What Service Quality Really Is

The concept of service quality is poorly understood, even by those who measure and report on it. Many times the term service quality is used to cover the collection of information pertaining to customer satisfaction. If you are to be effective with your quality improvement program you need to understand exactly what quality is, how it arises, and how it operates.

In an enterprise context, the value of IT is in delivery e-services that increase the performance of customer assets. Customer assets are the resources the customer has available to accomplish their business goals. For example, if the customer is the VP of Sales then customer assets include end-customers, sales staff, marketing literature, post-sales support, etc.

To understand what makes up e-service quality you have to start by understanding the concept of value. The two concepts are intrinsically linked in virtually inseparable. The more valuable the e-service to its consumers, the higher the expectations for quality will be. By developing an understanding of the value of an e-service begin to understand the primary motivators for the quality thresholds of that service. However, there is not a common understanding of what creates and drives value.

e-service value combines costs and benefits to help both parties evaluate their mutual consumer-provider relationship for better performance management. The value that can be derived from use of e-services is directly proportional to the level of effective IT support that can be provided for the customers of these services. From an enterprise perspective this makes e-service value, and thus quality, less a function of service performance (utility + warranty) and more a function of risk acceleration—increasing or decreasing the ability of the enterprise to satisfy its end-customers needs with its products.

While the definition of value varies based on the context within which it is used, there are objective and subjective measures of value. Objective value measurements are finite and mathematically predictable. For example, if a new IT system resource costs $10,000, and takes $2,500 of installation effort, then the replacement cost for it is simply $12,500. Another example might be if the organization has to pay a $100 per day penalty for every day a particular report is not filed, then a seven-day outage of the report filing service has a value of $700. Obviously however, replacement costs, fines, and penalties do not completely indicate the value or loss faced by the consumer of the e-service. This enters into the realm of subjective value measurements. Subjective value measurements include things that might be difficult to mathematically predict in an accurate fashion. For example, for the seven days the previously mentioned report was not filed the company had to pay a fine of $700. However, imagine what would happen if because the report was not filed the company lost its license to operate in that marketplace. The entire company could be put at risk due to the failed e-service—and an objective measurement of the service said the value was $700. Subjective value measurements must take into account the marketplace, and the impact risk to the enterprise should the e-service fail to perform as required.

Numerous ways have been proven less than successful in trying to document the value of e-services. It is useful to understand the limitations of these systems in order to operate in environments that require them—even though they tend not to be successful. Risk-based valuations are much more subjective and probabilistic. A risk analysis tries to understand what the potential impact would be if something were to occur. Generally the concept is to measure the probability of a threat, understand the vulnerability to a threat, and associate an impact with the vulnerability should it occur. For example, using the previous analogy with a report filing service out for seven days, one might understand that from a risk perspective, the value was immeasurable. While risk-based valuations are important because they capture the subjective values of the marketplace, risk-based valuations tend not to capture the more objective financial based cost related to a service.

All of the systems for valuing e-services have in mind a goal to help to make good decisions. Specifically the goal is for non-technical consumers (e.g., business people) who fund IT to make good technical decisions. The problem is that most IT organizations are not skilled at valuing e-services. A strategic solution to e-service valuation is to take into account e-service characteristics and dimensions of perceived quality. e-service delivery is part of the strategic execution of almost every business. e-service funding should be approached from a strategic perspective, and that means e-services and projects should be evaluated based on their impact on the business of the enterprise and its marketplace. One way to accomplish this is to value an e-service by taking into account the objective and subjective valuation measures. From these divergent techniques, the practitioner can produce an effective, repeatable, and accurate system for measuring the value of e-services.

Risk Management uses interviews to gather this type of data and information, usually including a valuation phase. This approach also offers mathematical models of assigning value, risk, and probability. From an e-service provider perspective the purpose for valuing an e-service is to understand consumer quality requirements and assist in making resource allocation decisions. In addition, e-services can have a strategic impact on the enterprise and its marketplace; and IT underpins the primary value chain (e.g., inbound logistics, operations, outbound logistics, marketing and sales, and service activities) for the enterprise of which the IT provider is a part. When we combine these two points (e-services have a strategic impact, and IT underpins the enterprise value chain) it becomes clear that the IT organization ought to focus on those services that have the most opportunity to improve the business outcomes desired and expected of the enterprise. It naturally follows that these are the services that will have the highest quality thresholds. These are also the services that require the highest level of IT capability.
The purpose of e-service value assessment is not to establish the cost of providing service. Nor is it to understand or attempt to quantify the value generating capability to capabilities of the service. The purpose of performing an e-service value assessment is to understand the relative value of one e-service compared to another within the same organization. This is why risk to the enterprise is an effective measure of value, and a sound basis for the valuation of e-services and the prioritization of resource allocation. This is important because for most IT organizations there is a fixed budget for which all e-services and all IT operational activities compete. The purpose valuation is to be able to understand what is important to the consumer since it is important to the consumer is precise and what quality measurement should measure. With this understanding the IT organization can also appropriately budget, plan, forecast, and maintain its e-services in accordance with requirements.

IT Service Risks

e-services represent potential risks to the consumer as represented by service intensifiers. Of course, e-services also represent potential benefit to the consumer. Customers often worry about possible losses and risks due to poor service quality more than the possible gains. For the purposes of e-service valuation in developing an understanding of quality requirements, it is important to understand what can happen to the enterprise and the marketplace should the e-service fail to perform as required. Generally accepted risk management frameworks include three major types of risks that face e-services. These risks to e-services of course represent risks to IT consumers. These risks are confidentiality, integrity, and availability, and they are the fundamental basis for the dimensions of e-service quality and arise from e-service characteristics. They also perform the basis of e-service value.

Confidentiality is a security principle that requires that only authorized people should access data and that information is not made available or disclosed to unauthorized individuals, entities or processes. From an e-service valuation perspective confidentiality refers to the requirements for an e-service and the enterprise (or business) processes it underpins, supports, or creates with regard to maintaining closed or controlled distribution of information, output or artifacts. An example of a confidentiality issue might be the disclosure of service artifacts to unintended or unauthorized parties.

Integrity is a security principle that ensures only modified by authorized personnel and activities modify data and resources. Integrity considers all possible causes of modification, including software and hardware failure, environmental events, and human intervention. Integrity refers to the modification of data without the awareness of appropriate change management control. Examples of integrity issues include malicious modification of data, for example by a hacker. Another example might include the unintended modification of data by a user—perhaps misspelling a name.

Availability refers to the ability of an IT system, resource, or service to perform its agreed function when required, the property of being accessible and usable upon demand by an authorized entity. Availability is determined by reliability, maintainability, serviceability, performance, and security. From a consumer perspective, availability refers to the sensitivity of the consumer to the lack of service utility for variable periods. Some processes can function for days without e-services. Other processes cannot function at all without the same service. An example of availability might include the inability to access an Internet application or a major business application.

Since e-services represent risks and opportunities for the enterprise, an important part of the value of an e-service is what impact failure of the desired outcomes supported by an e-service will have on the enterprise. Many immediately think of a monetary impact: fines, penalties, loss of income, lack of profit, etc. However sometimes more important are the non monetary losses. Important non monetary losses include privacy issues, potential legal action due to failure to meet regulatory or legislative requirements. Additionally, there are much more subjective elements of value including public embarrassment. Finally, one should always consider the safety of human persons—on both the enterprise side and those consumers in the marketplace to consume enterprise products.

Taken altogether the higher the confidentiality, integrity, and availability requirements (that is the higher the value) the higher the e-service quality requirements will be. The expected e-service quality becomes a direct reflection of the risks represented by the service, and the business value at risk. Developing a sound understanding of the value of your own e-services--in terms of the business value at risk--positions you squarely in the shoes of your consumer. Use this new understanding of quality as the basis for your communications with the business. Of course, it also forms the basis for service delivery, operation, and quality management activities.

The Machinery of IT Service Quality

Since e-service characteristics prevent direct measurement, consumers develop expectations of e-service quality based on outcomes. These expectations become more tangible through the dimensions and quality. Each dimension, taken together and apart, represents various potential risk scenarios to the consumer. Thus, the concepts of value and quality are related from the point of view of the consumer, with value leading quality.

e-service quality is a reflection of its value, and value is based on risk. This makes the value of an e-service fundamentally a risk management decision. The e-service consumer (end-customer for type 3 e-services, or the enterprise for types 1 and 2 e-services) makes a decision based on risk, and thus expects certain risks mitigated and other constraints managed. These expectations established thresholds of anticipated e-service performance, quality. If the e-service provider meets these expectations does the e-service consumer (perhaps the enterprise enterprise) realizes value in the form of expected outcomes facilitated by the e-service.

The capability of the e-service provider organization has direct impact upon perceived quality of the e-service. Higher capability controls variability and can result in reduced risk, higher consumer satisfaction, and higher perceived quality. Consumers expect higher quality in terms of the sustained delivery across the dimensions of an e-service. Ensuring consistency of delivery across e-service dimensions thus results in higher quality perceived by consumer, meeting the value requirements established by the consumer-provider relationship. Thus, control over e-service variability (which affects heterogeneousity and perishability) across the dimensions of an e-service are among the primary variables through which IT management can manage or improve e-service quality; and by which consumer expectations of value are realized.

The IT value chain thus becomes (in order of demand, from the provider point of view) value, capability, variability, and quality. The consumer has a simpler view of the value chain: value, service, and quality.

Decisions regarding the acquisition and provision of services are made consciously. A provider chooses to address the needs of a marketplace; a consumer chooses a service provider to mitigate risks and costs. The relationship between consumer and provider is obscured by the indirect nature of their decision-making. For example, consumers desire to obtain some outcome, but based on risk concerns and resource constraints, choose to use a service. Since a service is intangible, the only measure of success is the attainment of those outcomes expected, and consumers are aware that a service is of indirect benefit. Consumers still must interact with the provider however, and this interaction is palpable to them. The dimensions of quality represent the tangible manifestation of the intangible service. Thus, consumers make their decisions based on implicit and explicit value and risk assessments, and refer to the summation of these assessments as quality.

Providers face similar obstacles. They provide an e-service to a marketplace. Consumers acquire and use these services to accomplish desired activities and achieve expected outcomes. Providers are aware that the service they provide is of indirect value to the consumer. Provider capability controls the variability of service delivery, enhancing or detracting from the consumer perceptions of quality, and thus value.

The issue both face is the indirect nature of the realization of each other’s outcomes. Provider intangible services empower consumer outcomes. Adjustments to provider capabilities shape and mold service dimensions. Consumer expectations of service dimensions shape and mold required provider capabilities.

The Value Variable

Value is the starting point for the origin of all services in that services facilitate outcomes consumer’s want by avoiding certain costs and risks. Consumer value ultimately drives provider capabilities assuming the provider desires to remain in and compete within a marketplace. If the provider cannot deliver the required value (e.g., is not capable) then the consumer invests further or chooses another provider.
Value exists only where there is service. To ask oneself about the value of a service, one must raise the question of the creation and therefore the production of that same service.

If one reduces the process of service delivery to a plain transaction one ignores important components of quality and thus value. Service value arises through a complex set of relationships influenced by the social, technological, economic and political context in which it is embedded, and the consumer plays the central role in service value (Basole & Rouse, 2008). Attention to consumer value should be a primary motivator for IT organizational decisions, including investments in the capabilities of resources, and of resources.

Quality Variable

Quality is the means by which the consumer determines if they are (or are not) receiving the value they expect and desire. The concept of service quality means uniformity of service delivery around target values or standards determined by the consumer. One element of quality is thus linked with uniformity, or a lack of variability, and directly connected to the characteristic of heterogeniosity.

A quality standard is a value statement regarding the level of services that should be provided. Perceived quality is an abstract evaluation and judgment formed based upon the intrinsic attributes of the product. Yet, perceived value may be generally defined as “the consumer's overall assessment of the utility of a product based on what is received and what is given”.

Variability affects perceptions of quality and value. Quality is linked with value from the perspective of the consumer in that expectations of value manifest as dimensions of quality due to the characteristic constraints of all services. The consumer is often unaware of the direct capability of IT provider resources, and there is a plausible argument that abstraction of such complexity is one of the contributing factors in choosing a service in the first place. While quality if an indirect measure of value, it nevertheless is the measure of consumer satisfaction.

Capability Variable

The capability to manage IT processes grows in an evolutionary manner and growing maturity implies that IT management processes are improved cumulatively. Capability is the competence of the IT provider in delivering and supporting an e-service. Higher capability usually results in most sustained and more stable results and it is assumed that more mature management generally meets functional and quality expectations. Improvements and organizational capabilities that decrease process variation have a direct influence on quality, and capability leads to a reduction in related variability. The existing relationship between quality and variability is expanded to incorporate capability. Given that variability fluctuates with capability, it is reasonable to assume that moderating variability through capability has a positive influence upon service quality.

Variability Variable

Performance variability (or heterogeneity) over time is a prime factor that differentiates services from goods, and can be defined as “changes in performance from one service encounter to another with the same service provider”. Because performance variability may create consumer uncertainty, it is reasonable to expect that it will affect perceptions of service quality and value negatively. Process variation, caused by heterogeneousity, has a direct and negative impact on service quality as measured by customer satisfaction, and low process variation also contributes significantly to firm performance. Still service providers typically do not apply as much rigor to the definition of each step in the service delivery process, and it is common for upper IT management to be unaware of the details of a particular process and for there to be no institutional knowledge of process designs.

Variability is the target of IT capability, and process capability is an indicator of the quality in service delivery of. Thus, variability is the variable through which measures of value (and the perception of quality) is diminished or enhanced indirectly by means of capability. By moderating (or failing to moderate) IT resource and system variability through capability, the provider enhances (or diminishes) consumer perceptions of its quality, itself an indirect measure of the value expected.
H3 Linkages Between IT Management Variables

Perceptions of quality arise in a multivariate space, and four variables of value, quality, capability and variability are intrinsically linked in the delivery of e-services because modifying expectations or performance of one affects the others.

Perceived service performance has a significantly positive effect on perceived value, and perceived value has significantly positive effect on overall satisfaction. Perceived performance has an indirect effect on overall satisfaction moderated by perceived value rather than a direct effect.
There is a causal link between value expectations and capability, between capability and variability, between variability and quality, and between consumer value assumptions and expectations, and their assessment of quality. As service variability increases, its perceived value to consumers decreases. The evaluation, control and manipulation of these variables must therefore be of prime importance to the e-service manager.

For each actor in e-service delivery there is an assessment and a measurement. The assessment relates to the subjective qualitative perception; the measure pertains to a quantified value of the perception. In the case of quality for example, the assessment is made by the consumer, and measured through quantitative analysis of qualitative data. In this fashion, value pairs with quality; and variability with capability. Together, these four elements provide a correlated system connection IT provider and consumer. Consumer value determination drives requirements for quality; quality is moderated by variability; and capability moderates variability:
PROVIDER Capability ⇒ Variability ⇒ Quality ⇒ Value CONSUMER
PROVIDER Capability ⇐ Variability ⇐ Quality ⇐ Value CONSUMER

The consumer-provider relationship begins with an evaluation by the consumer that an e-service is of value. The relative dimension or scale or this value is a function of risk.

Value = f(RISK)

The variable of value is represented in terms of the consumer as an expectation of quality. Higher value e-services ought perform as required and are thus held to higher expectations. Value
From an IT providers’ perspective, as illustrated in Figure 3 6, by manipulating capability, we impact variability, which moderates the characteristic of heterogeneousity and perishability (key components of perceived quality.) The e-service characteristics of heterogeneousity and perishability in turn directly affect three of five quality dimensions: responsiveness, assurance and reliability, and possibly empathy depending upon the situation (e.g., providing human-based service such as an IT help desk.) Tangibility and empathy have the lowest impact on e-service quality perceptions.

Relationship Between Provider Capability and Consumer Quality Perceptions
The linkage of capability to variability, and thus to intrinsic service characteristics and ultimately perceived quality gives control to the e-service provider. The linkage between capability and variability within the IT provider positions the IT provider or manager to connect investments in IT systems and resources to outcomes expected by consumers when such outcomes are measured based on the five dimensions of quality. With proper management of resource allocations, the IT provider can meet expectations of consumers in the most efficient, effective, economical, and equitable manner. The linkage between consumer value and quality assessments provides an entry point for e-service managers to prioritize analysis and remediation based on importance to the consumer (or enterprise). If the IT manager understands the relative importance of the dimensions of quality, he or she is able to allocate resources in the most appropriate manner to achieve the desired results. The consumer holds the attributes of assurance, responsiveness and reliability in high value, and the provider can control those attributes – and thus moderate the consumers’ perceptions of quality and satisfaction – by moderating the capabilities of the IT systems of which the e-service is composed.

These linkages also present a manner of addressing the other two e-service characteristics of tangibility and inseparability through the quality attributes of tangibility and empathy. By providing a response or input mechanism from the consumer (control arrow in Figure 3 7) into the co-production of the service, the IT provider demonstrates empathy under the constraint of inseparability. By providing a feedback mechanism that truly engages the consumer, the IT provider also makes the service more tangible, countering the affects of the constraint of intangibility. This has the net affect of giving control over to the consumer. In actuality, in most cases, it is the consumer who truly has control over the transaction in the first place.

Taken altogether these linkages present a dual closed loop management model by which an IT manager can more adeptly assign, allocate, and manage resources and investments. The consumer’s final assessment of value, communicated to the service provider, drives the service provider offerings, which results in e-services consumed (and evaluated) by the consumer. Higher e-service value demands higher IT provider capability investments; and such investments made in capability and managed to this model can result in higher perceived value. This model directly addresses all four e-service characteristic constraints (heterogeneousity, perishability, intangibility and inseparability) and touches all five e-service quality attributes (responsiveness, assurance, reliability, empathy and tangibles) as an articulated system. Armed with a model that reflects consumer quality sentiment and the value proposition of the consumer in risk-based terms, as well as organizational capability and variability, the IT manager is in position to improve quality, control costs, and align with market and consumer requirements.

Value Chain Summary

e-services are constrained by their characteristics, and moderated by intensifiers manifesting as consumer-perceived service quality dimensions. Essentially, the characteristics of e-services establish the need to make e-service management decisions from a consumer oriented point of view. e-service characteristics provide important input into e-service management decision-making, and while necessary, are insufficient to improve it. A critical reason why IT systems fail is because the IT provider has failed to understand and accurately capture consumer expectations, manage changing expectations, and manage risks to resources in ways to meets consumer expectations. In short, the reason why e-services may often fail to meet IT consumer expectations is simply because e-service providers do not understand consumer expectations.

e-service dimensions add an important aspect to an improved IT decision-making model in that it provides the means to understand which aspects of an e-service require adjustment for improvement. The dimensions of quality provide a method for measuring these improvements.

Ultimately, the two primary axes through which one can model IT decision-making are capability and value. Any model for balancing resource allocations within IT organizations must therefore give sufficient credence and weighting to the subjective measure of e-service quality as a primary motivator of IT decision making. IT managers need to know the sources of pertinent consumer expectation and their relative importance for a consumer population, and, perhaps, even a particular consumer. They need to know the relative value of desired service and predicted service. Some of these sources are more stable and permanent in their influence such as lasting service intensifiers and personal needs, while others can fluctuate considerably like perceived service alternatives and situational factors. When combined with an understanding of e-service characteristics, an improved model begins to evolve.

All IT resources, systems and services face risks due to their inherent vulnerabilities. Increased IT provider capabilities manage these risks, and thus improve the utility and warranty of the resultant e-service. Improving utility and warranty through improved capabilities of provider resources acts to manage the constraints imposed upon them by e-service characteristics (i.e., intangibility, heterogeneousity, perishability and inseparability.) By manipulating the capabilities of IT systems, e-service providers mitigate risks and thereby directly impact the perceived dimensions of consumer quality. Measuring e-service value as a function of risk to e-service consumer expectations is therefore a viable method of measuring the improvement of e-service quality.

The four variables are value (the relative worth assigned to a service by its consumer and based on the expected gain or loss of an outcome dependent upon the service), capability (the ability of the e-service provider organization to manage risks its to resources capabilities in order to consistently perform tasks at a given level), quality (a measure consumer satisfaction that the service allows the consumer to realize value) and variability (the change in output from one service encounter to the next.)
These four variables (value, capability, quality, and variability) represent the machinery of quality, the means through which an effective e-service management model may be realized. Within this decision area, an IT manager can establish more effective resource allocation priorities.

Measuring e-service quality becomes the process of obtaining the expectations and perceptions of service consumers. Optimizing service quality is maximizing the difference between consumer-derived measures of perceptions and expectations. We have arrived at a simple understanding that quality is a measure of how close a consumer perceives a provider is to enabling value and minimizing risk. Based on this we can arrive at a very simple formula. The entire reality of e-service quality measurement is reflected in the simple equation of what service quality is:

Summary

e-service quality, or at least judgments made by consumers about e-service quality, are incredibly complex. The concepts of risk, value and quality intersect via consumer opinion. The five dimensions of service quality represent those aspects of service support and delivery of particular stakeholder group of stakeholders finds important. Essentially what we need to measure is the perception the consumer holds of our service support and delivery--simply measuring the status of operational symptoms is insufficient even though it is necessary.

Many IT organizations have always looked upon a requirement to provide support for the services they provide is a burden. However, it is from this very concept of supporting the consumers of our services that we are able to determine how to improve quality. We can use their experiences and perceptions as the basis for improvements and to identify new opportunities to satisfy and build relationships.
From one perspective Q = P - E is all that matters. Virtually all other measurements of quality are essentially irrelevant with regard to understanding consumer satisfaction and e-service quality. Internal measurements of device warranty may be useful in both reactive and proactive maintenance activities, and such measurements that improve reliability and other dimensions are essential, but they do not measure e-service quality, nor can they.