IT capabilities as the basis for an IT operating model

Business - IT Alignment Series

In our last post on Business - IT Alignment titled Aligning IT capabilities to business needs, we established the fact that the definition of technology capabilities required to support the business positions IT as an enabler of business value, and is a foundational requirement for defining a business-aligned IT strategy. We also discussed how to identify IT capabilities. Steps to define technology capabilities include (see the last post for details):

• Identify business capabilities

• Map technology capabilities to business capabilities

• Identify capability gaps

The IT capability document defines what the IT organization does at its core. While the definition of technology capabilities remains a key driver of Business - IT alignment, simply identifying capabilities is insufficient to get IT functioning as a cohesive organizational unit. At Virtro, we believe that every IT function should aspire to define and embed an operating model in order to function effectively, and to provide ongoing value to the business.

An operating model for an IT capability (or simply an IT Operating Model) is a visual representation of how an IT function delivers value to the business and other stakeholders. It is a representation of how each sub-function of IT functions, and provides a clear guide for the delivery of IT services. The IT operating model aligns the IT strategy to operations.

The IT operating model is key to transforming the IT function and is often the starting point for IT transformation or technology-enabled transformation of the organization. Without an IT operating model to serve as a guide for the delivery of IT services, the following challenges may plague the IT function:

• An IT organization structure/ resourcing not best-suited to execute on the tasks needed to support the business

• Poor IT governance, evidenced by gaps in direction, collaboration and decision making

• Increased operational risks and fragility of IT infrastructure and systems, due to poor controls and an unstable operating environment

• Longer time to completion/ time to market cycles due to sub-optimal processes and improper hand-offs between IT sub-functions

• Functional incoherence, impacting agility

• Overall, a negative impact on the performance of the IT function

How to define an IT operating model

• Functions: defining an IT operating model starts with the identification of technology capabilities required to enable business capabilities and drive the realization of business objectives and value. Our post on Aligning IT capabilities to business needs goes into some detail on how to define technology capabilities. The identification of technology capabilities provides clarity on the sub-functions required within the IT function. This is the functional model. The remaining parts of the IT operating model are built around the functional model.

• Processes: for IT to provide value to the business, the IT organization must execute on the technology imperatives of the strategy. The process model describes how IT executes. It identifies the activities and maps the workflows that enable effective and efficient delivery of IT services.

• Interfaces: the interface model describes how IT sub-functions interact to deliver services to the business. Oftentimes service provision is triggered from outside the IT function and the end-recipient of the IT function’s output is mostly outside of IT. IT sub-functions collaborate to provide these services. Consequently, it is necessary to define interfaces and hand-off points between IT sub-functions, as well as the interfaces that IT has with the business.

• Governance: as IT sub-functions work together to deliver value to the business, it is important to ensure that they are not working at cross-purposes to one another. Within the context of the IT operating model, governance refers to IT’s ability to be able to sponsor and enforce the decisions that drive appropriate execution. The need for central IT governance has grown in recent years as the business increasingly takes on roles that were previously held by IT e.g. the rise of citizen developers.

• Policies: the IT governance model is underpinned by IT policies. IT policies are a set of procedures and guidelines to govern how things work across the entirety of the IT function.

• Organization: a very critical piece of the IT operating model, the organization model identifies the roles required to deliver on activities required for IT to provide value to the business. The organization model describes how roles for each IT sub-function are organized into positions, options for sourcing technology talents to fill positions and how these positions are organized into a proper IT organization structure.

• Tools: the IT tools model identifies the technologies that will be used by IT sub-functions to support technology processes and to deliver services to the business.

• Performance: a critical role of IT leadership is to ensure that the IT function is effective in the delivery of IT services. The performance model measures the effectiveness of the IT function in enabling and supporting the business to achieve its objectives.

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The IT operating model is key to transforming the IT function. An IT operating model that is thoughtfully put together will result in a coherent, dependable and functional IT organization that operates like a well-oiled machine, and is positioned to deliver value to business.

Virtro enables digital transformation by helping organizations develop IT Strategy documents and IT Operating Models. Contact us to discuss or schedule a free consultation.

The IT Operating Model ensures that IT is organized and aligned to deliver on business objectives. If you are wondering about how well your business and IT are aligned, consider taking Virtro's free, high-level Business - IT Alignment Assessment.

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