cio the future of corporate it volumes 1 to 5

INFORMATION TECHNOLOGY PRACTICE

The Future of Corporate ITHow to Prepare for Five Radical Shifts in IT Value, Ownership, and Role

www.executiveboard.com

© 2010 The Corporate Executive Board Company. All Rights Reserved. CIO6012110SYN

LEGAL CAVEAT

The Corporate Executive Board Company has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and The Corporate Executive Board Company cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, The Corporate Executive Board Company is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by The Corporate Executive Board Company or its sources, or b) reliance upon any recommendation made by The Corporate Executive Board Company.

COPIES AND COPYRIGHT

As always, members are welcome to an unlimited number of copies of the materials contained within this handout. Furthermore, members may copy any graphic herein for their own internal purpose. The Corporate Executive Board Company requests only that members retain the copyright mark on all pages produced. Please contact your Member Support Center at +1-866-913-8101 for any help we may provide.

The pages herein are the property of The Corporate Executive Board Company. Beyond the membership, no copyrighted materials of The Corporate Executive Board Company may be reproduced without prior approval.

CONTENT PUBLISHING SOLUTIONSGraphic Design SpecialistPooja Manshani

Contributing DesignerSupriya Dhasmana

Senior Publications EditorLaura Sylvest


Executive DirectorsShvetank ShahWarren Thune

Managing DirectorsJaime CapellaChristian ContiBrian FosterDavid KingstonAllen MuellerJay ShankavaramKavitha Venkita

Practice ManagersDeb GoldbergAndrew HorneBart KaplanGregg RosenbergMark Tonsetic

Senior DirectorsEve KoopmanAlex StilleKD WeitzelMiles GibsonChris Mixter

DirectorTim Kelso

ConsultantsShalini DasLeda Nelson


TABLE OF CONTENTS

Executive Summary • iv

The Future of Corporate IT • vi

Does the IT Function Matter? • vii

INTRODUCTION: THE FUTURE OF CORPORATE IT • 1

Which Way Forward? • 3

Four Internal Trends • 5

Ten External Trends That Will Change Corporate IT • 9

The Future of Corporate IT • 11

What to Do Now? • 30

SHIFT 1: INFORMATION OVER PROCESS • 37

SHIFT 2: IT EMBEDDED IN BUSINESS SERVICES • 51

SHIFT 3: EXTERNALIZED SERVICE DELIVERY • 69

SHIFT 4: GREATER BUSINESS PARTNER RESPONSIBILITY • 79

SHIFT 5: DIMINISHED STANDALONE IT ROLE • 95

APPENDIX • 113

iv

INFORMATION TECHNOLOGY PRACTICEwww.executiveboard.com/IT


iv

EXECUTIVE SUMMARY

The Corporate Executive Board’s investigation into the five-year outlook for corporate IT points to fundamental changes in how the function is organized and managed. The IT function of 2015 will bear little resemblance to its current state. Many activities will devolve to business units, be consolidated with other central functions such as HR and Finance, or be externally sourced. Fewer than 25% of employees currently within IT will remain, while CIOs face the choice of expanding to lead a business shared service group, or seeing their position shrink to managing technology delivery.

After interviewing and surveying hundreds of IT and business leaders, we find that these changes are already underway. Many IT leaders are optimistic, seeing changes as no more than the usual swings of the centralization pendulum or a fad resulting from recent buzz around consumer technologies. This study argues that the changes will be rapid, permanent, and radical. We have advocated for a decade that IT leaders become demand shapers, not order takers. Similarly, we now recommend that IT leaders devote the time, energy, and resources to actively shape the coming transition.

BackdropFive years ago, less than 25% of business leaders rated their organization’s IT function effective at delivering the capabilities they needed. Today the number hasn’t changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting more—more efficiency, more innovation, more value—from technology.

Unasked Questions

Among all the talk of engagement, alignment, and “being part of the business,” one assumption is never challenged—that for information technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option, and the function’s resources and responsibilities were better located elsewhere?

To answer these questions we launched an exhaustive review of business, social, and technology trends across the next five years, and interviewed and surveyed hundreds of business and IT leaders. Our work revealed five emerging shifts in IT value and role that make these questions necessary and urgent.

Shift 1: Information Over ProcessThe rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio, and critically, exploits the information the services generate.

The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth—innovation, marketing, sales, customer service—up to 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured.

Shift 2: IT Embedded in Business ServicesThe corporate center is in flux. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support.The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact

v



EXECUTIVE SUMMARY (CONTINUED)

that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to “build things right,” or management resources that ensure IT “builds the right things.”

The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions.

Shift 3: Externalized Service DeliveryExternalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.

Shift 4: Greater Business Partner Responsibility

Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill.

A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units

cannot customize cloud applications but neither can the IT function.

Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need for integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making.

Shift 5: Diminished Standalone IT Role

As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adopt an agile operating model to allow rapid value delivery and resource mobility.

Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too, the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunity is also significant. Leading a business shared services organization offers new levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thrives on exploiting technology for competitive advantage.

vi



Value Risk

THE FUTURE OF CORPORATE IT

Five Radical Shifts in IT Value, Ownership, and Role

5. Diminished Standalone IT RoleIT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.

The Infrastructure Group Focuses on Contract and Vendor Management

Security Moves Away from Securing Physical Devices

Project Management and Business Analyst Roles Move to BUs

The Applications Group Shrinks to Legacy Maintenance

All Technologists Move Outside the Organization

2. IT Embedded in Business ServicesCentrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.

Information Technology Is Delivered as a Service

The Central IT Function Becomes Part of Business Shared Services

Low High Low High

1. Information Over ProcessCompetitive advantage from information technology shifts toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.

The IT Function Focuses on Enhancing End-to-End Customer Experience

The IT Function Focuses on Boosting Knowledge Worker Productivity

The IT Function Focuses on Delivering Information Analytics Capability

Information Technology Converges with Production Technology

4. Greater Business Partner ResponsibilityBusiness unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.

Business Units Plan and Procure Their Own Technology

End Users Acquire Their Own Collaboration and Knowledge Sharing Tools

End Users Provision Their Own End-Point Devices

3. Externalized Service DeliveryDelivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.

Most of the Infrastructure Portfolio Will Migrate to the Cloud

Back-Office Business Processes Will Become Entirely Commoditized and Outsourced

n = 127 IT leaders.



vii

DOES THE IT FUNCTION MATTER?

Strategic Importance of Information Technology and the IT Function

The importance of information technology to business success will continue to grow, but the importance of the IT function will not keep pace.

■ The growing importance of technology does not equate to a growing strategic role for the corporate IT function.

Our View

The strategic importance of the IT function declines as:

■ Demand for technology shifts from process to information and collaboration,

■ Technology is delivered via business shared services,

■ Technology is sourced from the cloud, and

■ Business partners take greater responsibility for technology.

Conventional Wisdom

For information technology to grow in strategic importance, so must the IT function.

Criticality of Technology to Business Success

Po

tent

ial S

trat

egic

Imp

act

o

f th

e IT

Fun

ctio

n

Technology becomes ever more critical to business success, but the strategic role of the IT function starts to decline.

viii





1

Introduction: The Future of Corporate IT

The Future of Corporate IT 2





Introduction 3

WHICH WAY FORWARD?

Conventional Wisdom on the Future of Corporate IT

There is no shortage of analysis into the future of corporate IT. However, conventional wisdom misses the impact of external change and tacitly assumes that the basic shape and remit of the IT function will remain the same.

■ In response, this research looks beyond technology trends to understand business, economic, and workforce changes that will affect how organizations use information technology.

■ This research also explores the future structure and remit of the IT function relative to other groups within the organization. It does not assume that the growing importance of technology to organizations equates to a growing future role for the IT function.

What Conventional Wisdom Misses

Technology on Demand

Greater externalization and the rise of the cloud will reduce the IT function’s in-house technology delivery role.

Increased Business Alignment

The IT function must work ever more closely with business partners to be effective.

A Strategist and Innovator

The IT function (and CIOs personally) must refocus on business strategy, customer enablement, and business innovation.

Wanted: Business Skills

IT staff will need business-centric skill sets and will often have business backgrounds.

Which Business Changes Will Impact Corporate IT?

Most analysts describe the impact of technology trends but miss the impact of changes in the economy, customers, or the workforce.

How Will Technology Create Business Value in Future?

There are many theories about how IT enablement will create value—data analytics and customer enablement are often mentioned—but there is no consistent view.

How Will Ownership and Accountability for Information Management Change?

Most analysis ignores structural changes elsewhere in the business that, in turn, will change the location and ownership of many IT roles.

Tacit Assumption: The IT function will remain a strong central function, led by a CIO, and grow in importance, if not in size.

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT WHAT TO DO NOW?




Department: Group ITLeader: Chief Information OfficerDate: December 2015

CostIn-house provision means we have higher IT costs and lower cost scalability than our competitors.

Value CreationOur core business processes are stable and efficient, but our IT–enabled customer experience is not competitive, nor are our collaboration and analytics capabilities. We have failed to keep up with new functionality used by our competitors.

Project PerformanceNew functionality is underused. Our largest IT was delivered on time but failed to meet its business case due to change management problems and user resistance.

Operational PerformanceOperational performance falls significantly below benchmarks available in the cloud. We have had several security incidents due to unauthorized applications and devices.

Customer SatisfactionBusiness Leadership—Business unit leaders believe that IT is “holding us back” and show frustration with IT’s inability to experiment. IT costs are viewed as opaque and hard to predict.

End Users—Users give low marks on the devices and collaboration tools provided by IT and express a strong desire to obtain better capabilities externally. Our poor IT brand is damaging our employee value proposition.

Talent ManagementThe latest employee survey found low IT staff engagement and performance (tied for last with Finance). We have lost our best technical talent to vendors, and we cannot attract or retain staff with business skills.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


THE CIO’S REPORT CARD IN 2015?Without change, a set of emerging internal and external trends mean that corporate IT risks becoming a significant drag on competitiveness by 2015.

■ Cost and capability will both lag competitors who have selectively migrated to the cloud.

■ The divide between IT and business will widen as the IT function is increasingly seen as a roadblock, not an enabler. The divide will prevent effective needs identification and change management.

■ End users and business leaders alike will increasingly circumvent central policies and technologies.

■ The IT function will lose the most talented staff to vendors but struggle to attract business-skilled staff into what is perceived as a difficult and uncompetitive role.

4 Internal Trends10 External Trends

Current SOPCorporate IT



Introduction 5

CENTRIFUGAL FORCES

Sources of Tension Between Roles Played by Corporate IT

The IT function is asked to do many roles that are difficult to do simultaneously and are often more closely related to being central than to being IT.

■ The IT function combines operational roles with roles related to business strategy and consulting, despite the different skills and incentives required.

■ Key central IT roles, such as program management and business process design, are not directly related to technology. The ownership of these roles by the IT function has as much to do with IT’s position in the corporate center as it does with IT’s technology capabilities. Increasingly, these roles are duplicated elsewhere in the corporate center.

■ Many of the IT function’s operational roles are being externalized so thinking roles will predominate.

■ Software Development and Maintenance

■ Infrastructure Operations

■ Vendor Management

■ User Support

■ IT Strategy

■ Innovation

■ Enterprise Architecture

■ Requirements Definition

■ Program Management

■ Change Management

■ Business Shared Services

■ Procurement

■ Corporate Strategy

■ Business Process Design

■ Information Management and Analytics

“Thinking” and “doing” roles require different skills, incentives, and business relationships.

Many central roles are now duplicated in Finance, Procurement, Supply Chain, and other corporate functions.

In addition to IT–centric roles, the IT function assumes a set of central roles that have no natural ownership.

IT “doing” roles are being externalized faster than other central “doing” roles.

IT Central

Do

Think

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS





NARROWER SOURCES OF COMPETITIVE ADVANTAGE

Evolution in the Sources of Competitive Advantage Provided by IT

The growing range of functionality available in the cloud erodes traditional sources of competitive advantage from information technology.

■ The ability of competitors to access the same functionality and processes is potentially most threatening to industry leaders, while the ability to obtain the same scale threatens the largest industry players.

■ Differentiation can only be achieved through better organizational change, the use of data, and the ability to integrate processes end-to-end.

Build/Buy and Customize (Before 2005)

Buy Vanilla (2006–2010)

Buy Cloud (2010 Onward)

Business Process Design

Application Functionality

Testing

Data Analytics

Integration

Organizational Change

Operation Scale and Quality

Maintenance and Upgrades

Sources of Differentiation

Accessible to Competitors

Start-ups and niche players will use the cloud to obtain the same IT functionality and scale that now give competitive advantage to industry leaders.

IT’s contribution to competitive advantage shifts from process enablement to data, integration, and change.

DERF xx-xxxx

Catalog # CIO6067210SYN

Title

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 7

STRUGGLING TO KEEP THE TEAM ON BOARD

Decline in Employee EffortPercentage of Employees with High Discretionary Effort

As demands on the IT function proliferate, IT staff feel disengaged and conflicted about their role.

■ The percentage of IT staff putting in high discretionary effort has declined from 17% to 4.3% since 2006, meaning that the organization now has about a quarter as many workers giving high levels of effort.

■ Moving from low- to high- discretionary effort can result in an improvement in employee performance rating by up to 20 percentile points.

■ A further symptom of IT staff confusion and disengagement is the lack of consensus on the role and name of the IT function.

Does the Name of Your IT Function Accurately Reflect Its Roles and Responsibilities?

44% Yes

56% No

Source: Engagement Survey and Analysis Tool; The Wall Street Journal; Bureau of Labor Statistics; Organization for Economic Cooperation and Development; Corporate Leadership Council research.

IT Employees

All Employees

n = 10,373 IT employees.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Second Half 2007

First Half 2008

Second Half 2008

First Half 2009

Second Half 2009

12.3%

10.5%

9.6%

7.4%

8.2%6.5% 6.6%

6.3%4.6% 4.3%

Less than half of IT staff believe that the IT function’s name reflects its role.




NOT WHERE WE WANT TO BE

Business Leaders: Percentage Rating the IT Function Effective at Providing Functionality to Advance Business Capabilities and Strategy

Business partners and end users remain broadly dissatisfied with the ability of the IT function to provide the capabilities they need.

■ Despite much effort, key measures of business partner perceptions of the IT function’s effectiveness have not risen in five years.

End Users: Because of the New System, My Job Performance Has Improved (2009)

24% Agree

Source: CIO Executive Board Business Alignment Diagnostic. Source: CIO Executive Board business productivity database.

n = 4, 172 business leaders at 44 organizations. n = 5,325 end users.

76% Do Not Agree

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


24% 23%

20092005

“The IT traditional ‘implementation’ process is no longer

an option. Many IT professionals are being driven from this organization for the lack of a sense of urgency.”General Manager Automotive Supplier



Introduction 9

TEN EXTERNAL TRENDS THAT WILL CHANGE CORPORATE IT

Ten external trends in IT demand and supply will change how organizations use technology to create value, and the roles, structure, and skills of the IT function.

■ Trends that are important but will likely not significantly change IT’s value drivers, structure, or skills include green IT and greater government intervention in the economy.

Demand-Side Changes

1. Rise of the Knowledge Worker—Widespread transaction automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker.

2. Ubiquitous Data—The rise of “smart” mobile devices and “ubiquitous sensing” will drive an exponential increase in data volume and throughput.

3. Social Media—The way customers and consumers learn about products and interact with companies is changing fundamentally.

4. Emerging Market Growth—Shifting global demand means emerging markets will be main source of growth, eventually reaching the scale of developed markets.

5. Efficiency Shortfalls—The corporate center (IT, Finance, HR, Supply Chain, Procurement, etc.) is reaching the limits of efficiency in its current functionally oriented form.

6. Tech-Savvy Workforce—Technology knowledge and confidence in the workforce is broadening but losing its depth (more employees understand how to exploit technology, fewer have a deep technical expertise).

Supply-Side Changes

7. Technology as a Service—Infrastructure and applications are increasingly available as virtualized, configurable, and scalable services in the cloud, or will to adopt licensing structures that mimic a service.

8. The Industrialized, Externalized Back Office—Industry standards will emerge for back-office business processes that are then delivered by external providers.

9. A Blueprint for Service Delivery—ITILv3 provides a pathway to reorienting IT around service delivery.

10. Desktop Transformation—A convergence of virtualization, SaaS, and unified communications combined with greater workforce mobility is triggering a “transformation of the desktop” that will enable device-agnostic service delivery.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS





V. IT Function Role

12. The Infrastructure Group Focuses on Contract and Vendor Management

13. Security Moves Away from Securing Physical Devices

14. Project Management and Business Analyst Roles Move to BUs

15. The Applications Group Shrinks to Legacy Maintenance

16. All Technologists Move Outside the Organization

SIXTEEN HYPOTHESES TO TEST

II. Delivery Structure5. Information Technology Is Delivered as a Service

6. The Central IT Function Becomes Part of Business Shared Services

Low High Low High

I. Value Drivers

1. The IT Function Focuses on Enhancing End-to-End Customer Experience

2. The IT Function Focuses on Boosting Knowledge Worker Productivity

3. The IT Function Focuses on Delivering Information Analytics Capability

4. Information Technology Converges with Production Technology

IV. Business Role

9. Business Units Plan and Procure Their Own Technology

10. End Users Acquire Their Own Collaboration and Knowledge Sharing Tools

11. End Users Provision Their Own End-Point Devices

III. Sourcing Model7. Most of the Infrastructure Portfolio Will Migrate to the Cloud

8. Back-Office Business Processes Will Become Entirely Commoditized and Outsourced

Value Risk

n = 127 IT leaders.

DERF xx-xxxx


Title

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 11

THE FUTURE OF CORPORATE IT

Five Radical Shifts in IT Value, Ownership, and Role

Current State The Future of Corporate IT

1. Value Drivers Business Process First—Business process automation absorbs the largest share of IT investment. Business process design is used to define future capabilities and drive competitive advantage.

Information Over Process—Competitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.

2. Delivery Structure IT as a Service Provider—Applications and infrastructure are bundled into services that directly reflect business partner technology consumption. The IT function is increasingly centralized as a standalone shared service.

IT Embedded in Business Services—Centrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.

3. Sourcing Model Right-Sourced IT—Delivery combines external provision with significant internal resources as vendors are uncompetitive for many critical tasks.

Externalized Service Delivery—Delivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.

4. Business Role Pressure for Central Control—Liaison and governance guide business units and end users away from obtaining their own IT capabilities.

Greater Business Partner Responsibility—Business unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.

5. IT Function Role Fully Functional IT Function—The scope of central IT function encompasses strategy, governance, and delivery with direct control of almost all IT–related resources and activities vested in the CIO.

Diminished Standalone IT Role—IT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 13

0%

0% 20% 40% 60% 80% 100%

100%

80%

60%

40%

20%

IT Leader Opinions on Relative Value and Risk of Potential Changes in IT by 2015Percentage Ranking Each Change as High Value and High Risk

Per

cent

age

Hig

h R

isk

Percentage High Value

Most of the infrastructure portfolio will migrate to the cloud.

IT converges with production technology.

Infrastructure group focuses on contract and vendor management.

Back-office business processes will become entirely commoditized and outsourced.

Central IT becomes part of business shared services.

IT is delivered as a service.

Applications group role shrinks to legacy

maintenance.

Project management and business analyst roles move to BUs.

End users provision their own end-point

devices.

Security moves away from securing physical devices.

All technologists move outside the organization.

n = 127 IT Leaders.

AN IT LEADER’S VIEW OF VALUE AND RISK

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Zone of Angst

Zone of Confidence

Business units plan and procure their own technology.

IT focuses on delivering Information Analytics.

Information Over Process

IT Embedded in Business Services

IT as Technology Broker

Greater Business Partner Responsibility

Diminished Standalone IT Role

IT leaders are confident about shifts in sources of IT value from process to information but more doubtful about shifts that affect the scope and role of the IT function.

■ In particular, they question the value and risk of 1) externalization and 2) of expanding business unit and end-user responsibility for technology.

End users acquire their own collaboration and knowledge sharing tools.

IT focuses on enhancing end- to-end customer experience.

IT focuses on boosting knowledge worker productivity.




WHEN WILL THE FUTURE ARRIVE?

Key Questions to Determine the Speed of Approach of the Five Shifts

To assess the speed of approach of the five shifts, organizations must constantly reevaluate their sources of competitive differentiation and risk, and the maturity of alternative delivery options in their industry.

1. Where in our business model is differentiation more valuable than standardization? – Which processes and technologies confer competitive advantage? – Which of our business units have unique technology needs?

2. How effectively are we managing our risk exposure? – Do we fully understand the costs, benefits, and vulnerabilities of externalization? – Is in-house provision really safer than external providers such as Google?

3. How mature are cloud and business process outsourcing (BPO) offerings in our sector? – Are cloud services ready for enterprise-scale applications? – Can a BPO provider beat internal cost and quality?

4. When will we be able to replace our legacy platforms? – What operations must we run internally in the center, and for how long?

5. What could stop or accelerate the shifts in our industry? – Do we face regulatory constraints or customer mandates that slow or hasten any of the shifts? – What are our competitors doing?

DERF xx-xxxx


Title

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 15

INDUSTRY VARIATIONS

Impact of the Five Shifts by Type of Organization

The impact of the five shifts depend on the intensity of the organization’s use of technology and the degree of diversity in products and operations.

DEFINITIONS

■ Non-Diverse—The organization has one line of business, or multiple lines with similar markets or products.

■ Diverse—The organization has multiple lines of business with diverse business unit markets or products.

■ Intensive—The organization’s products have a high information content. IT is used for production or delivery. Examples include Financial Services, Media, Telecom, and Transport.

■ Non-Intensive—The organization’s products have a low information content. IT is primarily used for administration. Examples include Chemicals, Energy, Government, Manufacturing, Mining, and Retail.

Non-Diverse/Intensive

Non-Diverse/ Non-Intensive

Diverse/ Intensive

Diverse/ Non-Intensive

1 2 3 1 2 3 1 2 3 1 2 3



IT as Technology Broker



WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Impact: 1 Low, 2 Medium, 3 High



Introduction 17

INFORMATION OVER PROCESS

Breakdown of IT Enablement Opportunities by Business Process

The majority of IT–enablement opportunities in innovation, sales and marketing, and customer service do not involve traditional process automation.

■ Analysis of 550 level three and four processes determines whether and how each process could be IT enabled.

■ Overall, almost half the opportunities do not involve process automation. In innovation, marketing and sales, and customer service processes, enablement opportunities are mainly at the customer interface or using business intelligence and collaboration.

■ For full details of this analysis, please see the companion document on Process Enablement Value Maps.

Source: Analysis based on APQC Process Classification Framework v5.0.

Finance and HR

Production and Supply

Chain

Customer Service

Marketing and Sales

Product/Service

Innovation

None Customer Interface

Collaboration Process Automation

Business Intelligence

3%

13%

13%

44%

28%

46%

9%

13%

16%

28%

34%

18%

20%

30%

18%

13%

4%

15%

54%

14%

11%

14%

27%

12%

In customer service, marketing and sales, and innovation, more than half the opportunities for IT enablement are at the customer interface or involve business intelligence or collaboration.

3%

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Note: May not equal 100% due to rounding.



Introduction 19

IT EMBEDDED IN BUSINESS SERVICESThe business shared services group subsumes many IT activities within business services, or in overarching service strategy and service architecture groups. A smaller, more operational IT function remains within the business service group.

■ Account management and help desk are shared across all business services, not just IT.

■ IT development and operations are externalized to outsourcers or the cloud.

■ Remaining internal IT resources are organized into groups for build and run.

Supply Chain

FinanceHRGroup IT

■ Design/procure applications and technology

■ Integrate

■ Test

■ Manage external run and maintain

■ Retire

Integration Layer and Standards

Business Service Strategy and Portfolio Management

Risk Management and Security

Service Architecture (Business, Information, and Integration)

Acco

un

t Man

agers

Help

Desk

External Service Providers (IT/Business Process Outsourcers and Cloud)

Business Services

PMO and Change Mgmt. Service

Business Analytics Service

Sourcing and Contracting Service

Communication/Collaboration Service

Connectivity and Hosting Service

Business Units

4. External providers deliver commoditized business processes and technologies.

6. Business service managers define their IT requirements and work directly with external providers.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


1. IT strategy, architecture, and risk are owned by groups under the head of business services.

3. Technology services are managed by functionally aligned IT resources.

2. Services requiring business knowledge to realize value are managed outside IT.

5. Account managers and help desk are shared by all business services.



Introduction 21

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


GREATER BUSINESS PARTNER RESPONSIBILITYGreater business leader responsibility does not entail a swing of the pendulum back to local or “rogue” IT functions.

■ It is a shift in responsibility from the IT function to business partners, not a shift in resource from central to local.

What Greater Business Responsibility Entails

What Greater Business Responsibility Does Not Entail

+ Business-Led Opportunity Identification—Business leaders are responsible for identifying technology enablement opportunities and defining needs.

+ Business Responsibility for Processes, Programs, and Change—Business process design, project management, and change management become business roles.

+ Selective Business-Owned Technology Sourcing—Business leaders can obtain IT capabilities directly from the cloud when the value of differentiation outweighs standardization.

– Rogue Local IT Staff—No local, “rogue” IT groups of dedicated IT headcount.

– “Servers Under the Desk”—No business unit–owned, on-premise application or technology portfolios.

– Unintegrated Data—No relaxation of central information and integration standards when the value of integration outweighs differentiation.

– Security Risk—No relaxation of central security policy where business unit actions create organization- wide risk.



Introduction 23

DIMINISHED STANDALONE IT ROLE

Current Location of Role

The role of the central, standalone IT function will diminish, with activities migrating to business shared services, business units, end users, and external providers.

■ A residual central IT function will remain within the business shared services group to design, procure, test, and integrate applications and infrastructure.

■ Other roles such as project management and data analytics will become business services while IT strategy and architecture become part of broader service strategy and architecture.

Future Location of Role

Business Units ■ Identify opportunities. ■ Manage project/program. ■ Set requirements. ■ Design business process.

■ Procure applications. ■ Manage change. ■ Procure technology

(cloud only).

End Users ■ Procure technology

(user devices only).

■ Procure applications (BI and collaboration only).

External Providers ■ Build/provision

applications. ■ Build/provision technology. ■ Maintain.

■ Enhance. ■ Run. ■ Support users.

Business Shared Services Group ■ Identify opportunities. ■ Manage project/program. ■ Set requirements. ■ Set IT strategy. ■ Liaise with business units. ■ Prioritize the portfolio. ■ Create roadmap.

■ Design business process. ■ Manage change. ■ Recover costs. ■ Manage data. ■ Support users. ■ Set security policy. ■ Manage compliance.

Indispensible IT ■ Design/procure

application. ■ Design/procure

technology. ■ Integrate.

■ Manage external run and maintain.

■ Test. ■ Retire.

Central IT

Office of CIO ■ Set IT strategy. ■ Liaise with business units. ■ Identify opportunities. ■ Prioritize the portfolio. ■ Recover costs.

EA ■ Create roadmap (process, data, apps.).

PMO ■ Manage project/program.

Applications Development ■ Set requirements. ■ Design business process. ■ Design application. ■ Procure/build applications. ■ Integrate. ■ Test. ■ Manage data. ■ Maintain. ■ Retire.

Infrastructure ■ Design technology. ■ Procure/build technology. ■ Run. ■ Support users.

Information Risk ■ Set security policy. ■ Manage compliance.

Business Knowledge

Industry- Wide Scale

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


The relative scope of business unit and shared service roles depends on business diversity. Business units focus on capabilities only they need, but the business shared service center has the same roles for services used by all.



Introduction 25

NOT MUCH LEFT

Estimated Reallocation of IT Headcount at Progressive Organizations by 2015As a Percentage of Total Central IT Headcount in 2010

Headcount in standalone IT roles will likely shrink to 25% or less of current totals by 2015 in organizations where the five shifts have taken full effect.

■ In many cases, the number of staff in standalone IT roles will be less than those with responsibilities related to technology in the business shared services group.

■ See the appendix on page 116 for full details of the analysis

20% External

80% Internal

45–75%

2–5%

13–25%

10–25%

Central IT Function in 2010

Externalized Business Units Business Shared Services Groups

“Indispensible” IT

Source: Analysis based on CIO Executive Board 2009 IT Budget Benchmark.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 27

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


CIO ROLE—WHAT NEXT?

Future Roles for CIOs

The evolution of the IT function amplifies contradictions in a traditional CIO role, which are resolved by segregating the responsibilities of a business service provider, head of technology, and technology-savvy business unit leader.

■ The CIO role can expand to become head of a business shared services organization and oversee business service strategy and architecture.

■ Managing technology procurement and integration still requires leadership, but is likely to be led by a report of the head of business services, and with a stronger focus on technology and operations.

■ CIOs may also transition to a leadership role in a business unit that derives competitive advantage from technology, or to a senior role at an external service provider.

Business Impact

Scal

e o

f R

ole

Head of Business Shared ServicesExternal Service Provider Executive

Technology Leader(Reporting to head of

business shared services)

Business Unit Manager

■ Advisor to business units on exploiting technology

■ Responsible for business service development and provision

■ Leads business unit in exploiting technology for competitive advantage

■ Develops new service offerings

■ Manages development, operations

■ Oversees shared technology operations

■ Manages vendors and integration

DERF xx-xxxx


Title




ROADMAP TO THE FUTURE

Within Three Years Beyond Three Years Endstate

■ Spend on customer experience, business intelligence, and collaboration rises relative to process automation.

■ Online platforms increase share of interactions with customers and consumers. ■ Process automation refocuses on end-to-end process integration. ■ IT and production technologies become more integrated, increasing data volumes.

■ All enterprise structured and unstructured data is captured and integrated.

■ Information management and analytics are delivered as business services.

1. Migrate IT spend to new sources of value.An enterprise-wide customer-centric information architecture to enable knowledge worker productivity, improved customer experience, and business decision making

2. Embed IT in business service delivery.

■ Service management methodologies embed technology within services. ■ IT organizational structure realigns around end-to-end service management. ■ IT function integrates into multi-functional shared services group with a shared

help desk, liaison, and management structure. ■ Business shared services introduced for a limited set of enterprise processes.

■ Primary alignment of business shared services group shifts from function to service.

■ Scope of business service offerings expands.

A Business Shared Services organization with centrally provided IT embedded within business services

■ Business leaders drive own technology strategy with guidance from the center.

4. Transfer responsibilities to business units and end users.

■ Organizations identify IT capabilities that can be sourced externally and owned by business units.

■ Business analyst and project management roles move into business units. ■ End users are given freedom to provision their own end-point devices. ■ End users individually combine internal and external collaboration platforms.

Improved IT agility for tech-savvy business leaders, individual end-user preferences satisfied, and central IT investment focused on shared business services

■ Organizations migrate to public cloud solutions.

3. Externalize infrastructure, most applications, and back-office processes.

■ Back-office operations are commoditized and outsourced. ■ Business units acquire capabilities directly from a growing base of niche SaaS

providers. ■ Organizations adopt private cloud infrastructure.

Central IT role changes to technology broker and vendor and contract manager

5. Upgrade IT skills and responsibilities to support the new model.

■ IT staff develop service management skills (design, build, and deliver). ■ Architecture team refocuses on business, information, and integration architecture. ■ Program and change management become business services. ■ Information security increases integration with other corporate risk groups.

■ Role of internal infrastructure group becomes vendor and contract management.

■ CIO roles expands to include business services or contracts to manage residual internal IT delivery.

■ Remaining IT resources form build and run groups.

Small central IT team within business shared service IT group focuses on coordination, integration, and partner management

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS




Introduction 29

WAY STATIONS

Key Intermediate Steps Toward the Five Shifts

Five short-term actions and investments pave the way for the five shifts.

■ In addition to these five intermediate steps, the following pages provide comprehensive to-do lists for CIOs, IT Leadership teams, and business stakeholders.

1. Information Architecture—Reemphasizing information architecture and data management creates a foundation for future investment in business intelligence and collaboration.

2. ITIL v3—The development of management processes, structures, and metrics for technology services paves the way for subsequent moves to business services. This can be done through selective adoption of ITIL v3 or by defining a similar model internally.

3. Private Clouds—Virtualized internal infrastructure allows organizations to gain shorter-term scale advantages and prepare for eventual migration to the public cloud.

4. New IT–Business Divisions of Labor—Emerging capabilities for business architecture and program management readies business units for greater responsibility.

5. Agile Development—Greater use of agile development concepts (formally or informally) allows greater rapid service enhancement and mobility for remaining internal IT resources.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS





WHAT TO DO NOW?

A To-Do List for CIOs

CIOs should take immediate action to prepare for the five shifts.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Immediate

This Year

1. Convene a subgroup of the IT leadership team and a few mid-level, high-potential employees to examine the five shifts. Ask them to think forward five years, identify implications for your organization, and develop scenarios for how your organization may change.

2. Include discussions related to the five shifts as a standing agenda item in meetings with the CEO.

3. Discuss implications of the second shift—IT Embedded in Business Services in the next meeting with the CFO, head of HR, head of Procurement, and other corporate function leaders.

4. Discuss implications of the first shift—Information Over Process and the fourth shift—Greater Business Partner Responsibility in the next meeting with business unit general managers.

5. Embed the implications of the five shifts in the IT strategic plan, defining how they affect the project portfolio, the IT function’s structure, role, and skills requirements.

6. Add metrics to the IT balanced scorecard to track changes related to the shifts. 7. Coach business unit management to help them take greater leadership in their technology decisions. 8. Describe the five shifts and their implications for the IT function’s structure and role, and for individual career

plans, in IT team meetings, conference calls, e-mails, and newsletters. 9. Reevaluate IT leadership team succession plans to ensure that the organization is developing leaders with the

right skill sets including service management, vendor management, and information and business architecture. 10. Explain how the IT function and its sourcing model are changing in meetings with vendor partners.



Introduction 31

WHAT TO DO NOW? (CONTINUED)

A To-Do List for IT Leadership Teams

IT leadership teams should take immediate action to prepare for the five shifts.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


Shift 1: Information Over Process

1. Develop a strategy for managing unstructured information and selectively merging it with structured information.2. Work with the CFO and business unit leaders to set portfolio targets for investments in knowledge worker

productivity, business intelligence, and customer interface. 3. Analyze how technology affects your organization’s customer experience and isolate the most significant

impacts.4. Invest in capabilities to enhance usability and user experience.5. Develop a plan for convergence between information technology and other technologies used in the organization

(for example, process control, shop floor automation, back-office operations).

Shift 2: IT Embedded in Business Services

6. Evaluate methodologies such as ITIL v3 as a first step toward business services provision.7. Identify which of the IT function’s capabilities are replicated in other corporate functions, and which

can be commoditized and externalized.8. Invest in resources for business and information architecture.

Shift 3: Externalized Service Delivery

9. Begin to develop a private cloud as an intermediate step toward migrating to the public cloud.10. Don’t sign or renew contracts for on-premise software, end-user devices, or user support that last more than

three years, and avoid infrastructure investments such as data centers that have payback periods of more than five years.

11. Educate vendors on which technology sourcing decisions will be taken by IT, business shared services, or business units.

12. Classify applications based on differentiation and scale (enterprise level, business unit level, individual use) to identify eventual ownership.




Shift 4: Greater Business Partner Responsibility

13. Collaborate with the leadership of sales, marketing, product innovation and customer service to develop strategies for collaboration, business intelligence, and customer experience.

14. Collaborate with the procurement and legal functions to establish policy for business-led technology acquisition.15. Collaborate with legal, communications, and other interested parties to establish policy for end-user acquisition

and use of SaaS, social media, and collaboration tools.

Shift 5: Diminished Standalone IT Role

16. Adopt agile methodologies to enable greater resource mobility.17. Reevaluate CIO succession plans to ensure candidates are prepared to run a business services group.18. Orient skills roadmaps, recruitment efforts, and development plans toward service management, information

management, and vendor management.19. Design build and run groups and define the processes and governance to connect them.20. Don’t recruit extensively for purely technical skills or qualifications.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


IT leadership teams should take immediate action to prepare for the five shifts.


A To-Do List for IT Leadership Teams



Introduction 33


A To-Do List for IT Stakeholders

The IT function’s business stakeholders must also take action in anticipation of changes to IT.

WHICH WAY FORWARD?


TEN EXTERNAL TRENDS


CEO and Board of Directors

1. Set expectations for which technology management capabilities (strategy, vendor management, program management, etc.) should be developed within business units and monitor progress to remedy gaps.

2. Identify capabilities at the corporate center (IT, Finance, HR, Procurement, etc.) that can be shared across functions.

3. Ensure clarity around the organization’s sources of competitive advantage and isolate which of these are enabled by technology.

4. Reach consensus on which business processes can be commoditized and externalized.5. Reevaluate succession plans to identify who in the corporate leadership team has the capabilities needed to run

a multifunctional shared service organization.

Business Unit General Managers

1. Pinpoint which business unit strategic goals and sources of operational risk and competitive advantage rely on technology.

2. Short-list which business processes must differ from the rest of the organization to support competitive advantage.

3. Identify which members of the business unit leadership team understand how technology can drive competitive advantage and how to lead change programs.

4. Define a plan to develop or recruit staff with vendor management, business architecture, and program management skills.

Corporate Functional Heads

1. Identify which of your function’s capabilities can be shared across other corporate functions and which can be commoditized and externalized.

2. Define a model for delivering your function’s capabilities as business services, either alone or combined with capabilities from other functions.

3. Help members of your team develop vendor management, business architecture, and service management skills.4. Identify, prioritize, and enhance the most valuable information and analysis produced by your function.






HOW TO USE THE RESEARCHThe Corporate Executive Board’s Information Technology Practice can help you to exploit the trends explored in this research.

■ For more information on any of the resources described on this page contact your account manager or the Member Support Center at +1-866-913-8101 or [email protected].

Uses for the Research Which Shifts to Look At

How We Can Help

1. Update Your IT Strategic Plan Use The Future of Corporate IT to refresh your three- to five-year strategy for IT value delivery.

All Initiate a Strategic Planning Engagement with the CIO Executive Board or have us lead a discussion on The Future of Corporate IT findings at your strategy off-site.

2. Broaden the IT Organizational Design ConversationInitiate conversations with company leadership on the future role and structure of IT and IT’s relationship to other corporate functions.

Shifts 2, 4, 5 Benefit from CEB’s cross-functional reach to keep up-to-date on parallel organizational changes in other corporate functions through our work on the Business Insights for IT.

3. Pressure-Test Your Sourcing ModelEnsure your sourcing strategy is ready for greater externalization and a move by providers to the cloud.

Shifts 3, 5 Use the Emerging Technologies Roadmap from the Infrastructure Executive Council to get real-world data on adoption rates and risk assessments for new technologies and sourcing models.

4. Clarify IT Staff Career PathsAccelerate development and boost engagement by giving IT staff clear direction on the direction of the function and the skills they need to succeed.

Shifts 2, 5 Provide your team with targeted training on the skills they will need most with our online training modules and IT Business Leadership Academy.

mailto:EXBD_Support%40executiveboard.com.%0D?subject=





Introduction 35

WITH SINCERE THANKS

Partial List of Participating Organizations

We would like to thank the IT and business leaders who helped guide our work through interviews and survey responses.

■ The ideas and opinions contained in this research are those of The Corporate Executive Board and do not necessarily reflect the views of the organizations listed here.

■ The research harnesses The Corporate Executive Board’s unique perspective:

– Cross-Functional: Serving all members of the executive suite

– Cross-Industry: Serving all industries

– Practitioner-Driven: Focused on the practical implications of trends and insights



37

Shift 1: Information Over ProcessCompetitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.



Information Over Process 39

Four business and technology trends will change the way organizations derive value from information technology.

■ See page 9 for a full list of the Ten External Trends That Will Change Corporate IT.

OVERVIEW: INFORMATION OVER PROCESS

Business and Technology Trends


Technology at the customer interface and in marketing and sales becomes critical to competitive advantage.

2. Ubiquitous Data—The rise of “smart” devices and “ubiquitous sensing” will drive an exponential increase in data volume and throughput.

The scope and importance of data analytics increases significantly.

3. Rise of the Knowledge Worker— Widespread process automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker.

Collaboration and business intelligence becomes critical to productivity.

4. Commoditized Processes—The growing range of functionality available in the cloud erodes competitive advantage from process automation.

Differentiation from process automation shifts from unique functionality to implementation effectiveness and true global end-to-end integration.

Impact Implication

Competitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.

SHIFT 1: OVERVIEW TRENDS IMPLICATIONS INDUSTRY

VARIATIONS KEY FINDINGS




TREND 1: SOCIAL MEDIA

Traditional Customer Communications

The way customers and consumers learn about products and interact with companies is changing fundamentally.

■ Using social media, customers and consumers will educate each other about products and services. The company producing the product or service loses control of its messaging and must learn how to participate, shape, and learn from these interactions.

■ More than 70% of organizations are already using social media, and most are planning to increase their spending on social media across the coming years.

Customer

Requests for Information

Product Messaging

Customer

Company

Customer

Company

Customer

Requests for Information

Product Messaging

Customer

Customer

Customer Communications with Social Media

■ Each customer directly interacts with the company.

■ Company controls product messaging. ■ Web is only one of many channels. ■ Interactions occur in company Web channel.

■ Customers interact with each other. ■ Customers control product messaging; company can only influence the conversation and learn from it.

■ Web becomes the primary channel. ■ Most interactions occur in third-party Web channels.






The rise of “smart” devices and “ubiquitous sensing” will drive an exponential increase in data volume and throughput.

TREND 2: UBIQUITOUS DATA

Sources of Data Growth

Estimated Rise in Global Data Volumes, 2010–2015 (Indexed to 100)

Information Technology (e.g., ERP, CRM) Will Converge with Production Technology (e.g., Shopfloor Automation)Percentage of Respondents

B2C ■ Presence information from mobile devices ■ Vehicle and consumer device telemetry ■ Web traffic monitoring ■ POS

B2B ■ Process control and shop floor automation data ■ Logistics tracking ■ Asset performance and maintenance monitoring ■ Automated replenishment

2010 2011 2012 2013 2014 2015

60% CAGR

49% Within

Three Years

32% More Than Three Years

19% Not Likely to Happen

n = 57 business leaders.

Source: “All Too Much” The Economist, 27 February 2010.

100160

260

410

660

1,050






TREND 3: THE RISE OF THE KNOWLEDGE WORKER Widespread process automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker.

■ An ever-growing percentage of employees use information technology to support their daily work.

■ IT leaders may be under-focused on this topic, as a higher percentage of business leaders than IT leaders rate boosting knowledge worker productivity as a high-value role for IT.

72%80%

100%

2006 2009 2012 (E)

??%

Percentage of Employees Support by ITDrivers of Expanded Knowledge Work

Source: 2007 and 2010 Budget Benchmarks; CIO Executive Board.

5%

(15%)

Percentage of Business Leaders Describing Each IT Role as “High Value” Minus Percentage of IT Leaders Doing Likewise

Knowledge Worker Productivity

End-to-End Customer Experience

n = 127 IT leaders and 58 business leaders.

■ Automation and/or externalization of production processes

■ Increased information content in products and services

■ Growing range of internal and external collaboration capabilities impact more roles








TREND 4: COMMODITIZED PROCESSES

Evolution in the Sources of Competitive Advantage Provided by IT

The growing range of functionality available in the cloud erodes traditional sources of competitive advantage from information technology.

■ The ability of competitors to access the same functionality and processes is potentially most threatening to industry leaders, while the ability to obtain the same scale threatens the largest industry players.

■ Differentiation can only be achieved through better organizational change, the use of data, and the ability to integrate processes end-to-end.

Build/Buy and Customize (Before 2005)

Buy Vanilla (2006–2010)

Buy Cloud (2010 Onward)

Business Process Design

Application Functionality

Testing

Data Analytics

Integration

Organizational Change

Operation Scale and Quality

Maintenance and Upgrades

Sources of Differentiation

Accessible to Competitors

Start-ups and niche players will use the cloud to obtain the same IT functionality and scale that now give competitive advantage to industry leaders.

IT’s contribution to competitive advantage shifts from process enablement to data, integration, and change.

DERF 10-4248

Catalog # ■ CIO6067210SYN

Title




IMPLICATION: A DIFFERENT TOOLSET

Impact of the Four Trends on Different Types of IT Enablement

The four trends will lead to an increase in the relative value and importance of technologies at the customer interface, and for business intelligence and collaboration.

■ The four types of enablement are defined as:

– Process Automation— Processes enabled by enterprise systems such as ERP, PLM, HRIS, and CRM

– Customer Interface— Systems used directly by customers or consumers

– Business Intelligence— Systems for aggregating and analyzing structured information

– Collaboration—Systems for synchronous and asynchronous collaboration and knowledge sharing within the organization and with external parties

IT–Enablement Categories

Process Automation


Customer Interface

Collaboration


2. Ubiquitous Data—The rise of “smart” devices and “ubiquitous sensing” will drive an exponential increase in data volume and throughput.

3. The Rise of the Knowledge Worker—Almost everyone is becoming a knowledge worker.

4. Commoditized Processes—The growing range of functionality available in the cloud means competitive advantage comes from sources other than process automation.

The use of technology for business intelligence, customer interface, and collaboration all increase in importance relative to process automation.






IMPLICATION: SOURCES OF NEW OPPORTUNITY

Breakdown of IT Enablement Opportunities by Business Process

The majority of IT–enablement opportunities in innovation, sales and marketing, and customer service do not involve traditional process automation.

■ Analysis of 550 level three and four processes determines whether and how each process could be IT enabled.

■ Overall, almost half the opportunities do not involve process automation. In innovation, marketing and sales, and customer service processes, enablement opportunities at the customer interface and using business intelligence and collaboration predominate.

■ For full details of this analysis, please see the companion document on Process Enablement Value Maps.

Finance and HR

Production and Supply

Chain

Customer Service

Marketing and Sales

Product/Service

Innovation

None Customer Interface

Collaboration Process Automation


3%

13%

13%

44%

28%

46%

9%

13%

16%

28%

34%

18%

20%

30%

18%

13%

4%

15%

54%

14%

11%

14%

27%

12%

In customer service, marketing and sales, and innovation, more than half the opportunities for IT enablement are at the customer interface or involve business intelligence or collaboration.

3%

Source: Analysis based on APQC Process Classification Framework v5.0.

Note: May not equal 100% due to rounding.






IMPLICATION: INFORMATION TAKES THE LEAD

Differences Between Process Automation and Other Forms of IT Enablement

Collaboration, business intelligence, and the customer interface are all less linear, more data-centric, and more diverse than traditional process automation.

■ These attributes have implications for the role of IT as business process declines in importance relative to data.

■ Structured processes

■ Value from process efficiency, quality, and integration

■ Commonality of needs

■ Standard functionality

■ In-house provision

■ Nonlinear processes

■ Value from information sharing and analysis

■ Diversity of needs

■ User-defined functionality

■ Use of third-party platforms

Process Automation Customer Interface, Business Intelligence, Collaboration

IT Role in Business Process Design

IT Role in Information Management

– Nonlinear processes and diversity of needs means business process mapping is less useful for customer interface, collaboration, and business intelligence.

– Other functions acquire greater business process design skills.

+ Information management becomes vital for customer interface, collaboration, and information management.

+ No other function is a natural owner for information architecture.

“The past few years were about business process. In fact, we

recently hired computer science graduates who barely knew data modeling or master data management. Our future plans relate to data, so we have to correct this imbalance.”Head of Applications Global Transportation Company






Unstructured information accounts for 85% of all information in an organization, and its share continues to grow.

■ Consequently information management roles will increasingly emphasize the management of unstructured information.

IMPLICATION: LEANING TOWARD THE UNSTRUCTURED

Percentage of Structured and Unstructured Data and Related Information Management Roles (2010)

15% Structured Information

Structured Information

■ Manage a minimum set of standardized, enterprise data.

■ Help users interpret data.

■ Establish alerts and triggers based on data thresholds.

■ Integrate structured with unstructured information.

Unstructured Information

■ Establish lightweight structures to capture and share unstructured information.

■ Provide tools to mine unstructured information.

■ Set usage and security policies for information sharing on internal and external platforms.

■ Integrate unstructured with unstructured information.

17% Flowing Outside

Channels (e.g., Gmail,

LinkedIn)

68% Flowing Inside

Corporate Channels (e.g., E-Mail)

A key role is to integrate both types of information for better decision making.






IMPLICATION: END-TO-END PROCESS VISIBILITY

Two Examples of End-to-End Processes

Improved information management capabilities will enable end-to-end process visibility where existing efforts at process automation have created islands of integration.

■ Vendor diversity and the process evolution both mean that organizations struggle to integrate information across end-to-end processes.

■ Two examples are in the supply chain and HR.

– In the supply chain, true global optimization remains elusive, with no one vendor providing end-to-end visibility.

– In HR, managers do not have a holistic view of the recruitment pipeline due to 1) the process automation of applicant tracking and alumni management and 2) the emergence of new processes such as forming pools of potential candidates in advance of need.

Global Supply Chain

Hire-to-Retire

SRM ERP WMS DRP CRMGlobal Trade Management

Applicant Tracking

HRISProactive Talent Pool Creation

Perf. Mgmt. System

Alumni Database

1. One core system such as ERP or HRIS covers much but not all of the end-to-end process.

2. Additional, niche applications provide superior functionality but are not fully integrated.

3. The process continues to expand, requiring new, hard-to-integrate functionality, often developed by a start-up, not an existing vendor.

Little ability to see, manage, or optimize the process end-to-end






Process automation and process design skills will retain greater value in IT–intensive organizations.

■ While customer experience, business intelligence and collaboration will rise in importance in all organizations, the shift away from process automation will be less marked in IT–intensive organizations.

■ The shift toward integration of end-to-end processes is likely to occur in all organizations.

INDUSTRY VARIATIONS

Impact of Change by Type of Organization



Diverse/ Intensive


1 2 3 1 2 3 1 2 3 1 2 3

Customer Experience, Business Intelligence, and Collaboration Become Relatively More Important

Data Skills Become Relatively More Important Than Process Design

Information Management Enables End-to-End Process Visibility




Definitions




■ Non-Intensive—The organization’s products have a low information content. IT is primarily used for administration.




KEY FINDINGS


1. Four business and technology trends will change the way organizations use information technology to create value:

■ The use of social media in customer and consumer interactions ■ Growing volumes of data from smart devices and ubiquitous sensing ■ The rise of the knowledge worker ■ The erosion of competitive advantage from process automation as a broader range of functionality becomes available in the cloud

2. These trends will create a greater number of opportunities for IT enablement at the customer interface, and using business intelligence and collaboration.

3. The customer interface, business intelligence, and collaboration represent the majority of opportunities to enable innovation, marketing and sales, and customer service.

4. The new opportunities for IT enablement are characterized by non-linear processes, and so the importance of information management in IT will increase relative to business process design. This trend will be most pronounced in less IT–intensive organizations and will include both structured and unstructured information.

5. Information management capabilities will also enable organizations to integrate siloed processes, as the current generation of process automation does not provide the ability to see, manage, or optimize end-to-end processes.





51

Shift 2: IT Embedded in Business ServicesCentrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.



IT Embedded in Business Services 53

OVERVIEW: IT EMBEDDED IN BUSINESS SERVICES

Business and Technology Trends

Four business and technology trends will change the way information technology is delivered.


1. Efficiency Shortfalls—The corporate center is reaching the limits of efficiency in its current functionally oriented form.

Further efficiencies will come from merging standalone, back-office functions into multifunctional shared services groups.

2. Emerging Market Growth—Shifting global demand means emerging markets will be main source of growth, eventually reaching the scale of developed markets.

On-the-ground and in-language support can best be provided by a multi-functional shared services group as standalone functions lack scale and expertise.


A rising percentage of back-office processes and the technology that supports them will be delivered as standardized services by external partners.

4. A Blueprint for Service Delivery—ITILv3 provides a pathway to reorienting IT around service delivery.

Service orientation in IT paves the way for business service delivery by developing the necessary service management processes, skills, and charging mechanisms.

Centrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.

Impact Implication






TREND 1: EFFICIENCY SHORTFALLS

Average Annual Decline in Cost to Sales Ratio for Elite Cost Cutters

The corporate center (IT, Finance, HR, Supply Chain, Procurement, etc.) is reaching the limits of efficiency in its current functionally oriented form.

■ Companies with sustained track records of cost reduction have seen their cost to sales ratios decrease relatively more slowly over the past few years, indicating the potential for further reductions in costs may be limited.

■ Year-on-year variable cost reductions run their course eventually and create pressure for restructuring fixed costs by eliminating duplicative activities across functions.

1995–2005 2005–2008

Source: CFO Executive Board.

“Our central functions are running out of room to cut costs. The

only way to get step-change efficiencies is to start merging them.”CIO and Head of Supply Chain European Chemical Company

Note: Elite cost cutters refers to companies with negative average annual growth of expense to sales over both the 1994–2000 and the 2001–2008 periods.

n = 102 organizations.

0.78%

0.58%

■ Procurement and vendor management

■ Business process design

■ Business liaison

■ Service desk

■ Financial controlling

■ Analytics and reporting

■ Program management

■ Talent management

■ Offshore service centers

Sample List of Activities That Can Be Consolidated Across Back-Office Functions






TREND 2: EMERGING MARKET GROWTH

Changing Shares of Global GDP

Shifting global demand means emerging markets will be the main source of growth, eventually reaching the scale of developed markets.

■ As emerging markets increase in importance and complexity, IT and other central functions will struggle to 1) balance local with global standards and 2) provide sufficient on-the-ground and in-language support.

Key Questions for IT Leaders to Consider in Global Organizations

■ Are our IT management resources located in the right place to support global growth?

■ Do our global standards meet the needs of our emerging market operations?

■ Can our service providers support our global operations?

1980 1990 2000 2010

7.1%

22.8%22.5%

29.7%

19.7%21.4%

Developing Asia

Europe

United States

Source: IMF World Economic Outlook Database.






Industry standards will emerge for back-office business processes that are then delivered by external providers.

TREND 3: THE INDUSTRIALIZED, EXTERNALIZED BUSINESS PROCESS

Back-Office Business Processes Will Become Entirely Commoditized and OutsourcedPercentage of IT Leaders

30% Within

Three Years

37% More Than

Three Years


Note: Charts may not equal 100% due to rounding.

n = 124.

Characteristics of Externalized Business Processes

■ External provider executes the business process using its own technology.

■ Processes are industry standard for scale and quality.

■ Delivery combines onshore and offshore resources.

■ Processes are modularized to allow for customization.






6% Will Not Be Aligned

24% Unsure

The latest ITIL (IT Infrastructure Library) v3 framework focuses on services that create value as opposed to older versions that focus on processes.

■ Released in 2007, the ITIL v3 standard has emerged as the most popular approach to IT Service Management.

■ It allows for expanding collaboration across functions, recognizing that the next layer of opportunity to find efficiencies lies in processes that span across traditional functional verticals.

TREND 4: A BLUEPRINT FOR SERVICE DELIVERY

The ITILv3 Services Lifecycle Model

Continual Service Improvement

Service Strategy

Service Transition

Service Operation

Service Design



Adoption of ITILv3 Service Design ProcessesPercentage of Respondents

n = 22 IT leaders.

Source: IT Infrastructure Library; Office of Government Commerce.

71% Will Be

Aligned in 18 Months

Note: Graphs may not equal 100% due to rounding.






13%

IMPLICATION: IT DELIVERED WITHIN BUSINESS SERVICESThe majority of IT and business leaders believe that technology will ultimately be delivered as part of business services but disagree on the value and risk.

■ There is a gap between IT and business leaders’ opinions on the likelihood and impact of embedding IT into business services. IT leaders are more positive about both the likelihood and the value of a service-based approach.

■ IT leaders are also more concerned about the risks, with 54% of respondents describing the move as high risk.

IT Delivered Within Business Services Risk–Return on IT Delivered Within Business Services

IT Leader Perspective IT Leader Perspective

Business Leader Perspective Business Leader Perspective

49% Within

Three Years

35% Within

Three Years

26% More Than

Three Years

n = 127.

n = 57.


9% No Plans Yet

39% No Plans Yet

Risk

Returns

High

LowLow High

6%

28%18%

48%

Risk

Returns

High

LowLow High

29%

24%

34%






BUSINESS SERVICES EXPLAINED

Example 1: New Supplier Installation Service

A typical business service is an end-to-end integrated black-box service with a single customer interface.

■ The service is SLA–driven and is charged for by usage.

■ The underlying applications and infrastructure are provided and charged for as part of the service.

Business Partner

Manager

New Supplier Installed

Employee Ready to Move

■ Receive from manager.

Help desk ticket system

■ Action expense reimbursements for move.

Expense management system

■ Move payroll and update employee information.

Payroll system and HRIS

■ Provide logistics for transport and housing.

Help Desk Finance

Travel portal

Admin.HR

■ Receive from business partner.

Help desk ticket system

■ Complete due diligence.

■ Conduct contract negotiation.

Collaboration space for negotiating teams

■ Review and approve supplier contract.

Contracts database

■ Create Accounts Payable for supplier.

ERP Account Payable

■ Create new supplier record , ID, and extranet log-in.

Supplier relationship management system and extranet

Help Desk

Underlying Technologies

Underlying Technologies

Supply Chain FinanceLegal IT

Example 2: Employee Relocation Service






Versioned Servicesto reflect business

unit diversity

Service Components to embed in unique business unit processes

Opt-In Services

for a subset of business units

IMPLICATION: EXPANDED SERVICE SCOPE

Delivery Models for Standardized and Differentiated Services

The scope of business shared services expands beyond the back office via 1) opt-in and versioned services and 2) service components that business units can integrated into unique business processes.

■ The service delivery models will be used for processes where business units need a degree of differentiation such as sales, customer service, supply chain, and manufacturing.

■ The models may also be used to support differentiated needs in emerging markets.

■ Diverse and IT–intensive organizations will make more use of these differentiated service delivery models than will organizations that are non-diverse and non-intensive.

Unique Business Unit Needs

Expanding Beyond the Core—The scope of business shared services expands via optional or versioned services and service components in areas such as sales, customer service, supply chain, and manufacturing.

Scope of Core and Expanded Shared ServicesDiverse/Intensive Organizations

Non-Diverse/Non-Intensive Organizations

Enterprise- Standard Services

■ HR ■ Finance ■ Procurement

A small core of enterprise services plus many versioned services and service components

Most services are enterprise standard.






EXAMPLES OF BUSINESS SERVICES

Representative List of Business Service Titles and Services

Business services integrate technology with the resources to deliver a business process and enable a business outcome.

Source: “Governance of Global Shared Solutions at Procter & Gamble,” Weill, Peter; Soh, Christina; Sia Siew Kien; Research Briefing Vol VII, number 3B, Center for Information Systems Research, December 2007; Seven Steps to Better IT Service Economics, Infrastructure Executive Council (2009).

Business Service Name Description

Enterprise Standard

Acquisitions/Divestitures Due diligence, integration/disintegration

Communications/Collaboration

E-mail, Internet, telephony, mobile devices

Content Management Conversion and/or storage of hard copy documents in digital formats, allowing improved workflow to store, organize, manage, and deliver business information

Financial Processing Accounting, budgeting, investing, production of financial statements

Hospitality Dining, entertainment, employee wellness/retention services

Human Resource Processing

Payroll, benefits, recruiting, staffing, performance management, and succession planning

Meetings Rooms, technology and scheduling, audio and video conferencing, events

People Management Compensation planning, relocation, employee management tools

Purchases Strategic sourcing, supplier relationship management, procurement service

Travel Booking, expense accounting, credit cards, group meetings

Differentiated

Billing Bill generation and presentation, payment collection

Consumer Solutions Prime prospect research, CRM systems, advertising and media measurement

Customer Solutions Shopper intelligence, in-store action planning, trade fund management systems

Information Delivery Analysis, management reporting, decision making

Product Innovation Bioinformatics systems, product imaging and modeling systems

Supply Chain Solutions Demand planning systems, total order management, physical distance systems






IMPLICATION: MULTIFUNCTIONAL SHARED SERVICE ORGANIZATION

Approximately 65% of organizations have already built or are planning to build a multifunction shared services model to include IT and other corporate functions.

■ IT and business leaders agree about the likelihood and the potential risks and value of a multifunction shared service model.

■ The biggest challenges in proposing a multifunction shared service strategy is resistance to change, and fear of loss of control.

■ Comparing this data to the data on page 58, it is clear that IT leaders are more comfortable with the idea of technology being delivered within business services than they are about the IT function becoming part of a business services group.


45% Within

Three Years

n = 58.

Expected Migration to Multifunction Shared Service Risk–Return Perspective on Multifunction Organization Shared Service Organization


46% Within

Three Years



33% No Plans Yet

36% No Plans Yet

n = 127.

”If we become part of a business shared service organization,

I worry about IT being seen as a back-office utility.”Head of ApplicationsGlobal Airline

Risk

Returns

High

LowLow High

18%

19%40%

23%

Risk

Returns

High

LowLow High

23%

26%31%

21%

Note: All graphs may not equal 100% due to rounding.








DERF 10-4005


Title

IMPLICATION: FROM VERTICAL TO HORIZONTAL

A Path to Business Services

As organizations exhaust efficiencies from functional consolidation, the next opportunities lie in integrating across functions, and ultimately aligning horizontally around the delivery business services.

■ Ninety-one percent of IT leaders believe that technology will be delivered within business services, and 67% believe that the IT function will integrate with a business services organization.

■ Examples of business services include customer intelligence, new supplier installation, employee relocation, or acquisition integration.

2. Siloed Shared Services

Supply Chain

Shared Services

HR Shared Services

Finance Shared

Services

IT Shared Services

3. Multifunctional Shared Services

IT HRFinance Supply Chain

Multifunctional Shared Services

1. Decentralized Functions

IT

HR

Finance

Supply Chain

BU

IT

HR

Finance

Supply Chain

BU

■ IT is embedded in each business service.

■ Horizontal services become the predominant organizing principle.

4. Integrated Business Services

Integrated Business Services

Employee Services

Customer Services

Supplier Services




The integrated multifunctional shared services model combines accountability for the service outcome with service design and control of all technology resources needed to deliver the service.

IMPLICATION: FUSING ACCOUNTABILITY AND EXECUTION

Business Functions (e.g., Finance, HR)

Central IT Function

External PartnersExternal Partners

■ Service design and execution are shared by business function and IT.

■ Business function leadership is accountable for service outcome but lacks control of execution.

■ Relationship management is required to connect business and IT.

■ External providers are two steps removed from business owner.

■ IT is embedded in business shared services group.

■ Business shared service group leadership owns outcome, design, and execution.

■ Relationship management overhead is eliminated.

■ Single step is between business owner and external providers.

Business Shared Service

Group

Accountability for Service Outcome

Service Design

Service Execution

Traditional Model: Divided Accountability and Execution

Business Shared Services Model: Fused Accountability and Execution






Supply Chain

FinanceHRGroup IT

POTENTIAL BUSINESS SHARED SERVICES MODELThe business shared services group subsumes many IT activities within business services, or in overarching service strategy, service architecture, and risk groups. A smaller, more operational IT function remains within the business services group.


■ IT development and operations are externalized to outsourcers or the cloud.




Acco

un

t Man

agers

Help

Desk

External Service Providers (IT/Business Process and Technology Outsourcers and Cloud)

Business Services

PMO and Change Mgmt Service





Business Units

1. IT strategy, architecture, and risk owned by groups under the head of Business Services.

2. Business service managers define their IT requirements and work directly with external providers.





Risk Management and Security Policy








An IT shared service offers cost efficiency from centralization, but additional savings are available from integrated multifunction shared service organizations.

■ Creating an integrated business services organization can provide additional cost savings of up to 23% compared to standalone siloed shared services.

■ The savings result from the ability to share infrastructure, management overhead, staff, facilities, IT systems and from greater scale in outsourcing and/ or offshoring.

THE ECONOMICS OF BUSINESS SERVICES

Savings from Migration to Integrated Business Services (Indexed)

50–60

100

44–54

37–44

1. Decentralized Functions

3. Multifunctional Shared Services

2. Siloed Shared Services

4. Integrated Business Services

Additional Benefits of Integrated Business Services:

■ Improved quality and consistency of service ■ Process standardization and integration ■ Best practice sharing ■ Agility in responding to business change

■ Better cross-functional data integration and visibility ■ Job enrichment opportunities and high-potential talent sharing

■ Improved support for M&A integration

Source: Shared Services Roundtable; CIO Executive Board.

DERF 10-4005


Title




INDUSTRY VARIATIONS


The shift toward delivering technology as part of business services will be more complete in non-IT intensive organizations.

■ However, the creation of a multifunctional shared services group including the IT function is likely in all organizations. For IT–intensive organizations, a shared service group may lack scale or maturity without IT. In non–IT intensive industries, IT may lack scale unless it joins a shared service group.

■ Program management will be offered as a service except where local units are intensive users of IT and have their own program management capabilities.

■ In non-intensive organizations, IT strategy and architecture may merge with broader business service strategy and architecture.



Diverse/ Intensive


1 2 3 1 2 3 1 2 3 1 2 3

Technology Is Delivered as Part of a Business Service

The IT Function Becomes Part of Business Shared Services Group

Program Management Is Offered as a Service

IT Strategy and Architecture Become Part of Broader Service Strategy and Architecture




Definitions

■ Non-Diverse—The organization has one line of business, or multiple lines with similar markets or products. ■ Diverse—The organization has multiple lines of business with diverse business unit markets or products. ■ Intensive—The organization’s products have a high information content. IT is used for production or delivery. Examples include Financial Services, Media, Telecom, and Transport.





KEY FINDINGS


1. Four business and technology trends will change the way centrally provided applications and infrastructure are delivered:

■ Corporate functions are reaching the limits of efficiency in their current functionally oriented form. ■ Shifts in global demand mean emerging markets require more intensive and differentiated IT support. ■ Back-office business processes are being industrialized and externalized. ■ The growing popularity of ITILv3 offers a viable framework for service delivery.

2. Many IT activities will be subsumed within business services so that business units consume and pay for business outcomes enabled by information technology.

3. The scope of shared business services will expand beyond the back office as organizations offer opt-in and versioned services and service components that create scale while permitting business unit differentiation.

4. Single-function shared service groups such as IT, Finance, or HR will evolve into multifunction groups to deliver business services. This move will expand economies of scale, provide higher service quality, and increase agility. Account management and user support will be shared across all functions.

5. Business analytics, program management, and vendor management may be offered as services in themselves.

6. In organizations that use information technology less intensively, IT strategy and architecture will become part of broader service strategy and service architecture groups. A smaller, more operational IT function will remain within the business services group to 1) design and procure technology and 2) oversee testing and operations.





69

Shift 3: Externalized Service DeliveryDelivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.



Externalized Service Delivery 71

The emergence of cloud computing and the growing availability of industry-standard business processes drives further externalization and prompts a shift in internal roles from providers to brokers.


OVERVIEW: EXTERNALIZED SERVICE DELIVERY

Business and Technology Trends Impact

Delivery will be predominately externalized as vendors expand service provision and internal resources become brokers not providers.

Implication


A rising percentage of back-office processes and the technology that supports them will be delivered as standardized services by external partners.

1. Technology as a Service—Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.

The cloud provides an additional approach to external provision that will lead to the externalization of assets and activities that were not viable with other forms of outsourcing.






TREND 1: TECHNOLOGY AS A SERVICE

Software-as-a-Service Adoption Timeline

Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will begin to adopt licensing structures that mimic a service.

■ Software-as-a-service (SaaS) is predicted to reach mainstream adoption in 2010, with infrastructure-as-a-service (IaaS) following after 2012. However, IT leaders predict that IaaS will not account for the majority of infrastructure until at least 2015.

Elastic—Capacity scales up and down automatically based on need.

Multitenant—Customers share the same underlying resources, forcing commonality and generating greater scale.

On Demand—Services are internet-based and can be consumed as and when needed.

Usage-Based Metering—Billing is based on usage or a subscription (without long-term contracts or licenses).

Self-Service—Services are simple to use and can be directly consumed from the user interface on an application programming interface, thus reducing IT’s role in implementation.

Infrastructure-as-a-Service Adoption Timeline

50% Mainstream

Adoption Threshold

47% Deployed by 2009

12% 2011 Onward

16% Planned 2010

25% No Opinion

Key Characteristics of Cloud

9% Deployed by 2009

25% Planned

2010

28% 2011

Onward50% Mainstream

Adoption Threshold

38% No Opinion

Source: 2009 Vision for Infrastructure Survey; Infrastructure Executive Council.






Industry standards will emergence for back-office business processes that are then delivered by external providers.

TREND 2: THE INDUSTRIALIZED, EXTERNALIZED BUSINESS PROCESS

Back-Office Business Processes Will Become Entirely Commoditized and OutsourcedPercentage of IT Leaders

30% Within

Three Years

37% More Than

Three Years


Note: Chart does not equal 100% due to rounding.

n = 124.

Characteristics of Externalized Business Processes

■ External provider executes the business process using its own technology.

■ Processes are industry standard for scale and quality.

■ Delivery combines onshore and offshore resources.

■ Processes are modularized to allow for customization.






With substantial externalization of business processes and technology, the majority of IT leaders predict that contract and vendor management will become the main infrastructure role.

■ Slim majorities of IT leaders believe that this transition carries high risks and high value.

FROM PROVIDERS TO BROKERS

Contract and Vendor Management Will Become the Main Infrastructure Operations RolePercentage of IT Leaders

Risk–Return of Contract and Vendor Management Becoming a Infrastructure RolePercentage of IT Leaders

39% Within

Three Years



n = 124.

“We will become technology brokers. Our job will be to know

what the business needs, find the right offering in the market, and then integrate.”CIOGlobal Media Company

Risk

Returns

High

LowLow High

25%

34%

19%

22%






The economics of cloud significantly increase the percentage of spend that is externalized, a trend that will be compounded as cloud services expands deeper into applications and infrastructure.

MOVING SPEND OUTSIDE

Estimated Vendor Share of Total Lifetime Spend1 on an Application

Potential Expansion of Cloud Services

Integration- as-a-Service

Security- as-a-Service

Communication- as-a-Service

Computing-Capacity- as-a-Service

Storage- as-a-Service

Testing- as-a-Service

Databases-as-a-Service

Desktops- as-a-Service

Cloud

Infrastructure- as-a-Service

Platform- as-a-Service

Software- as-a-Service

On Premise Cloud

80% Vendor

20% Internal

50% Internal

50% Vendor

1 Includes all costs for licensing, implementation, maintenance, support, and operations.






Outsourcing will remain as one of a portfolio of sourcing options.

■ Sourcing decisions will be guided by degree of commoditization.

■ Shared external services from the cloud and industry-standard business process outsourcers will fulfill commoditized needs. Traditional outsourcing will provide technical resources to build and run internally built or customized technology.

OUTSOURCING, ONE EXTERNALIZATION CHOICE AMONG MANY

The Portfolio of Sourcing Options

Business Process

OutsourcingSaaS IaaS/PaaS

Business Shared Service

CenterIT Outsourcing

Deg

ree

of

Co

mm

od

itiz

atio

n High

Low

Business Process Applications Infrastructure

Review of IT Outsourcing and Offshore Trends

■ Shrinking Vendor Pool—Vendor consolidation continues, reducing leverage and choice.

■ Shorter, Smaller Deals—The multiyear mega-deal is replaced with a range of smaller, more flexible contracts.

■ Service-Based Pricing—Non-cloud outsourcing adopts consumption-based charging models.

■ From Cost to IP—Declining cost differentials mean offshore centers reposition around unique skill sets or IP.

■ End of the Captive Offshore Centers—Captive offshore centers refocus on local market support or are transferred to external providers.

Source: TPI, Equaterra, Everest, Shaw Pitman, CIO.com.






INDUSTRY VARIATIONS


All organizations will maintain a portfolio of sourcing options, however, IT–intensive organizations will make greater use of traditional outsourcing models and on-premise applications.



Diverse/ Intensive


1 2 3 1 2 3 1 2 3 1 2 3

Adopt Software-as-a-Service

Adopt Infrastructure- as-a-Service

Outsource Applications Development and Infrastructure

Retain On-Premise Applications




Definitions










KEY FINDINGS

Externalized Service Delivery

1. Cloud offers benefits for both vendors and users, and therefore will emerge as a significant sourcing option.

2. Back-office processes will continue to be commoditized and outsourced.

3. As a result of the move to the cloud and back-office outsourcing, a significantly higher percentage of IT spend will be externalized.

4. Internal roles will shift from technology provider to technology broker, concentrating on 1) identification and qualification of vendor capabilities and 2) the definition and management of contracts and service levels. In some instances, help with vendor selection and management may be offered to business units as a centrally provided business service.

5. Sourcing decisions will be guided by degree of commoditization, with the cloud used to obtain commoditized services, and outsourced resources used to develop and run technology where differentiation remains important.





79

Shift 4: Greater Business Partner ResponsibilityBusiness unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.



Greater Business Partner Responsibility 81

Four business and technology trends will enable business unit leaders and end users to procure and exploit technology by themselves.


OVERVIEW: GREATER BUSINESS PARTNER RESPONSIBILITY

Business and Technology Trends Impact

Business unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.

2. Tech-Savvy Workforce—Technology understanding and confidence is growing among business unit staff and leaders.

Business unit leaders become more capable of defining their own technology strategy, and end users of obtaining their own capabilities.

1. New Sources of Opportunity—The impact of information technology is expanding through business intelligence and collaboration, and at the customer interface, enabling new processes in customer service, marketing and sales, and innovation.

The criticality of technology to business unit success and the need for differentiation within the organization both increase.

3. Technology as a Service—Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.

Technology becomes easier for business units to provision and use.

4. Desktop Transformation—A convergence of technologies is triggering a “transformation of the desktop” that will enable device-agnostic service delivery.

End users will find it increasingly easy to select and integrate capabilities from internal and external sources on the desktop or equivalent device.

Implication






TREND 1: NEW SOURCES OF OPPORTUNITY

Collaboration, Business Intelligence, and Customer Interface as a Percentageof Total IT Enablement Opportunities

The majority of IT enablement opportunities in the areas most critical to business unit success are characterized by user- and customer-driven requirements that may vary across the organization.

■ On average, 63% of business processes in innovation, sales and marketing, and customer service can be enabled via collaboration, business intelligence, or technology at the customer interface.

Source: CIO Executive Board analysis based on APQC Process Classification Framework v5.0.

Back Office (HR and Finance)

Production and Supply Chain

Innovation, Sales, Customer Service

Criticality to Business Unit

Success

Low High

The majority of IT enablement opportunities in areas of greatest value to business units are shaped by user or end customer needs that may vary across the organization.

28% 30%

63%






TREND 2: TECH-SAVVY WORKFORCE

U.S. College Graduates’ Attitudes on Technology Skills

Basic technology understanding and confidence is growing among the business staff and leaders.

“Even in the past two years I have seen a change in the sales

force. They used to resist technology, but now they are lobbying for it.”Head of Sale Operations U.S. B2B Services Company

Expect to Encounter New Technologies in

Their Future Jobs

See a Need to Increase

Technology Skills

Marketer (Chemical Company)

Examines data and applies tools to see trends and implications for costs and benefits…

Identifies trends in technology and draws conclusions and makes recommendations…

Works in collaboration with Tech Services to solve problems…

Sales Rep (Industrial Company)

Uses technology to analyze and manage the business effectively…

Stays current with new technologies that help to create a competitive selling advantage…

AVP, Finance (Investment Bank)

Has command of business information and provides value-added analysis and insight into business decisions…

Keeps current with IT systems applicable to own working group…

Understands the interrelationships between systems…

Excerpts from Functional and Business Unit Competency Models

80%

60%

Source: Dubie, Denise, “IT Skills Crucial to Any Career, Students Say,” Network World, 12 March 2009.






TREND 3: TECHNOLOGY AS A SERVICE

Software-as-a-Service Adoption Timeline

Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.

■ Software-as-a-service is predicted to reach mainstream adoption in 2010, with infrastructure-as-a-service following after 2012. However, IT leaders predict that IaaS will not account for the majority of infrastructure until at least 2015.

■ SaaS and IaaS will make it easier for business units to provision and use technology unaided, and vendors will take this opportunity to sell to them directly.

Elastic—Capacity scales up and down automatically based on need.

Multitenant—Customers share the same underlying resources, forcing commonality and generating greater scale.

On Demand—Services are Internet-based and can be consumed as and when needed.

Usage-Based Metering—Billing is based on usage or a subscription (without long-term contracts or licenses).

Self Service—Services are simple to use and can be directly consumed from the user interface on an application programming interface, thus reducing IT’s role in implementation.

Infrastructure-as-a-Service Adoption Timeline

50% Mainstream

Adoption Threshold


12% 2011 Onward

16% Planned 2010

25% No Opinion

Key Characteristics of Cloud

9% Deployed by 2009

25% Planned

2010

28% 2011

Onward50% Mainstream

Adoption Threshold

38% No Opinion


“As we offer services in the cloud, our sales strategy will shift to

selling directly to business leaders. The CIO will become only one of five or six buying centers.”CIOGlobal Software Company






TREND 4: DESKTOP TRANSFORMATION

Desktop Virtualization Adoption Timeline

A convergence of technologies is triggering a “transformation of the desktop” that will enable device-agnostic service delivery.

■ The transformation is enabled by the growing maturity of virtualization, SaaS, and unified communications combined with the imminent move to Windows 7 at many organizations.

Unified Communication Adoption Timeline

Windows 7 Adoption Timeline



52% Planned

2010

8% Deployed by 2009

55% Planned

2010

40% Planned 2010

24% 2011 Onward

16% No Opinion

18% 2011 Onward

10% 2011 Onward

10% No Opinion

12% No Opinion

50% Mainstream

Adoption Threshold

50% Mainstream

Adoption Threshold

50% Mainstream

Adoption Threshold







Changes in sourcing models, technology usability and business competence reduce the value of the skill and scale advantages traditionally enjoyed by corporate IT.

■ The fact that cloud services cannot be extensively customized levels the playing field; business users cannot customize a cloud service, but neither can the IT function.

IMPLICATION: ERODING IT’S ADVANTAGE IN SCALE AND EXPERTISE

IT

Business Units and End Users

Low

Low

High

High

Access to Expertise

Acc

ess

to S

cale

Business units can obtain scale via the cloud similar to that available to IT.

Cloud and consumer technologies become less customizable.

Business leaders and end users become more technology-savvy.






IMPLICATION: MOVING THE DIVIDING LINE

Project Management and Business Analyst Roles Will Move into Business Units

A majority of IT leaders predict that the key value delivery roles of project management and business analysis will become embedded in business units, not central IT.

■ Sixty-four percent of IT leaders believe that this is a low risk move, but only 39% believe it will be valuable.


Risk-Return of Project Management and Business Analysis Moving to Business Units

36% Within

Three Years

20% More Than

Three Years

n = 125.


Note: Charts may not equal 100% due to rounding.

Risk

Returns

High

LowLow High

35%

5%

29%

31%






A NEW DIVISION OF LABOR

Factors Influencing Central and Local Roles

User preferences, differentiation, and external service availability will all determine the division of labor between centrally located IT resources and business units.

Q. User Preference—Do the benefits of a common solution outweigh individual user preferences about the interface, process, or functionality?

Q. Value of Differentiation—Do the benefits of local differentiation outweigh the benefits of a common solution?

Q. External Service Availability—Is the functionality available in the cloud?

NO, end users provision externally.

YES

NO, need met with a business service.

YES

NO, the center is the provider.

YES, the center is the integrator.

Central Roles Business Unit Roles

No Role

Deliver a Business Service

■ Design ■ Procure Applications ■ Integrate ■ Test ■ Secure ■ Maintain ■ Run

■ Prioritize ■ Set Requirements ■ Manage Project ■ Manage Change

■ Prioritize ■ Set Requirements ■ Procure Applications ■ Manage Project ■ Manage Change

■ Integrate ■ Test ■ Secure

No Role

No Role

“Things have changed and perhaps I should let people get on with

IT, but then what is the role of IT?”CIOEuropean Airline






BREAKING THE PENDULUM: A SHIFT IN RESPONSIBILITY, NOT RESOURCE

Greater business leader responsibility does not entail a swing of the pendulum back to local or “rogue” IT. It is a shift in responsibility from IT to business, not a shift in resource from central to local.

What Greater Business Responsibility Entails

What Greater Business Responsibility Does Not Entail

+ Business-Led Opportunity Identification—Business leaders are responsible for identifying technology enablement opportunities and defining needs.

+ Business Responsibility for Processes, Programs, and Change—Business process design, project management, and change management become business roles.

+ Selective Business-Owned Technology Sourcing—Business leaders can obtain IT capabilities directly from the cloud when the value of differentiation outweighs standardization.

– Rogue Local IT Staff—No local ”rogue” IT groups of dedicated IT headcount

– “Servers Under the Desk”—No business unit–owned, on-premise application or technology portfolios

– Unintegrated Data—No relaxation of central information and integration standards when the value of integration outweighs differentiation

– Security Risk—No relaxation of central security policy where business unit actions create organization-wide risk






IT leaders predict a gradual rise in the provision of collaboration tools and knowledge sharing tools by end users

■ Business and IT leaders disagree about the benefits and risks of this trend. Sixty percent of business leaders believe that end-user autonomy in this area will be valuable, while only 29% of IT leaders agree. Sixty-three percent of business leaders believe the trend is low risk, while only 37% of IT leaders agree.

■ A majority of IT leaders also predict that end users will provision their own end- point devices. Thirty-eight percent believe this will happen within three years and a further 25% in more than three years.

IMPLICATION: THE RISE OF THE END USER

End Users Acquire Collaboration and Knowledge Sharing Technologies Themselves

IT Leader Perspective

Risk-Return of End Users Acquiring Knowledge- Sharing Technologies for Themselves


42% Within

Three Years

34% Within

Three Years

14% More Than

Three Years

19% More Than

Three Years



n = 125 IT leaders and 58 business leaders.

Note: Numbers may not equal 100% due to rounding.

Risk

Returns

High

LowLow High

18%

11%

19%

53%

Risk

Returns

High

LowLow High

37%

23%

26%

14%

IT Leader Perspective






End-user provision of devices and applications offers a third alternative to internal provision and outsourcing.

■ Market changes such as the transformation of the desktop and the emergence of consumer alternatives create the opportunity for end-user provision in a growing number of areas.

■ Organizations can take advantage of these opportunities in situations where user flexibility is more important than integration, where users routinely combine internal and external information sources, and where security concerns are manageable.

A THIRD PLAYER IN IT

Analysis of Decision Criteria for End-User Provisioned Technology

Decision Criteria Process Automation


Collaboration End-User Devices

Affected by “transformation of the desktop”

Viable consumer alternatives

Greater value in user flexibility than in integration and harmonization

Users combine internal and external information

Moderate to low security risks

Cost savings from reduced internal provision

No Provision by End Users

Optional Provision by End Users

Mandatory Provision

by End Users

No Yes

“Employees bring their external knowledge networks into their

jobs. We must accept that these networks reside on external platforms.”CIO European Technology Company






INDUSTRY VARIATIONS


Business units will have less IT responsibility in non-diverse organizations where technology is not critical to the product.

■ End users in all organizations will have greater freedom to provision their own devices. They will also provide their own collaboration capabilities, although this may be less important in non-diverse organizations where centrally provided enterprise collaboration tools may have sufficient scale and reach.



Diverse/ Intensive


1 2 3 1 2 3 1 2 3 1 2 3

Business Units Provision Their Own Technology

Program Managers and Business Analysts Move to Business Units

End Users Provision Their Own End-Point Devices

End Users Provision Their Own Collaboration Tools




Definitions










KEY FINDINGS


1. Pressure for a greater role for business units in obtaining and managing information technology will grow as 1) technology understanding and confidence among business unit leaders and end users increases and 2) technology becomes ever more critical in differentiated business processes such as customer service, marketing and sales, and innovation.

2. The increased availability of software and infrastructure delivered as a service via the cloud reduces the difficulty for business units and end users of planning and provisioning their own information technology.

3. For capabilities that are differentiated, business units will increasingly own their own technology strategy, requirements definition, and change management. This will be particularly likely in IT–intensive organizations. Centrally located IT resources will continue to provide strategic guidance, procure traditional on-premise solutions, and act as an integrator and tester when externally provided services are chosen.

4. End users will provision capabilities where there is little benefits from a common solution and where they have strong individual preferences for specific interfaces, functionality or networks. Examples include end-user devices and collaboration and knowledge sharing tools.





95

Shift 5: Diminished Standalone IT RoleIT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.



Diminished Standalone IT Role 97

OVERVIEW: THE STORY SO FARMany IT roles will relocate, as those requiring business knowledge become embedded in business units or business shared services, and those benefiting from scale are externalized.

Business Unit Specific

Requires Technology Knowledge

Requires Business

Knowledge

Industry- Wide

Skill

Scale

IT

Business Units/End

Users

Business Shared Services Group

External Providers

Greater Business Partner Responsibility—Business unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.

IT Embedded in Business Services—Centrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.

Externalized Service Delivery—Delivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.

SHIFT 5: OVERVIEW IT STRUCTURE NEW ROLES ROLE

MIGRATION CIO ROLE INDUSTRY VARIATIONS KEY FINDINGS




WHAT GOES WHERE?

Current Location of Role

The traditional set of IT roles (EA, PMO, Applications, Infrastructure, Information Risk) will be redistributed.

■ Identifying opportunities and managing change will become business unit roles.

■ Roles that can be shared such as project management and data analytics will become business services. IT strategy and architecture will become part of broader service strategy and architecture teams.

■ The provision and operation of technology will mostly be externalized.

■ A residual central IT function will remain to design, procure, test, and integrate applications and infrastructure.

Future Location of Role

Business Units ■ Identify opportunities. ■ Manage project/program. ■ Set requirements. ■ Design business process.

■ Procure applications. ■ Manage change. ■ Procure technology

(cloud only).

End Users ■ Procure technology

(user devices only).

■ Procure applications (BI and collaboration only).

External Providers ■ Build/provision

applications. ■ Build/provision technology. ■ Maintain.

■ Enhance. ■ Run. ■ Support users.

Business Shared Services Group ■ Identify opportunities. ■ Manage project/program. ■ Set requirements. ■ Set IT strategy. ■ Liaise with business units. ■ Prioritize the portfolio. ■ Roadmap.

■ Design business process. ■ Manage change. ■ Recover costs. ■ Manage data. ■ Support users. ■ Set security policy. ■ Manage compliance.

Indispensible IT ■ Design/procure

application. ■ Design/procure

technology. ■ Integrate.


■ Test. ■ Retire.

The relative scope of business unit and shared service roles depends on business diversity. Business units focus on applications only they need, the business shared service center has the same roles for services used by all.

Central IT

Office of CIO ■ Set IT strategy. ■ Liaise with business units. ■ Identify opportunities. ■ Prioritize the portfolio. ■ Recover costs.

EA ■ Develop roadmap (process, data, apps.).

PMO ■ Manage project/program.

Applications Development ■ Set requirements. ■ Design business process. ■ Design application. ■ Procure/build/applications. ■ Integrate. ■ Test. ■ Manage data. ■ Maintain. ■ Retire.

Infrastructure ■ Design technology. ■ Procure/build technology. ■ Run. ■ Support users.

Information Risk ■ Set security policy. ■ Manage compliance.

Business Knowledge

Industry- Wide Scale






NOT MUCH LEFT

Estimated Reallocation of IT Headcount at Progressive Organizations by 2015As a Percentage of Total Central IT Headcount in 2010

Headcount in standalone IT roles will likely shrink to 25% or less of current totals by 2015 in organizations where the five shifts have taken full effect.

■ In many cases, the number of staff in standalone IT roles will be less than those with responsibilities related to technology in the business shared services group.

■ See the appendix on page 116 for full details of the analysis.


20% External

80% Internal

45–75%

2–5%

13–25%

10–25%

Central IT Function in 2010

Externalized Business Units Business Shared Services Groups







A FUTURE HOME FOR IT?

Reporting Lines for Standalone IT

With diminished scale and scope, the remaining standalone IT function is unlikely to warrant a separate reporting line and will become a sub-group within a business shared service organization.

CEO

Head of ITHead of Business Shared Service


Business Shared Service Group

CEO

Head of Business Shared Service

Business Shared Service Group


Head of IT

+ IT integrated with its largest user+ Synergies from shared admin, support, and

liaison roles + Diminished IT scope and scale unlikely

to warrant separate CEO reporting line+ Expanded career paths for IT leadership

– IT positioned as part of the “back office”

Reporting Lines for IT in a Business Shared Services Group






POTENTIAL BUSINESS SHARED SERVICES MODELThe business shared services group subsumes many IT activities within services or in overarching service strategy, service architecture, and corporate risk groups. A smaller, more operational IT function remains within the business services group.


■ IT development and operations is externalized to outsourcers or the cloud.

Supply Chain

FinanceHRGroup IT

■ Design/procure applications

■ Design/procure technology

■ Integrate

■ Test

■ Manage external run and maintain

■ Retire




Risk Management and SecurityA

ccou

nt M

anag

ers

Help

Desk

External Service Providers (IT/Business Process Outsourcers and Cloud)

Business Services






Business Units




1. IT strategy, architecture, and risk move to groups under head of business services.







THE FIVE KEY NEW ROLESSuccessfully embedding the IT function into a business shared services organization and delivering technology within business services will require five critical new roles.

■ Each role requires hybrid capabilities that combine technology and business knowledge and skills.

■ In each case, there are risks related to the role during the transition from the current to future organizational model. These risks relate to skills scarcity or the need to cope with user or vendor to immaturity.

Role Hybrid Capabilities Likely Source Transition Risk

1. Business Service Manager

Understand business outcomes of service and underlying technology.

■ IT–business liaisons ■ External

Inability to find/afford sufficient individuals to fill the role

2. Business Service Architect

Integrate business, information, and technology architecture.

■ Enterprise or business architects

Inability to find individuals with combined skill sets

3. Information Analyst

Understand business context of data, user needs, and underlying data architecture.

■ Finance or market research

■ External

Has heavy user support role until maturity of business partner information usage improves

4. Strategist Understand how technology integrates with other capabilities to shape corporate strategy.

■ Senior IT leaders ■ Corporate strategists ■ External

Influence of dedicated IT leadership declines before strategists develop sufficient technology understanding

5. Vendor Manager Understand vendor management and technology.

■ Infrastructure managers ■ Applications managers ■ External

Until cloud vendors mature, must have deep enough technology knowledge to understand vendor maturity






BUSINESS SERVICE MANAGERS

Potential Model for a Business Shared Service GroupIllustrative

Business Service Manager Profile

Key Responsibilities ■ Determine what customers want or need related to the service line.

■ Run service delivery strategic planning process for service line and update technology plan.

■ Help business understand how to adjust to anticipated technology/product changes.

■ Set price for services and help business in determining budget needs.

Competencies Required for Selection ■ Experience in service delivery, direct business engagement, and multiple technology domains

■ Has participated in design or implementation of major IT projects

■ Technology sales and marketing experience ■ Ability to develop complex financial plans ■ Ability to communicate and build relationships outside IT

As existing IT roles are moved, reconfigured, or externalized, one critical new role in service management will emerge.

■ Service managers are already appearing in progressive IT functions as the end-to-end owners of delivery for a specific service.

■ The role is accountable for designing and building the service as well as delivery and cost recovery. As such, the role requires business knowledge, and skills in sales and communications, program management, and financial management.

“A service manager should own the ‘bible’ for a service offering—

the scope of what’s offered, SLAs, metrics, and cost.”Manager, Service Management U.S. High-Tech Company

Supply Chain

FinanceHRGroup IT

Business Services






Each service is managed end-to-end by a business service manager.

Source: Infrastructure Executive Board.






AN AGILE OPERATING MODEL FOR SERVICE DELIVERY Differentiated services are launched and enhanced through short, iterative Agile releases that maximize speed to value capture and ensure resources mobility.

■ The operating model includes build resources remaining in IT as well as the PMO, service managers and architects from the business services group, and external providers.

■ Commodity services are obtained directly from external providers.

Service Roadmap

Service Roadmap

Service Roadmap

Business Service Managers

Business NeedsExpressed as Capabilities

Bu

sin

ess

Ser

vice

Cat

alo

g

Test

an

d In

teg

rate

Ru

n (

Pri

mar

ily C

lou

d)

Service Roadmap

Resource Mobility

Differentiated Services

Commodity Services via SaaS

Business service managers maintain roadmaps for each service.

■ Roadmaps for differentiated services are executed in rapid releases using Agile methodology to expedite value capture and resource mobility.

■ Involves IT build team, business services PMO and service architects, and external resources

■ Service orientation expedites integration and reuse.






REORIENT ON BUILD AND RUN

Traditional IT Functional Model

Remaining internal applications and infrastructure activities are reallocated to build and run teams.

■ The build and run teams support the needs of the business service managers within the business shared service center.

IT Build and Run Model

Build

■ Design/procure application.

■ Design/procure technology.

■ Integrate.

■ Test.

Applications

■ Set requirements.

■ Design business process.

■ Design application.

■ Procure/build applications.

■ Integrate.

■ Test.

■ Manage change.

■ Manage data.

■ Maintain.

■ Enhance.

■ Retire.

Infrastructure

■ Design technology.

■ Procure/build technology.

■ Run.

■ Support users.

Run


■ Retire.

Moved to Business Services, Business Units, or Externalized

■ Set requirements.

■ Design business process.

■ Build application.

■ Build technology.

■ Manage change.

■ Manage data.

■ Run.

■ Maintain.

■ Enhance.

■ Support users.






ROLE MIGRATION—OFFICE OF THE CIO

Potential Migration by 2015

Roles currently in the Office of the CIO will be subsumed by similar, but more business-centric, roles within the Business Shared Services Group.

■ This migration will ensure technology becomes more firmly embedded in business architecture and business strategy.

Role Location Responsibilities Required Skills and Knowledge

Enterprise Architect

Subsumed in business service architecture group reporting to Head of Business Shared Service

Coordination of the business, technology, and information architecture for each business service

■ Business architecture ■ Information architecture ■ Technology architecture

IT Strategist

Split and subsumed in Office of Head of Business Shared Services and Corporate Strategy group

IT strategy becomes embedded in the strategies of the business shared service group and the company as a whole

■ Deep knowledge of drivers of competitive advantage and operational risk

■ Insight into competitor use of technology ■ Understanding on corporate strategic planning processes

■ Senior-level relationships across the organization

IT Controller

Subsumed in Office of Head of Business Shared Services

Financial management and cost recovery of business shared services, including underlying technology

■ Financial accounting and controller skills

IT–Business Liaison

Subsumed in liaison layer of Business Shared Service Group

Liaison between business units and Business Shared Services groups for opportunity identification

■ Deep knowledge of business units ■ Negotiation and consensus building ■ “Challenger” profile






ROLE MIGRATION—APPLICATIONS AND PMO


The traditional business-facing applications roles of business analyst and project manager migrate or embed into the business shared service group or business units.

■ Most application development is externalized, leaving solutions architects to oversee integration and applications managers to oversee external partners and testing.

■ Data and analytics are managed as a business service.


Business Analyst

Dedicated BAs located in Business Shared Service group and business units while basic requirements definition skills also become embedded in business roles

Understanding technology needs, gathering requirements, identifying vendors

■ Understanding of business processes and business needs

■ Business requirements definition skills

Project Manager

Split between business shared service group where project management is offered as a service, and business units where project skills are embedded in business roles

Managing all organizational change projects (not just change related to technology projects)

■ Stakeholder management ■ Managing delivery from external providers

■ Project management processes and reporting

Solutions Architect

The build group in the remaining IT function

Designing and enhancing remaining customized applications, and integrating applications from the cloud

■ Applications and infrastructure architecture

DBA/Master Data Manager/ Data Warehousing

Moves to a data and business analytics service in the business shared services group

Enforcing consistent data architecture (as defined by business services architects) and providing support for business analytics

■ Data administration ■ Information architecture ■ Business context of data

Application Developer

Mostly externalized, a few remain in the build group in the remaining IT function in IT–intensive organizations

Legacy maintenance and enhancement, testing, and short-turnaround development of customized applications that confer competitive advantage

■ Applications development ■ Managing external development partners

■ Testing and QA ■ Integration






ROLE MIGRATION—INFRASTRUCTURE AND SECURITY


Infrastructure roles refocus on external provider management and on service provision within the run group in the remaining IT function.

■ The security role changes less, but it shifts from securing devices to securing information and user behavior.


Infrastructure Manager

The run group in the remaining IT function

Manage external infrastructure providers (traditional outsourcers and providers in the cloud).

■ External provider management ■ Infrastructure market trends

Infrastructure Architect

The run group in the remaining IT function

Integrate external technology providers; identify and evaluate new technologies.

■ Infrastructure architecture

Help Desk Moves to Business Shared Services Group and/or externalized

Provide user support for business services including underlying technology.

■ Knowledge of workflow and business process

■ Technology knowledge ■ External partner management

Information Security Officer

Merges with other corporate risk roles, either within business shared services group or as a standalone office

Define risk policy, oversee vendor risks, influence user behavior.

■ Risk management








CIO ROLE—WHAT NEXT?

Future Roles for CIOs

The evolution of the IT function amplifies contradictions in a traditional CIO role, which are resolved by segregating the responsibilities of a business service provider, head of technology, and technology-savvy business unit leader.

■ The CIO role can expand to become head of a business shared services organization and oversee business service strategy and architecture.

■ Managing technology procurement and integration still requires leadership, but is likely to be led by a report of the head of business services, and with a stronger focus on technology and operations.

■ CIOs may also transition to a leadership role in a business unit that derives competitive advantage from technology, or to a senior role at an external service provider.

Business Impact

Scal

e o

f R

ole

Head of Business Shared ServicesExternal Service Provider Executive

Technology Leader(Reporting to head of

business shared services)

Business Unit Manager

■ Advisor to business units on exploiting technology

■ Responsible for business service development and provision

■ Leads business unit in exploiting technology for competitive advantage

■ Develops new service offerings

■ Manages development, operations

■ Oversees shared technology operations

■ Manages vendors and integration

DERF 10-4005


Title




INDUSTRY VARIATIONS


Non-intensive users of IT will see a more complete change in IT’s roles than organizations that use IT intensively.

■ IT–intensive organizations that retain some on-premise applications will have greater roles for applications and infrastructure teams.

■ See page 15 for definitions of Diverse/Non-Diverse and Intensive/Non-Intensive.



Diverse/ Intensive


1 2 3 1 2 3 1 2 3 1 2 3

CIO Role Expands or Shrinks

The Infrastructure Group Focuses on Vendor Management

PMO Becomes a Business Service

Information Security Integrates with Corporate Risk

The Applications Group Focuses on Design, Integrate, and Test

Remaining IT Resources Organize as Build and Run

Service Manager Role Rises in Importance







KEY FINDINGS


1. Central IT will disperse as roles requiring business knowledge become embedded in business units or business shared services, and roles benefiting from scale are externalized. Remaining headcount in the IT function may be cut to 25% or less of current totals.

2. The most likely organizational home for this much diminished IT function is a Business Shared Services Group, as the IT function’s lack of scale or impact will not warrant a direct reporting relationship to the CEO.

3. Traditional office of the CIO roles such as strategy, architecture, and IT controlling will be subsumed by similar but more business-centric roles in the business shared services group.

4. The applications and PMO roles change substantially as the IT function merges with other shared services, and business units, end users, and external providers play a greater role. PMO becomes a role for the shared service group and selectively, for business units. Applications shrinks to focus on design, procure, integrate, and test, and infrastructure increasingly manages external providers rather than manage technology itself.

5. A critical new role in service management will emerge with accountability for end-to-end delivery for a specific business service. The role includes designing and building the service as well as delivery and cost recovery.

6. A new operating model emerges to launch and enhance differentiated services through short, iterative agile releases that maximize speed to value capture and ensure resources mobility.

7. Contradictions in a traditional CIO role are resolved by segregating responsibilities. CIOs may move into the business critical role of designing, deploying and leading a business services organization. A technology leader reporting to the head of business services can then oversee shared IT operations.





113

Appendix



Appendix 115

APPENDIX—A BUSINESS-DRIVEN METHODOLOGY

The Future of Corporate IT Research Process 2009/2010

The research used an outside-in approach that starts by determining business, social, and technology trends that will affect how organizations use and manage information technology, before developing hypotheses on how the IT function itself might change.

■ The research also relied on input from IT and business leaders, both through one-on-one interviews and online surveys.

1. Identify Business, Social, and Technology Trends

■ Review academic and general business literature and data on business, economic, and social trends with a three- to five-year horizon.

■ Review Corporate Executive Board research into future of Finance, Shared Services, Sales, Marketing, etc.

■ Interview 20 business unit general managers and heads of Sales, Finance, Procurement, and HR.

Output: List of “Ten External Trends That Will Change Corporate IT”

2. Hypothesize Implications for Corporate IT

■ Review analyst, consultant, and trade press analysis of the future of the IT function and technology.

■ Interview 40 CIOs and other IT leaders on changes in IT’s value drivers, ownership, and role.

Output: Hypotheses on changes in IT value drivers, ownership, and role over three to five years

3. Test and Validate

■ Conduct online survey to test hypotheses with 127 IT leaders and 58 business leaders globally.

■ Convene small group of leading CIOs for direct discussion feedback.

Output: The Future of Corporate IT study




APPENDIX—ESTIMATED REALLOCATION OF IT HEADCOUNT

Estimated Reallocation of IT Headcount by 2015As a Percentage of Total Central IT Headcount in 2010

Analysis of IT headcount reallocation as depicted on page 25 and 99.

Current Future

Central IT Externalized Business Unit2 Business Shared Service Center2

IT

Application Development and Maintenance

33% 16–28% 1–2% 2–3% 4–10%

Infrastructure (Server support, network, telecom, security ops)

13% 7–11% 2–6%

End-User Computing and Help Desk

9% 1–8% 0–5% 0–2%

Vendor Management1 1% 1% 1–3% 3–4%

Test and QA 3% 1–2% 1–2%

PMO 4% 1–2% 2–3%

Business Liaison 3% 3%

DBA 3% 0–2% 1–2% 0–1%

IT Finance 1% 1%

Enterprise Architecture 2% 2%

IT Strategy 1% 1%

Other 10% 0–4% 0–2%

Already Externalized (May include any of the roles above)

20% 20%

Total 100% 45–75% 3–5% 13–25% 10–25%

1 Assumes 6x increase due to greater externalization.2 Business unit and business shared services roles may be blended with other responsibilities,

not new dedicated headcount.


cio the future of corporate it volumes 1 to 5

Documents

iterative agile releases

deskno business unitowned

external provider executes

conventional wisdom misses

agile operating model

leads business unit

delivery combines onshore

adopt licensing structures