Inescapable challenge for the IT organisation
Reinventing the IT organisation
Our projections of how IT organisations of large companies will look in five or ten years’ time often include certain threats. How do you cope with an ageing staff, a legacy system or increasingly sophisticated cyber attacks? Yet the future holds as many opportunities as it does questions. What are the main challenges for IT organisations given that information technology is woven into the very fabric of business processes, products and services? This article discusses the new contours of IT and how to shed obsolete working methods.
The clock is ticking, and we are on the verge of alarming problems. IT must act. At a large European bank, more than 1,300 IT employees will retire in the next three years – starting in late 2010. That is almost a fifth of the entire IT workforce. Of those 1,300 employees, 500 are working on business-critical platforms of first generation Cobol. This brain drain can neither be resolved with new employees – not even from India – nor with offshoring.
At the same time, the business often perceives the classic IT organisation as a multi-headed monster in which all specialisations work together as little as possible.
Many applications are still being developed in the traditional way. A new group of experts is deployed in each phase, from functional design to operations. At the end of the day, the process is very time-consuming and the outcome is still often uncertain. Users of the system are only involved at the start and at the end of the process – that is, while specifications are being drawn up, and during the acceptance test. This model is no longer tenable in situations where the business is constantly on the lookout for functionality to increase its competitive edge.
In this new decade, the IT organisation is faced with the task of reinventing itself so that IT can fulfil a partner role when creating innovation and business value. What should be done?
Step 1: Bring IT out of isolation
IT specialists like to talk about functional requirements: what exactly must the application be able to do? These days, however, the wishes of users and business managers are constantly changing. For this reason, they usually know exactly what they do not want, but are still looking for exactly what they do want. As an IT employee, you can no longer wait for ready-to-use registered specs and then build systems on your own initiative that are only subjected to a user test at the end of the process. Many of today’s IT organisations work hard on process optimisation, but all too often in isolation. The alignment between business and IT as an elaborate coordinated effort, where different blood groups only meet in conference rooms, is no longer possible. That is certainly not an appropriate way to achieve innovation and growth of the business. It must become second nature to them to get to know each other’s biotopes and work together. And that requires social attributes such as empathy, curiosity, creativity and openness.
Case: JetBlue: IT as owner with economic impact
The example of JetBlue, an American aviation company, shows what happens when the IT organisation comes out of isolation and becomes a co-innovator of open innovation in R&D, improved customer perception and cooperation in the supply chain. At JetBlue, the IT organisation is co-responsible for the impact of new information systems on efficiency and on passenger loyalty. JetBlue’s IT organisation does not just deliver projects on-time-on-budget (OTOB), it is also part-owner of their economic impact. That is why JetBlue’s new home terminal at New York’s JFK is full of smart IT to help customers faster and provide them with more accurate flight information. Using screens at the gate, customers can themselves order what they want to buy at the food court. After the new terminal opened in early 2009, the loyalty of customers – who therefore continued to fly with JetBlue – rose by 7.5 percent over the following quarter.
Becoming owner of economic impact also requires cooperation of other IT-related KPIs. Real KPIs must be key for the business and must refer to the daily reality in which the business operates. Only then will it be possible to achieve customer-orientation and innovation.
Step 2: Don’t talk about scope; become a strategist
If you as an IT organisation want to make a concrete contribution to innovation, you must use new working methods and competencies. However, any discussions about the transformation of IT all too often focus on the size of the IT organisation and therefore the numbers of people. Yet that number system is the least interesting part of the discussion. It is essential for the IT organisation to break loose from its old role, when the business was able to offload its responsibilities onto the IT organisation. By formally bestowing ownership of the main processes on the business and focusing on operational excellence across the company, IT can free itself in order to fulfil a more strategic role.
The IT organisation of the future will no longer be a project factory, but rather an organisation that specifically defends the strategic interests of the business and has a good knowledge of how to deal with the continuously changing landscape. This requires the use of new working methods.
Step 3: Visit the customer
Observe customers – from internal users to online customers – in their ‘natural habitat’. Talk to the people on the work floor to find out what they believe is important to make the company more successful.
Step 4: Work fast
It will become necessary to work in short cycles with concrete results – for example, an application prototype. This need not apply to all components (such as in-depth described processes that have taken shape via best practices), but it should apply to anything that is changing fast and for which the wishes of users must be taken into account.
Step 5: Use new, agile development methods
Business managers themselves are generally not in a great rush to get involved in an IT project. They find it much too technical and time-consuming, and if the project is unsuccessful you immediately have a blot on your reputation. Say goodbye to your career! That situation must and can be changed.
New agile development methods focus on this area. Scrum is a method that involves all experts in the project at the same time and that stimulates dynamic communication and cooperation. In this way, energy is released and this in turn generates a good team spirit. And even more importantly, the relevant parties in the business appreciate this working method. It’s time we put the pleasure back into IT. Using Scrum, ABN AMRO has found a completely new way of managing innovative IT projects – and with staggering results: not only are the projects more successful, they are also cheaper because they avoid costly project bureaucracy.
Step 6: Use technology as accelerant
IT’s new role will not only be driven by new working methods. For example, cloud computing will level barriers such as high investments or limited internal capacity, making local experimentation more and more feasible. The cloud is therefore more than an infrastructure: it allows central IT organisations to become an important enabler of innovation by giving flexibility to the business and by being active in those areas in which the business is bogged down, such as integration. If software-as-a-service (SaaS) is used to gain rapid access to functionality or extra capacity, there will usually be an exchange of data between the external applications and internal systems.
The use of the cloud and the decentralisation of innovation will result in a new role for centralised IT. IT will take on the director role, as it were. It will act as a coordinating unit that keeps track of integration, compliance and in that way creates transparency. This will have a huge impact on end user satisfaction.
Step 7: Switch from infrastructure to infostructure
With the growing influence of technology on business processes, the amount of data is also increasing exponentially. Besides existing data − from ERP systems, for example − real-time data such as click streams, social media mining and scan data are also creating new knowledge sources. By 2015, companies will no longer stand out by what they have in their back-offices, but by their interaction and intimacy with customers. The question therefore is how IT can help maximise the added value of all that available data. A new form of R&D involves working with data throughout the company. A competency such as data analysis must be democratised and left to the experts. Fast causality is becoming increasingly important for improving processes in short cycles. You can use ‘A/B experiments’ to test which user interface or web page produces better results – such as a higher response level, turnover or customer satisfaction. The data immediately show which option works best. This working method can be used for more and more IT applications when defining an outside-in release strategy. Google performs some 300 experiments every day. By gaining this action-based insight into all kinds of business processes, the IT organisation moves closer to the business, but it also means that IT must facilitate in organising information management. IT must take the step from infrastructure to infostructure..
First things first: clean up!
In the coming years, the sense of urgency to reinvent IT will need to be greater than ever.
The upcoming generation will want access to information whenever and wherever they need it − to an increasing extent using their preferred devices and easily accessible software. There is no point in outsourcing IT if there is no plan to migrate to new platforms. Without such a plan, you are only postponing the problem until the inevitable crisis occurs.
But what should now be done with the existing landscape? It is important to remember that the greater part of the current IT expenditure is due to the complexity of the generations of technology that have been built up over the years. Application reduction as a ‘strategy’ is not enough to achieve this since performances and politics determine which applications will be discarded. However, a major cleanup is definitely a precondition for operating higher in the value chain.
Eighty percent of the functional requirements can be covered with twenty percent of the time and technology. The rest of the time, IT could focus on promoting innovation and quality. That would also create more space for the IT organisation to focus on delivering a cheap, reliable back-office and realise an innovation engine for processes that make the company more competitive.
People who do not clean up will never have the time, money or self-esteem to take that step towards a reinvented IT organisation. There is a real chance that the central IT organisation will become smaller than it is now. But smaller can also mean that there is more attention for the really important issues.
Increase the IT organisation’s self-respect
The value of a central IT organisation in the future particularly relates to organising expertise to help the business to cope with the ever-growing influence of digitalisation Such help does not consist of fulfilling as many wishes as possible, but of presenting people with choices and drawing up scenarios. Facilitating innovation or guaranteeing business continuity are ‘non-functional requirements’. These are our new specs.
In employee satisfaction surveys, IT often scores the lowest. This lack of self-respect in many IT organisations is blocking the step towards the model in which IT is actually close to the business.
If you want the business to think differently about the IT organisation, you as IT will have to first learn to look at and begin to think about yourself in another way. Before you can play a new role and before the business accepts you as an innovative sparring partner, you must make sure that as the IT organisation you have found a better way of dealing with the bulk of the work you are now doing.