Backdrop Five years ago, less than 25% of business leaders rated their organization’s IT function effective at delivering the capabilities they needed. Today the number hasn’t changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting more—more efficiency, more innovation, more value—from technology. Unasked QuestionsAmong all the talk of engagement, alignment, and “being part of the business,” one assumption is never challenged—that for information technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option and the function’s resources and responsibilities were better located elsewhere?
Shift 1: Information Over Process – The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio, and critically, exploits the information the services generate.The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth—innovation, marketing, sales, customer service—up to 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured.
Shift 2: IT Embedded in Business Services – The corporate center is in flux. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support.The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to “build things right,” or management resources that ensure IT “builds the right things.”
The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions.
Shift 3: Externalized Service Delivery – Externalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.
Shift 4: Greater Business Partner Responsibility – Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill.A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units cannot customize cloud applications but neither can the IT function.Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making.
Shift 5: Diminished Standalone IT Role – As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adoptan agile operating model to allow rapid value delivery and resource mobility.Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too,the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunityis also significant. Leading a business shared services organization offersnew levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thriveson exploiting technology for competitive advantage.