The New IT Operating Model

Drive Your Business

The New IT OperaTINg MOdel

INTrOducTIONWith the surge of everything-as-a-service (XaaS), big data, cognitive computing and automation, and the ownership of IT by the business, it is time for IT leadership to rethink how it views technology and approaches new challenges – organizationally, operationally, and technically. These technological changes are rewriting the narrative of IT, shifting it from a utilitarian silo entity, to becoming part of the DNA of a modern digitally- enabled business. The best IT strategies for the future cannot be just about technology, but must be all about business results.

What then is technology’s new role and what type of operational models must be applied?

Some view their automobile merely as a utility—a means of transportation to get them from point A to point B. Others view it as means for enjoyment. A corporation’s view of technology is no different. The key is to find out whether your company views IT as a sports car or merely a dependable truck. These views will also reflect whether you should still purchase a car, lease it, or move to rely on Lyft or other shared services.

This paper discusses how WGroup believes how IT operating models must evolve, but most importantly, how these should be executed in the face of the disruptive technological developments.

Today, both the role

of IT leaders and the

very definition of IT

are rapidly evolving.

Strategies, perceptions,

and key metrics are

becoming more

business oriented as

in-house services are

outsourced and new

technologies create

new opportunities.

2 thinkwgroup.com The New IT OperaTINg MOdel I COpYrIghT © 2017 wgrOup

http://thinkwgroup.com

IT commoditization is increasing

IT commoditization began at the bottom of the stack with network and infrastructure. Cloud providers began offering IaaS (Infrastructure as a Service) and PaaS (Platform as a Service) solutions that allowed companies to outsource their hardware needs on a per-unit basis, greatly improving scalability and cost effectiveness. This trend is now spreading to the application layer, as SaaS providers hit the market and offer standardized software solutions.

Today, commoditization has moved all the way to the top of the stack with business processes. Traditionally, companies would develop their own processes for all organizational operating needs. Leaders developed new systems for paying bills, making sales, and creating products. Now these processes are becoming increasingly standardized as vendors offer commoditized models built on commoditized applications and services. This trend, while lowering costs and improving flexibility, is making it increasingly difficult for companies to differentiate themselves and gain a competitive advantage in the marketplace.

New TreNds aNd challeNges

Traditional IT operating models have been primarily focused around buying and building solutions. IT leaders would work with business leaders to determine needs, then fulfill those needs in-house or outsource the solutions to meet them. However, the following trends are forcing a revision of this traditional view.

thinkwgroup.com 3 The New IT OperaTINg MOdel I COpYrIghT © 2017 wgrOup


growing focus on business

Many business leaders believe that IT continues to be out of touch with the needs of the business. This has forced business units to create shadow IT organizations that go out and find their own solutions, creating a dispersed network of IT within the company. Although this model may allow companies to source solutions more rapidly and increase the likelihood that the chosen solutions are what the business needs, it also can create waste, security holes, and inefficiencies within the organization. To keep the business on track, IT must look at the bigger picture and focus solely on driving business goals with its solutions. It also must understand that it can’t and shouldn’t eliminate shadow IT, but rather manage it, guide it, and ensure that solutions across the company are working cohesively.

growing diversity in the IT service delivery ecosystem

As IT commoditization increases, companies are relying on a wider range of standardized software, services, and vendors to deliver their needs. Managing this growing group is challenging from both a technical and a business perspective. Leaders struggle to ensure that they are optimizing performance, cost, and speed while juggling a range of competing interests, personalities, and technical specifications. Although the new IT models simplify many of IT’s traditional roles, they can make others vastly more complicated.

Organizations are now responsible for managing dozens of vendor agreements, each of which is on a different schedule, measured with different metrics, and conducted with different suppliers. This can create a major challenge for an organization that was primarily in the business of building and managing solutions only a decade ago. To keep up with the changes, IT leaders must work to ensure that their team has the differentiating skills, processes and systems necessary to manage vendors, coordinate diverse solutions and meet the needs of the company.

New TreNds aNd challeNges



growing role of data and analytics

Data, and a company’s ability to accumulate it and make meaningful information from it, is the new “top of the pyramid” for IT. Companies that want to stay competitive must take a close look at how their organization currently uses data and find new ways to leverage its power. Predictive analytics allows the business to gain foresight into customers’ buying habits, internal operating performance, workplace safety hazards, and other parameters. This allows business leaders to more easily decide which strategies will be most impactful and what potential problems may arise. This means that a proper data governance model with data oriented people should be put in place. This means hiring those with the skills necessary to capture, analyze, and interpret information from a wide range of sources.

New TreNds

aNd challeNges

Louis Hector Berlioz was a 19th century

composer who didn’t know how to play

the piano. Nor, in fact, did he know how

to play the violin, the flute, the trombone

or any other musical instrument for that matter.

Yet, the man managed to compose symphonies

that to this day are considered musical

masterpieces. Mr. Berlioz was the ultimate

orchestrator. His most recognized work,

“Symphonie Fantastique”, was scored for an

orchestra consisting of 2 flutes, 2 oboes,

2 clarinets, 4 bassoons, 4 horns, 2 trumpets,

2 cornets, 3 trombones, 2 ophicleides1 ,

2 pairs of timpani, snare drum, cymbals,

bass drum, bells in C and G, 2 harps and strings.

Berlioz success was based on knowing

a) what he wanted to express,

b) what specific set of instruments should

be used and

c) how to communicate the notes of his

composition to the orchestra.

1 And what is an ophecleide? A forerunner of the euphonium.

And what is a euphonium? Well, check it out in Wiki!

BuIldINg aN IT

OperaTINg MOdel

fOr TOday

IT used to be the orchestra; but now it must become the composer and the conductor.

For commoditized functions, it makes sense to have a default position to outsource to third parties when possible. This increasingly means more items at the application and business process layer can be considered “commoditized” and therefore candidates for external sourcing. Although it might be difficult for IT to let go of some of its traditional roles, this outsourcing can play a critical role in ensuring that the company has the flexibility it needs to innovate. An optimized organization can then change direction with the prevailing winds while more entrenched companies get left behind.

Berlioz was outsourcing the music production to the orchestra. New IT models are evolving along a similar view. Because of the trends mentioned in the earlier section, IT is now becoming the organization responsible for brokering, integrating, and orchestrating the enterprise technology services as opposed to just acting as an order-taking organization. Modern IT organizations need not be focused on building in-house systems, but should now find ways to develop new services that meet the changing needs of the business.

BuIldINg aN IT

OperaTINg MOdel

fOr TOday

This approach represents a significant departure from traditional ways of thinking. IT’s new operating model also means the following:

letting the business acquire technology directly

It is natural that the IT group doesn’t want to let go of its traditional role as the primary source of technology within the organization. Many IT leaders won’t let the business group grow and use technology on its own. However, this way of thinking is outdated, and leaders need to recognize that business units will source solutions regardless of IT. Instead of fighting it, the organization must learn to embrace it and help guide it in a positive direction. By setting standards for financials, security, performance, and integration, while acting as an advisor to the business, CIOs and other technology professionals can help the shadow IT organization grow into a productive part of the company. In a way, IT can endeavor to subsume “shadow IT” into a federated model where solutions are sourced at the business unit level while conforming to a centrally-driven infrastructure architecture and standards

Recognizing the benefits of decentralized IT

Although decentralized IT can create many problems, it also has many benefits. No organization knows the needs of business units better than the business units themselves. In most cases, they are better able to identify problems and recognize which solutions will solve them. Since most solutions are managed and maintained by third parties, their lack of technical expertise is less of an issue than it was in the past. Still, the secret recipe is having as good and nurturing a collaborative relationship with decentralized IT as possible, and recognizing their technical knowledge limitations and fill them via centralized IT support.

focusing on training and advising the business

By advising business units and embedding technology workers within them, the business can understand solutions and have the knowledge to deal with potential problems. In other words: the business will be a savvier consumer of technology. As IT becomes more consultative in nature, the skill level of the people in technical roles may have to be shifted to allow them to make a bigger contribution to the overall business. By increasing the channels of communication and working to integrate the team with business units, the organization can better achieve strategic goals.

BuIldINg aN IT OperaTINg MOdel fOr TOday



Even though WGroup supports the Broker, Integrate, and

Orchestrate model, no single model works for every

organization. Every company must find its own balance on

the way it evolves its IT operating model. For example, the

choice between centralization and decentralization

depends on company culture, size, and overall geographic

commercial span. Also, centralization needs to be consistent

with the overall operating model of the business i.e. how

federated is the business operations. It is important for all

technology leaders to understand that decentralization is an

overall industry trend, and every company should consider

the relative merits of each strategy.

Broker

• Implement IT solutions that support business objectives • Measure customer activity and business metrics• Technology tracking and assessment process• Cross-functional technology steering group

Integrate

• Create, integrate, and manage best of breed solutions• Well-defined enterprise architecture• Architecture mappings to business processes• Strategy on emerging technologies for the enterprise

Orchestrate• Transparency in service delivery• Clear service level metrics• Vendor management office

BuIldINg aN IT OperaTINg MOdel fOr TOday



In the modern IT enterprise, outcomes are key. As technology becomes an increasingly integral part of the business landscape, the universe of potential outcomes and the challenges to deliver increase. For the Broker, Integrate, Orchestrate operational model to be implemented successfully, IT should leverage the various technology tools and trends accordingly. The following are some areas worthy of consideration.

IMpleMeNTINg a MOderN IT OperaTINg MOdel

Brokering is about having IT work closely with the business to identify and implement technology solutions that will better support the business objectives. As indicated earlier, it is not effective for IT to be an order-taking partner, but rather it should now sponsor business solutions. In addition to establishing a strong business management function, capable of quickly translating business unit requirements, effective brokering involves proactively collecting, cataloging and analyzing company data; particularly around measures of customer activity and business metrics (sales, service times, etc). New innovations in big data and predictive analytics offer ample opportunities for IT to help identify and broker the implementation of new solutions to increase revenues, improve efficiency, and decrease costs. Data scientists and statisticians can drive increased profits and make the company more competitive just as much as salesmen if they are used right. It also means training existing employees and leaders to be data literate, allowing them to better use data in their decision-making process.

Brokering also requires the establishment of a technology tracking and assessment process which will be responsible for evaluating potential technology developments as solutions to business needs. This function will also carry over prototypes and pilots to quickly ascertain competitive advantage opportunities. Remember, under the new operating model, IT is no longer an order-taking operation but rather a proactive force for business.

While we advocate the implementation of diverse solutions delivered, where feasible, via a common centralized infrastructure and the maintenance of a common data model, there will always be decentralized technology environments. Keep in mind that the need for coordination is increased by these decentralized areas and these further necessitate the establishment of a centralized group to ensure the alignment of and support of this shared enterprise portfolio as well as the governance of a cross- functional technology steering group to ensure all requirements across the enterprise are prioritized appropriately.

BrokeringIMpleMeNTINg

a MOderN IT OperaTINg

MOdel



Even under the new operating model, IT is still responsible for enabling the technology. Although the business has become a sophisticated user of technology, it cannot create, integrate, and manage technology on its own. It also is important to ensure that solutions spread throughout the company are integrated and operated effectively. Technology leaders must still take the lead when it comes to systems architecture, best practices, and prototypes.

Once you open the door to best-of-breed solutions, the need to properly integrate them into the ecosystem becomes paramount. You’ll need a well-defined Enterprise Architecture. Unless you first define an enterprise architecture as the framework for the system, you risk ending up with an unmanageable cornucopia of disassociated technologies. The enterprise architecture will consist of a reference document outlining in narrative form the key concepts of the model: components, key technology standards, tenets, interaction maps, and component inter-dependencies. However, its key element will be a visual representation of the end system via a highly iconic diagram showing all the key elements of the logical architecture and its mapping to business processes. Additionally, you will need to build a strong architecture practice with system, data, and security architects.

Also, integration demands the use of emerging technology solutions whether they be micro-services to automation. A key component of the overall architecture should be the enterprise strategy on the use of cloud and XaaS approaches. Advances in machine learning are allowing organizations to find new ways to use data that human workers would have trouble identifying. A modern integration strategy should define how tools such as robotic process automation (RPA), or developments related to the Internet of Things (IoT) will be introduced into the enterprise.

Integration





IT will continue to be ultimately responsible for the smooth, safe, and efficient running of information technologies. Service delivery needs to be transparent, accountable, cost-efficient and reliable. This is still a valid requirement, and perhaps more so, when the systems are being outsourced or placed in the cloud. To that effect, IT should focus on establishing strong and clear service level metrics, management and operational processes, and ongoing informational protocols to ensure communication to the business and to other key stakeholders are the backbone of day to day operations.

Orchestration also includes vendor’s control and alignment. Establishment of a vendor management office (VMO), has become one of the most effective ways to deal with this need. As an increasing number of systems and services are outsourced to third parties, vendor management will play an outsized role in most organizations. To ensure the office is well equipped to handle its growing duties, it is important to adhere to best practices. This means maturing processes for vendor analytics, demand management, contract administration, competitive sourcing, and strategic management. By implementing systems that keep the office organized and focused on business goals, IT can help ensure that vendor relationships are strong and work to the benefit of the business.

Orchestration

cONclusIONs

In the end, the chosen

operating model should support

the fast, transparent,

and cost-efficient

mantra.

IT leaders feel growing pressure to deliver business results that help companies find new opportunities for growth. Commoditization has made it difficult for enterprises to find points of differentiation and many companies struggle to innovate and keep up with changing trends as startups and new competitors enter the field. To adapt, organizations must rethink their operating models, looking for new ways to take changing environments and expectations into account. A business-driven approach with an awareness of the importance of data, outsourcing, and decentralization is critical to creating an organization that is nimble and competitive.

For years, the complaints about IT have been the same; cost too much, doesn’t deliver on-time, not aligned with the business. The new operating model needs to focus on the quality and other characteristics of how service is delivered. In the end, the chosen operating model should support the fast, transparent, and cost-efficient mantra. In this paper, we have focused on the Broker, Integrate, Orchestrate model, but in the end what most truly matters is that whichever emerging operating model pursued is properly executed. This means that you should be prepared to change the IT governance, skillsets, and even the funding models so that this model remains flexible, and adapts to new, often unpredictable, turns and twists of business and technology. Following our earlier metaphor, IT today is more than a utilitarian truck; it is the vehicle that can provide your company with solutions, fast and effectively. If you accomplish this feat, you will be ahead of your competition.

For more information on how WGroup can help your IT group build a faster, better, and more business aligned operating model, visit us online at thinkwgroup.com.




www.thinkwgroup.comTel: 610-854-2700

re-ThINk ITDrive Your Business
