IT Focus Area: strategy
October 14, 2015
Is Your IT Organization Driving Business Transformation?
They all disrupted and transformed their industries.
Instead of speaking with an insurance rep on the phone, you can now get a quote and buy a policy online. Instead of driving to your local video rental store, you can now download and stream movies directly from your device. Instead of calling a cab and staring out a window waiting for it to show up, you can now order a car through an app and check its route to your location on your smartphone.
The competitors of Esurance, Netflix and Uber have struggled to keep up and evolve. Many have disappeared through bankruptcy or are clinging to old business models that are no longer relevant to today’s consumers and how they want to purchase these services.
One of the best case studies is how Blockbuster denied the impact online streaming would have on the video industry. Another example is how Circuit City tried to bring a 1980s business strategy into the new millennium. Many Millennials probably don’t even recognize these brands, which at one point were market leaders in their segments.
Every Company Should Be a Technology Company
The continued evolution of technology has made it easy for startups to compete with big companies.
This transformation to a technology-based business model puts IT organizations front and center in the business plan. In the past, IT organizations were typically considered an overhead expense and measured mainly by how cost effectively they could keep the IT infrastructure running. Now, IT organizations are integrated into the corporate strategy and play an instrumental role in the business’ success.
Today’s IT organizations must meet the demands of customers who want to do business 24/7 and have access to business services from any device. Instead of simply filling requests for new technology, IT organizations must now provide new services in a flexible, scalable and always-on model. They are at the core of enabling businesses to be more agile and innovative. The value of these services is in their ability to transform and differentiate. Faster and cheaper are expectations set for all parts of a business and are no longer the key deliverables of an IT organization.
This means that IT organizations are no longer measured by the cost savings in their annual operational model but by the value they deliver to the business. They’re also measured on time-to-value. How quickly can they deploy services to help the business respond to market and competitive demands?
Instead of simply fulfilling requests for new technology, IT organizations are now service brokers that drive innovation across the business. For example, IT organizations can use technology to launch new services, improve the delivery of existing services, change business models and expand into new markets.
Here are three ways the IT organization is critical to business transformation:
Alignment of Vision
- Identify and acquire new markets and customers
- Broker solutions rather than being an impediment
- Link diverse parts of your business to optimize the value and functionality of your data
Direct Contribution to Business Success
- Differentiate your company based on aggregation and analysis of data (think TripAdvisor)
- Significantly shorten the links within the supply chain (online retailers)
- Make products that were not financially viable cost effective
A Model for Agility and Flexibility
- Building of an operating model that is responsive to seasonality and change (bursting to the cloud, acquisition integration, speed of provisioning, etc.)
- Cost and time-effective support of evaluating business options (app/dev, use of virtual environments for testing of new features and load testing)
Modernization vs. Transformation: What’s the Difference?
Modernization and transformation are two different animals.
Modernization is refreshing your technology. Doing this likely won’t change the way you do business. For example, your company may switch from voice to VoIP. However, employees will do the same things with both services – make calls. Switching from voice to VoIP isn’t transformational. It is updating your voice system to take advantage of new technologies. Yes, VoIP makes collaboration easier and may dramatically reduce your costs for voice calls. However, this switch is not transformational to the business nor does it differentiate you in the market.
Transformation isn’t just about replacing and updating your equipment or IT infrastructure. It’s about using technology to accomplish what wasn’t possible or was too expensive to implement and support in the past. Transformation changes the way you do business and reshapes your corporate culture. It makes you agile, so you can quickly release new services and respond to market demands. This ultimately enables you to differentiate yourself, beat your competitors and increase revenues.
Our Transformation Story
It would be unfair to you if we wrote about the importance of business transformation without walking the walk; here’s how Forsythe has transformed over our 44-year history.
In 1971, Forsythe started out as a technology leasing and financing company. As the needs of Forsythe’s clients evolved, Forsythe transformed itself into a data center, hosting and managed services provider. Due to this transformation, Forsythe now helps clients design, implement, deploy, and manage their hybrid data center infrastructures and applications.
Without this transformation, Forsythe would probably not exist today. This is especially important now as enterprises take advantage of “cloud” and as-a-service IT solutions. These new models are all disruptive to the traditional equipment resale model, since compute, storage, etc. are now bought as services rather than as equipment.
How Your IT Organization Can Enable Transformation
Here are four ways the IT organization can uncover opportunities that will transform your business:
1. Start with your customers.
Transformation begins with your customers. When you focus on what your customers need, you’ll uncover opportunities to transform your business.
For example, your CIO and CMO can partner to improve your customers’ digital experience. You can use technology to gain insights into how customers interact with your business. When you do this, you’ll find areas for improvement that will help you create a better customer experience and drive business growth.
2. Proactively collaborate with the business.
The first key to transformation is aligning the IT organization’s goals with the business’ goals. Both sides need to clearly state their goals and work together to achieve them. IT should lead this collaboration.
Look beyond the shiny penny to set goals that align with where the business wants to go. For example, you may not need the latest tech tool. You may already have too many tools, which makes your IT costly and complex. Or you may have old technologies that don’t allow you to keep pace with your competitors. To transform, you need the right technologies along with a willingness to change. IT should proactively drive this change throughout the organization.
3. Understand your strengths and constraints.
Create a scorecard of your strengths, weaknesses and IT costs. Many IT organizations omit their facility costs, such as space, power, cooling and cabling. Calculating the total cost of ownership (TCO) will show you when it’s more cost effective to manage or host something in house or via a third party.
4. Take advantage of strategic sourcing.
To transform, IT organizations should determine their strategic sourcing strategy for everything that doesn’t drive business value. For example, you can partner with software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), hosting or managed services providers. Strategic sourcing frees up your internal IT team to innovate, as you won’t have to spend all your time on mundane tasks.
Ask yourself if a specific IT task is core to your business. Will it help you differentiate yourself from the competition? If not, can you find a strategic sourcing partner who can complete the task more efficiently and at a lower cost?
Strategic sourcing also reduces your overhead. Most transformational IT services are purchased with operational expenditures (OPEX), so you won’t need to invest your limited capital expenditures (CAPEX) into equipment and apps. For example, using an infrastructure-as-a-service (IaaS) partner allows you to scale quickly and cost effectively while maintaining your target service level agreements (SLAs).
However, there are certain things that should remain in house such as your security and compliance policies. Sourcing the wrong things can hinder your flexibility, increase your risk and disenfranchise your IT organization. It is also important to work with the business to develop SLAs that you can incorporate into third-party vendor contracts. This will allow for strategic alignment between the business and IT.
Why Transformation Is Not Optional in Today’s World
The pressure for business transformation is coming from all corners.
Customers no longer accept waiting to speak with a sales or services rep to have their questions answered. They want low-touch, high-experience applications that give them personalized information at their fingertips. They also want to do business at their convenience and not be limited to the traditional hours of 9 a.m. to 5 p.m. They want access to services:
Around the clock. From any location. And on any device.
Meanwhile, executives can’t afford to lag behind agile startups. They are pushing for speed, so they can quickly deliver new services and meet customer demands. They also want technology that will help them differentiate themselves from their competitors so they can maintain or take market share.
Employees are also demanding transformation. Many of the employees who manage legacy technologies and applications are approaching retirement. This presents a challenge for the business to find replacement resources that can support these legacy environments.
On the other side of this challenge is the recruitment of younger employees. Talented Millennials don’t want to work for their father’s company with outdated systems, processes and tools. They want to work with the latest technologies and enjoy a demanding, yet fun, corporate culture.
Businesses are all competing to attract this top talent. They realize that a cubicle and a slight pay increase every year isn’t going to cut it. To attract talented Millennials, businesses must transform their cultures and provide the latest technologies.
Transformation Shouldn’t Be a Scary Word
Transformation isn’t something new. Successful companies have always transformed themselves. What is new in today’s world is that transformation is no longer optional. The rewards of transforming your business are immeasurable, and the risks of not doing it can crush you.
Many people think that “transformation” is a scary word. They think it’s a road to nowhere and that it can’t be done. However, enterprise resource planning (ERP) was scary when it first appeared in our lexicon. It was expensive, as well as complex to implement and run. This gave it a low chance of success. Now, ERP is a basic part of business and can be procured in a software-as-a-service (SaaS) model. Customer relationship management (CRM) is another example, as Salesforce.com completely changed and disrupted the model.
Break Up Your Transformation
Transformation is no longer optional, but it also shouldn’t be a scary nebulous project. It’s easier to transform if you do it in measurable segments that can stand alone if your organization does not move on to the next segment. Thanks to cloud computing and “as-a-service” platforms, you don’t need to rush in. You can break down your transformation into bite-sized pieces and make the process manageable.
One key to success is to define your goals first, as opposed to immediately buying and implementing the latest technologies. Another key is to identify a strong partner who understands your business and has a proven track record of helping customers transform, versus simply modernizing technology.
Transformation is imperative in your journey to the new world of IT. If you take the time to complete this journey well, your company will thrive even amidst the most daunting changes.