The technology services market is undergoing a massive transformation toward business self-service as services become easier to use.
As it becomes much easier for tech-savvy business managers and staff to procure their own technology, it also dramatically alters the IT organisational structures and business relationships we take for granted today.
To keep up with the pace of change, IT must evolve to a new model of business technology (BT), which Forrester calls empowered BT and defines as a technology approach that embeds enabling technology innovation in the business while providing sufficient centralised coordination and oversight for enterprise goals.
The challenge for organisations is that empowered BT requires a mature and robust governance framework that is driven by the executive and business leadership. In other words, IT doesn't drive the car.
This governance framework must balance the need to ensure that decisions maximize value, are compliant with the enterprise architecture, and fall within risk guidelines without becoming a barrier to flexibility and speed.
Unfortunately, in many organisations today, IT governance remains immature, fragmented, and still driven primarily within IT.
An empowered BT approach requires the CIO to act as the portfolio strategist. The CIO, with their complete understanding of the business strategy, operating model, and a global view across all of the business units, functions, and geographies, is in the best position to gain a holistic view across all of the BT subportfolios (see Figure).
Armed with this knowledge, the CIO can provide critical input in respect to key IT governance decisions, including:
- Relative weightings of the portfolios. A holistic view of the portfolio enables optimization of the entire IT spend and ensures that the maximum value is obtained at an acceptable level of risk. Tradeoffs can be made between investing in running the business, growing the business, or developing new services to transform the business.
- Sourcing strategies around services. Cloud computing creates opportunities to externally source infrastructure, platforms, and applications with the potential to significantly reduce cycle times and cost, enabling flexibility to scale up or down in response to changes in demand and to convert capital expense to operating expense. The sourcing strategies can be employed with both existing and new services. The CIO is in the best position to understand when, where, and what can or should be outsourced to the public cloud versus a private cloud or even a more traditional in-sourced approach.
- Provisioning strategies. The combination of growing technology savvy on the part of the business and the disruptive technologies cited earlier creates opportunities for the business to self-provision some IT-enabled business services. As long as enterprise architecture has been documented and infrastructure standards and road maps implemented and a compliance process exists as part of overall governance, enabling the business to self-provision solutions can lead to competitive advantage. The key is to understand where it makes sense and where it doesn't and to provide the business with guidelines.
- Standardization versus customization. Standardized business processes and common data definitions promote operational efficiencies that can reduce costs and speed time-to-market; however, at the same time, they can inhibit new opportunities by preventing flexibility or be mis-aligned with local practices. The CIO with a global perspective can provide guidance and recommendations on how to balance these conflicting approaches.
Holistic portfolio management is a major organisational change effort, but we believe it is required if IT organisations are going to successfully make the BT transformation. The disruptive technologies are already here and maturing rapidly, and empowered computing initiatives are well under way in some organisations.
CIOs need to be proactive in developing their transformation plans before it's too late and organic initiatives begin to sprout across the organisation, leading to reactive, disjointed, and suboptimized results.
In the future, CIOs have a choice to make. They can facilitate their organisation's transformation to BT and assume the role of portfolio strategist, or they can remain focused on the technology and keep responsibility for a decreasing technology portfolio because the drivers of transformation will not wait.
Craig Symons is VP and Principal Analyst at Forrester Research. He is a leading expert on deriving business value from IT investments.