Digital Product Definition

The Digital Product definition used in the IT4IT Standard highlights the distinction between Digital and non-Digital Products and provides clarity about the use of the term “digital” throughout the rest of the IT4IT Standard.

This definition flows from widely accepted definitions of both “digital” and “product”, brought together to form a unique type of product that incorporates IT management. Merriam-Webster defines digital as “characterized by electronics, especially computerized technology”.

The Business Dictionary defines product as “a good or service that most closely meets the requirements of a particular market and yields enough profit to justify its continued existence”.

The Economic Times defines product in more detail as:

“A product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual or cyber form. Every product is made at a cost and each is sold at a price. The price that can be charged depends on the market, the quality, the marketing, and the segment that is targeted. Each product has a useful life after which it needs replacement, and a lifecycle after which it has to be re-invented.”

A “Digital Product” can be defined as:

“A service, physical item, or digital item that provides an agreed and specific outcome for a consumer; that incorporates and requires software to realize that outcome; that is expected to require active management of the software and its required resources over its lifecycle, in a manner prescribed by the provider; and that is described by a formal offer of the outcome to be provided in exchange for an explicit price.”

The criteria of a Digital Product:

  • A Digital Product must include one or more Service Offers which define Service Contract options for consumers

  • A Digital Product may be delivered as a Digital Product Instance (defined below) as described in the Service Offer

  • The Digital Product Instance may include a system containing IT, non-IT resources, and software

  • A Digital Product may be consumed within an organization or externally

  • A Digital Product may have dependencies on other Digital Products

  • A Digital Product may be comprised of other Digital Products

  • A Digital Product may be a resource for other Digital Products

  • A Digital Product must provide interactions via machine and/or human interfaces

A Digital Product refers primarily to the perspective of a Product Manager and represents a complete product line over its lifetime, to include product variants, types and locations of consumers, annual and lifetime financial models, dependencies on other products and services, supplier relationships, capacity, service-level options, distribution models, pricing and usage rules, delivery and management of Digital Product Instances, and so on.

System Definition

The system comprises those technology components of a Digital Product Instance that will be managed by the provider.

Software, compute, and networking hardware are the most common system resources integrated into Digital Products. This may include custom and externally sourced software that may change frequently through Agile processes.

The system recursively includes any supporting resources upon which the system relies, including other products. Resources might be as simple as a few intangible lines of code to be deployed on hosted infrastructure in the cloud, or might be comprised of a large and complex number of components.

Service Offer Definition

The Service Offer (sometimes shortened to Offer) describes possible Service Contract terms as perceived by the potential consumer of a Digital Product Instance. The Offer must include all the elements that will become part of the contract if the Offer is accepted.

The Offer formalizes the value statement and contract terms for consumer/provider interactions. The promises articulated in the Service Offer are recorded in a Service Contract as part of the agreed criteria for how the system will be managed and supported throughout its lifecycle. Longer-term contracts may be defined as subscriptions that track ongoing consumption and billing.

The Offer is derived from the Digital Product definition, which includes all available consumable variants, and all possible contract terms. A product may in theory provide as many unique Offers as there are prospective types of consumer.

Service Offers
Figure 1. Pricing Table

A consumer can either be a human or internal employee actor, a paying customer, or alternatively a machine actor such as another Digital Product. The structure of both the Offer and the Service Contract may vary significantly based on the type of actor involved, and how a particular product is to be consumed.

Contract Definition

When an Offer is accepted by a consumer, an Instance of the Digital Product is created in which the relationship between provider and consumer is captured in a contract based on the relevant Offer. The contract includes all the details required for financial recording, governance, measurement, charging, support, and servicing of the Digital Product Instance.

A contract for a Digital Product may include a subscription that describes the ongoing usage rights for a consumer, with periodic charges.

For example, a Wi-Fi network in a public place is made available to consumers. When a consumer logs on to the network using the credentials supplied by the network owner, a Digital Product Instance is created. The product is not the Wi-Fi network itself. The product is the provision of access to the network and its resources. This product incorporates other Digital Products including, at a minimum, the Wi-Fi router. The contract may be implicit or explicit, and will likely be governed by a range of legal and technical constraints, all of which form part of the contract.

In its simplest form, a Service Contract may record a single transaction that is not normally expected to have recurring charges, usage charges, or to require support. However, even such a one-off transaction will typically include mutual commitments to rules and metrics about possible future circumstances governed by the contract terms, such as regulatory compliance, warranty, repair, refunds, Service-Level Agreements (SLAs), consumer support, product recalls, offers on related items, commitments to keep the software up-to-date, and so on.

The contract structure includes Offer terms as agreed upon for the Digital Product Instance. The interaction process described in the Consume value stream addresses all the concerns for this interaction with a consumer, to include the following:

  • Warranties and SLAs

  • A record of the transactional commitments made by both parties

    For a consumer Digital Product sold online, this may be an identifier for a series of web page interactions in which terms are accepted and money is taken. For an internal machine-to-machine contract, this may be the digital record of a “handshake” acknowledgement between two systems.

  • Usage and financial rules, especially where there is a recurring financial payment

    In the IT4IT Standard, this contract data forms the basis for managing chargeback/showback, and penalties for the breach of SLAs.

  • A description of the usage monitors needed for governing the Digital Product Instance to ensure operational status

    Depending on the relationship between the provider and the consumer of the product, this may include legally binding terms with provisions for events such as returns, subscription renewal, refunds, warranty claims, recourse for breach, and so on.

  • A right for the provider to audit the consumer for such things as license compliance audits or conformance to usage rules

  • Long-term ownership rights to physical components or assets

  • Lifecycle management expectations such as support, updates, replacement, or retirement

Price Definition

Each Service Offer and Service Contract describes a price which may require direct payment by a consumer through the Chargeback Record and may include an ongoing subscription.

Price need not be related to cost and is merely relayed to the customer as showback. In some cases, the price may consist entirely of indirect benefits anticipated by the provider with no financial charge at all.

The element of chargeback and showback at a minimum is meaningful for effective reporting and Product Management. In every offering, a Product Manager should be able to describe the Return on Investment (ROI) over the product lifecycle. Offering a Digital Product Instance with no direct price should always be a deliberate pricing decision that is explained in the product’s lifetime financial model.

In cases where the Digital Product is perceived by the consumer primarily as software, it will always include other components defined by the Digital Product Manager, including those required by the business or legal context of product delivery, as well as the provision of a supporting infrastructure.

These other associated components – which may not be explicit in the Offer or Service Contract – may include hardware in which software is embedded (disk drive, smartphone, Internet of Things (IoT) doorbell, automobile). They may also include contractual elements (SLAs, chargeback terms, warranties, software maintenance commitments, customer support).