The Organization Of IT

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One of the steps IT executives can take that will help them transition from perhaps where they are today to where they might very well need to go tomorrow is discussed below. It describes an approach to organizational alignment that builds from the assumptions laid out in Part 1, as well as current and future core competencies.

The best way to interpret the approach is to read it as an open letter to your company. The organizational structure described below can work within a centralized or decentralized organization, though the clear bias is toward a decentralized structure.

What follows also works within alternative sourcing scenarios. If, for example, you’re decentralized but insist on in-house requirements, specification, implementation and support, then you can use the model to help you make it all work.

The “open letter” format is intended to personalize new organizational requirements. It was constructed in response to the problems plaguing most IT organizations and companies struggling with what to do about IT. Please read it with these assumptions in mind and – much more importantly – as something that you might perhaps resend in your company!

THE ORGANIZATION OF IT

An Open Letter to the Business/Technology Community

It’s time for us to re-think how we acquire, deploy and support IT and how we should organize ourselves to effectively apply IT to our business models and processes. This letter is intended to explore the parameters of that organization and offer a set of specific suggestions for making IT the strategic weapon it’s destined to become. Let’s begin with a description of the new business/IT agenda – which really describes a new business/IT partnership.

The New Business/IT Agenda

There are clear objectives which together prescribe a new agenda for information technology at our company.

IT must align with current and anticipated business processes, products and services; if alignment cannot be determined then investments in existing or new infrastructures or applications should not be made.

The ultimate purpose of IT is to ensure efficiency, profitability and growth, not to champion “technologies.”

IT is as major a contributor to business strategy and planning as any other “conventional” business activity or function; without (well-conceived, -implemented and -supported) IT, there are no business processes, products or services; IT is therefore as “legitimate” a corporate stakeholder and provider as marketing, financial controls and other “core” business activities.

Our IT organizational structures must adapt to changing business priorities; the ability of IT to adapt to new competitor challenges and business opportunities is essential to its ability to contribute to profitability and growth.

From Here to There

Decentralization is appropriate: our businesses are moving too quickly to be organized or managed centrally. The decentralization of IT is a natural and appropriate extension of the decentralized business environment. While one might argue that centralization/decentralization swings with the political winds, it’s difficult to imagine it ever swinging back to where applications development becomes separate from their business units or users. What is possible – and desirable – is the “centralization” of the “infrastructure” – defined in very specific ways – since there is a lines of business and enterprise benefit to the central management of infrastructure services.

Our internal IT organization must evolve from “control” to “collaboration” and “facilitation.” IT is too often seen as an obstacle to progress and growth, not as a facilitator of business.

IT needs to identify a short list of enterprise (corporate-wide) infrastructure areas in which to invest – and then invest in them consistently and predictably. These areas include:

— The design and development of a world-class communications network.

— Methods for organizing, accessing and securing data.

— World-class mobile computing, virtual office and electronic commerce infrastructure
technology.

IT also needs to identify a set of activities that will add business value to the lines of business – activities that are appropriately conducted at the enterprise level. They include:

— The setting of standards boundaries that simultaneously provide room for the businesses to operate in and offer the cost and performance advantages of less-rather-than-more-variation in our communications and computing environment.

— Process improvement initiatives.

— The co-management of any enterprise outsourcing activities.

— Procedures for aligning systems and technology investments with business strategies.

— The facilitation of reuse (of applications, data bases, development architectures) and the reduction of redundant technical activity in the lines of business.

— Leadership in enterprise wide initiatives (like major upgrades).

— Enterprise hardware and software (license) acquisition.

— Contracting and sub-contracting.

— Hardware and software asset acquisition and disposition.

— Selected security administration and business resumption planning.

— Overall security policy.

IT should organize accordingly:

— IT should evolve to a proactive decision-making and problem-solving body: The technology decision-making organization should be comprised not only of technology professionals but business representatives as well.

— The central IT organization should establish a Program Office (PO) that will manage all outsourced activities, all account executive activities, and those “negotiations” activities that characterize so many of the interactions with the businesses. This PO should be staffed by central/enterprise IT and representatives from the lines of business.

— The office of the CIO of the enterprise should create deputy CIO positions to be filled by technology representatives from the lines of business.

— Enterprise IT should organize according to the targeted enterprise activities, according to the percentage of support that is outsourced, and according to what the businesses need and will find useful. The organization should be defined via a partnership with the lines of business (who – as “clients” – have a clear vested interest in the way enterprise IT is organized). The central IT organization has a clear vested interest in defining an organization the businesses will find useful. This is not a call for reengineering, which when done in-house nearly always fails; rather, the suggestion is to identify – with the help of the divisions – a slate of activities and capabilities the businesses would find valuable and then back-fill the organization into these requirements.

— The central IT organization should establish Centers of Excellence on a temporary basis. For example, when there is a cross-divisional need like in the areas of Year 2000 compliance or eBusiness, Centers of Excellence, staffed by enterprise and lines of business professionals.

— IT should take the lead in massing the talent and technology to develop solutions to problems that all the businesses face. Once the problems have been solved, the technology should be exported to the businesses, making room for the next Center (or “tiger team”). These Centers collectively represent the “special services” the central IT organization provides to the lines of business.

— Central IT should organize a small set of (excellent) “consultants” that will support the businesses in the enterprise areas. These consultants should not be charged on a fee-for-service basis. Instead, they should be (a) charged to tax or (b) embedded in the rates. However, over time – and once value has been demonstrated – then a “declining subsidy” funding model can be implemented. Such a model provides non-fee-for-service support initially but converts the support to fee-for-service over time.

The central IT organization should adopt a new attitude about its relationship with the businesses:

— It should partner with the businesses, actively seeking their involvement in key decisions about infrastructure and other enterprise activities. Failure to get buy-in results in unnecessary and unproductive conflict.

— The central IT organization should adopt the “consulting mindset” which would see the divisions as clients, not as adversaries.

— The central IT organization should work with the businesses to develop charge-back and investment procedures for paying for IT services. This source of enormous conflict can be reduced or eliminated.

The central IT organization should rethink charging/funding mechanisms:

— It should identify (with the businesses) those services that should fall into the traditional charge back model, those services that should be fee-for-service, those services that should be non-fee-for-service, and those services that should be funded centrally (via some model that puts skin in the game from all sources). Ambiguity here must be eliminated.

— There are special occasions when the enterprise will subsidize business costs, such as for major technology refreshes and events like the Year 2000 conversion effort. But this funding will come with “strings”: The enterprise will require the divisions to comply with certain conditions of acceptance, such as hardware/software asset acquisition practices, adherence to standards, and enterprise systems management.

In Part 3 on Tuesday, we’ll cover services, alternative funding mechanisms, organizational structure and people.

Steve Andriole is the Thomas G. Labrecque Professor of Business at Villanova University where he conducts applied research in business and technology alignment. He is also the founder & CTO of TechVestCo, a new-economy consortium that focuses on optimizing investments in information technology. He can be reached at stephen.andriole@villanova.edu.