IT leadership 2.0 – the next generation of IT management.

How digitalization is changing the role of the future CIO.

Shadow IT is taking over in the name of digitalization
The traditional delivery model for IT leaders has been to focus on ensuring stable infrastructure and reliable releases. Key has not primarily been to help the business prosper and to create strategic advantage, it has rather been to settle for supplying basic IT infrastructure and provide conditions for cost cutting. But the days when the technocrats ran all the applications are over. IT has matured from building a technological, infrastructural backbone to an era of a service layer that is available to everyone. The world has become “on demand” and “as-a-service” and nowadays every employee has an entire fleet of systems right in the palm of their hands. So even if they don’t understand how the underlying technology works, they will consider themselves experts in purchasing and using applications. So the step to start subscribing to a new cloud service – just as you do at home – is an easy one to make.

Looking for trouble
A recent study showed that approximately 20% of total IT spending today is outside of the IT budget and it is continuously growing. While IT budgets are decreasing, overall IT spend is increasing. This means that around one fifth of all IT applications are not in the control system of the IT organization. ”So what”, you say. ”Isn’t it a good thing that the business units can just get their applications without being forced through the slow and bureaucratic process of the IT department?” Well indeed, I fully concur on the idea to make things easier on the staff. But that ease comes with some serious disadvantages to the organization.

  1. Data control. When applications are run and owned by a third party without any specified agreements, the IT department will have no control over how the data is managed, stored or used. In fact, all data may actually be given away never to be owned again.
  2. Integration. With many strategic applications being hosted by various suppliers online, we will at some point realize that it would be more useful if these applications could collaborate, communicate, and share data. But having left this out of the hands of the IT department we are likely to end up in a similar situation as in the SOA era 10-15 years ago when we discovered the issue with all applications running in siloes. Only this time we will not even be hosting the applications ourselves, so the possibility to access and update them will be miniscule. We risk getting locked in to a segregated application infrastructure.
  3. SLA management. Most of an organization’s employees are not accustomed to defining service level agreements, so for many of our most critical business applications we may have little control over what we are getting ourselves into. What happens if a service goes down for 48 hours, the response times slow down, data is lost, or the supplier goes bankrupt? If the agreements are not managed by the SLA experts in IT we are putting our most valuable assets at risk.
  4. Redundancy. Without a centralized function coordinating our application services, we are more than likely to find ourselves in a situation where different divisions within the same organization are purchasing similar, or the same, services at full price. The larger the organization, the more likely this is to happen. (I’ve seen this many times.) There are multiple plausible side effects of not coordinating service use and getting a strategic perspective of our application map.

And these are just to name a few. The overarching point is that there are no bad intentions from the employees when bypassing IT and getting their own services online, but there are things about IT management that they are not familiar with and that will lead to severe consequences for the business. Just because we call it “digitalization” instead of IT does not mean we can let services run freely into the wild. “Digital” services are also based on IT and should be managed as such. I cannot emphasize this enough.

Death of the technocratic leadership
Don’t get me wrong, IT must have its fair share of technological experts. This is the IT department’s USP. But to get back into pole position the IT leadership must converge to a much more business-oriented approach. In order to take back the coordinating role and merge digitalization and IT, the IT leadership must adjust and collaborate. By “adjust” I mean that CIOs and IT leaders must stop talking about technology itself (in terms of mbps, terrabytes, release cycles, etc) and focus on what value it generates. The rest of the business is not interested in how you do it, they are interested in what it will cost and what benefits come out of that spend. You must speak to the business on business terms and on business terms only, only then will you get a fair chance of getting your voice heard. Not being able to conform to this transition may be devastating to the IT department’s future role in the organization. By “collaborate” I mean integrate with the other departments and divisions so that you can communicate your value. For instance, it is not too uncommon that the CMO starts pushing the envelope for digitalization. As head of business development he/she sees the opportunities served by digital and starts acting on them. If you don’t collaborate, the shadow IT portion of the spend will increase and the problems associated with my bullet points above will increase accordingly. But if you can agree to certain forms of collaborative activities that are managed by both business development and IT in tandem, you can form mutual forums for digitizing the business. This way you make IT part of the digitalization process again. And this is key.

Conclusions and recommendations
If IT leaders handle the current situation correctly they can turn this shift in the market into a great opportunity. But IT has be proactive and aligned with the rest of the business to make this happen. The CEO is not going to call you at night to convince you to take this responsibility on, because he is most likely not even aware that there is a situation. You will have to be the one to break down the barriers to consolidate IT and digital and make IT a business priority again. So IT leaders, dress up and sharpen your lingo, because you are already subsisting in the new generation of IT leadership. Like it or not.

One important activity to conduct to be able to cover these undertakings is to develop an integrated IT strategy that is fully aligned and supportive of the business digitalization agenda. I will cover how this can be done in a forthcoming article.