Once upon a time, there was a multi-billion-dollar conglomerate (whose name you probably know).
To stay competitive, the company duly increased its IT department headcount, purchased new IT systems, and invested in proprietary software development.
The company’s IT function kept growing larger and more complex.
However, IT was bringing increasingly less value to the business, as the IT department could just barely keep up with so many IT systems, policies, and compliance requirements.
The IT headcount kept getting bigger and bigger, as the IT department needed to support unnecessary assets.
At the same time, revenue and operational efficiency hardly budged.
Why? Because the company’s IT function didn’t proactively solve end users’ issues. Instead, IT was working for itself and generated new problems as technologies aged and operational processes grew redundant.
The above story isn’t unique.
60% of tech leaders described their current IT landscape as complex, and three-quarters of this group said it was so complex as to be unmanageable.
Why enterprise IT transformation is more about investments in processes rather than just new software
Enterprises once had the advantage of acquiring best-in-breed software. Yet today, many struggle to keep up with the pace of change. What was once a cutting-edge enterprise technology (such as COBOL) is now a heavy anchor hampering the ability to innovate.
Likewise, people originally employed to service legacy enterprise IT programs now lack the skills and motivation to challenge the status quo.
Technology is important, but the people dimension (organization, operating model, processes, and culture) is usually the determining factor. Organizational inertia from deeply rooted behaviors is a big impediment.
As a result, enterprises face an alarming disconnect between IT (as an enabler) and core functions (as a driver) for transformation.
For decades, IT departments operated in isolation from the core business. As Joe Peppard of the MIT Sloan School of Management CSIR has pointed out: “Despite their mission, which often talks about driving corporate-wide innovation and digital transformation, chief information officers, as heads of [IT] departments, are frequently reduced to running a metaphorical island.”
Heritage IT departments are siloed from other business units and mostly deal with back-office tasks: maintaining legacy systems, supporting business apps, running security checks, providing updates, and so on.
Culturally and operationally, IT people stay at the margins of operational efforts, whereas the modern market landscape expects IT to bring new technologies to the mainstream.
Every company needs to become an IT company
Tech adoption’ times ‘tech capability,’ multiplied ‘to the power of trust.’ This is what I feel every company needs to do to become a software company.
Traditionally, companies define their business in terms of the products or services they sell: We’re an e-commerce organization, We’re an apparel company, We’re a fashion brand, We’re a biotechnology firm.
Yet digital technologies have grown engrained in every business and now dictate a company’s market position.
“Computing is a core part of every industry. A car is now a computer. Software skills are a valuable resource. I don’t think in ten years we will have [industry] demarcations. We won’t have the tech industry and other industries,” said Dieter Zetsche, chairman of the board of management at Daimler AG and head of Mercedes-Benz Cars, during a Mobile World Congress (MWC) panel with Satya Nadella.
The increased role of tech became evident during the pandemic, which dramatically changed the ways (and the speed) of doing business. Among companies surveyed by IBM, 59% accelerated digital transformation during the pandemic and 66% said they completed digital projects that previously encountered resistance.
Organizations that managed to quickly switch to remote work and remote product/service delivery saw massive growth. Over 100 global companies added $1+ billion in market cap during 2020 alone (despite the economic slowdown).
The pandemic also accelerated the adoption of new digital channels by consumers, creating what has proven to be sustained demand for doing business online.
When technology is everywhere, businesses that don’t embrace it risk becoming obsolete.
Due to competitive pressure from digital-first players, 80% of heritage financial institutions can be commoditized or exist only formally by 2030 if they continue the same course.
In heritage organizations, the gap between IT and core business runs deep and often manifests itself in the form of:
- Frequent security breaches
- Ballooning IT tool sprawl
- Overspending on IT infrastructure
- Slow time to market
- High applications and other assets’ TCO
Ultimately, it manifests itself in the form of lost customers, competitive advantage, market share, and revenue.
Signs of problematic IT
Heritage IT departments cannot muster the speed companies need to navigate the modern market realities due to low process maturity, non-existent engagement with other functions, and limited visibility into end users’ needs and goals.
And that’s why forward-looking enterprises are looking to reinvent their IT departments.
3 pillars of a successful enterprise IT transformation program
When companies consider an IT transformation project, the discussions eventually lead to upgrading the IT department to partner status.
In other words: They try to establish a moat between IT and the core business by coaching the IT team to deliver faster and better IT services.
While the partnership model isn’t inherently bad, it may be prone to tunnel vision. If you’re still measuring IT strategy success in terms of budget spent or percentage of app deployments done on time, you’re not seeing the full picture.
Businesses don’t generate value from owning and effectively operating IT systems. The value comes from putting said systems in the service of the right objectives.
Your IT department’s role is to provide your business function with the assets they needed to achieve their goals — sell more services, improve client service levels, and generate more leads.
Yet many in-house IT departments lack the knowledge to implement leaner operational workflows and the ability to apply innovative thinking to real-world customer problems.
So how can you reconcile the business and IT?
At Intellias, we call for a pragmatic approach to enterprise IT digital transformation that is based on three pillars:
- Evolution of IT from a supporter to a designer role
- Bottom-up approach to tech adoption
- Lean IT governance driven by Centers of Excellence
Let’s break things down.
Evolution of IT from a supporter to a designer role
IT as a supporting function is mostly focused on putting out fires.
Glitching app? Need to call the IT guy. Unplanned system downtime? Probably the IT department is up to something again.
This type of thinking is common among staff when the IT department is primarily focused on ensuring that the current IT function operates as it should (at least most of the time).
Because the IT team is disconnected from the wider operational context (e.g. they’re not sure why scheduling maintenance at 3 pm on a Monday isn’t a great idea), the level of services they deliver is mediocre at best.
At the same time, savvier business users, tired of ongoing inefficiencies, take matters into their own hands by installing unauthorized apps, writing custom automation scripts, or otherwise trying to fix the tech issues they’re facing every day.
As a result, shadow IT — the use of various technologies without IT department knowledge or approval — grows. As much as 30% to 40% of IT spending in larger enterprises goes to shadow IT. Apart from costs, shadow IT also increases the risks of cyber breaches and data leaks.
What do digital leaders do differently?
They upgrade the IT function to a designer role, in which tech people are responsible for defining new digital business processes for the line of business and end users.
- A supporter IT department is mostly concerned with things such as ensuring high availability and adequate security for a mobile banking app.
- A designer IT department works with customer-facing staff to jointly create a digital account opening process for the bank’s customers.
The process assumes both a cultural and operational shift, where IT people are progressively trained to seek out new technology use cases rather than merely support day-to-day operations.
As part of our IT transformation services, we work with your organization across the people–processes–technology axis. Our goal is to help your people adopt the new designer mindset, then figure out and implement the right processes for implementing the new vision, and only afterwards select fit-for-purpose technologies.
Bottom-up approach to tech adoption
Because CIOs stand at the helm of the organization’s IT efforts, they’re often pressed with the mission to reconcile line units’ goals and needs with IT resource capabilities.
Every CIO in charge of an IT transformation process faces a tough balancing act:
- Cost optimization vs investment in innovative capabilities
- Higher product security vs higher interoperability
- Predictable and reliable IT services delivery vs better operational agility
The need for greater alignment in the organization is the central element of digital transformation, which is often characterized by four fundamental changes in IT service requirements:
- Speed becomes more important than cost
- Wider choice of technologies over standardization and controls
- On-demand access to infrastructure and extra computing resources
The obvious question is how you can deliver on these objectives.
Our recommendation is to establish a provider-to-market communication model in which IT as a function interacts with the business.
Here’s what better provider-to-market communication means in practice.
Picture this: You come to a branch to open a new bank account.
The clerk requests your ID documents and goes to make a copy. Although you are already a customer and your identity has been verified, the clerk cannot access this information.
Afterwards, you’re once again asked to provide your personal details — address, up-to-date contact information, and so on. The process takes a long time because the system is glitching.
Within half an hour, the clerk finally says you should now receive new login details for your account, but those don’t arrive. After spending some time on the phone with the IT department, the clerk apologizes profusely and asks you to come by tomorrow to complete the account setup because there’s planned maintenance going on.
The above situation is frustrating for the client and the clerk, but that’s just one business dimension. The bank could have serviced more customers should their account opening process have been better designed: client data synced instantly, account forms pre-filled, and ID documents scanned and validated with image recognition software.
Such inefficiencies in the customer experience (CX) have a direct impact on corporate bottom lines.
Customers who had the best past experiences spend 140% more compared to those who have the poorest past experiences and are 4.5 times more likely to pay a price premium.
Yet only 27% of companies with average customer experience scores indicate that they have a clear view of which technology platforms they need to leverage to remain competitive and relevant to customers.
That’s the knowledge gap you address by establishing effective provider-to-market communication.
Successful organizations can identify problems at the grassroots level, such as an inability to identify repeat customers in service channels, lack of past purchase data at the point of sale, and no inventory visibility among floor staff. Then they can bring those issues in front of the IT staff to jointly identify the optimal tech solution to the described problem.
By building IT solutions from the bottom up, organizations don’t fall into the trap of pursuing the wrong objectives or facing fierce cultural resistance.
Moreover, by designing IT services and solutions around real-world business users and customer needs, you’re able to see justifiable ROI in terms of measurable (and often monetary) improvements across key KPIs.
Lean IT governance, driven by the Center of Excellence (CoE)
Now that you better understand your people and the technology they need, it’s time to address the most complex element — IT processes.
Process (re)design is a key part of IT transformation for enterprises, which are largely driven by almost biblical beliefs about doing one thing one way (never another way) and are constrained by inefficient tooling.
If your IT systems were never designed to handle self-service password resets (for example), your IT teams will feel obliged to run this process manually for lack of better alternatives.
The goal of our pragmatic approach to enterprise IT transformation is to progressively build new processes and supporting technology platforms that will:
- Replace legacy components
- Automate manual and menial work
- Unify and rationalize available IT resources
- Increase the speed and quality of new product development
- Improve the corporate security posture
- Enhance customer service levels
To accomplish the above goals (both within our company and for our clients), we have designed an IT function framework that creates the optimal people–processes–technology dynamics.
We apply a bottom-up approach, where we first work with the line of business leaders and available end-user feedback to identify the most problematic areas, which we then turn into ROI-driving business outcomes.
At the strategy level, we collaborate closely with the technical C-suite to:
- Evaluate the as-is state of the enterprise IT environment
- Define key priorities and areas for investment
- Align corporate goals with IT objectives
To lead the IT legacy transformation initiative, we establish an IT Center of Excellence (CoE) — a unit that combines strategic decision-making and executive powers. Typically, a CoE is led by the company’s CIO and includes advisory team members from our end (senior product IT manager, enterprise architect, SRE & DevOps consultants, etc.).
Jointly, we develop a vision of how IT will be made part of the digital product design function and empowered to produce the most value for the organization at large.
Afterward, we bring those ideas to life through a series of quick wins — tangible outcomes achievable in a short time. Quick wins are the building blocks of a larger transformative effort that includes the progressive modernization of legacy IT systems, toolkits, and applications.
Our goal is to rationalize your IT portfolio by replacing legacy, outdated components with better-suited technologies. These can include:
- Off-the-shelf solutions for cost optimization and operational efficiency improvements. Right-sized IT platforms, along with new self-service capabilities, shorten the time to market for new products and improve your ability to better serve customers.
- Owned technologies for creating proprietary digital products to differentiate your company from the competition. Over 70% of top economic performers differentiate themselves with their software. We can help you become one of them.
Ultimately, our goal is to make your IT function the center of technology innovations via closer integration with the core business and leaner operational practices.
The outcome: IT becomes a profit pool, not a sunk cost
Remember the multi-billion-dollar conglomerate whose IT function grew too big and too ineffective to remain competitive?
The story did end well. By recognizing and addressing the growing chasm between IT and business, the company took decisive action and went full speed ahead on IT transformation.
Within 18 months, the company’s IT function evolved from a laggard to a leading disruptive function, boasting high service quality and satisfaction scores.
Thanks to better alignment between business goals (revenue growth) and IT capabilities (a faster software delivery lifecycle) the company’s CIO no longer struggled to secure sufficient funding, while the IT team got into the driver’s seat of designing new solutions for capitalizing on emerging profit pools.
Wondering what it would take to build an outcome-driven IT function? Contact Intellias to receive a personalized assessment based on our high-impact enterprise IT framework.