Executive Briefings

Maybe You Do Need an IT Department - But Not This One!

A couple of weeks ago I wrote an article suggesting that it might be time to eliminate the IT department, absorb the application skills into the business and outsource the rest. Needless to say I got lots of responses - ranging from cheers to questions about my sanity. Many of you were also concerned about whether I could get away with proposing the end of IT and still keep my job at Gartner. You will be happy to hear that as of this writing I am still employed.

I got emails from readers around the world, with lots of really thoughtful comments and ideas. While I heard from a range IT professionals, operational users, IT product vendors and consultants, their reactions did not really reflect their roles. There were CIOs who were fully in agreement, and departmental users who thought I was delusional. Many of the people that responded were very curious about what their peers in other companies and other roles might think of my proposal. As a result, I thought I would take this week's column to share some of that feedback.

What About Shared Applications?

One of the major objections or concerns had to do with selecting and managing applications that spanned multiple department or business units. People pointed to business processes like Order-to-Cash, or personal productivity applications like Microsoft Office, as applications that would be difficult, if not impossible, to manage without a centralized IT function. While I agree that there is real benefit in application standardization and applications that support extended business processes, the question is whether centralized IT is the best way to facilitate that. In order to really make this work, you have to get consensus and commitment from the business, but I see many situations where the IT department is the one that gets stuck trying to "herd the cats." Instead of the affected departments and divisions stepping up to do the hard work of designing an integrated process and agreeing to standards, they simply dump the responsibility on IT, which rarely has the skills or authority to make it happen.

The Business Doesn't Have the Appetite or Skills to Manage IT Activities

Lots of readers from both IT and business roles suggested that while the business might complain about IT, they really don't want to do this stuff themselves. There were also many people who felt that the business would be unlikely to take a strategic view of IT decisions and investments. While these are legitimate concerns, they are also a key part of why I think this change is necessary. The existence of a separate IT department allows the other departments to avoid taking responsibility for the systems that support their activities, and it actually encourages them to focus only on the tactical implications of their requests. Sales, finance, supply chain and HR routinely have to balance their departmental needs against the corporation's strategic objectives, and there is no reason to think that they can't do this for IT as well.

There was a pretty even split of people who commented that IT professionals didn't have the necessary business skills and those who thought my assessment of user's IT knowledge was overblown. Several of you saw this (as I do) as simply an employee development issue or a case where people are allowed to overspecialize. A couple of readers talked about programs in their companies where middle managers are required to rotate between IT and business roles in order to build the necessary skills and facilitate the dialogue.

What About the Cost?

Whether they liked my idea or not, many of the respondents felt that moving IT back to the business would result in higher costs. Lots of people suggested that centralized IT is like other shared-service functions, such as finance, HR and procurement, that save the organization a lot by eliminating redundant people and activities. A number of you pointed out the inefficiencies that we so often saw in the days of local or divisional IT departments. Another concern was the potential loss of IT cost visibility.

These are certainly valid points, but I think they have to be weighed against the likelihood that user departments would be much more judicious about IT spending if it had to be funded out of their departmental budgets. I am not suggesting that each part of the business be allowed to create their own IT department - if one IT department is bad, many would be very bad! The idea was that users should learn to deploy and manage their own IT, not that they should establish their own private army of specialists.

Another key part of the cost argument was that many companies are performing activities that could and should be outsourced. Most infrastructure, development and application management are not a "core competency" or a business differentiator, and there are lots of firms that can do it better and cheaper.

New "Hybrid" Models

Several of you wrote about existing or proposed alternatives. There were a number of companies where IT now reports to the supply chain organization because they were the most demanding user. One reader suggested keeping a CIO for IT strategy and a very small (less than 10 people) staff for research and departmental assistance, with a total budget 0.5 percent of revenue. The rest of the IT funding should go back to the business.

Conclusion

This is clearly a subject where people have great interest and strong opinions. I want to thank all of you who responded for your interesting ideas and anecdotes. I promise to look at some other aspects of this Future of IT topic later in the year. As always I can be reached at jim.shepherd@gartner.com.

Source: Gartner

A couple of weeks ago I wrote an article suggesting that it might be time to eliminate the IT department, absorb the application skills into the business and outsource the rest. Needless to say I got lots of responses - ranging from cheers to questions about my sanity. Many of you were also concerned about whether I could get away with proposing the end of IT and still keep my job at Gartner. You will be happy to hear that as of this writing I am still employed.

I got emails from readers around the world, with lots of really thoughtful comments and ideas. While I heard from a range IT professionals, operational users, IT product vendors and consultants, their reactions did not really reflect their roles. There were CIOs who were fully in agreement, and departmental users who thought I was delusional. Many of the people that responded were very curious about what their peers in other companies and other roles might think of my proposal. As a result, I thought I would take this week's column to share some of that feedback.

What About Shared Applications?

One of the major objections or concerns had to do with selecting and managing applications that spanned multiple department or business units. People pointed to business processes like Order-to-Cash, or personal productivity applications like Microsoft Office, as applications that would be difficult, if not impossible, to manage without a centralized IT function. While I agree that there is real benefit in application standardization and applications that support extended business processes, the question is whether centralized IT is the best way to facilitate that. In order to really make this work, you have to get consensus and commitment from the business, but I see many situations where the IT department is the one that gets stuck trying to "herd the cats." Instead of the affected departments and divisions stepping up to do the hard work of designing an integrated process and agreeing to standards, they simply dump the responsibility on IT, which rarely has the skills or authority to make it happen.

The Business Doesn't Have the Appetite or Skills to Manage IT Activities

Lots of readers from both IT and business roles suggested that while the business might complain about IT, they really don't want to do this stuff themselves. There were also many people who felt that the business would be unlikely to take a strategic view of IT decisions and investments. While these are legitimate concerns, they are also a key part of why I think this change is necessary. The existence of a separate IT department allows the other departments to avoid taking responsibility for the systems that support their activities, and it actually encourages them to focus only on the tactical implications of their requests. Sales, finance, supply chain and HR routinely have to balance their departmental needs against the corporation's strategic objectives, and there is no reason to think that they can't do this for IT as well.

There was a pretty even split of people who commented that IT professionals didn't have the necessary business skills and those who thought my assessment of user's IT knowledge was overblown. Several of you saw this (as I do) as simply an employee development issue or a case where people are allowed to overspecialize. A couple of readers talked about programs in their companies where middle managers are required to rotate between IT and business roles in order to build the necessary skills and facilitate the dialogue.

What About the Cost?

Whether they liked my idea or not, many of the respondents felt that moving IT back to the business would result in higher costs. Lots of people suggested that centralized IT is like other shared-service functions, such as finance, HR and procurement, that save the organization a lot by eliminating redundant people and activities. A number of you pointed out the inefficiencies that we so often saw in the days of local or divisional IT departments. Another concern was the potential loss of IT cost visibility.

These are certainly valid points, but I think they have to be weighed against the likelihood that user departments would be much more judicious about IT spending if it had to be funded out of their departmental budgets. I am not suggesting that each part of the business be allowed to create their own IT department - if one IT department is bad, many would be very bad! The idea was that users should learn to deploy and manage their own IT, not that they should establish their own private army of specialists.

Another key part of the cost argument was that many companies are performing activities that could and should be outsourced. Most infrastructure, development and application management are not a "core competency" or a business differentiator, and there are lots of firms that can do it better and cheaper.

New "Hybrid" Models

Several of you wrote about existing or proposed alternatives. There were a number of companies where IT now reports to the supply chain organization because they were the most demanding user. One reader suggested keeping a CIO for IT strategy and a very small (less than 10 people) staff for research and departmental assistance, with a total budget 0.5 percent of revenue. The rest of the IT funding should go back to the business.

Conclusion

This is clearly a subject where people have great interest and strong opinions. I want to thank all of you who responded for your interesting ideas and anecdotes. I promise to look at some other aspects of this Future of IT topic later in the year. As always I can be reached at jim.shepherd@gartner.com.

Source: Gartner