Forrester: Getting Your IT Organization to Grow Up

What defines a mature IT organization in today’ s rapidly evolving enterprise? The impact of cloud computing, social media and dazzling new business applications are again putting the IT organization into a pivot role, but the key question is: Are most CIOs capitalizing on the new opportunity to elevate the IT department’s performance? Alexander Peters, a princpal analyst at Forrester Research, has much to say on this topic – so read on to find out how this potentially alters the IT offshore dynamic.

Why the traditional IT model doesn’t work anymore

Because of the enormous leap in technology and computing power in the last ten years, we’re moving away from a world where the company IT department tells the business management side what is and is not possible. Instead due to three game-changing tech developments, as Peters calls them, it’s now the business side that decides what applications, models and functions should be used. What this means is that those IT functions must be increasingly geared toward business goals. The traditional model is not business process oriented, and in short, it’s not what firms need.

The three game-changers in business technology:

• Social computing – Moves the traditional service orientation of IT from personal computers and personal workplaces to multichanneled relationships.
• Dynamic business applications – A new generation of SOA applications that create digital maps of the business, model market trends and processes at a high level, and help executives increase end-to-end ownership of those processes.
• The Cloud – Probably the most disruptive element as it creates a new service model. Businesses are fitted directly with services that can come from anywhere, and this is radically altering the way tradition IT models work.

C-level change

“For several years we’ve been running a survey on business change”, said Peters. “We ask executives what their reasons are for trying to transform their business, and last year was the first time that ‘Increasing business orientation’ was ranked higher than ‘Reducing costs’. They’re now more interested in repositioning the IT organization into what we call a Business Technology role”.

It’s now the business side that decides what applications, models and functions should be used.

The survey also showed that CIOs or top IT execs make up a large part of the accountability in business process management, but the drivers of change and process automation are the COOs. So there’s a large disconnect there, and evolving businesses are trying to bridge that gap.

Incremental transition to Business Technology

According to Peters, IT companies’ transition to Business Technology happens in three stages:

1. Immature – Firms that still behave like IT service providers. They try to get more process improvement by reorganizing to reduce cost and eliminate waste.
2. Aspiring – A hybrid organization between the immature and mature stage, it continues to reorganize for more business process orientation. To enable more responsiveness, it establishes four centers of excellence (COE) – ERP, CRM, Product and R&D. What makes this stage different is also a coordinative position called Demand Management which ensures that the CIO and the different IT roles are all on the same page.
3. Mature – The company creates what are called Process Information Offices (PIO) to manage four areas: Product creation, Order to delivery, Customer and service, and Business and support. These then run the COEs mentioned above. In this stage, the CIO also climbs the ladder to become a member of the executive board. IT now becomes a true business partner, highly focused on business processes.

Developing a road map

For companies looking to make the above business transformation, Peters outlines a few steps to move from the immature to the mature stage:

• Harmonize the business relationship function, and elevate it to be closer to the business decision making side. This is necessary to avoid disrupting business continuity as you’re making the change.
• Get people in place to coordinate the business relationship with the IT organization. Develop business oriented COEs and Shared Services.
• Leadership – Someone at the top needs to be responsible and accountable for this new aspect of your business. This is the chance for the CIO to propose a new governance model.
• Increase that governance, and deploy it throughout your business processes.
• Continue improving your process skills, and make sure that more and more modern technologies get embedded into your business process, to drive better efficiency.

As Peters says, the CIO should be the one proposing the transformation from IT to Business Technology, and is best positioned to run it. He should be the champion of the move from immature to mature.

Editor’s Note: Nearshore Americas drew much of these insights from a webinar recently held that featured  Peters as a speaker. The webinar was hosted by Softtek.