IT Focus Area: strategy
December 6, 2013
The Power of Business and IT Unification
According to the U.S. Federal Reserve, information technology (IT) drove the late 1990s’ historically high productivity growth. However, research has shown that despite immense advances in IT capabilities since then, we have seen flat productivity.
After years of trying to align, business and IT have failed to work together in a unified fashion.
At many companies today we see divisive business environments. There is a lack of trust and poor communication between the business and IT. We also see conflicting priorities and artificial productivity, despite the use of modern technologies. In essence, the business and IT still have a tough time working together effectively, and this has kept overall productivity at dangerously low levels by historical standards.
Business and IT have been drifting apart, despite best intentions by both sides. For decades, IT infrastructures were designed to run systems of record applications. Business units, on the other hand, have rapidly adopted systems of engagement. As a result, new stress points have emerged in data centers, devices and infrastructures.
Since the early 2000s, external business complexity has been growing faster than companies’ abilities to adapt. Complexity severely undermines productivity by creeping into cross-functional business processes, thereby creating new silos, work effort redundancies and project ownership ambiguity — resulting in less innovation and flat productivity for the past decade.
Systems of Engagement vs. Systems of Record
Silicon Valley technology consultant and best-selling author Geoffrey Moore famously divided the world of information management and collaboration into two different categories: systems of engagement and systems of record.
To get around a traditional IT culture that seems to inhibit business innovation and productivity, business units are driving systems of engagement — systems that “engage” through online communities, crowdsourcing, social customer relationship management, social media, and other forms of collaboration — while IT has been “keeping the lights on” supporting systems of record (e.g. back office information that “record,” such as enterprise resource platforms, finance and accounting systems and human resource systems such as payroll).
The Case for Business and IT Unification
Because businesses cannot control the rapid pace of business complexity, they should instead manage its operational consequences — work effort redundancy, white space ambiguity and shrinking innovation time. These consequences are essentially problems of information visibility and unclear priorities. Until companies directly address them with a long-term vision, business complexity will continue to weigh down productivity growth.
The solution is to manage the consequences of business complexity through improvements in data collection, enterprise data visibility, knowledge sharing, modeling tools and other similar measures. These are the main components in business and IT unification: a vision to leverage modern IT capabilities to ensure that everyone speaks the same language and shares the same priorities at the very start.
More enterprise IT expenditures are being managed outside the IT department's budget. With technology budgets shifting toward the business, technology decisions are essentially leaving central IT. In other words, the perceived business value of centralizing IT is rapidly eroding. As shown by the rise of shadow IT, the business is finding outside alternatives to try to meet their internal productivity and technology needs.
Business and IT unification squeezes out the causes of low productivity, and therefore, sets the stage for re-invigorating enterprise-wide, measurable productivity growth.
5 Steps to Business and IT Unification
Business and IT unification is a transformational journey that requires steady, unwavering commitment. There are five fundamental steps that companies should take to reach unification in order to unlock innovations in process efficiency, process optimization, insights and value creation.
1. Application neutral zone
The common bond between business and IT is the set of applications delivered and supported through IT, known as the application portfolio. This common bond is like a neutral zone between business and IT. Over time, the applications pile up and eventually lose their financial value and business usefulness. A large company can easily have thousands of applications, each having opaque costs associated with areas such as maintenance, support, innovation, infrastructure and storage.
Unification, as well as sound business practice, requires removal of dead weight in the application portfolio. IT and the business should inspect the application portfolio using a fact-based, data-driven scoring method. Then, rank their relative importance based on these scores. Business and IT should categorize applications according to their investment priority much like a financial portfolio manager categorizes investments: buy, hold or sell.
2. Lean IT
Determine and measure how much time and money IT spends simply with “keeping the lights on” activities. Usual culprits behind “keeping the lights on” growth include business complexity, antiquated processes, unmanaged application portfolios and complacency.
Go after easy-to-find cost savings such as waste around mismanaged contracts or costs around maintenance coverage, software licenses and inefficient power consumption, to reduce costs. Equally important to the leaning process is the optimization of computer hardware utilization and redundant or aged applications. By leaning IT, capital allocation is improved — lowering baseline costs, slowing the pace of consumption and reducing complexity. It ultimately helps organizations recapture the most valuable commodity: time.
3. Measure your company’s transformation capacity
Complete transformation can only take place after achieving sufficient capacity for transformation. Without measuring this capacity, executives run the risk of setting inappropriate expectations for transformation. A way to measure an organization’s baseline capacity for transformation is by measuring time, talent and transparency.
Time. How much time is spent “keeping the lights on” and how many people are available for a transformational project?
Talent. Are the skills sets for transformation available? Is training and education needed? How does this affect salaries and budgets?
Transparency. How will we measure our transformation? When we want to move faster, will we know what “faster” really means in business terms?
These variables should be measured quantitatively and taken together to compute an overall transformation score. Employee bias and optimism tends to lead to overstate the true capacity for transformation but by using a data-driven approach, appropriate expectations can be established.
4. IT infrastructure modernization through the hybrid data center model
Since systems of engagement and systems of record must be simultaneously supported by IT today, increased attention should go toward the hybrid data center model. Infrastructure modernization helps enable seamless integration with cloud-based, selectively outsourced applications and legacy systems.
5. A unified digital platform for Business and IT unification
By implementing a unified digital platform, business and IT can transform a company by significantly lessening data ambiguities and clarifying priorities. As a result of broadening the visibility of actionable information across silos and business units, data-driven process optimization and productivity become a natural response throughout the organization.
Both business and IT have roles to play in the execution of a business model supported by a unified digital platform. Through this transparency of a unified platform, business leaders and IT can begin to optimize existing functions and processes. And, in the process, discover, model and create new value chains based on data-driven information and knowledge. This accomplishes the unification that did not exist before, as the business and IT start to speak the same language and share the same priorities. As they define and execute new value chains that create new competitive advantages, transformation, and process innovation emerge, increasing productivity growth. While other IT initiatives may appear to be innovative, they are not transformational if they do not create new competitive advantages and new value chains.
Setting the Stage for Productivity
By unifying business and IT, companies can set the stage for a steep upward trajectory for productivity not seen since the late 1990s. As a company goes further along its business and IT unification journey, it can achieve compounded productivity gains that will eventually accelerate its innovation engine.
As more companies throughout our economy pursue business and IT unification, significant interdependent network benefits will result. Interdependent companies can co-operate much more productively in ways that advance mutual priorities, and this will form a continuously accelerating unification feedback loop that will create incremental value throughout the value chains they share.
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