The IT Organization, Circa 2015By Brian P. Watson | Posted 12-11-2008
The IT Organization, Circa 2015
Information technology executives have a tendency to buy into--and subsequently overuse-- buzzwords and conventional wisdom. This group of leaders seems to have an affinity for adopting an almost group-speak when it comes to vocally deliberating what the organizations they lead will look like in 2015, not to mention their own roles.
So it came as no surprise that a number of prominent executives, consultants and experts evoked many old gems of IT management and the way it's changed in recent years. The subject of discussion: the future of IT organizations. The bulk of the discussion: how IT needs to become more business-savvy, more aligned with the business and more forward-looking in the way they operate.
Sound familiar? It should.
Sound like a tired argument? It shouldn't.
The problem with the current culture of business operations, specifically when it comes to the role of the IT organization, is that best practices barely exist. Sure, plenty of IT organizations have built notable track records of success, but they've done so in unique ways, varying across businesses of different sizes, mindsets and industries.
To find consensus on what the ever-changing--and downright thorny--role of IT organizations will be in the future is about as easy as agreeing on a college football champ. CIO Insight set out to do just that, and its efforts revealed the truly arduous challenges IT leaders face in adapting to the future needs of business.
A number of enormous, game-changing possibilities emerged from those discussions:
- Businesses and their IT departments have a decision to make: Will technology be a strategic driver or simply a utility?
- The majority of IT organizations may become centralized units, but global factors may force a level of decentralization.
- The advent and adoption of new and emerging technologies can cause an identity crisis for IT organizations. Will they make IT shops more integral to corporate operations, or will they minimize IT's importance?
- The CIO's role could change drastically, moving into more of a general business manager mold than one centered on technology.
Those possibilities point to the potential of a dramatic reshaping of the way IT is viewed and consumed within businesses. Navigating the twists and turns of what's to come is no easy task, but beyond all the challenges, plenty of opportunities exist for IT organizations to boost their capabilities and value to their companies.
In recent years, much of the discussion around IT's role has revolved around the always tricky issue of alignment. That very issue reclaimed the top concern for CIOs in 2008, according to the Society for Information Management's annual study. It edged out recruiting and retaining talented staff, which in 2007 knocked alignment from atop the list, where it had reigned for several years. Alignment also topped the list of CIO management priorities for 2009, according to our Future of IT study. (Click here for a PDF of the survey findings.)
And much of the chatter around alignment--at least from the business side's perspective--rests on IT executives and their teams becoming more business-savvy. More recently, IT pros have turned that argument on its head, claiming that for their companies to truly be successful, business leaders need to become more tech-savvy.
That back and forth represents a significant obstacle. "There will always be an alignment issue," says John Sviokla, vice chairman of Diamond Management and Technology Consultants and a former Harvard Business School professor. "It's just the natural tension of having a cost center--which is both a direct and an indirect cost--and having the business operationally dependent on this cost center, without a substitute internally."
This cross-department bickering will likely sort itself out, predicts Barry Brunsman, a managing director with the consultancy Alvarez and Marsal. "By the time we reach 2015, the technical sophistication of both the client and the IT organization is going to be radically different from what it is today," he says.
That's true for several reasons. First, the next generation of business leaders will essentially have been raised on technology. They may not have toted a BlackBerry since the devices were invented, but they certainly have interacted with technology--and seen its impact on business operations--as they matured in their careers.
Likewise, technology has grown with each generation, becoming more intrusive--and, some would say, addictive. That leads to a new breed of business operative who doesn't shun IT, but welcomes it.
Several implications emerge from that shift. Business units will have a much deeper understanding of what technology has to offer them. On top of that, non-IT business leaders will have a better perspective on the intrinsic or inherent risks of technology and the change it can bring. That's an important point, Brunsman says: Many executives turn to outside advisors to make sense of technology strategies because they themselves have not developed a strong risk-versus-reward perspective.
Give it a few years, and that should change. "In the future, there will be less of that," Brunsman says. "That means the fundamental role of IT as a translator between technology and what it means to the business is going to be less relevant, because people will be relatively fluent in the language of technology. Today, people can make a career in IT just by being translators, but I don't think that will be a possibility in the future."
Subsequently, IT project management--a skillset traditionally cloistered within the IT organization--will become a core business skill. Business change doesn't happen without technology, so the management of it is sure to trickle out from the IT shop and into the business units.
That's not to say that IT pros won't be managing projects; they just won't be managing everything. "At the end of the day, most people grow up in their career delivering projects," Brunsman points out. "So, as projects in IT are linked, everyone will become IT project managers."
Bobby Cameron, vice president and principal analyst focusing on CIO issues for Forrester Research, concurs. He and his colleagues see a radical reshaping of the scope and structure of IT shops in the future. Under Forrester's model, roles that used to be cloistered within IT will be decentralized into the business units. Sure, there will still be some technical specialists, but it will no longer be necessary to house them within an IT organization.
With that comes a splitting of business enablement. Corporate IT shops traditionally handled the brunt of IT project management, but with those specialties dispersed throughout the business, the IT department will cease its domination over it. At the same time, business will become more synchronized with IT, taking more responsibility for strategic and purchasing decisions, and putting IT executives in a position to help enable larger corporate initiatives.
Even so, Cameron doesn't see the model taking hold by 2015: "It's not likely that this model will dominate more than 20 percent of the firms by then."
Centralized or Decentralized?
Centralized or Decentralized?
The issue of managing centralized or decentralized structures presents another issue for business. IT executives forcefully proclaim that it will be the former. According to our Future of IT study, more than three quarters of respondents said they expect IT departments will become more centralized in the future.
Hal Sirkin, global leader of Boston Consulting Group's operations practice and former head of the firm's technology practice, sees IT shops becoming simultaneously more centralized and decentralized. On one hand, businesses will have individual systems that aren't integrated on the corporate level. However, to maximize cost reductions, management of those systems will have to become centralized.
Companies are also looking to grow their global footprint, but operating in different countries forces businesses to navigate varying rules and regulations. Doing so through a centralized IT organization can be arduous, so decentralization will have to come into play.
"It's going to be a tough balancing act for CIOs," Sirkin says. "They're already facing cost pressures--and that will get worse--so they have to do more with less."
The issue has become more complicated as IT service providers expand the scope of their capabilities. The wide availability of services--seen today in the rise of cloud computing--presents another question for IT organizations, says Lynden Tennison, CIO of Union Pacific. "There are two ends of the spectrum," he says. "We do it all and are the technology center for the business, or we have a small staff and outsource everything. Everyone is somewhere in between."
In times of economic uncertainty, innovation can become a victim of reprioritization. Some companies decide that information technology is a key business driver, but others opt to farm out IT operations in search of cost and staff reductions.
The result: an identity crisis for CIOs. Forrester's Cameron says almost 40 percent of new CIO hires come from a nontechnical background, which points to a manifestation of companies trying to make their IT leader into more of a business operative than a techie.
At Union Pacific, Tennison straddles the line between technology and business. His role is much like many other CIOs: His primary role is to drive technology for the company's gain, but he also must serve as mediator between the two realms.
Tennison sees flaws in CIOs acting primarily as business managers. "I've seen more of those not work that well," he says. "It becomes a self-fulfilling prophecy of having to go down the path of using third parties. Companies that are more technical tend to recruit more people who are technical."
Diamond's Sviokla sees IT organizations taking one of three forms in the future. The first is a traditional IT shop, which today, in many cases, looks and acts like a utility. Then there's the virtual IT shop, where the CIO takes on more of a systems integrator and contract manufacturer role. The third option is what Sviokla calls a "super-deep, super-invested" customized IT organization, where expert technologists interact with business experts in a truly aligned fashion.
The third option focuses on value-add per em-ployee, which Sviokla says is key. Aggressive companies spend about 8 percent of sales on IT, and few go above 10 percent. But when they get to those levels, they have the ability to create what Sviokla calls "knowledge blacksmiths": technical experts who can build technology internally instead of relying on outside providers. Those shops not only differentiate their company, but look much different from other IT organizations.
"Those high-value-added shops generally are not thought of as IT shops," Sviokla says, "because they don't resemble a utility or systems integrator."