http://www.ebizq.net/blogs/ea_matters/2013/08/business-services-versus-capabilities.php
Neither business service nor capability are unanimously defined and agreed so far.
In the absence of sanctioned definitions, the subject is then open to interpretation until an wide agreement is reached.
Nevertheless, employing common sense meanings, a business service can be defined in relation to a customer and supplier pair. The customer is external to the service but not necessarily to the enterprise. In fact the notion of "externality" is relative. A business service can have internal customers and and as such can be "internal" to the enterprise.
A capability is something the enterprise can do, can deliver. It has the expertise, the technology and the organisation to do it. Capabilities can be planned and realised as such.
What can a capability do? Deliver a business service indeed.
Hence, there is a strong relationship between them.
The question is do we need both in representing a business architecture? Yes? No?
Enterprises are not services oriented, not yet, that is they they don't have well cut business services. But they do have capabilities.
Hence, for most enterprises I would employ the capabilities concept.
For a potential target state of such enterprises, I would use the business service concept as an evolution from capability.
For example, in an enterprise there is often an IT Help Desk. Once this capability is formalised and well defined with interfaces, contracts... then it becomes a service eventually supplied by someone else or in the cloud.
More in "The Enterprise Architecture matters blog" Kindle ebook athttp://www.amazon.com/Enterprise-Architecture-matters-blog-ebook/dp/B00C3MJJ1O to find the difference between a capability and a function or process, for instance.
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