Eight to Late

Sensemaking and Analytics for Organizations

IT does matter

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Does IT matter? This question has been debated endlessly since Nicholas Carr published his influential article over five year ago. Carr argues that the ubiquity of information of information technology has diminished its strategic importance: in other words, since every organisation uses IT in much the same way, it no longer confers a competitive advantage. Business executives and decision-makers who are familiar with Carr’s work will find a readymade rationale for restructuring their IT departments, or even doing away with them altogether. If IT isn’t a strategic asset, why bother having an in-house IT department? Salaries, servers and software add up to a sizeable stack of dollars. To an executive watching costs, particularly in these troubled times, the argument to outsource IT is compelling. Compelling maybe, but misguided. In this post I explain why I think so.

About a year ago, I wrote a piece entitled Whither Corporate IT, where I reflected on what the commoditization of IT meant for those who earn their daily dollar in corporate IT. In that article, I presumed that commoditization is inevitable, thus leaving little or no room for in-house IT professionals as we know them. I say “presumed” because I had taken the inevitability of commoditisation to be a given – basically because Carr said so. Now, a year later, I’d like to take a closer look at that presumed inevitability because it is actually far from obvious that everything the IT crowd does (or should be doing!) can be commoditised as Carr suggests.

The commoditisation of IT has a long history. The evolution of the computer from the 27 tonne ENIAC to the featherweight laptop is but one manifestation of this: the former was an expensive, custom-built machine that needed an in-house supporting crew of several technicians and programmers whereas the latter is a product that can be purchased off the shelf in a consumer electronics store. More recently, IT services such as those provided by people (e.g. service desk) and software (e.g. email) have also been packaged and sold. In his 2003 article, and book published a little over a year ago, Carr extrapolates this trend towards “productising” technology to an extreme, where IT becomes a utility like electricity or water.

The IT-as-utility argument focuses on technology and packaged services. It largely ignores the creative ways in which people adapt and use technology to solve business problems. It also ignores the fact that software is easy to adapt and change. As Scott Rosenberg has noted in his book, Dreaming in Code

“…of all the capital goods in which businesses invest large sums, software is uniquely mutable. The gigantic software packages for CRM and ERP that occupy the lives of the CTOs and CIOs of big corporations may be cumbersome and expensive. But they are still made of “thought-stuff”. And so every piece of software that gets used gets changed as people decide they want to adapt it for some new purpose…”

Some might argue that packaged enterprise applications are rarely, if ever, modified by in-house IT staff. True. But it is also undeniable that no two deployments of an enterprise application are ever identical; each has its own characteristics and quirks. When viewed in the context of an organisation’s IT ecosystem – which includes the application mix, data, interfaces etc – this uniqueness is even more distinct. I would go so far as to suggest that it often reflects the unique characteristics and quirks of the organisation itself.

Perhaps an example is in order here:

Consider a company that uses a CRM application. The implementation and hosting of the application can be outsourced, as it often is. Even better, organisations can often purchase such applications as a service (this CRM vendor is a good example). The latter option is, in fact, a form of IT as a utility – the purchasing organisation is charged a usage-based fee for the service, in much the same way as one is charged (by the meter) for water or electricity. Let’s assume that our company has chosen this option to save costs. Things seem to be working out nicely: costs are down (primarily because of the reduction in IT headcount); the application works as advertised; there’s little downtime, and routine service requests are handled in an exemplary manner. All’s well with the world until…inevitably…someone wants to do something that’s not covered by the service agreement: say, a product manager wants to explore the CRM data for (as yet unknown) relationships between customer attributes and sales (aka data mining). The patterns that emerge could give the company a competitive advantage in the market. There is a problem, though. The product manager isn’t a database expert, and there’s no in-house technical expert to help her with the analysis and programming. To make progress she has to get external help. However, she’s uncomfortable with the idea of outsourcing this potentially important and sensitive work. Even with signed confidentiality agreements in place, would you outsource work that could give your organisation an edge in the market? May be you would if you had to, but I suspect you wouldn’t be entirely comfortable doing so.

My point: IT, if done right, has the potential to be much much more than just a routine service. The example related earlier is an illustration of how IT can give an organisation an edge over its competitors.

The view of IT as service provider is a limited one. Unfortunately, that’s the view that many business leaders have. The IT-as-utility crowd know and exploit this. The trade media, with their continual focus on new technology, only help perpetuate the myth. In order to exploit existing technologies in new ways to solve business problems – and to even see the possibilities of doing so – companies need to have people who grok technology and the business. Who better to do this than an IT worker? Typically, these folks have good analytical abilities and the smarts to pick up new skills quickly, two traits that make them ideal internal consultants for a business. OK, some of them may have to work on their communication skills – going by the stereotype of the communication-challenged IT guy – but that’s far from a show-stopper.

Of course this needs to be a two-way street; a collaboration between business and IT.

In most organisations there is rarely any true collaboration between IT and the business. The fault, I think, lies with those on both sides of the fence. Folks in IT are well placed to offer advice on how applications and data can be used in new ways, but often lack a deep enough knowledge of the business to do so in any meaningful way. Those who do have this knowledge are generally loath to venture forth and sell their ideas to the business – primarily because they’re not likely to be taken seriously. On the other hand, those on the business side do not appreciate how technology can be adapted to solve specific business problems. What’s needed to bridge this gap is an ongoing dialogue between the two sides at all levels in the organisation. This is possible only with executive support, which won’t be forthcoming until business leaders appreciate the advantages that internal IT groups can offer.

Once in place, IT-business collaboration can evolve further. In an opinion piece published in CIO magazine, Andew Rowsell-Jones describes four roles that IT can assume in a enterprise. These are:

  1. Transactional Organisation: Here IT is an “order taker”. The business asks for what it needs and IT delivers. In such a role, IT is purely a technology provider; innovations as such focus only on improving operational efficiency. This is basically the outdated IT-as-service (and not much else) view.
  2. Business partner: Here IT engages with the business; it understand business needs and provides a solution appropriate to business requirements.
  3. Consultant: This is takes IT engagement to the next level: IT understands business issues and technology trends, and feels free to suggest solutions that will help drive business success- much like an external business/technology consultant.
  4. Strategic: This is the semi-mythical place all IT departments want to be: In such organisations IT is viewed as an asset that plays an important role in developing, implementing and executing the organisation’s strategy.

[Note that levels (2) and (3) are qualitatively the same: A business partner who understands the business and is viewed as an adviser by the business is really a consultant.]

These roles can be seen as describing the evolution of an IT department as it moves from an operational to a strategic function.

Moving up this value chain does not mean latching on to the latest fad in an uncritical manner.   Yes, one has to keep up with and evaluate new offerings and ideas. But  that apart,  shiny, new technologies are  best left alone until proven (preferably by others!). Even when proven, they should be used only when it makes strategic sense to do so. Business strategies are seldom realised by shoehorning organisational processes into alleged “best practices” or new technologies. Instead, organisations would be better served by a change in how IT is viewed; from service provider to business partner or, even better, consultant and advisor.

IT is more about business problem solving and innovation than about technology. Corporate IT folks must realise, believe and live this, because only then will they be able to begin to convince their business counterparts that IT really does matter.

Written by K

April 25, 2009 at 9:56 am

One Response

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  1. […] Carr makes a persuasive case, he glosses over a key difference between IT and other utilities (see this post for more). Despite this, many business and IT leaders have taken his words as the way things will […]

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