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Contents

List of figures v 4.3 Financial management for


IT services 200
List of tables viii 4.4 Demand management 244

Foreword ix 4.5 Business relationship management 256

Preface x 5 Service strategy, governance,


architecture and ITSM
Acknowledgements xi implementation strategies 283
5.1 Governance 285
1 Introduction 1
5.2 Establishing and maintaining
1.1 Overview 3 a service management system 290
1.2 Context 5 5.3 IT service strategy and the business 290
1.3 ITIL in relation to other publications 5.4 IT service strategy and enterprise
in the Best Management Practice architecture 292
portfolio 7
5.5 IT service strategy and application
1.4 Why is ITIL so successful? 8 development 294
1.5 Chapter summary 9 5.6 Creating a strategy for
implementing service
2 Service management as a practice 11 management processes 294
2.1 Services and service management 13
6 Organizing for service strategy 315
2.2 Basic concepts 20
6.1 Organizational development 318
2.3 Governance and management
systems 25 6.2 Organizational change 323
2.4 The service lifecycle 27 6.3 Organizational
departmentalization 323
3 Service strategy principles 33 6.4 Organizational design 324
3.1 Strategy 35 6.5 Organizational culture 324
3.2 Customers and services 41 6.6 Functions 326
3.3 Service providers 80 6.7 A logical organization structure
3.4 How to define services 87 for an IT service provider 326
3.5 Strategies for customer satisfaction 102 6.8 Roles 329
3.6 Service economics 106 6.9 Responsibility model – RACI 337
3.7 Sourcing strategy 117 6.10 Competence and training 338
3.8 Service structures in the value
7 Technology considerations 341
network 125
7.1 Service automation 344
3.9 Service strategy inputs and outputs 128
7.2 Service interfaces 347
4 Service strategy processes 131 7.3 Tools for service strategy 350
4.1 Strategy management for
IT services 133
4.2 Service portfolio management 170

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iv | Contents

8 Implementing service strategy 353 Appendix D: Related guidance 391


8.1 Implementation through D.1 ITIL guidance and web services 393
the lifecycle 355
D.2 Quality management system 393
8.2 Service strategy implementation
D.3 Risk management 394
activities following a lifecycle
approach 356 D.4 Governance of IT 394
8.3 The impact of service strategy on D.5 COBIT 394
other lifecycle stages 358
D.6 ISO/IEC 20000 service
management series 395
9 Challenges, risks and critical
success factors 363 D.7 Environmental management and
green/sustainable IT 395
9.1 Challenges 365
D.8 ISO standards and publications
9.2 Risks 367 for IT 396
9.3 Critical success factors 369 D.9 ITIL and the OSI framework 396

Afterword 371 D.10 Programme and project


management 397
Appendix A: Present value of an D.11 Organizational change 397
annuity 375
D.12 Skills Framework for the
Information Age 398
Appendix B: Description of asset types 379
D.13 Carnegie Mellon: CMMI and
B.1 Management 381
eSCM framework 398
B.2 Organization 381
D.14 Balanced scorecard 398
B.3 Process 381
D.15 Six Sigma 399
B.4 Knowledge 381
B.5 People 382 Appendix E: Risk assessment and
management 401
B.6 Information 382
E.1 Definition of risk and risk
B.7 Applications 382 management 403
B.8 Infrastructure 382 E.2 Management of Risk (M_o_R) 403
B.9 Financial capital 383 E.3 ISO 31000 404

Appendix C: Service strategy and the E.4 ISO/IEC 27001 405


cloud 385 E.5 Risk IT 406
C.1 Characteristics of cloud services 387
Appendix F: Examples of inputs and
C.2 Types of cloud service 388 outputs across the service lifecycle 409
C.3 Types of cloud 388
References and further reading 413
C.4 Components of a cloud architecture 389
Abbreviations and glossary 419

Index 463

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| 3

1 Introduction

ITIL is part of a suite of best-practice publications organization and roles, technology, associated
for IT service management (ITSM).1 ITIL provides challenges, critical success factors and risks. The
guidance to service providers on the provision of service lifecycle uses a hub-and-spoke design, with
quality IT services, and on the processes, functions service strategy at the hub, and service design,
and other capabilities needed to support them. ITIL transition and operation as the revolving lifecycle
is used by many hundreds of organizations around stages or ‘spokes’. Continual service improvement
the world and offers best-practice guidance to all surrounds and supports all stages of the service
types of organization that provide services. ITIL is lifecycle. Each stage of the lifecycle exerts influence
not a standard that has to be followed; it is on the others and relies on them for inputs and
guidance that should be read and understood, and feedback. In this way, a constant set of checks and
used to create value for the service provider and its balances throughout the service lifecycle ensures
customers. Organizations are encouraged to adopt that as business demand changes with business
ITIL best practices and to adapt them to work in need, the services can adapt and respond
their specific environments in ways that meet their effectively.
needs.
In addition to the core publications, there is also a
ITIL is the most widely recognized framework for complementary set of ITIL publications providing
ITSM in the world. In the 20 years since it was guidance specific to industry sectors, organization
created, ITIL has evolved and changed its breadth types, operating models and technology
and depth as technologies and business practices architectures.
have developed. ISO/IEC 20000 provides a formal
and universal standard for organizations seeking to
have their service management capabilities audited Continual
and certified. While ISO/IEC 20000 is a standard to service
improvement
be achieved and maintained, ITIL offers a body of Service
transition
knowledge useful for achieving the standard.
In 2007, the second major refresh of ITIL was
published in response to significant advancements
in technology and emerging challenges for IT Service
service providers. New models and architectures strategy

such as outsourcing, shared services, utility


Service
computing, cloud computing, virtualization, web design Service
operation
services and mobile commerce have become
widespread within IT. The process-based approach
of ITIL was augmented with the service lifecycle to
address these additional service management
challenges. In 2011, as part of its commitment to
continual improvement, the Cabinet Office
published this update to improve consistency across
Figure 1.1 The ITIL service lifecycle
the core publications.
The ITIL framework is based on the five stages of
1.1 Overview
the service lifecycle as shown in Figure 1.1, with a
core publication providing best-practice guidance ITIL Service Strategy provides best-practice
for each stage. This guidance includes key guidance for the service strategy stage of the ITIL
principles, required processes and activities, service lifecycle. Although this publication can be
read in isolation, it is recommended that it is used
in conjunction with the other core ITIL publications.
1 ITSM and other concepts from this chapter are described in
more detail in Chapter 2.

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4 | Introduction

1.1.1 P
 urpose and objectives of service Two aspects of strategy are covered in ITIL Service
strategy Strategy:
The purpose of the service strategy stage of the ■■ Defining a strategy whereby a service provider
service lifecycle is to define the perspective, will deliver services to meet a customer’s
position, plans and patterns that a service provider business outcomes
needs to be able to execute to meet an ■■ Defining a strategy for how to manage those
organization’s business outcomes. services.
The objectives of service strategy include providing:
1.1.3 Usage
■■ An understanding of what strategy is
ITIL Service Strategy provides access to proven best
■■ A clear identification of the definition of practice based on the skill and knowledge of
services and the customers who use them experienced industry practitioners in adopting a
■■ The ability to define how value is created and standardized and controlled approach to service
delivered management. Although this publication can be
■■ A means to identify opportunities to provide used and applied in isolation, it is recommended
services and how to exploit them that it is used in conjunction with the other core
■■ A clear service provision model, that articulates ITIL publications. All of the core publications need
how services will be delivered and funded, and to be read to fully appreciate and understand the
to whom they will be delivered and for what overall lifecycle of services and IT service
purpose management.
■■ The means to understand the organizational
capability required to deliver the strategy 1.1.4 Value to business
■■ Documentation and coordination of how Selecting and adopting the best practice as
service assets are used to deliver services, and recommended in this publication will assist
how to optimize their performance organizations in delivering significant benefits.
■■ Processes that define the strategy of the Adopting and implementing standard and
organization, which services will achieve the consistent approaches for service strategy will:
strategy, what level of investment will be ■■ Support the ability to link activities performed
required, at what levels of demand, and the by the service provider to outcomes that are
means to ensure a working relationship exists critical to internal or external customers. As a
between the customer and service provider. result, the service provider will be seen to be
The reader should be able to understand the most contributing to the value (and not just the
important practices related to defining and costs) of the organization.
executing a service strategy within a service ■■ Enable the service provider to have a clear
provider organization. understanding of what types and levels of
service will make its customers successful and
1.1.2 Scope then organize itself optimally to deliver and
ITIL Service Strategy starts by defining and support those services. The service provider will
discussing the generic principles and processes of achieve this through a process of defining
service management, and these generic principles strategies and services, ensuring a consistent,
are then applied consistently to the management repeatable approach to defining how value will
of IT services. be built and delivered that is accessible to all
stakeholders.
This publication is intended for use by both
■■ Enable the service provider to respond quickly
internal and external service providers, and
and effectively to changes in the business
includes guidance for organizations which are
environment, ensuring increased competitive
required to offer IT services as a profitable
advantage over time.
business, as well as those which are required to
■■ Support the creation and maintenance of a
offer IT services to other business units within the
portfolio of quantified services that will enable
same organization – at no profit.

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Introduction | 5

the business to achieve positive return on its ■■ ITIL Service Operation


investment in services. ■■ ITIL Continual Service Improvement
■■ Facilitate functional and transparent
Each one addresses capabilities having direct
communication between the customer and the
impact on a service provider’s performance. The
service provider, so that both have a consistent
core is expected to provide structure, stability and
understanding of what is required and how it
strength to service management capabilities, with
will be delivered.
durable principles, methods and tools. This serves
■■ Provide the means for the service provider to
to protect investments and provide the necessary
organize itself so that it can provide services in basis for measurement, learning and improvement.
an efficient and effective manner. The introductory guide, Introduction to the ITIL
Service Lifecycle, provides an overview of the
1.1.5 Target audience lifecycle stages described in the ITIL core.
ITIL Service Strategy is aimed at executives and
ITIL guidance can be adapted to support various
managers who are responsible for defining the
business environments and organizational
strategy of a service provider.
strategies. Complementary ITIL publications
Customers and business unit leaders who interact provide flexibility to implement the core in a
with service providers as part of their diverse range of environments. Practitioners can
responsibilities will also find this publication select complementary publications as needed to
helpful in providing a perspective about how provide traction for the ITIL core in a given context,
service providers work, and how they can facilitate in much the same way as tyres are selected based
a more constructive interface with the service on the type of vehicle, purpose and road
provider. The more a customer understands the conditions. This is to increase the durability and
context of service provision, the better they are portability of knowledge assets and to protect
able to articulate their needs in a way that the investments in service management capabilities.
service provider is able to fulfil.
ITIL Service Strategy will also be valuable to owners 1.2.1 Service strategy
of more strategic processes such as strategy At the centre of the service lifecycle is service
management for IT services, service portfolio strategy. Value creation begins here with
management, demand management, financial understanding organizational objectives and
management and business relationship customer needs. Every organizational asset
management. Indeed, service management including people, processes and products should
professionals working in any part of the service support the strategy.
lifecycle will find this publication helpful in ITIL Service Strategy (this publication) provides
identifying the context for the activities they are guidance on how to view service management not
performing, which will help to improve their ability only as an organizational capability but as a
to define and deliver quality services, and to build strategic asset. It describes the principles
appropriate structures to manage those services. underpinning the practice of service management
which are useful for developing service
1.2 Context management policies, guidelines and processes
across the ITIL service lifecycle.
The context of this publication is the ITIL service
lifecycle as shown in Figure 1.1. Topics covered in ITIL Service Strategy include the
development of market spaces, characteristics of
The ITIL core consists of five lifecycle publications.
internal and external provider types, service assets,
Each provides part of the guidance necessary for an
the service portfolio and implementation of
integrated approach as required by the ISO/IEC
strategy through the service lifecycle. Business
20000 standard specification. The five publications
relationship management, demand management,
are:
financial management, organizational
■■ ITIL Service Strategy development and strategic risks are among the
■■ ITIL Service Design other major topics.
■■ ITIL Service Transition

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6 | Introduction

Organizations should use ITIL Service Strategy to introducing new and changed services into
set objectives and expectations of performance supported environments. It describes how to
towards serving customers and market spaces, and transition an organization from one state to
to identify, select and prioritize opportunities. another while controlling risk and supporting
Service strategy is about ensuring that organizational knowledge for decision support. It
organizations are in a position to handle the costs ensures that the value(s) identified in the service
and risks associated with their service portfolios, strategy, and encoded in service design, are
and are set up not just for operational effectiveness effectively transitioned so that they can be realized
but for distinctive performance. in service operation.
Organizations already practising ITIL can use ITIL ITIL Service Transition describes best practice in
Service Strategy to guide a strategic review of their transition planning and support, change
ITIL-based service management capabilities and to management, service asset and configuration
improve the alignment between those capabilities management, release and deployment
and their business strategies. ITIL Service Strategy management, service validation and testing,
will encourage readers to stop and think about change evaluation and knowledge management. It
why something is to be done before thinking of provides guidance on managing the complexity
how. related to changes to services and service
management processes, preventing undesired
1.2.2 Service design consequences while allowing for innovation.
For services to provide true value to the business, ITIL Service Transition also introduces the service
they must be designed with the business objectives knowledge management system, which can
in mind. Design encompasses the whole IT support organizational learning and help to
organization, for it is the organization as a whole improve the overall efficiency and effectiveness of
that delivers and supports the services. Service all stages of the service lifecycle. This will enable
design is the stage in the lifecycle that turns a people to benefit from the knowledge and
service strategy into a plan for delivering the experience of others, support informed decision-
business objectives. making, and improve the management of services.
ITIL Service Design provides guidance for the
design and development of services and service 1.2.4 Service operation
management practices. It covers design principles ITIL Service Operation describes best practice for
and methods for converting strategic objectives managing services in supported environments.
into portfolios of services and service assets. The It includes guidance on achieving effectiveness and
scope of ITIL Service Design is not limited to new efficiency in the delivery and support of services to
services. It includes the changes and improvements ensure value for the customer, the users and the
necessary to increase or maintain value to service provider.
customers over the lifecycle of services, the
Strategic objectives are ultimately realized through
continuity of services, achievement of service levels,
service operation, therefore making it a critical
and conformance to standards and regulations. It
capability. ITIL Service Operation provides guidance
guides organizations on how to develop design
on how to maintain stability in service operation,
capabilities for service management.
allowing for changes in design, scale, scope and
Other topics in ITIL Service Design include design service levels. Organizations are provided with
coordination, service catalogue management, detailed process guidelines, methods and tools for
service level management, availability use in two major control perspectives: reactive and
management, capacity management, IT service proactive. Managers and practitioners are provided
continuity management, information security with knowledge allowing them to make better
management and supplier management. decisions in areas such as managing the availability
of services, controlling demand, optimizing
1.2.3 Service transition capacity utilization, scheduling of operations, and
ITIL Service Transition provides guidance for the avoiding or resolving service incidents and
development and improvement of capabilities for managing problems. New models and architectures

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Introduction | 7

such as shared services, utility computing, web Act (PDCA) cycle, is established. Feedback from any
services and mobile commerce to support service stage of the service lifecycle can be used to identify
operation are described. improvement opportunities for any other stage of
the lifecycle.
Other topics in ITIL Service Operation include event
management, incident management, request Other topics in ITIL Continual Service Improvement
fulfilment, problem management and access include service measurement, demonstrating value
management processes; as well as the service desk, with metrics, developing baselines and maturity
technical management, IT operations management assessments.
and application management functions.
1.3 ITIL in relation to other
1.2.5 Continual service improvement
publications in the Best
ITIL Continual Service Improvement provides
Management Practice portfolio
guidance on creating and maintaining value for
customers through better strategy, design, ITIL is part of a portfolio of best-practice
transition and operation of services. It combines publications (known collectively as Best
principles, practices and methods from quality Management Practice or BMP) aimed at helping
management, change management and capability organizations and individuals manage projects,
improvement. programmes and services consistently and
effectively (see Figure 1.2). ITIL can be used in
ITIL Continual Service Improvement describes best
harmony with other BMP products, and
practice for achieving incremental and large-scale
international or internal organization standards.
improvements in service quality, operational
Where appropriate, BMP guidance is supported by
efficiency and business continuity, and for ensuring
a qualification scheme and accredited training and
that the service portfolio continues to be aligned
consultancy services. All BMP guidance is intended
to business needs. Guidance is provided for linking
to be tailored for use by individual organizations.
improvement efforts and outcomes with service
strategy, design, transition and operation. A closed
loop feedback system, based on the Plan-Do-Check-

Glossary

Guidance
Models

Management Management Portfolio,


Portfolio, of Risk of Value Programme ITIL®
Programme (M_o_R®) (MoV™) and Project
and Project Offices
Management (P3O®)
Maturity
Model
(P3M3®)
Portfolio management (MoP™)

PRINCE2®
Maturity Programme management (MSP®)
Model
(P2MM)
Project management (PRINCE2®)

Figure 1.2 ITIL’s relationship with other Best Management Practice guides

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8 | Introduction

BMP publications include: Cabinet Office (2011). Managing Successful


Programmes. TSO, London.
■■ Management of Portfolios (MoP™) Portfolio
management concerns the twin issues of how ■■ Managing Successful Projects with PRINCE2®
to do the ‘right’ projects and programmes in PRINCE2 (PRojects IN Controlled Environments,
the context of the organization’s strategic V2) is a structured method to help effective
objectives, and how to do them ‘correctly’ in project management via clearly defined
terms of achieving delivery and benefits at a products. Key themes that feature throughout
collective level. MoP encompasses consideration PRINCE2 are the dependence on a viable
of the principles upon which effective portfolio business case confirming the delivery of
management is based; the key practices in the measurable benefits that are aligned to an
portfolio definition and delivery cycles, organization’s objectives and strategy, while
including examples of how they have been ensuring the management of risks, costs and
applied in real life; and guidance on how to quality.
implement portfolio management and sustain Office of Government Commerce (2009).
progress in a wide variety of organizations. Managing Successful Projects with PRINCE2.
Office of Government Commerce (2011). TSO, London.
Management of Portfolios. TSO, London.
■■ Portfolio, Programme and Project Offices
■■ Management of Risk (M_o_R®) M_o_R offers an (P3O®) P3O provides universally applicable
effective framework for taking informed guidance, including principles, processes and
decisions about the risks that affect techniques, to successfully establish, develop
performance objectives. The framework allows and maintain appropriate support structures.
organizations to assess risk accurately (selecting These structures will facilitate delivery of
the correct responses to threats and business objectives (portfolios), programmes
opportunities created by uncertainty) and and projects within time, cost, quality and other
thereby improve their service delivery. organizational constraints.
Office of Government Commerce (2010). Office of Government Commerce (2008).
Management of Risk: Guidance for Practitioners. Portfolio, Programme and Project Offices. TSO,
TSO, London. London.
■■ Management of Value (MoV™) MoV provides a
cross-sector and universally applicable guide on 1.4 Why is ITIL so successful?
how to maximize value in a way that takes
ITIL embraces a practical approach to service
account of organizations’ priorities, differing
management – do what works. And what works is
stakeholders’ needs and, at the same time, uses
adapting a common framework of practices that
resources as efficiently and effectively as
unite all areas of IT service provision towards a
possible. It will help organizations to put in
single aim – that of delivering value to the
place effective methods to deliver enhanced
business. The following list defines the key
value across their portfolio, programmes,
characteristics of ITIL that contribute to its global
projects and operational activities to meet the
success:
challenges of ever-more competitive and
resource-constrained environments. ■■ Vendor-neutral ITIL service management
Office of Government Commerce (2010). practices are applicable in any IT organization
Management of Value. TSO, London. because they are not based on any particular
technology platform or industry type. ITIL is
■■ Managing Successful Programmes (MSP®) MSP
owned by the UK government and is not tied to
provides a framework to enable the any commercial proprietary practice or solution.
achievement of high-quality change outcomes
■■ Non-prescriptive ITIL offers robust, mature and
and benefits that fundamentally affect the way
time-tested practices that have applicability to
in which organizations work. One of the core
all types of service organization. It continues to
themes in MSP is that a programme must add
be useful and relevant in public and private
more value than that provided by the sum of its
sectors, internal and external service providers,
constituent project and major activities.

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Introduction | 9

small, medium and large enterprises, and within showing the major inputs and outputs for the
any technical environment. Organizations service strategy lifecycle stage.
should adopt ITIL and adapt it to meet the
■■ Chapter 4 Service strategy processes
needs of the IT organization and their
Chapter 4 sets out the processes and activities
customers.
on which effective service strategy depends and
■■ Best practice ITIL represents the learning
how they integrate with the other stages of the
experiences and thought leadership of the
lifecycle.
world’s best-in-class service providers.
■■ Chapter 5 Service strategy, governance, architecture
ITIL is successful because it describes practices that
and ITSM implementation strategies
enable organizations to deliver benefits, return on
Chapter 5 deals with some of the major
investment and sustained success. ITIL is adopted
strategic interfaces between service strategy,
by organizations to enable them to:
the business context and service management.
■■ Deliver value for customers through services Specifically, it looks at the interface between
■■ Integrate the strategy for services with the the overarching organization strategy, the
business strategy and customer needs strategy of the service provider, and the service
■■ Measure, monitor and optimize IT services and provider’s IT service management strategy. It
service provider performance also considers the relationship between service
■■ Manage the IT investment and budget management, enterprise architecture and
■■ Manage risk application development.
■■ Manage knowledge ■■ Chapter 6 Organizing for service strategy
■■ Manage capabilities and resources to deliver This chapter identifies the organizational roles
services effectively and efficiently and responsibilities that are needed to manage
■■ Enable adoption of a standard approach to the service strategy lifecycle stage and
service management across the enterprise processes. These roles are provided as guidelines
■■ Change the organizational culture to support and can be combined to fit into a variety of
the achievement of sustained success organizational structures. Examples of
■■ Improve the interaction and relationship with organizational structures are also provided.
customers ■■ Chapter 7 Technology considerations
■■ Coordinate the delivery of goods and services ITIL service management practices gain
across the value network momentum when the right type of technical
■■ Optimize and reduce costs. automation is applied. This chapter provides
recommendations for the use of technology in
service strategy and the basic requirements a
1.5 Chapter summary
service provider will need to consider when
ITIL Service Strategy comprises: choosing service management tools.
■■ Chapter 2 Service management as a practice ■■ Chapter 8 Implementing service strategy
This chapter explains the concepts of service For organizations new to ITIL, or those wishing
management and services, and describes how to improve their maturity and service capability,
these can be used to create value. It also this chapter outlines effective ways to
summarizes a number of generic ITIL concepts implement the service strategy lifecycle stage.
that the rest of the publication depends on.
■■ Chapter 9 Challenges, risks and critical success
■■ Chapter 3 Service strategy principles factors
This chapter describes the terminology and key It is important for any organization to
principles which form the building blocks of understand the challenges, risks and critical
service strategy best practice. These principles success factors that could influence their success.
are the policies and governance aspects of the This chapter discusses typical examples of these
service strategy lifecycle stage that anchor the for the service strategy lifecycle stage.
tactical processes and activities to achieving
■■ Appendix A Present value of an annuity
their objectives. It concludes with a table

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10 | Introduction

■■ Appendix B Description of asset types


This appendix describes the key asset types of
management, organization, process,
knowledge, people, information, applications,
infrastructure and financial capital.
■■ Appendix C Service strategy and the cloud
Included here is a brief overview of the major
themes and issues surrounding the complex area
of cloud services.
■■ Appendix D Related guidance
This contains a list of some of the many external
methods, practices and frameworks that align
well with ITIL best practice. Notes are provided
on how they integrate into the ITIL service
lifecycle, and when and how they are useful.
■■ Appendix E Risk assessment and management
This appendix contains basic information about
several commonly used approaches to the
assessment and management of risk.
■■ Appendix F Examples of inputs and outputs across
the service lifecycle
This appendix identifies some of the major
inputs and outputs between each stage of the
service lifecycle.
■■ References and further reading
This provides a list of other sources of
information that both informed the writing of
this publication and can be used for further
study and exploration by readers.
■■ Abbreviations and glossary
This contains a list of abbreviations and a
selected glossary of terms.

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