About 10 years ago I was contemplating ‘getting off the road’. You know, actually being home every night, not spending countless hours of my life on planes, trains, and automobiles. I was lucky enough to receive a very attractive offer from a major financial institution, an offer that meant I could increase my remuneration and be home for dinner each night.
It probably shouldn’t have been a difficult decision. My wife was very much in favor of the proposed move. I guess at that point she still wanted to see more of me! But a conversation with a friend who happened to work in the financial services industry completely changed my mind. He explained how he worked in the ‘front-office’, the place where financial institutions made their money, whereas IT was ‘back-office’, the place that kept the lights on. At best, I would be part of an enabling function; at worst, a cost center to be squeezed when markets were unfavorable.
In many organizations today, IT remains a cost center. But perhaps IT needs to change.
Today’s Challenge for IT
The average company age of the original Fortune 500 list compiled in 1955 was 75 years old. Today that average is closer to 10 years old. I have said it before, and I’ll say it again: the markets in which we all compete today are global, fast-moving, and fiercely competitive. Truly sustainable competitive advantages are few and far between.
In the last 15 years or so, large enterprises have taken advantage of relatively cheap capital to make major investments in IT. These investments delivered efficiencies and cost savings through largely incremental improvements to back-office processes. The cost of achieving such efficiencies having been minimized by standardizing application platforms, rationalizing hardware, and increasing use of IT outsourcing. Today’s IT organizations, one could argue, are not unlike the well-defined processes through which IT services are outsourced, i.e., designed to maintain current service levels at the lowest possible cost; essentially, a cost center to keep the lights on.
But IT is now being asked to do more than keep the lights on. By definition, disruptive technologies such as big data, mobility, in-memory, and cloud are not about delivering incremental changes to existing business processes but instead fundamentally changing the way business is done. In today’s markets, the business is clamoring for IT to figure out how these and other technologies can be used to create competitive advantage.
The challenge for today’s IT organization is how to add agility to a level of efficiency that has been optimized over the last 15 years.
The 4 C’s and The Big V
How can IT create this type of agility? Of course there is no easy answer, or everyone would have figured it out by now. But perhaps it is possible to establish some principles to guide us in the right direction.
- Customer – The customer of IT is the business, and IT needs to be customer-centric. Align the priorities and therefore the budget of IT to those of the business.
- Collaborate – Integrate IT with the business. Ensure that a healthy percentage of IT resources reside within, or are co-located with, the business units they ultimately serve. Share with the business new and potentially disruptive technologies, and be prepared to speculate on how they might be used.
- Co-Innovate – Most studies estimate failure rates for new innovations to be well in excess of 50%. Place a large number of small bets in the form of prototypes and pilots, and be prepared to double-down when initial results are positive.
- Co-Invest – Include innovation in the budget for IT and business units. Create an internal market whereby both are incentivized to maximize the return on their investments. Translate further efficiencies into increased budgets for innovation.
- Value – If IT is to be treated more like a profit center than merely a cost center, it should be measured by and held accountable for the creation of business value, not merely the management of costs.
What other principles might be established to add agility to already efficient IT organizations? What risks must be carefully mitigated, and what trade-offs managed, when seeking to combine agility and efficiency in the same organization?
This all leads to another question. How should IT service providers like HCL change the way we engage with our clients, knowing that IT must be an efficient, agile, and ever-changing business function?