I recently had the unique opportunity to chat one on one with a highly experienced CIO with a history of managing IT large shops. It was a fascinating conversation and eventually it wandered to the evolution of corporate IT in larger companies. At one point in the discussion, he started drawing on a whiteboard as he was describing his perspective. The whiteboard picture was a great way to visualize the IT transformations over the decades. In a break from my series on helping engineers get their great ideas to resonate with senior management, I’ve captured that discussion here including the visuals and added some additional perspectives as that conversation has stuck with me over the subsequent weeks.
Through the 80′s = Specialization
This graphic reflects various company business units with their IT function and staffing reporting directly into the business unit itself. As an example, the Human Resources business unit has their own “HR IT” department that is a completely self sufficient group of individuals with all of the tools and ability to support all the needs of the HR business unit. From basic helpdesk/PC support through server/application support and new application development needs, “HR IT” can and does do it all.
90′s to 00′s = Centralization
As depicted in this graphic, this decade of corporate computing reflects a great centralization effort across the industry. Company leadership noticed they were paying people in “HR IT” to say, fix PCs, as well as additional people with the same skill-set in “Finance IT” to fix PCs. Also, it was becoming more obvious that fixing PCs wasn’t a unique skill-set, rather, the same skill-set that could be sourced from a central team. Pooling the skill-set enabled an aggregate reduction in head count. If all department IT PC fixers totaled, say, 10, then a central PC fixing team could deliver the same level of service with, say, 7 people. Thus, cost savings became a big driver for this large scale organizational change over this decade for pretty much all IT functions.
The change wasn’t without pain. Business unit individuals were used to having an IT need and literally walk down the hall to “Bob the IT guy” and get immediate service. Once Bob became part of a central team, one could no longer just reach out to Bob and get that immediate high touch service. One had to call a “helpdesk” and report the need. Then the “helpdesk” assigned a request “ticket” number to the need. Next, the requester was informed of the “SLA” (service level agreement) to which their need would be serviced. Instead of bringing your broken mouse to Bob to have him pull a replacement from a cabinet and hand it to you immediately, you were told a new mouse replacement was on its way and should arrive within 24 hours or something clearly not as immediate.
This began a huge cultural shift in the business/IT relationship. In times prior, Bob was viewed as a trusted member of the business unit who knew everyone, knew the business, knew the priorities, and even knew the applications sometimes more thoroughly than the business users themselves. Bob knew that Sally got really frustrated with technology and needed extra time and attention. Bob knew that Jim had zero patience and would flip out if his needs weren’t met immediately. As IT became ever more centralized through out the decade, all of Bob’s high touch, high value service was getting replaced with narrowly defined IT “services”. Business users began experiencing “high call volume” delays and “We no longer provide that service” and “We can provide that service. Can we get your manager to sign off on the $X charge back?” IT became increasingly viewed as just a service provider.
I am going to date myself as I began my IT career seeing first hand this service provider transformation. I was “Bob” providing high touch, high quality service getting constantly re-organized into a more and more centralized IT functions. I saw the business user’s frustration grow and the quality of service plummet. I also appreciated that it was a necessity. The cost to provide high touch service wouldn’t scale to meet the business demand for IT in any sustainable manner from a balance sheet operating cost perspective.
This rise in IT being viewed as a “commodity” service provider that was increasing disconnected from the business gave way to the other IT trend in the 90′s: outsourcing. Once IT was a commodity, the next logical management thought process was: “Why should all these expensive IT people be employees? Why not shift them to contractors as well as shift a bunch of fixed cost to variable cost on the balance sheet?” IT already had plenty of contractors to supplement permanent staff with specialized skills. Shifting IT management to consulting firms also removes the complexities of aligning staff skill sets to rapidly expanding technology innovations plus reduces the IT HR overhead as well. Thus the 90s saw significant, large scale, IT outsourcing activities.
I personally went through such an outsourcing experience early in my career. I started as an actual department IT employee and then got caught up in the centralization activities followed by a massive outsourcing effort. Over nine years I probably had a new boss and a new reporting structure every six months. The company went from many thousands of IT employees world wide to literally 127 over the course of four to five years. I remember that specific number because it was such a dramatic transition (which is worthy of its own blog article). I also had five employers over those nine years as each wave of outsourcing involved larger and larger IT outsourcing firms
00′s to 10′s = Repair the damage
This decade for IT was equally disruptive as the prior. The wide spread use of the Internet created whole new marketplaces and opportunities for companies to get revenue from new products and services continued to drive up demand for IT. The dot-com crash brought a much needed fiscal correction to the fundamentally flawed business models of some Internet birthed companies. Though unfathomable at the time, in hindsight, a company has to make revenue at some point or the finite capital funding will shift to those that can demonstrate profit making ability. Yet, not everything IT was Internet related. There was still a need to operationally support the non-Internet activities of a company. Business folks were growing ever dissatisfied with IT services. IT, considered a commodity, had established the reputation for being big, slow, expensive, unable to change and unable to deliver on time. CIOs and IT leadership knew they had to fix this great divide of what was seemingly the business versus IT and IT versus the business.
As I’ve depicted in the graphic above, IT, still centralized, begins to repair the “relationship” with the business by adding new roles that bring IT closer to the business. Business executives complained to IT executives that they don’t know how to engage IT for services nor do they know how to escalate issues for effective resolution nor have a mechanism to ensure IT is working on their most important needs. Thus new IT roles like “business relationship managers/executives” are created. These roles involve highly polished communicators that know how to talk business to business people and enough IT to quickly navigate the monstrous IT organization to bridge the gaps. The business versus IT tension begins to reduce. Relationship roles expand to provide more people to address different levels and expectations within the business. Project management expands into program and portfolio management. Relationship managers now present a “book of business” or a “portfolio dashboard” to keep their business partners informed of what IT is working on and delivering for them.
You’ll also notice the size of the business units is shrinking. As IT continues to automate human activities, the business needs less humans. IT continues to grow to meet the demands of the business for automation. The actual total company employee count, in aggregate, starts to show and consistent and continuing declination trend.
For more on this people versus automation theme, I strongly encourage you to read the books and articles from Andrew McAfee at MIT’s Sloan School of Business as he has some phenomenal research and perspectives on this topic.
Towards the end of the decade and prior to the US financial collapse, the typical maturing IT organizational structure had delivery teams aligned to business units as well as teams grouped around common services. Developers might work for the HR aligned delivery team within IT but interact with database and platform engineers that were in a single pool reporting into a separate technology aligned management structure. I’ve tried to depict this with the almost overlapping circles between the business units and IT. IT begins the perception shift from a commodity to a trusted business partner. At the end of the decade, the US financial crisis put a screeching halt to the good progress IT and the business was making as massive staffing cuts were occurring at all levels of companies for survival.
The outsourcing waves of the 90s became less massive as those companies that did extreme outsourcing started pulling back in IT employees to fix the bruised relationship problems. A variety of pure commodity support functions (first level helpdesk, PC, server and network support for example) were still ripe for outsourcing. Another area that was ripe for outsourcing was software development and support. Low cost labor in places like India became attractive to IT management. IT failed to produce any hourly rate to quality model in the application support and development areas. Thus, from a finance perspective, it pretty much impossible to say with numbers why a $50 an hour application resource was that much better or worse than a $75 or $100 and hour resource. Thus, when an IT firm said they could provide those resources, offshore, for $20 an hour, CFOs put pressure on CIOs to take advantage of those drastic cost cutting opportunities. Thus business aligned delivery teams trying to manage employees, specialty contractors, on-shore and off-shore resources and their “book of business” with their business partners. These roles demanded strong talent to address all of these factors impacting success.
10′s – present = More disruption within IT
Although the current decade isn’t even at the halfway point, corporate IT coming out of the US financial crisis has been forced to evolve even more rapidly. IT industry buzz worthy trends such as “consumerization of IT/BYOD (bring your own device)”, “big data”, “cloud” and “cyber-everything/data breaches” have forced businesses and IT to further align and hold each other more accountable for the company’s overall success. IT itself, as I’ve tried to depict in the above graphic, is beginning to split very clearly into the portion aligned to the business and the remaining commodity portion. The business aligned portion of IT is essentially brokering the commodity portion of IT to deliver services to the business. At times, those commodity IT services are being brokered outside of the IT department itself to “cloud” providers. And, in situations where the business and IT delivery alignment isn’t crisply delivering needed value, the business is going around IT and brokering their own “cloud” provided IT services.
Within IT itself new roles are appearing to support the growing chasm between commodity IT and delivery IT. “Integration engineers/architects” represent a function that takes the application services the delivery teams needs to construct and aligns the various internal and external commodity technology components to host the application services. “Application/solution architects” expand to assemble plans to leverage existing IT assets as well as buy or build new assets. It is rare today for a corporate IT shop to embark on a completely green field software development project. So much IT solution options have been built up within companies as well as available via software companies that the majority of software development has morphed into targeted development to support the integration of existing to new purchased software components. “Enterprise architects” are looking across a wide range of project activities and trying to identify common patterns and leverage-able components so projects are less likely to build redundant technology for different business units. “Cloud integration architect/specialists” augment the knowledge of what company IT capabilities exist compared to cloud “x-as-a-service” capabilities. The IT solutions now need to consider beyond just buy or build technology to include sourcing the technology “as a service” from a “cloud” provider ss the best way to meet the business needs.
Another aspect to the business versus IT dynamic is becoming obvious. In prior decades, the business knew the business and just needed to give orders to IT to automate work flows or enhance existing automation. Thus the notion of “IT as order takers” existed where many IT organizations waited around to be told what to do by the business and then would run around and execute what the business was asking. I think, although controversial, it is increasingly more likely that those extremely aligned to the business actually know more about the business than the business. When a company’s products and services become more and more IT-like in form and function, the company’s delivery IT increasingly becomes more knowledgeable than the business because they know the IT side and have been rapidly partnering with the business in order to know the business. One supporting example would be the financial services industry. Sure, there is a significant predominance of bankers in banking, but if you look at the products a bank offers, a strong number are essentially technology in form and function (think ATMs, online and mobile banking, account to account electronic money transfers, online account opening, electronic statements, etc.). Many financial products can be researched, selected, purchased/enrolled, used, serviced and closed/terminated all digitally with a majority if not all bank back office functions technologically automated to the point that no human interaction occurs with any transactions. Hence in the graphic for this time period reflects a significant overlap between IT and the business.
Present and beyond = Continued evolution
What do the years ahead look like for corporate IT and business evolution? Not owning a crystal ball and only listening to the IT pundits, one might think corporate IT is going to disappear and the business is going to go directly to the “cloud” for all their IT needs. One can Google “end of the CIO” and scroll through the pages of articles making such claims.
I do think that that the trend of IT splitting into highly business aligned groups with a commodity/raw technology providing group is going to continue unabated. Additionally, I think there will be increased growth in business process outsourcing which, depicted as the example HR cloud bubble in the above graphic, involves not only using cloud IT services but having that cloud service provider take on more business tasks previously handled by company employees. “Commodity” business functions such as aspects of say, HR and Finance are the potential candidates for this complete business process outsourcing. Functions such as processing payroll, previously handled completely in house can now be a data file out of an HR system (potentially in the cloud itself) and into a new cloud provider to figure out who needs a check or direct deposit or a purchase card, etc. Due to the need for complex IT integrations of these services, passing data electronically between the company and cloud providers for various reconcilement needs, the business will need to partner with their IT delivery teams to effectively utilize these services. Thus, the business and IT partnership will continue rather than the cloud consuming in house IT.
Additionally, I see cloud service providers subbing out portions of their services to other cloud providers. This allows cloud providers to further optimize the cost to deliver services while at the same time increasing the contract and integration complexity for their customers. As far as public/private “hybrid” clouds, the potential for less security pressured industries, say non-enterprise software development companies, may gain “hybrid” traction. My guess is highly secure environments will grind to an almost halt with “hybrid” clouds due to the general security noise around cloud host-ers as well as all the access control, monitoring and reporting that, traditional on premise “identity and access management “ capabilities provide.
All in all, corporate IT is in constant evolution. The rate of evolution appears on all counts to be accelerating with no signs of any slowdown in the future. Anyone who isn’t prepared to have to constantly re-invent themselves should seriously consider a different career path than corporate IT.
Anyone disagree with my evolutionary perspective or future predictions?