Page 1 of 17 Chapter 14 Operational Enterprise IT Capabilities and Competencies Given the importance of operational competences are to trust, credibility, performance, and execution, it's possible that this set of three enterprise IT capabilities should come first. Chapter 14 describes the three operational enterprise IT capabilities, as shown in Exhibit 14.1: 1. Cost & Performance 2. Service & Operational Excellence 3. Sourcing Exhibit 14.1 Operational Enterprise IT Capabilities While operational in character, these capabilities equally contribute to the issues of response to turbulence and uncertainty, trust, and partnership. It can be argued they are foremost in both, as the inflexibilities of bureaucracy and unwillingness to change often loom largest in these kinds of operational capabilities. Similarly, Sourcing raises all the relationship questions between the business and the sources, as well as among the IT organizations (e.g., issues like security, use of networks, and so forth). Enterprise IT Capability: Service & Operational Excellence This enterprise capability covers IT services and includes the elements of operational excellence (Exhibit 14.2). Exhibit 14.2 Service & Operational Excellence The phrase “operational excellence” often dominates business and IT management conversations. In our context, we use this phrase to describe the first of the six stages of demonstrated IT performance for the enterprise, as described in the section on Trust and the Total Value Performance Model (TVPM) in Chapter 2. The issue here is whether the enterprise is capable of specifying and delivering IT services to a standard of operational excellence. Major parts of frameworks like the IT infrastructure library (ITIL) and Control Objectives for Information and Related Technology (COBIT) are devoted to the managing the foundations of IT's operational excellence. In the business context, service management focuses on operational excellence as an outcome of good service practices. Even in the business strategic domain, Strategic IT Management Example Outcomes for Objective Superior Value Service & Operational Excellence Manage to expectations for service and operational excellence Superior performance matched to business requirements. Competence. Example Outcomes for Superior Response to Turbulence Adaptability, responsiveness, partnerships Example Methods ITIL COBIT Service Management Enterprise IT Capability Page 2 of 17 operational excellence (or operational effectiveness) is one of the two competitive outcomes 1 and one of the three strategic thrusts. 2 So, Service & Operational Excellence is important, perhaps even critical, as the foundation of both business performance and IT performance. Of course, it is helpful to define exactly what the concept covers. From an IT Supply perspective, operational excellence generally covers reliability, ability t.

1. Page 1 of 17
Chapter 14
Operational Enterprise IT Capabilities and Competencies
Given the importance of operational competences are to trust,
credibility, performance, and execution, it's possible that this
set of three
enterprise IT capabilities should come first.
Chapter 14 describes the three operational enterprise IT
capabilities, as shown in Exhibit 14.1:
1. Cost & Performance
2. Service & Operational Excellence
3. Sourcing
Exhibit 14.1 Operational Enterprise IT Capabilities
While operational in character, these capabilities equally

2. contribute to the issues of response to turbulence and
uncertainty, trust, and
partnership. It can be argued they are foremost in both, as the
inflexibilities of bureaucracy and unwillingness to change often
loom largest in
these kinds of operational capabilities. Similarly, Sourcing
raises all the relationship questions between the business and
the sources, as well
as among the IT organizations (e.g., issues like security, use of
networks, and so forth).
Enterprise IT Capability: Service & Operational Excellence
This enterprise capability covers IT services and includes the
elements of operational excellence (Exhibit 14.2).
Exhibit 14.2 Service & Operational Excellence
The phrase “operational excellence” often dominates business
and IT management conversations. In our context, we use this
phrase to
describe the first of the six stages of demonstrated IT
performance for the enterprise, as described in the section on
Trust and the Total Value
Performance Model (TVPM) in Chapter 2. The issue here is
whether the enterprise is capable of specifying and delivering
IT services to a
standard of operational excellence.
Major parts of frameworks like the IT infrastructure library
(ITIL) and Control Objectives for Information and Related
Technology (COBIT)
are devoted to the managing the foundations of IT's operational
excellence. In the business context, service management focuses
on

3. operational excellence as an outcome of good service practices.
Even in the business strategic domain,
Strategic IT Management Example Outcomes for
Objective Superior Value
Service &
Operational
Excellence
Manage to expectations for
service and operational
excellence
Superior performance matched to
business requirements.
Competence.
Example Outcomes for
Superior Response to
Turbulence
Adaptability, responsiveness,
partnerships
Example
Methods
ITIL
COBIT
Service
Management
Enterprise IT

4. Capability
Page 2 of 17
operational excellence (or operational effectiveness) is one of
the two competitive outcomes
1
and one of the three strategic thrusts.
2
So, Service & Operational Excellence is important, perhaps
even critical, as the foundation of both business performance
and IT performance.
Of course, it is helpful to define exactly what the concept
covers. From an IT Supply perspective, operational excellence
generally covers
reliability, ability to respond to interruptions or defects, cost
efficiency, and similar provider-oriented concepts. These
concepts apply to the
business, its processes, and the services it extends to customers
as well.
From an IT Demand or IT user perspective, these concepts are
also certainly important. But equally important are business-
based service
perspectives: whether the (IT service) provider is in tune with
the business requirements, the people-to-people aspects of
services, and similar
concepts. Again, these issues are important in the business in its

5. own processes and services as well: The business has Service &
Operational
Excellence concerns with its customers and its supply-chain
partners. From the business perspective, IT can be a critical
component in
delivering business-to-consumer and business-to-business
services.
Perhaps Operational Excellence is an unfortunate choice of
words, as it tends to imply only data-center operational
services. As we discussed
in Chapter 8, IT services runs the entire gamut of the activities
IT does for the business. Exhibit 8.2 showed the five basic
service groups, which
include applications, project development, infrastructure, and
user support. But within these categories are also the services
associated with
strategic planning, information delivery and analysis, and so
forth. So although we refer to “basic” services, we are focusing
on everything IT
does…from wherever this full range of IT services is delivered.
What do we expect from this enterprise IT capability? This is
not, per se, a process question answered by structures like ITIL
or (in business)
service management processes. Those are the operational
details; important to be sure, and certainly affected by the
enterprise IT capability to
perform them. But we're asking a more fundamental question.
What Is the Service & Operational Excellence Enterprise IT
Capability?
In Chapter 1, we say, “an enterprise requires the capability to
perform its IT services with operational excellence and the right

6. balance of
adaptability/flexibility toward standards and stability (and,
overall, holistically covering the enterprise and all its IT).”
This is not an IT organization–centric question or capability; it
is an enterprise question combining the business and IT
perspectives. In
Chapter 2, we introduced the six-step TVPM (Exhibit 14.3),
which is based on a
foundation of service delivery and service requirements. Note,
though, that each of the successive steps also involves services,
whether
developmental, planning, or analytical in nature. This engages
both IT (as the supplier) and business (as the consumer) of IT
services; the
enterprise IT capability of performing requires the full
participation of both. But as an aside, it is interesting how few
IT professionals are
aware of the business-based service management connections to
IT operational excellence. It is as though the concept of service
is behind the
IT wall, and not in the context of the IT “customer.” Chapter 11
devoted considerable attention to this connection to service
management. In
another aside, recall that the relationship is n to m: That is,
multiple IT sources and multiple business users may exist in the
enterprise. The IT
Sources/IT Supply Profile exhibit seen later in this chapter
provides a simple way to understand the relationships among
the various IT service
provides and the services they deliver.
Exhibit 14.3 Total Value Performance Model

7. While we aren't focusing on specific processes (like ITIL's set
of internal IT service management processes,) it is instructive to
think about the
pain points in operational excellence. In Chapter 2, we
discussed the elements of credibility leading to (dis)trust
between business and IT. If IT
is simply unable to do the job right, both in operations and in
project development, this is the source of pain. Costs can focus
this pain—“IT
costs too much”—and the ill feeling does not decline even once
the data centers are managed better. The traditional means of
measuring
performance from the IT Supply perspective include: reliability
(interruptions) and performance/response
times. The business-focused means of measuring performing
include functionality, ease of use, and similar user-focused
issues. Failures in any
of these areas are significant pain points. Without question, IT
has to perform. (And the business has to perform with respect to
its customers.)
This is core to achieving the kind of IT performance reflected in
our TVPM in Exhibit 14.3. Shortcomings in IT and business
processes must be
remedied to improve operational excellence.
Page 3 of 17
Incidentally, lest the reader think these issues are in the past (so
20th century!) and are well addressed in current practice, this is

8. certainly not
our experience, whether in the United States or in other
countries. While yes, perhaps the IT Supply–oriented things
(like reliability) might be
doing better, the business-focused measures (like functionality,
ease of use, et al.) are most certainly not. Business service
expectations (which
are, per Chapter 11, the heart of operational expectations) are
not being met.
3
However, this focus on current processes obscures the question
asked earlier: What is it that characterizes an enterprise's
capability for achieving operational excellence?
The End Point
The key elements of this enterprise IT capability are:
▪ Service & Operational Excellence is applicable to all IT-
provided services (the five service portfolios, including
projects, applications, user
services, direct infrastructure such as networks and
workstations, and management services; see Chapter 8).
▪ All IT services in the ecosystem are included; all IT sources
are included.
▪ IT is operated as a true service. Service performance metrics
focus on the business use and impact of the services.
▪ Expectations for service performance are mutually developed.
Accountability for service performance and operational
excellence is

9. established.
▪ The service management and operational excellence processes
engage all of IT and all of business.
▪ Service requirements are connected to the characteristic of the
enterprise and its lines of business.
▪ It includes cost and metrics reflecting the business perspective
of the services.
▪ It applies to all sources of IT (e.g., central IT organization,
business unit activities, sourcers/cloud providers, etc.). See the
IT Supply Source
Profile exhibit later in this chapter.
▪ Business outcomes such as those listed in Exhibit 14.4 are
achieved
.
Exhibit 14.4 Example Outcomes for Service & Operational
Excellence
The reader can ask whether these end-point attributes accurately
describe the current practices in the enterprise and whether they
apply to all
IT sources in the IT ecosystem (e.g., sourcers, cloud).
A core component of strategic management is “marshaling the
enterprise resources to achieve desired business strategic
outcomes.”
4

10. In
Service & Operational Excellence, these means two things: the
resources necessary for accomplishing Service & Operational
Excellence from
the supply perspective, and those resources necessary to define
the requirements for IT services from the business perspective.
This is reflected
in the TVPM by pairing service requirements with service
delivery as the foundational elements. Here we are more
concerned about the
former, while the latter are described aptly in the formal
description of the many processes and methodologies available
(e.g., ITIL, CoBIT).
Our focus here, as always, is particularly on partnership and
trust. Recalling the previous chapters, we emphasize the
establishment of
common goals, transparency, credibility based on performance,
service, and speed of response.
Over the last few years IT organizations have gone astray,
adopting the mental model of “IT as a business” without
thinking through the
implications.
For example, this mental model puts the business enterprise in
the role of a “customer” to which IT is sold and delivered as a
service product.
This is different from the mental model of IT as a service
provider in the context of a partnership with common goals and
trust. The service
provider model gives good guidance for service performance,
but the relationship to the business is one of jointly agreeing on
goals and

11. Execution and Performance: The Actual Outcomes as the Basis
for Credibility and Trust
Service & Operational Excellence
Examples:Execution and Performance
Business Outcomes for “Superior Business
Value”
Project Development • Successfully implemented and
operationalized
& Benefit Realization projects
• Access to a domain of relevant and valuable data
Software
Configuration &
Development
Service Delivery
• Successfully developed projects
• Successfully acquired software and solutions
Service & Operational Excellence
Examples:Execution and Performance Business
Outcomes for “Superior Response to Turbulence and
Uncertainty”
• Adaptable solutions
• Integratable solutions
• Dynamic capabilities
• Adaptable solutions

12. • Dynamic capabilities
• Supports cost and risk mitigation
• Meets requirements
• Provides cost transparency
• Provides performance transparency
• Flexible and adaptable
TVPM
Page 4 of 17
outcomes, costs, and performance levels. The IT-as-a-business
model gives too much importance to IT's self-interests, while
the IT-as-a-
service-provider model gives full rein to the common goals
trust, and transparency of a partnership. (See Chapter 9.)
However, the underlying requirement is true partnership with
common goals. Credibility is based on service performance, of
course, but this
too is a part of the common goals, trust, and transparency of a
partnership. Again, we are not focusing so much on the
internals of IT service
management (e.g., ITIL). Much goes into defining and
delivering truly excellent services, and IT needs to command

13. that. But there's even
more to what constitutes good services from the business
perspective. That's the message of Chapter 9; that message
needs to be incorporated
into the enterprise IT capability of Service & Operational
Excellence.
There's no question about the need for credibility in IT's
delivery of services to the business. As stated previously, this
credibility is the
foundation of trust and of the TVPM. So IT has to execute.
The focus of this execution targets service excellence from a
business perspective. As Chapter 9 emphasized, this vision of
service excellence is
founded on business service management principles, including
such concepts as empathy, reliability, responsiveness, and
assurance. This is
not simply based on meeting technical specifications (e.g., 99
percent uptime), but rather treating the relationship holistically
as a service
relationship.
Execution and performance are made more complicated by the
increasing expanse of IT providers, as we've remarked about
corporate,
business-unit, outside sources, and do-it-yourself IT. All play a
role in the delivery of IT services and, ultimately, in the IT and
business
partnerships. Often the end user cannot tell exactly who is
involved, as several of these sources can combine to provide the
end service. All of
this is taken into account in the need for execution and
performance, with the requisite technical (e.g., uptime) and
business service (e.g.,
responsiveness, empathy) required.

14. The Processes and Methodologies in Service & Operational
Excellence
As we've emphasized, the business–IT relationship is one of
partnership (e.g., common goals) and service (e.g., IT supplying
five basic
services, such as projects, applications, user services). And
we've also emphasized that IT is not a single organization, but
embraces all sources,
including business-based,
sourced, and do-it-yourself IT. Accordingly the assessment
combines these as the Exhibit 14.5 suggests. The enterprise IT
capability for
Service & Operational Excellence capability is the sum of all
these: whether the enterprise overall can perform the services
with the attributes
described here. Exhibit 14.5 is meant to give a context for the
questions.
Exhibit 14.5 IT Sources/IT Supply Profile
Consideration to all sources should be given as the assessments
are made. The point is that, however IT activities occur, the
enterprise needs to
capably deliver services with the appropriate quality,
performance, and service characteristics.
We have introduced the concept of fit: Do the IT services fit
with the requirements and characteristics of the business? We
have emphasized
speed in the context of response to turbulence. We talked about
a holistic perspective (e.g., covering all sources of IT) and a

15. partnership
perspective. These issues are foundational, as we emphasized in
Part II.
Turbulence, however, really impacts the enterprise IT capability
for Service & Operational Excellence. So much of the IT edifice
is built around
the goals of stability: a stable environment, a stable set of
operational processes, a stable set of organizational
relationships, a stable
(predicable) set of technologies and characteristic user
requirements. Turbulence—both business and technical—
undercuts this stability. How
can an enterprise deal with it? What is
the nature of the enterprise IT capability need to continuously
achieve operational excellence? Consider, for example, the
recent tendency for
cloud provider's services to be offered directly to the business.
As a minor example, we recently worked with a manufacturing
company whose
products hadn't changed markedly for decades, nor had their
customer requirements. Yet the business organizations imposed
67 application
packages on the IT organizations and said “run them.” But, you
ask, what about security? Data integration? Help desk
understanding of
problems and solutions? This is just one example of a form of
turbulence, yet it certainly undermines the stability upon which
the IT
organization had depended. To the extent that operational
excellence includes effective performance of such things, the
manufacturing
company's IT was certainly challenged.

16. Understanding the problems is a good start. A self-assessment is
helpful to position an enterprise's current situation in its
capability to Service
& Operational Excellence. We began this with the execution and
performance discussion, in which the assessment is about the
current actual
IT Services Profile
IT Services
(Described in
Chapter 8)
Application Services
Project Services
Direct Infrastructure
Services
Technical (User)
Services
IT Management
Services
Provided from a
Central IT
Organization
Provided from
Business-Based IT
Activities
Provided from Sourced Provided through “Do-It-
Providers, Including Yourself” IT Activities in the

17. Cloud Business.
Page 5 of 17
performance in the sense of producing desired business
outcomes. Here, we've noted nine factors specifically of
interest. We offer our
perspective on the relative importance to superior value and
response to turbulence based on our research and client
experience, although a
particular enterprise may differ.
Chapter 11 presents a complete scorecard for enterprise
capabilities. The following 10 assessment questions reflect our
view of the important
characteristics of Service & Operational Excellence. They are
taken from the 22 requirements described in Chapter 11.
Exhibit 14.6 provides self-assessment for the current
methodologies and processes for Service & Operational
Excellence. Exhibit 14.7 provides
the assessment for the degree for which business outcomes are
achieved.
Exhibit 14.6 Strategic IT Management: The Systemic
Capabilities for Producing the Outcomes with Service &
Operational Excellence
Exhibit 14.7 Strategic IT Management: The Business Outcomes
with Service & Operational Excellence

18. Strategic IT Management: The Systemic Capabilities for
Producing the Outcomes with Service & Operational Excellence
Six of the 14 systemic enterprise IT capability requirements
apply particularly to Service & Operational Excellence.
Builds Credibility through IT's Execution and Performance (A1)
As the TVPM (Chapters 2 and 4) emphasizes, service quality is
the foundation for credibility and ultimately trust between
business and IT.
Specifically, are the “end points” listed achieved?
The challenge is defining what “execution and performance”
means. It is not solely a technical matter; things like uptime and
data quality are
important, but are not the central concern. Rather, it is the
service management aspects
that form the foundation of credibility—that is, it is from the
perspective of the business, not the IT providers.
Furthermore, the concept of Service & Operational Excellence
apply to the entire service relationship between IT and business,
namely the
five basic service portfolios. It is not limited to the traditional,
operational views of the networks and data centers; Service &
Operational
Excellence embraces systems development and project services,
user services, and management services. And it applies to all IT
sources,
whether internal or external.

19. The question is whether the business and IT partnership—
covering all sources of IT—is capable of performing the
enterprise IT capabilities.
Can the relevant IT activities execute the specific IT services,
deliver value with IT, and think strategically about IT in the
enterprise? In
particular, can the goals for each specific capability (e.g., for
Planning & Innovation, effective, achievable plans) be
delivered? Is the enterprise
capable of this?
Adds to Trust between Organizations (A2)
As IT services are delivered to the business, this question
applies to the manner in which the various organizations
involved interact, through
processes, in management styles and decision making, in
organizational approach to performance measurement and
management, and in
problem solving. Trust is created through transparency and
through delivery on promises made.
IT Management Provides Necessary Leadership with Emphasis
on Culture, Trust, and Partnership with the Business (B2)
The importance of leadership cannot be overstated given IT's
50-year history of being managed as a technology organization
with an
engineering-based mental model. The new mental model
expressing IT as a service, with attention to the business and to
traditional business
service management principles, is an enormous change. It turns
IT from an internally focused technical management
organization to an

20. externally focused service management organization. IT
leadership must be on board as an enabler and an encourager for
this culture change.
Importance Status
To what extent does the existing Service & Operational
Excellence enterprise IT capability deliver or support business
strategic effectiveness? (D1)
To what extent does the existing Service & Operational
Excellence enterprise IT capability deliver or support
innovation and change? (D2)
To what extent does the existing Service & Operational
Excellence enterprise IT capability enable or support the
deployment of solutions faster? (E3)
To what extent does the existing Service & Operational
Excellence enterprise IT capability deliver or support
adaptability and flexibility in its solutions? (E4)
Requirement for Outcomes
Importance Status
To what extent does the existing Service & Operational
Excellence enterprise IT capability build credibility through
IT's execution and performance? Specifically, are the end points
achieved? (A1)
To what extent does the existing Service & Operational
Excellence enterprise IT capability enable or strengthen
partnerships and collaboration at all levels and with all IT
sources? (A3)

21. To what extent does the existing Service & Operational
Excellence enterprise IT capability employ methodologies that
focus on specific business, strategic intentions, and goals? (B1)
To what extent does IT management provide necessary
leadership for Service & Operational Excellence enterprise IT
capabilities, with emphasis on culture, trust, and partnership
with the business? (B2)
To what extent does business management provide necessary
leadership for this Service & Operational Excellence
enterprise IT capability, with emphasis on culture, trust, and
partnership with IT? (B3)
To what extent does the existing Service & Operational
Excellence enterprise IT capability apply holistically across
silos, organizations, and other processes? (B4)
Requirements for Trust, Partnership, Leadership, and Services
Page 6 of 17
While the question focuses on the business, the same element of
trust and partnership is required across the silos in IT and
among the possible
IT sources. A common view of the services to be provided and,
more importantly, the underlying business orientation to the
common goals
and objectives is needed across the complete service provider
landscape.

22. Business Management Provides Necessary Leadership with
Emphasis on Culture, Trust, and Partnership with IT (B3)
While perhaps not as dramatic as the IT cultural changes,
business too has a mental model change, to think of IT as a
partner rather than
solely a
technology manager and service provider. This mental model
change requires business management to set the change, define
the culture
throughout the business.
Similar to IT, the business too has its silos and focus on local
optimization. Breaking down the walls, seeing the role and
development of IT in
the business as an enterprise matter, is at least as important.
Establishes Accountability for the Processes and Outcomes (B5)
When considering the possible breadth of IT sources (consider
Exhibit 14.5), you may discover that accountability for service
management is
diffuse or nonexistent. The question here is the degree to which
the enterprise is capable of managing its IT services, with focus
on ensuring
performance to appropriate standards and expectations.
Applies Holistically across Silos, Organizations, and Other
Processes (C2)
It is common for enterprise and IT silos to impede processes,

23. reducing understanding and trust with all the stakeholders and
organizations.
This particularly applies to operational excellence, where
common standards of quality, performance, and service
management should apply
everywhere that IT service is delivered. The point applies to the
different sources of IT as well, in which the business
expectations for services
should be applied equally.
Failure to apply service and operational excellence holistically
across the enterprise ends up confusing everyone, both service
providers and
consumers. Difficulty in supervising the provider part, and
difficulty in responding to user expectation consistently, is the
result.
Strategic IT Management: The Business Outcomes with Service
& Operational Excellence
Four of the enterprise IT capabilities apply particularly to
Service & Operational Excellence.
Delivers or Supports Business Operational Effectiveness (D3)
This raises a key aspect of the partnership between IT and
business. While providing services effectively is certainly
important and is a direct
factor in establishing the trust needed, the element of
partnership focuses on the common goals between IT and
business. It is easy for IT, in
effect, to toss the services over the transom and take no interest
in the achievement of the business goals, particularly the
business operational

24. effectiveness goals such as business quality, timeliness,
flexibility, and responsiveness to the business's customers and
clients. IT is
increasingly a direct component of those business
services, whether through the Internet or through processes such
as kiosks and portals.
This increasing IT role in business product and service delivery
demands awareness of the business and participation in the
achievement of
business goals for its service and product delivery.
Delivers or Supports Cost and Risk Mitigation (D4)
While arguably this is a component of business operational
effectiveness, when focused on IT, the goals of cost mitigation
are critically
important across all IT sources. Risk, including such matters as
security risk, technical risk, and supplier risk, is equally
important across all IT
sources.
Enables or Supports the Faster Deployment of
Solution
s (E3)
Sadly, it is possible that focus on operational excellence adds

25. elements of standards and bureaucracy to IT service delivery.
This can be most
easily observed in pure operational services, the data center,
and so on, which can tend to view new technology or new
applications with some
suspicion. In many respects, the mental model for IT service
providers emphasizes stability as a core component of ensuring
reliability.
Delivers or Supports Adaptability and Flexibility in Its