is always a balance, not just more features.

Quick Check: Outcomes, Costs, or Risks?

Decide which concept best fits the statement.

A university adopts the online exam platform mainly so that exam results are available within 24 hours instead of 3 weeks. In ITIL 5 terms, what is the 24-hour turnaround primarily an example of?

  1. An outcome
  2. A cost
  3. A risk
Show Answer

Answer: A) An outcome

The 24-hour turnaround is a **result** enabled by the service, so it is an **outcome**. Costs are about money, time, and resources spent; risks are possible harmful events.

Products, Services, and Service Offerings

What Is a Product?

A product is a configuration of resources (people, tech, processes, information) designed to offer value. The exam platform software plus its cloud setup is a product.

What Is a Service?

A service uses products to enable outcomes for customers through an ongoing relationship. "Online Examination Service" is how the platform supports all assessments.

What Is a Service Offering?

A service offering is a specific package of one or more services, with defined access, service levels, pricing, and support, tailored to a customer group.

Layered View

Visualize layers: products at the bottom, services in the middle using those products, and service offerings at the top as customer-facing packages or plans.

Sort It Out: Product, Service, or Service Offering?

Classify each item as product, service, or service offering. Think before reading the suggested answers.

  1. "AWS EC2 virtual machine instances plus the underlying AWS infrastructure."
  2. "A managed web hosting package with 99.9% uptime, daily backups, and 24/7 chat support for small businesses."
  3. "A university library’s digital access to academic journals, including authentication and off-campus access."

Pause and decide:

  • Which are mostly products?
  • Which are services?
  • Which are service offerings?

Suggested answers

  1. Mostly product: EC2 instances and infrastructure are resources configured by AWS. They are used in many services.
  2. Service offering: a specific package, with defined uptime, backups, and support, tailored to small businesses.
  3. Service: the ongoing digital library access that enables outcomes like research and study.

If you classified something differently, check whether you focused on resources (product), ongoing value and outcomes (service), or packaged terms for a segment (service offering).

Value Co-Creation and Service Relationships

What Is Value Co-Creation?

Value is not simply delivered by the provider. It is co-created when both provider and consumer actively contribute to making the service work in real life.

Service Relationships

A service relationship joins provider and consumer through service provision, service consumption, and relationship management such as communication and improvement.

Exam Platform Example

Vendor and IT provide a secure, available platform; departments define exam rules; lecturers and students use it correctly. All these actions together create or destroy value.

Value Appears in Use

Even a perfect platform fails if consumers misuse it. Value appears when utility and warranty meet effective use, and both sides manage costs and risks together.

Who Co-Creates Value?

Test your understanding of co-creation.

Which option best reflects ITIL 5's view of value co-creation?

  1. The provider delivers value and the consumer receives it passively.
  2. Both provider and consumer contribute to creating value through their actions and interactions.
  3. Value is created only by the consumer when they buy the service.
Show Answer

Answer: B) Both provider and consumer contribute to creating value through their actions and interactions.

ITIL 5 emphasizes that value is **co-created**. Providers and consumers both have responsibilities; value emerges from their collaboration and how the service is actually used.

Key Term Review: Core ITIL 5 Concepts

Use these flashcards to quickly review the core concepts from this module.

Service
A means of enabling value co-creation by facilitating outcomes that customers want to achieve, without the customer having to manage specific costs and risks.
Customer
The person or group that defines the requirements for a service and takes responsibility for the outcomes of service consumption.
User
The person who actually uses a service on a day-to-day basis.
Sponsor
The person or group that authorizes and pays for a service; often approves budgets and business cases.
Stakeholder
Any person or organization that has an interest in, or can affect or be affected by, a service.
Utility
The functionality offered by a service to meet a particular need; often described as 'fit for purpose'.
Warranty
Assurance that a service will perform as required; often described as 'fit for use' and linked to availability, capacity, security, and continuity.
Outcome
A result for a stakeholder, enabled by one or more outputs of a service.
Product
A configuration of an organization's resources designed to offer value to a consumer; used as a building block for services.
Service Offering
A formal description of one or more services, designed to meet the needs of a specific target consumer group, including terms and conditions.
Value Co-Creation
The concept that value is achieved through active collaboration between provider and consumer, not delivered one-way.

Key Terms

Cost
The amount of money, time, and other resources spent on an activity or service.
Risk
A possible event that could cause harm or loss, or make it more difficult to achieve objectives or desired outcomes.
User
A person who uses a service.
Outcome
A result for a stakeholder, enabled by one or more outputs of a service.
Product
A configuration of an organization's resources designed to offer value to a consumer; used as a building block for services.
Service
A means of enabling value co-creation by facilitating outcomes that customers want to achieve, without the customer having to manage specific costs and risks.
Sponsor
The person or group that authorizes and pays for a service; often approves budgets and business cases.
Utility
The functionality offered by a service to meet a particular need; often described as fit for purpose.
Customer
The person or group that defines the requirements for a service and takes responsibility for the outcomes of service consumption.
Warranty
Assurance that a service will perform as required; often described as fit for use and linked to availability, capacity, security, and continuity.
Stakeholder
Any person or organization that has an interest in, or can affect or be affected by, a service.
Service Offering
A formal description of one or more services, designed to meet the needs of a specific target consumer group, including terms and conditions.
Value Co-Creation
The concept that value is achieved through active collaboration between provider and consumer, rather than being delivered one-way by the provider.
Service Relationship
A cooperation between a service provider and a service consumer, including service provision, service consumption, and relationship management.

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