Over the coming weeks we’ll be looking at the 5 big strategic ITSM challenges for 2015. This week, we ask ‘How can central IT stay relevant to the business?’
Staying relevant to the business will be the biggest challenge IT will face in the coming years. The great irony is that, as technology becomes a more important part of what businesses do, the IT department (the people who know technology best) is being squeezed out of the decision-making process. Why? Because although they are the technology experts within the organization, it doesn’t mean that what they are offering can’t be surpassed. Technology will always be relevant to the business, but a lumbering and monolithic IT department no longer fits in with the business’s need for agility. There are three specific threats to central IT’s control over technology that are coming from outside the organization:
- Cloud technology – The cloud model makes it easy for business units to buy the technology they want without involvement from central IT. Business units with new technology needs are bypassing their own poor-performing IT departments as a technology provider.
- Consumerization of IT – The power of consumer devices and apps is out-pacing the standardized corporate technology being issued by central IT. Individual employees of the business are plugging gaps in productivity by bringing their own devices (BYOD) and apps into the workplace.
- Commodity IT service outsourcing – IT outsourcing is nothing new, but Managed Service Providers continue to pitch successfully for chunks of the central IT estate. Low-risk commoditized IT functions are frequently passed to external providers to improve focus on differentiation and innovation.
While central IT has been bogged down with firefighting, a technology gap has opened up – a chasm between what they provide and what the business needs. Cloud, BYOD and outsourcing allow business units to plug the gaps.
According to Gartner, an average of 73% of enterprise technology spend is controlled by central IT (1). The other 27% is Shadow IT - technology bought by business units without the involvement of the IT department. A study by Logicalis (2) found that 75% of employees are using their own devices for work. Computer Economic’s IT Outsourcing Statistics 2014/2015 (3) report states that, on average, 10.2% of the IT budget is spent on outsourcing. The worrying part is that these statistics only include what the IT department knows about. It’s the tip of the iceberg, but the general trend is clear: technology budget is leaking out of the IT department. The feeling is that central IT is just not offering enough to the business, particularly now that there are visible alternatives to compare against. Central IT is now just one player in an open technology market; they no longer have the monopoly.
Central IT struggles to compete with the variety and flexibility of specialized cloud providers that take advantage of global economies of scale; there simply aren’t enough internal IT resources. Unsanctioned spend on cloud applications is only going to rise. Central IT is becoming redundant. The question is: what does central IT offer that highly-specialized cloud providers can’t do better, faster and cheaper? What the IT department does now will define which path it takes: rebirth or obsolescence.
The key to the future of central IT is the realization that the shape of IT needs to change. First, IT needs to give up the idea that technology has to be centralized and concentrated in a physical datacenter. It’s time to remember the primary objective of IT: harnessing new technology to enable the business. Where this technology “lives” is less relevant. The old “put it in the datacenter” habits need to be revised in order to fit with what the business needs.
So how do you structure IT to reflect the new needs of the business today? IT needs to re-shape itself to mold around the needs of the business. In today’s fast-paced business environment, organizations need to be lean and agile. Just as the business is seeking lean agility, IT needs to optimize commoditized technologies and divert more attention to technologies that support differentiation and innovation. The chances are that some core technology will need to remain under the control of central IT – within the datacenter (e.g. due to legislative requirements). Other commoditized elements that don’t support market differentiation can be farmed out to the cloud, but IT should still have a degree of influence and control: acting as a broker to support the right purchase decision and consider security, backup and continuity issues. The “line” between core IT in the datacenter and controlled IT that lives out in the cloud (or is provided by MSPs) will depend on a number of factors: industry regulation, business technology budget, perception of IT, maturity of cloud offerings, acceptable business risk and the level of control that must be maintained.
Generally, core IT is shrinking. As cloud technologies handle more of the “heavy lifting”, the size and complexity of the datacenter will shrink, as will the infrastructure and operations teams that surround it. While maintaining a more concentrated and streamlined IT “hub”, IT needs to grow out into the business – pro-actively sending teams out into business units to gain domain knowledge, identify needs and implement solutions from within. New IT will look more like a wheel, with a core “hub” running shared services, “spokes” that support individual business units, and a governance “rim” that holds it all together in terms of overall business alignment policy, centralized technology procurement and enterprise-wide IT performance analytics.
• Manages shared services strategy (but not just IT – see ESM later in this whitepaper).
• Responsible for core technology that is to remain within the walls of the datacenter.
• Provides core communications, network, storage and security functions.
• Responsible for setting up new “spokes” to support new business units.
• Small IT sub-teams living within each business unit to assist directly with technology.
• Cross-trained to understand the operational workings and needs of the departments they support.
• Responsible for managing the lifecycles of the technologies that each business unit owns.
•Liaising with the IT “hub” and outside “rim” to ensure proper integration and efficient governance within the wheel framework.
• CIO sits at the boardroom table to advise the business at the highest level on how technology can enable strategic business objectives.
• Maintain oversight of all IT projects, processes, purchasing and staffing.
• Business Productivity Team – leveraging service management, process management and new technologies to improve operational efficiency within the business.
• Structured, enterprise-wide performance reporting ensures a complete view of IT performance and spending – not just the tip of the iceberg.
In short, the IT department needs to be more involved in the business and less obsessed with owning and controlling all of the grey boxes that support IT services. The cloud technology model has come of age and can be trusted to deliver high availability, high performance, and high security services. With a more lightweight and simplified IT estate, the IT department can unburden itself and work on restructuring to better engage and support the business. If IT resists the unstoppable tide of change, it risks a death of a thousand budget cuts as it becomes less and less relevant to the needs of the business.
You can read more about the top 5 Strategic ITSM Challenges in 2015 in our latest briefing paper.
Download the briefing paper