Easy Pieces

Modular logic involves breaking up IT activities into units aligned with the two primary tasks of all IT organizations: value-creating activities, or value streams, on the one hand, and capabilities on the other. Value streams—the key IT processes that are essential to boosting innovation and business performance—are further divided into primary and secondary activities. The primary value streams include "value innovation" (the conceptualization of strategic IT applications), "solutions delivery" (the development of applications) and "services provisioning" (the availability of reliable IT services such as desktop support, help desk and call centers). Secondary activities are equally important to developing agile and innovative IT groups, though they also influence IT performance. They include activities such as strategic planning, financial management, the leveraging of IT best practices and innovations across the company and, at some companies, generating revenue from superior IT skills or in-house capabilities.

Capabilities—organizational skills and knowledge that are essential to strategic IT innovation—include infrastructure, highly skilled IT workers, and the ability to work with business clients, executive management, dispersed IT staff and external IT partners.

To apply modular logic, first identify your firm's critical value stream activities and capabilities. Then pinpoint the best organizing option for each value stream and capability. Solutions delivery, for instance, might best be centralized, decentralized, federal, outsourced or organized as an independent IT subsidiary. Infrastructure might be either centralized, leased, outsourced or provided through an ASP (see a complete list of the organizing options for each value stream and capability).

Once the organization of each value stream and capability is chosen, they must all be tied into the overall IT architecture. Our study suggests seven possible architecture strategies. Whichever one you choose must be supplemented with other integration options to devise the best IT organizational architecture for your needs.

Our study showed that the notion of a "one size fits all" IT organizational design is false; there simply are no silver bullets that would work well for every corporation. All IT organizations face a unique set of management challenges and strategic imperatives, and so every organizational design must be customized. Further, any decision that the CIO makes must inevitably be influenced by historical context. Even within the same industry, we found a variety of different IT organizational structures.