Transformation and the future of the IT Organization – Part 2

In Part 1 of this post, I examined the various forces that drove the development of technology and computers, and how this gave rise to the IT department to manage this for the enterprise. The IT department has established itself within businesses, but is now subject to financial and performance standards like other organizational functions. If the business does not perceive commensurate value for costs incurred in supporting the IT department, what does the future hold for corporate IT organizations?  I spoke with the following executives to get insights into some of these issues.

Paul Chapman: Paul is the VP of Global Infrastructure at VMware. He runs the Global Infrastructure and Cloud Ops Organization within VMware, primarily focused upon running internal infrastructure, networks, datacenters, compute, the internal private cloud, and all the traditional IT services.

Mark Settle: Mark is the Chief Information Officer at BMC Software, with responsibility for applications and Business Operations. He has been a CIO at companies within various industries, such as Oil & Gas, Financial services, Consumer products, and Hitech distribution.

I discussed a number of topics with them, including the current state of the IT function within their companies, and the industry in general. What are the transformational forces driving IT and what are its effects?  How would the future IT organization be, and what would it need to do to thrive? Most of all, I wanted their opinion on the role of innovation within IT, and its value to the business. I have listed some of their insights on various topics from our conversation below.

On IT Transformation

Mark “There is always a wave of transformation sweeping through the IT industry, and some of the (traditional IT) construction skills are getting commoditized”.

Paul “I think that there has always been a notion of IT transformation; it is more a movement than transformation. Transformation has a real and defined start and end; there is a movement to IT as a Service”.

Mark “We have an assembly line model kind of concept, which is unfortunately prevailing in IT, where we have highly specialized jobs that need to be performed in a certain sequence to deliver service to the ultimate customer”.

Value for IT

Paul “I think the key is that you understand the new roles that are starting to emerge”.

Mark “The value for IT always gets generated really from interaction with the business”.

Paul “All the complexity that had been holding IT back is being solved. The challenge now has shifted from technology to the organization itself, it is about change management, about adopting and embracing the service model”.

Mark “They (IT organizations) know how to cut costs, they know all the stones to turn over, and they have become quite good at doing it, so they are asked to do it every budget cycle”.

Paul “IT is no longer able to hide behind the complexity (of technology)”.

Role of Innovation

Paul “Absolutely, IT organizations need to innovate (to provide value to the business)”.

Mark “If the SaaS providers start to displace the development activities, and the IaaS providers disrupt the extension of the datacenter, the only kind of equity that IT delivers is the data”.

Paul “By focusing on agility, we have freed up resources, and dollars to focus on innovation activities without necessarily increasing the overall IT budget”.

Future IT organization

Paul “We are seeing less demand for people that manage storage, people that manage compute, and people that keep the lights on in an infrastructure role”.

Mark “The IT organization of the future, (needs to) focus in moving to the value boundary with the business”.

Paul “IT professionals are always on a continuum of always needing to reinvent themselves, because of technology change. I think constant change is the new steady state”.

Mark “Figure out where you are within the commoditization wave, try to swim upstream, to get to wherever the maximum value gets generated, which is typically in direct interaction with the business”.

Read more of their insights from my conversations here.

In my opinion, IT needs to innovate for the business, providing Points of Differentiation. After one player within an industry demonstrates improved business due to an innovation, competitors quickly catch up to the leader. However, not catching up will become a competitive disadvantage. As Mark stated, “(IT) is kind of a force multiplier that goes out and finds solutions that makes groups more productive, at a personal level, or as a group, and helps in supporting the business”. Providing a steady stream of innovation is the crucial advantage that an IT organization can provide to the business.

Technology has become simpler to setup and use, and processes will simplify as well. The organizational cost focus has already afflicted IT departments, and the only manner that IT organizations survive is by providing a strategic edge to the business, like every other function within the company. As Paul summarized, “an IT organization that is very low in terms of innovation output, then by default, you have greater scrutiny of your IT budget”.

I think that IT Transformation this time has to focus upon the actual needs of the business – agility, simplicity, and cost. In addition, it has to deliver tangible value to the bottomline of the organization.

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