IT sourcing practises damage business IT alignment
IT-organisations are more than ever before under pressure to cut their cost. Many business managers see IT as a cost centre which adds limited value. And activities with a limited perceived value are the ones which get the highest cost reduction targets.
In reality does IT add a lot of value, but the typical IT organisation is not able to sell that message. It starts with the subjects IT talks about with the business. In 9 out of 10 cases is IT uses to automate manual activities resulting in a cheaper and faster business process. So using IT using to reduce cost.
The IT organisation increases this perception by organising itself into functional silo’s in an attempt to increase internal efficiency. So all network engineers in one department and all application developers in another. To improve standardisation and efficiency even further best practises and models like Cobit (IT governance), BiSL (information management), ASL (development), CMMi (development), ITIL (operations) and ISO20000 (operations) are implemented to standardise processes and control.
This ‘horizontal’ design allows for maximum efficiency from an internal IT perspective. It is therefor not more than logical that this approacg is also reflected within the sourcing strategy: the network infrastructure or application development is being outsourced, again to optimize the IT budget (typically forgetting the trade off between positive effect on IT value versus negative effect on business value).
The IT value created from a business perspective cuts vertically through the horizontal IT ‘ stacks’ and process models (from information mgt to development to operations). One can however seriously doubt whether the actual business demand will survive a collision with all the standard process models and best practises. I have seen change management procedures which have 15 control and decision making steps. Nothing moves anymore within such organisations and IT people are keeping each other and the business busy with procedures and templates. In the mean while is the business getting more and more frustrated with the IT.
By the continuing increase of standardisation, among other driven by outsourcing, get the real demands of the business forgotten, damaging the perception of IT as a value centre. In many cases do the business managers trying to sell the product in the front office (KPIs: flexibility, time-to-market) the same IT service as the business manager running the back office (KPIs: low cost, high volume). The result is a vicious cycle of business managers getting unhappier with the IT services delivered, leading to even more pressure to cut cost (the balance shifts too far to the right in the illustration below).
I expect myself that the whole trend of standardisation might be at the top of its cycle and that business units will soon start demanding more tailor made IT services again. Either the centralised/shared IT organisation starts to break down some of its walls are the decentralised business units will start building their own IT organisation again to compensate the mismatch between demand and supply.
This also means that IT organisations have to rethink their current sourcing practises as outsourcing per horizontal stack limits the ability to align its value chain to the business value chain.
In reality does IT add a lot of value, but the typical IT organisation is not able to sell that message. It starts with the subjects IT talks about with the business. In 9 out of 10 cases is IT uses to automate manual activities resulting in a cheaper and faster business process. So using IT using to reduce cost.
The IT organisation increases this perception by organising itself into functional silo’s in an attempt to increase internal efficiency. So all network engineers in one department and all application developers in another. To improve standardisation and efficiency even further best practises and models like Cobit (IT governance), BiSL (information management), ASL (development), CMMi (development), ITIL (operations) and ISO20000 (operations) are implemented to standardise processes and control.
This ‘horizontal’ design allows for maximum efficiency from an internal IT perspective. It is therefor not more than logical that this approacg is also reflected within the sourcing strategy: the network infrastructure or application development is being outsourced, again to optimize the IT budget (typically forgetting the trade off between positive effect on IT value versus negative effect on business value).
The IT value created from a business perspective cuts vertically through the horizontal IT ‘ stacks’ and process models (from information mgt to development to operations). One can however seriously doubt whether the actual business demand will survive a collision with all the standard process models and best practises. I have seen change management procedures which have 15 control and decision making steps. Nothing moves anymore within such organisations and IT people are keeping each other and the business busy with procedures and templates. In the mean while is the business getting more and more frustrated with the IT.
By the continuing increase of standardisation, among other driven by outsourcing, get the real demands of the business forgotten, damaging the perception of IT as a value centre. In many cases do the business managers trying to sell the product in the front office (KPIs: flexibility, time-to-market) the same IT service as the business manager running the back office (KPIs: low cost, high volume). The result is a vicious cycle of business managers getting unhappier with the IT services delivered, leading to even more pressure to cut cost (the balance shifts too far to the right in the illustration below).
I expect myself that the whole trend of standardisation might be at the top of its cycle and that business units will soon start demanding more tailor made IT services again. Either the centralised/shared IT organisation starts to break down some of its walls are the decentralised business units will start building their own IT organisation again to compensate the mismatch between demand and supply.
This also means that IT organisations have to rethink their current sourcing practises as outsourcing per horizontal stack limits the ability to align its value chain to the business value chain.
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