What is an IT operating model?

An IT operating model is the system by which an IT department carries out its strategic goals and day-to-day functions to support the overall goals of the organization.

How can you measure business value in IT?

Beyond tracking key deliverables when providing services or products to internal users and external clients, an IT department should be able to draw a clear line between its various functions and how they relate to the overall strategic goals of the organization.

Visualize the IT Operating Model

Demonstrate how IT continuously enables value for the organization.

Analyst Perspective

Don't just define the IT operating model - visualize it.

Defining the IT operating model is a critical component in any IT leader's role. This can be hard; visualizing it in a way so that all can understand it is even more difficult. But it doesn't have to be.

We know that when organizations have a clearly defined and articulated IT operating model, it leads to increased clarity and an ability to deliver on strategic objectives. For many organizations, it is through defining the IT operating model that they discover how the current way of operating is preventing success and the ability to deliver on objectives.

Brittany Lutes
Research Director, CIO Organization Transformation Practice
Info-Tech Research Group

Executive Summary

Info-Tech Insight
The landscape of the IT operating model is changing, making it even more critical to define and visualize it for the organization.

Your challenge

For leaders looking to create and visualize the IT operating model, it can be difficult to properly reflect:

• The different functional areas of IT are and how they work together.
• Where and how IT is embedded into the organization itself - if at all.
• What is a priority to improve or mature to meet organizational objectives and how this delivery of value can be measured and monitored.
• Who is a stakeholder and how that stakeholder needs to be engaged to ensure adequate collaboration.
• How the functional areas deliver value to their stakeholders.
• IT's products, technology, and services clearly.
• The decision rights of each functional area to ensure the strategy remains prioritized and aligned to.
• IT's sourcing approach to engaging with and using third-party vendors.

52%
Percentage of CIOs who considered the overhaul of the IT operating model to be a top priority.

Source: Deloitte, "Global Tech Leadership Survey," 2023

Common obstacles

Defining and visualizing the IT operating model is difficult because:

• The industry lacks a consistent and clear framework around what an IT operating model is and what it should include.
• Ownership ambiguity for IT capabilities is increasing as different business lines embed technology-focused roles into their functional areas.
• Trending operating models get defined and marketed as the perfect fit for every organization but rarely can deliver on the promised value.
• Both the business and talent workforce are changing what they work on and how they work on it, leading to a change in how employees engage with their work.
• IT often removes itself from how end-customers receive value from the organization when this is no longer realistic and needs to be measured.

Define the IT operating model before it gets defined for you

40%
The percentage of CIOs focused on increasing the operational efficiency of IT.
Source: Foundry, "The State of the CIO," 2023

82 %
The percentage of finance leaders embedding data and computer capabilities into their own department.
Source: KPMG, "The Data Imperative," 2021

The Technology Value Trinity

All three elements of the Technology Value Trinity work in harmony to delivery business value and achieve strategic needs. As one changes, the others need to change as well.

How do these three elements relate?

• Digital and IT strategy tells you what you need to achieve to be successful.
• I&T operating model aligns resources, processes, measures, stakeholders, value streams, and decision rights to enable the delivery of your strategy and priorities. This is done by strategically structuring IT capabilities in a way that enables the organization's vision and considers the context in which the model will operate.
• I&T governance is the confirmation of IT's goals and strategy, which ensures the alignment of IT and business strategy and is the mechanism by which you continuously prioritize work to ensure that what is delivered is in line with the strategy.

Too often strategy, operating models, and governance are considered separate practices - strategies are defined without clarity on how to support them. A significant change to your strategy necessitates a change to your operating model, which in turn necessitates a change to your governance and organizational structure.

What is an operating model?

If the strategy is what, the operating model is how.

An IT operating model is a visual representation of the way your IT organization will function using a clear and coherent blueprint. This visualization demonstrates how capabilities are organized and aligned to deliver on the business mission, strategic objectives, and technological objectives.

Additionally, it should clearly show the flow of work so that key stakeholders can understand where inputs flow in and outputs flow out of the IT organization. Investing time in the front-end to get the operating model right is critical. This will give you a framework to rationalize future organizational changes, allowing you to be more iterative and your model to change as the business changes.

Info-Tech Insight
Picking the right IT operating model should not be a choice made lightly. It is foundational to how IT will depict and deliver on strategy and create value for the organization.

Blueprint benefits

By completing this blueprint you will:

1. Have a customized IT operating model aligned to industry-standard capabilities that are supportive of both current and future ways of operating.
2. Highlight the primary IT priorities that will be required to enable organization successes.
3. Define the products, services, and technologies that underly the value stream components of the organization's reference architecture.
4. Clarify the operational decision rights of each functional area.
5. Outline key collaborators within the organization that should be engaged.
6. Identify the right mix and approach to leveraging third-party sources.
7. Have metrics to measure the functional performance of the operating model and report the positive impact to organization leadership and stakeholders.
8. Remove the barrier between IT and end-customers by defining if there are key engagements where IT is delivering direct or indirect value.

When leaders provide an operating model, it leads to:

• Improved speed to deliver or move through a transformation.
• Ability to take informed risks and avoid unnecessary uncertainty.
• Definition of stakeholders and which products they consume.
• Clarity on organization priorities.
• Leaders who are empowered to make decisions over their functional area(s).
• Decisions that are understood and transparent.
• Clear roles and responsibilities.

Source: Harvard Business Review, 2020

Insight summary

Overarching insight
Visualizing the IT operating model provides an organization-wide perspective on how value is enabled through information and technology.

Phase 1 insight
Design principles are not something to casually define to check as complete. They strategically support the selection and customization of the right IT operating model for your organization. Moreover, they help communicate why this operating model was the right one for your organization.

Phase 2 insight
Don't be fooled into selecting the trending operating model archetype. If the selected model will not align with the organizational drivers and expectations, it will be costly for the organization and IT's reputation.

Phase 3 insight
Stop only seeing internal stakeholders as the customer. Operating models tied to the business reference architecture value streams that consider the end-customers' perspective will recognize greater value for the organization.

Phase 4 insight
Succeed in making the changes to the IT operating model by embedding activities on how the change will be successfully adopted and implemented. Don't assume the new operating model will succeed without change management activities.