ITaaS is a new name for an old idea — that CIOs should run their organizations as if they were independent businesses, selling information technology to its “customers” in the rest of the business.
The KJR Manifesto advises a different course of action: Don’t run IT as a business — run it in a businesslike way. But as with everything else in the manifesto, this is a guideline, not a law of the universe. Sometimes this is what you have to do. So continuing on the path of helping you make it work instead of just writing it off as a bad idea …
Start with a tedious but necessary conversation with the CEO. See, running IT as a business had better be a metaphor, not something to be taken literally. And all metaphors are dangerous because of the temptation to treat them as identities rather than as parallels.
The conversation, then, is where to draw the line — where to use the metaphor and where it stops. Among the topics:
- Growth: Profitable revenue growth is a central goal of just about every business. So if a CIO is supposed to run IT like an independent enterprise that sells products and services to internal customers, it’s important to know whether growth should be one of IT’s business goals.
My guess: At least half of all CEOs would be horrified at the very idea. They distrust IT, think everyone in it wants the company to buy them technology for technology’s sake, spending every last bit of profit on toys if the company didn’t have a carefully constructed governance process to ensure all IT projects will deliver enough business value to warrant the investment.
The last thing this group of CEOs wants is for IT spending to grow.
But if pressed, many of even the most recalcitrant CEOs would acknowledge that if IT is to be run as a business, it has to be in a position to satisfy demand, and if the demand for IT services increases … if, for example, the CMO wants a more sophisticated big data analytics capability … then IT’s size will just have to expand to accommodate.
- Sales and Marketing: True independent businesses don’t just satisfy demand. They generate it. That’s the whole point of sales and marketing. Does the CEO want IT to engage in sales and marketing?
Don’t be ridiculous. That’s pushing the metaphor way past its useful boundaries.
Or is it? Because a common complaint among CEOs is that the CIO doesn’t provide technology leadership, and doesn’t act as a strategic partner. What does that take? Identifying new technologies that can improve the company’s competitive posture and painting a picture of what they could do.
The difference between that and sales and marketing? Mostly, the difference is what you call it, not what it is.
- Competition: Does IT continue to have a captive market? ITaaS’s proponents list competition as one of its most desirable attributes — that IT loses its monopoly and has to compete for business in the business. This supposedly will drive down costs as competition always does.
It might. Competition, especially for commodities, does drive efficiency (when you’re on the receiving end of this statement what it does is put pressure on margins).
But when competition is based on price, the result can also be a race to the bottom. And as IT’s “customers” often lack IT’s sophistication in evaluating an application’s engineering, and sometimes lack IT’s perspective regarding the importance of an IT provider’s marketplace viability, the result of competition can also be an accumulation of attractive but poorly built and unsupported junk.
- Competition #2 — technical architecture: “Technical architecture” sounds like something IT tosses out to intimidate its less-knowledgeable business counterparts. Let’s simplify things.
The immediate question is whether IT does or doesn’t establish technology standards for the company. If it does, competition is fair, because everyone — IT and outside vendors — have to conform to the company standards. If it doesn’t, what the heck — throw out the standards, and let every project team build what it needs to build using whatever tools and techniques will let it build its product as cheaply as possible.
That’s the short-term issue. The bigger and longer-term issue is whether the company has nothing more than a technology portfolio … a pile of stuff … or a coherent, integrated computing environment.
If every business department goes shopping every time it needs something, there’s really only one possible outcome, and that’s the pile of stuff.
Read about ITaaS and you might think it’s nothing more than service catalogs and chargebacks. It’s more complicated than that.
And we aren’t done yet, but we are out of space, so stay tuned.
“The immediate question is whether IT does or doesn’t establish technology standards for the company. If it does, competition is fair, because everyone — IT and outside vendors — have to conform to the company standards.”
Nice idea, but who’s enforcing standards conformance? Oh, right — that’s IT’s job. And if an outside vendor doesn’t conform and IT objects, IT will be blamed for insisting on “unnecessary” added cost. And next time, IT will be cut out of the loop.
IT can’t be both competitor and cop. (Don’t have to guess about this — that’s how it works already.) Seems to me you have to pitch either competition or enforcement to the CEO or CFO. Or am I missing something here?
No, you aren’t missing a thing. The idea can work, but to make it work, the Enterprise Technical Architecture Management group would have to report outside IT, just as most PMOs report outside of IT. – Bob
Excellent column! I’d like to add that business also typically get to choose what products and services they offer, and they aren’t expected to be all things to all customers, e.g., IT may be expected to support mission critical operational systems still running XP through the Google glass application that could revolutionize xxx… Independent business can also develop a branded recruitment strategy; harder for an internal IT shop to tout their charms, especially if the primary business isn’t too exciting (“Come work in IT at American Toilets!”)