A business model determines how a company will attract customers and generate profit. It defines the methods, functions and components by which a company makes money, which is largely driven by its position in a market value chain. Manufacturers, service companies, retailers and others all have different business models.

For an internal IT organization, the selection of an appropriate business model is driven by the group’s value proposition in the context of the company’s business model, strategy and perceptions of IT. This largely determines whether the internal IT provider should be a cost center that supports the business, a center of excellence that enables the business, or a business unit in and of itself that contributes to top-line growth.

Internal IT operating models define and bind spheres of influence — that is, at a broad level, where responsibility for delivering different types of IT value will reside, and how the trade-offs between monopolistic economies of scale and entrepreneurial flexibility will be balanced within the business.

The IT service delivery model takes the contextual realities of the business and operating models and translates them into an optimized vehicle for delivering the right products and services with the right price, quality and timeliness. The IT organization’s tools and automation, sourcing, organization, process and people management architectures are largely determined by the adopted service delivery model. Thus, each type of model includes a range of choices, with the “best” choice being greatly influenced by earlier combination decisions.