5 Factors: The IT Organization is Changing Radically

5 Factors: The IT Organization is Changing Radically

The IT department will be small, fast and specialized. She will no longer have anything in common with her current state. Forrester shows models for new structures. […]

In the medium term, the IT department will have changed so much that it no longer has anything in common with its current state. That’s according to Forrester Research. CIOs should already be shaping this change now. And they need political skills to live up to their growing leadership role.

The difference will be huge. You have to imagine it as the visual contrast of an old phone and a smartphone of the latest generation. According to Marc Cecere of Forrester Research, it will take five to seven years for a company’s IT organization to be completely transformed. The CIO then has a department that has not changed radically in one fell swoop, but in many small steps. It will then be characterized primarily by three characteristics: small, fast and specialized.

Cecere paints this forecast in the study “The Future Tech Organization: Smaller, Faster, And More Specialized”. Of course, the core of this is about a transformation that is driven by digitization and the customer orientation associated with it. According to Forrester Research, the Customer-Obsessed Operating Model (COOM) requires changes on six levels: structure, culture, talent, metrics, processes and technologies. Cecere’s study is comprehensively devoted to one of these levels, namely structure.

After all, a reorganization of IT in order to better understand the requirements of the business side is on the agenda of more than 70 percent of companies worldwide. This is the result of a Forrester survey of over 18,600 decision-makers. The topic has a critical priority for 8 percent, a high priority for 30 percent, a medium priority for 33 percent.

On the one hand, the structure of IT can make things possible, according to Cecere. He cites the Havard Business Review, which described a customer-centric structure as a vehicle for better understanding customers, building closer ties with them and increasing customer satisfaction. On the other hand, the structure could be a barrier. For example, when it separates groups that should actually work together. Or if it forms a hodgepodge, the diversity of which can no longer be managed.

Forrester identifies five factors that are likely to determine the future structure of IT departments.

According to the study, the share of IT software and service purchases led by the departments has increased from 35 to 39 percent in the past two years. Therefore, IT must be structurally involved in business activities so that factors such as scalability and security continue to be taken into account in planning and implementation.

The departure to the cloud leads to a lower need for internal technological skills. Ideally, outdated silo structures in technology and processes can be broken up on a cloud basis.

Monolithic software platforms no longer meet specialized requirements. Microservices in combination with interfaces to established software packages offer flexibility for those companies that want to stand out from the competition with tailor-made solutions.

“CIOs need to create agile governance structures,” the study says. “With faster and more flexible end-to-end response times that can span all systems of engagement.“

Forrester predicts that most technological functions will be supplemented or even replaced by technologies such as artificial intelligence (AI), robots, machine learning and natural language processing. This will initially happen with simple functions such as backups, but later also with change management or transformation.

The smaller specialist IT resulting from the above developments should be a value driver for the business and will change in many ways, according to Forrester. For example, infrastructure processes are the first automation targets for software engineers. In particular, the cloud will reduce the number of employees needed for support. The focus of the role change will be on governance, technology, customers and the ecosystem.

According to the study, the specialization in the skills performs well in fields such as relationship & vendor management, data and customer experience. Career progress will no longer depend on how many people you can manage, but on how pronounced the expertise in certain areas is.

According to Cecere, there are further concrete consequences for the CIO. Because presumably the mentioned special knowledge will not be able to be kept in its own department in its entirety. The head of IT will therefore have to initiate partnerships with third parties – namely with universities, think tanks and consultants.

The differences between business and IT are becoming increasingly blurred. According to Forrester, two-thirds of companies only have a single, multi-year roadmap for both business and IT processes. This only applied to 54 percent of the companies.

The study also cites Mike Murphy, partner at Infosys, as a guarantor. According to Murphy, the days when IT was entrusted by the business with the definition and construction of applications will soon be over: “Instead, IT will have to keep an ecosystem of providers ready so that end users can find and use the desired apps at any time.“

According to Forrester, the blurring of the traditional boundaries has an impact on the reporting structures. According to Cecere, IT may remain an independent department. However, it may also break up into a frontend and a backend part – and the latter then reports to a shared services department.

In any case, even before the CEO, the CIO is considered the leader of business transformation. Four out of ten decision-makers expressed this expectation to the analyst firm. “CIOs without leadership skills will be marginalized, so that every department buys software at will,” Cecere writes. “Leading CIOs, on the other hand, need the political skills to break down organizational silos and align the company with its external customers.“

The analyst also predicts that the line between the digital and non-digital world will disappear, the more companies say goodbye to old systems. As models for possible new structures of IT, there are three experimental models:

1. Broker/Integrator/Orchestrator: Forrester relies on a KPMG model here, as the IT of the future consists of three elements. “Broker” combines business requirements with service options; “Integrate” combines data and services from internal and external sources; “Orchestrate” controls and monitors service delivery.

2. Continuous business services: IT and business professionals work together on planning, design and control of business process clusters such as customer service, event marketing or accounting. Unlike common project teams, these teams work together on a long-term basis, but are not involved in the system implementation.

3. Internal consulting: There are already highly specialized teams in various companies. As “Data Centers of Excellence” or “excellent design teams”, they take care of challenging matters such as project management or everything that has to do with agility. In the future, this approach may be extended to non–outsourced or automated fields – for example, to service management.

To address the medium-term change, Forrester recommends a handful of short-term measures to CIOs. This includes an upgrade of selected key roles and processes such as architecture, vendor management and mobile design. The analysts also recommend adjusting the reporting structures and mobilizing the Management Board to define the future structure.

To build data platforms, Cecere notes that CIOs need data for two purposes: on the one hand, for a better understanding of customers, on the other hand, for balancing conflicts in resource and portfolio management. When building an independent digital structure, it should be borne in mind that at some point the transformation of the non-digital structure must also take place.

*Werner Kurzlechner lives as a freelance journalist in Berlin and deals with legal judgments that influence the daily work of financial decision-makers. As an economic historian, he also works for trade magazines and daily newspapers beyond the IT world.

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