The most obvious example is in Sales and Marketing, where its projected that by 2017 the CMO will spend more on IT than the CIO [per Gartner]. However, this trend is occurring in other parts of the business as well. As a technology executive by trade this is a scary trend – what about security, controls, disaster recovery, network compatibility, etc.? How can a CMO, COO, VP of Manufacturing make the right decision about a new system?
While those questions may seem reasonable, it’s more interesting to think about why this trend is happening instead what the impact is – at least initially.
Over the years IT organizations grew in size and power by amassing more and more applications and infrastructure, becoming the foundation that enabled core business processes, and the focal point for new security compliance regulations. This “new” IT organization became the logical place to manage and govern systems and processes. Support organizations, change control processes, enterprise architecture, and business analysts emerged to bring stability to the ever changing systems landscape. At the same time, demands for business and product innovation grew and placed increased demands on the technology to keep up. As a result, IT morphed from a group of innovation and technology enablement resources to the organization often seen as the bottleneck telling LoB executives why something couldn’t be done or justifying the months it takes (and frequently years) to implement a solution.
IT gained independence, moving out of the CFO shadow. Budgets grew, and with them so did the creation of independent strategies focused on cost management, security, integration, and support. That strategy, however, tends not to be one of driving revenue, market, or value share for the company – which does tend to be the strategy of Operations and Marketing. As of 2014, an estimated 55% of enterprise IT budget is allocated to maintaining the existing portfolio of services (support, security, governance) while only 22% is allocated to supporting business growth [per Deloitte CIO Survey]. This gap is shrinking but is still mostly focused on non-business growth and value creation activities. While supporting existing operations is important, so is ensuring the right allocation of budget and attention to the priorities of the business, else they are incentivized to find their own alternatives to support their initiatives.
If the culture and misaligned priorities were the drivers for Operations and Marketing to look for other options, Software as a Service (SaaS) was the catalyst that sparked the shift. Salesforce is the most notable example, but there are many others as it seems the majority of the software industry is moving toward this subscription model. What Salesforce does really well is drive the perception that their product (mainly CRM, but growing) is not “Software” and thus does not require traditional IT to implement. Over the last five years, I’ve seen numerous examples of Salesforce implementations being sold to, approved by, and implemented by the Marketing organization – with IT only to be brought in to manage it after its already there (and often surprised). They are essentially selling against the negative perceptions of traditional IT:
These are enabling statements and in stark contrast to how enterprise IT organizations are generally viewed – as a command and control organization not primarily focused on driving business value. Again, Salesforce is just one of the more obvious examples but Microsoft, Oracle, and countless new and smaller software vendors are moving in this same direction. It’s conceivable that soon the majority of services that IT provides today can be purchased directly in a SaaS model instead of through existing IT channels.
So, is it doom and gloom and is IT destined to be a commodity rather than a true value adding service? Not necessarily, as new operating models are emerging that focus on partnership, agility/speed, and value creation. Below are some thoughts on areas IT can focus on to make up some lost ground to SaaS providers.
New IT organizational structures are emerging that focus on both low and high speed delivery. For example, legacy ERPs or key back-office systems, where stability is a premium, should not have the same support structure as new product development and thus IT can be structured to support and enable both. Some IT organizations are going so far as to split into a business as usual group – focused on security, process, and legacy/enterprise system support – and an IT Services organization, unencumbered by supporting legacy processes, solely focused on building intimate trusted relationships with the business and providing agile, flexible services to its users
Once devised to provide a more effective software development process, Agile principles can be applied more broadly in enterprise IT to gain a more internet and effective relationship with their customers. Concepts such as Minimum Viable Product, iterative delivery, DevOps, and rigorous prioritization with defined business facing product owners can be applied in a number of contexts.
Furthermore, recognizing that some services have become commodities and aggressive pursuits for reducing cost and resource allocation for them can enable an increase in “business value” budget allocation. Workloads in the cloud, integration, recognition and adoption of SaaS solutions, and reducing the support footprint for low-value solutions with offshore or service partners are examples of how IT can take cost out of the business as usual bucket.
There are others, this is just a starting point, but this is how the SaaS vendors operate and how they have slowly become favorable options for business decision makers looking for rapid and agile partners to implement solutions that enable new products or processes. Maybe IT should view itself as a products and services vendor that has to value trusted relationships and rapid value delivery, and ultimately strive to be the preferred “vendor” or technology services to its customers, instead of someone else…
Happy to discuss more and interested to hear what others think in the comments or in person.