CIOs must prepare for the transformation of IT

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IT is going through a period of great change, a transition which will see organisations shift focus dramatically from technology to business processes and relationships. That's what Gartner Research Vice-President John Mahoney has told DaniWeb. He warns that by no later than 2010 as many as 50 percent of IT organisations will be refocussing on brokering services and shaping business demand, instead of delivering IT services directly. This is a huge leap from the 5 percent figure reported by Gartner in 2004. Such a fundamental change in focus will inevitably drive new styles of IT organisations and new roles for IT service businesses. Oh, and let's not forget new functions for Chief Information Officers. CIOs should be preapring to take decisions concerning the future direction of their organisational change now, not least because such changes will take at least two years to execute according to Gartner.

Mahoney, who will co-chair the 'Transformation of IT - CIO Summit' during September in Barcelona, Spain reckons that at least 50 percent of large IT organisations will divide into two distinct parts by 2012, one focused on technology sourcing and delivery while the other concentrates on architecture and change. “CIOs need to lead transformation and to adapt their own roles as they do so. CIOs who master leadership will blend business and technology capabilities in their teams and in themselves” Mahoney commented.

In order to facilitate this transformation, CIOs will have to pursue five critical actions within the next 18 months:

1. Choose the Main Value Focus of the Department (previously) Known as IT and Rename It

When planning for the future focus of the IT organisation, CIOs should not dwell on the existing IT organisational chart and boundaries but rather think in terms of the IT organisation’s required capabilities, and consider how they can best be delivered in their company. “The management information system (MIS), information technology (IT), information system (IS) organisation of today is no longer a monolithic organisation but an organisational unit made up of complementary sets of roles. These roles hinge on creative collaboration between business and traditional IT professionals” said Mahoney.

2. Implement Policies to Reduce Complexity

Complexity is becoming the chief enemy of effective IT management. It inhibits cost management, transparency and adaptability. “Today, it is not only necessary to rationalise IT environments after the past two years of cost-cutting, but also to think critically about the root causes of technology proliferation and variation,” added Mahoney. CIOs must establish carefully crafted policies that will, over time, refine their organisations' IT architecture, rationalise IT suppliers and leverage information. They must ensure that their organisations' business case processes examine conforming to policies before requesting project approval, and that their organisations' architecture addresses effectiveness in the actual business context, not just technical elegance.

3. Decide When Your Default Source of IT Infrastructure Should Be External

IT-utility-style computing technologies and the maturing service provider market will drive many organisations to externally source infrastructure services that are not mission-critical, joining established services (such as LAN/WAN provisioning help desk and other functions) that are typically outsourced today. Although in-house data centre will continue to have an advantage in enterprises whose IT infrastructure is mission-critical, almost all IT organisations will use external providers for non-critical or transitory capacity. The outsourcing of most enterprise data centre infrastructure will grow from a few early adopters now to the mainstream majority by 2015. By 2015, more than 75 percent of IT infrastructure will be purchased as a usage-based service from external and internal providers. “This will be a long, complex transformation, and advance planning is essential. IT leaders must decide by early 2008 when their default source for base-layer IT infrastructure should be external, and identify the critical architecture and management capabilities that must remain in-house,” said Mahoney.

4. Decide Which Services, Metrics and Incentives Map to Business Outcomes

As businesses take advantage of partnerships to create agility and growth, the importance of managing by business outcomes increases. By 2010, at least 50 percent of new outsourcing deals will use measures based on business outcomes, not IT service levels. When developing their sourcing strategy, user organisations need to select the style of outcome they intend in relation to the business value of the activity. Once this is decided they can then select appropriate service provider partners.

5. Identify and Start Building Competencies for Your Organisation's Future Value Focus

Mahoney concludes by saying that clear guidance for the IT team and the organisation is essential for coherence, effectiveness and safety. It also minimises the need for repeated management intervention to solve similar problems. He advised CIOs to focus IT organisation competencies on the disciplines of leadership (people management, strategy, sourcing, and service management) and governance (architecture and infrastructure, security, asset management and process management). The capability requirements for each discipline will vary depending on the nature of the role of IT in the strategy of the business as a whole, however, it will engender an environment where business, technology and business relationships can be successfully fused to deliver real business advantage.

jwenting 1,889 duckman Team Colleague

hmm, I've seen first hand the "transformation" of an IT company into a "service oriented organisation" and it was a bloodbath.
Instantly, within days of the board getting their brainwave that we were no longer a software company but a "service company" everyone outside the software development group had just about forgotten that our services revolved around the software created by that group.
All successes (including ours to deliver new functionality) were heaped upon the sales and training teams, all failure of them to do their jobs was blamed on us.
In the next end of year letter the CEO explicitly stated that the success of the company had been reached DESPITE the software group, without whom (he didn't of course state) the rest of the company would have had nothing to sell or craft services around.

If that's the future we're in for a rough ride, and a lot of highly frustrated and overworked IT staff queueing up for reeducation into other fields where our skills are still respected.

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