How to transform IT while running the business
Analysts contend that IT has split into two different organizations, each operating at a different speed. The one that runs critical business operations is slow, cautious, and deliberate. The other, which often operates within the business units, wants to quickly iterate and fail fast. But, in your digital transformation roadmap there should only be one core function—IT—that delivers all of the technology services that support the business.
Some of your services support applications that run the business. With these, you keep compliance and risk management in mind, protecting your current business while you create new offerings. Those new offerings require your team to create new, innovative technology services. In essence, you need to run IT and transform it at the same time.
But can your IT organization transform quickly enough? And how can you rationalize the existing services while transforming people, processes, and technology to address the new?
Ultimately you don’t have a choice, because you have to do this to stay relevant to the business. You must evolve your IT organization not just to run the business, but also to get out in front by developing new technology services that will drive new business. And to do that, you need to transform your IT operation—and your mindset. You need to move from a project- or program-based approach to a services-based approach that delivers value to the business.
That’s not easy, but with these three steps, which I have used in practice as a CTO, you can kick-start the process
1. Sort out your portfolio
You need to know where you stand before you can move forward, so start with an assessment of your IT portfolio, and classify everything your IT organization delivers into the four key services areas listed below.
Sorting your portfolio into these categories is the first step toward having a conversation with the business and to setting a transformation framework for the business of IT. I have successfully used these service categories in multiple transformation projects.
- Established service offerings include your existing products and services that support enterprise applications, such as your ERP system or other back-office systems. These systems could be candidates for a transition to SaaS or for placement under an outsourcing contract. Established service offerings usually require deep tribal knowledge to operate.
- Standard service offerings include current applications and surrounding operational services that have been purpose-built for the business. They produce the majority of the revenue for the business today and will continue to do so for the foreseeable future. As such, they are under tight control and subject to day-to-day operational governance and best practices. There’s also a good chance that these applications are specific to the business units and have different technology stacks.
- Emerging services offerings are the technologies that the business needs to market new offerings. For example, you might modernize a mainframe application by creating a mobile application front end. (If yours is like most IT organizations, you probably don’t have anything in place to support these services right now.)
- Rapid prototyping services are the set of technology services that enable an engineer to start work in the morning, create, and deploy something new, and see the app she dreamed up posted on the lab website by end of day. Such capabilities might exist in your enterprise within the business lines, or in the CTO’s office.
2. Realign IT resources and processes across the services lines
Once you have everything sorted into the buckets above, start organizing your transformation activities, such as aligning and training talent, reviewing and keeping or changing processes, and so on. For example, in the context of your established service offerings, you might reduce costs and free up budget by determining whether it’s more efficient to outsource some assets than to keep them in-house.
In the case of your standard service offerings, the supported applications are a rich area for normalization, technology standardization, and automation of day-to-day tasks such as compliance patching. This will free up talent to work on new offerings. For example, consider creating fully automated build, test, and release engineering environments that the business can use in a self-service mode through a modern IT catalog. On a side note, delivering these experiences across traditional application stacks will showcase your ability to move at the speed of DevOps.
For emerging service offerings, your IT organization has an opportunity to create one or more centers of excellence, partnering with the business to support new business that relies on new application stacks and technologies. For example, you might deliver cloud-native applications that connect to existing enterprise systems or core application systems, such as those for account management or user sign-on services. Here you’re creating an emerging standard that informs and drives the types of activities you need in order to start supporting those new offerings, and that builds on the foundation your standard offerings provide.
Finally, rapid prototyping service offerings serve as an opportunity for your IT organization to demonstrate its understanding of the business's need for speed and agility while testing new delivery experiences.
Think of the service offering classifications as a way to drive the transformation of IT across people, process, and technology.
Doing more with less: How do I find the budget?
As you realign and transform, your budget will need to follow. But if yours is like most IT budgets, this might present a challenge. Here’s why.
The traditional IT investment profile has 95% of the budget going to run-the-business functions, with 5% dedicated to innovation. After your digital transformation, however, your budget profile should be closer to a 50/35/15 split, with 50% allocated to run-the-business, 35% to gaining efficiencies (embracing automation and DevOps methodologies), and 15% to developing new, innovative IT services.
But how do you get there? The typical enterprise IT budget at best might stay flat, but it usually shrinks as the business demands greater efficiencies. The business measures your success in the number of dollars you return to the business while continuing to deliver the same IT services flawlessly.
How do you find the resources to develop innovative new services when management wants to see greater efficiency with a smaller budget? You think outside the box, and get aggressive in your planning and approach to change.
For example, when I was given a 10% budget cut objective, I worked with my team to cut 15%. This aggressive plan enabled us to keep our commitment to the business while investing the extra 5% in new ideas and service offerings. And the categorization process we went through made it easier to decide where to invest themoney.
A successful transformation is always the result of an engaged team, so the methodology and framework you use are important. It lets you have an honest, trusting conversation with your team that will set the stage for accomplishing the task ahead—both within your team and with the key stakeholders in the business.
When figuring out where to free up budget for innovation in your own organization, think back to the offerings you identified in the four key areas above. Your standard offerings include all of the IT activity you have to support applications that currently generate revenue for the company. They've run for a long time, and you have established operating processes and a high-availability pattern in place.
But there’s a good chance that these applications are high-touch. So automate as much as possible, deliver those capabilities through self-service, and consider moving those offerings to a private cloud. Doing so can bring efficiencies. And because those applications generate revenue, the business case for automation will have a substantial ROI.
3. Partner with the business—and get out in front
For my organization's transformation, I set out to build an emerging service with our best and brightest, along with a few new people. We worked in partnership with the business to create a new model of operation. We weren't reactive; we didn't just jump when asked. We started going to the business teams with ideas.
That’s the key: Rather than letting the business teams pull you in after the decisions have been made, partner with them at the beginning of the ideation process. That’s hard to do at first, because usually IT is not at the table when the brainstorming begins.
And why is that? If yours is like most IT organizations, it’s because you’ve lost credibility. You‘re seen as slowing down everyone. The business thinks that you have too much friction and that you’re unable to iterate and fail fast.
But you’ll prove them wrong. Don’t wait for them to come up with ideas: Bring them your team’s best ideas for new services. There’s always tension between the business and IT teams, but when you come to them with innovative ideas and show that you can be flexible, iterate quickly and fail fast, those tensions will quickly melt away. You just need to demonstrate that IT is both the organization that runs the business and the one that innovates.