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Executive Summary
The Corporate Executive Boards investigation into the five-year outlook for
corporate IT points to fundamental changes in how the function is organized
and managed. The IT function of 2015 will bear little resemblance to its
current state. Many activities will devolve to business units, be consolidated
with other central functions such as HR and Finance, or be externally sourced.
Fewer than 25% of employees currently within IT will remain, while CIOs face
the choice of expanding to lead a business shared service group, or seeing
their position shrink to managing technology delivery.
After interviewing and surveying hundreds of IT and business leaders, we
find that these changes are already underway. Many IT leaders are optimistic,
seeing changes as no more than the usual swings of the centralization
pendulum or a fad resulting from recent buzz around consumer technologies.
This study argues that the changes will be rapid, permanent, and radical. We
have advocated for a decade that IT leaders become demand shapers, not
order takers. Similarly, we now recommend that IT leaders devote the time,
energy, and resources to actively shape the coming transition.
Backdrop
Five years ago, less than 25% of business leaders rated their organizations
IT function effective at delivering the capabilities they needed. Today the
number hasnt changed. IT functions have strived tirelessly to understand
demand, set priorities, deliver effectively, and capture value, yet the results
still disappoint. Business and IT leaders alike feel they should be getting
moremore efficiency, more innovation, more valuefrom technology.
Unasked Questions
Among all the talk of engagement, alignment, and being part of the
business, one assumption is never challengedthat for information
technology to grow in strategic importance, so must the IT function. But
what if this is not the case? What if a dedicated, standalone IT function is no
longer the best option and the functions resources and responsibilities were
better located elsewhere?
To answer these questions we launched an exhaustive review of business,
social, and technology trends across the next five years, and interviewed
and surveyed hundreds of business and IT leaders. Our work revealed five
emerging shifts in IT value and role that make these questions necessary
and urgent.
Organizations that do not make these shifts will be left behind as they
struggle to effectively exploit technology and manage an inefficient IT
function and an underperforming corporate center. For IT leaders too,
the shifts present risk and opportunity. Those who do not adapt face a much
diminished role in a group with little strategic impact. But the opportunity
is also significant. Leading a business shared services organization offers
new levels of resource and accountability for business outcomes. Another
option is a leadership role in a newly empowered business unit that thrives
on exploiting technology for competitive advantage.
This research is just the beginning of our work in this area. Across 2010,
we will help IT leaders navigate the five shifts. We will offer input into
strategic planning, provide readiness diagnostics, and publish tactics for
information and service management, new IT-business divisions of labor,
and agile development.
Together, these trends point to a greater role for business partners in areas
where the value of differentiation outweighs the need integration. This is not
a return to local control of IT resources, rather it is a shift in responsibility for
technology decision making.
Shift 5: Diminished Standalone IT Role
As IT roles migrate to business services, evolve into business roles, or are
externalized, the scope of the IT function will diminish and its headcount
fall by 75% or more. Strategy, architecture, risk, program management, user
support, and relationship management will exist at the business services level,
not within the IT function. The CIO position will expand to lead this broader
group or shrink to manage technology procurement and integration. Roles
remaining in the IT function will organize around build and run, and adopt
an agile operating model to allow rapid value delivery and resource mobility.
There is no shortage of
analysis into the future
of corporate IT. However,
conventional wisdom
misses the impact of
external change and
tacitly assumes that the
basic shape and remit
of the IT function will
remain the same.
Technology on Demand
The IT function is
asked to do many roles
that are difficult to do
simultaneously and
are often more closely
related to being central
than to being IT.
Centrifugal Forces
Sources of Tension Between Roles Played by Corporate IT
IT
Think
Central
IT Strategy
Innovation
Enterprise
Architecture
Requirements
Definition
In addition to ITcentric
roles, the IT function
assumes a set of
central roles that have
no natural ownership.
Do
Software Development
and Maintenance
Infrastructure
Operations
Vendor Management
User Support
Business Process
Design
Information
Management
and Analytics
Corporate Strategy
Program Management
Change Management
Business Shared
Services
Procurement
Supply-Side Changes
7. Technology as a ServiceInfrastructure and applications are increasingly available as virtualized,
configurable, and scalable services in the cloud, or will to adopt licensing structures that mimic a service.
8. The Industrialized, Externalized Back OfficeIndustry standards will emerge for back-office business
processes that are then delivered by external providers.
9. A Blueprint for Service DeliveryITILv3 provides a pathway to reorienting IT around service delivery.
10. Desktop TransformationA convergence of virtualization, SaaS, and unified communications combined with
greater workforce mobility is triggering a transformation of the desktop that will enable device-agnostic
service delivery.
Current State
1. Value Drivers
2. Delivery Structure
3. Sourcing Model
4. Business Role
5. IT Function Role
Risk
High
Low
High
n = 127 IT leaders.
2010 The Corporate Executive Board Company.
All Rights Reserved.CIO5847710SYN
The majority of IT
enablement opportunities
in innovation, sales and
marketing, and customer
service do not involve
traditional process
automation.
9%
15%
18%
27%
13%
12%
14%
14%
28%
16%
20%
34%
30%
4%
11%
3%
13%
46%
13%
54%
3%
28%
Finance
and HR
44%
Production
and Supply
Chain
None
Customer Interface
Collaboration
Process Automation
18%
Customer
Service
Business Intelligence
Marketing
and Sales
13%
Product/
Service
Innovation
1. IT strategy,
architecture,
and risk are
owned by
groups under
the head
of business
services.
Remaining internal IT
resources are organized into
groups for build and run.
2. Services
requiring
business
knowledge
to realize
value are
managed
outside IT.
3.
Technology
services are
managed by
functionally
aligned IT
resources.
Integrate
Test
Manage external
run and maintain
Retire
6. Business
service managers
define their IT
requirements and
work directly with
external providers.
Finance
Business Services
Communication/Collaboration Service
Business
Units
Help Desk
IT development and
operations are externalized
to outsourcers or the cloud.
Design/procure
applications and
technology
HR
Account Managers
Supply
Chain
5. Account
managers and
help desk are
shared by all
business services.
Integration Layer
and Standards
4. External providers
deliver commoditized
business processes
and technologies.
10
It is a shift in responsibility
from the IT function to
business partners, not a shift
in resource from central to
local.
+ Business-Led Opportunity
IdentificationBusiness leaders are
responsible for identifying technology
enablement opportunities and defining
needs.
+
+ Selective Business-Owned
Technology SourcingBusiness
leaders can obtain IT capabilities
directly from the cloud when the
value of differentiation outweighs
standardization.
11
Headcount in standalone
IT roles will likely
shrink to 25% or less of
current totals by 2015 in
organizations where the
five shifts have taken full
effect.
4575%
20%
External
25%
80%
Internal
1325%
1025%
Central IT
Function in 2010
Externalized
Business Units
Business Shared
Services Groups
Indispensible IT
12
Way Stations
Key Intermediate Steps Toward the Five Shifts
13
Which Volumes
to Look At
All
Volumes 2, 4, 5
Volumes 3, 5
Volumes 2, 5
14
15
2. Hypothesize Implications
for Corporate IT
16