This is a defining moment for IT. As business objectives increasingly depend on new digital capabilities – and as companies increasingly push these digital objectives front and center – enterprise IT organizations are finding themselves more and more often in direct competition with external service providers. Some must even respond to requests for proposals from the business in the same way an outside provider would. For many IT organizations, the competition is forcing them to prove their value in a whole new way.
Digital transformation is like a game of chess; IT has to move its pieces strategically, making sure its investments generate the right opportunities. Though IT is the key player in digitization, its role is often misunderstood. Business divisions want to know why the solutions are always “so expensive.” They want to know how the budgets are used. And why innovative and business-oriented projects are not financed. A lack of transparency about how IT spends its money can mask its value, however real it may be.
For years, CIOs have been trying to change IT’s reputation from being a cost center to being a hub of innovation and business problem-solving. The explosion of software-as-a-service and cloud-based computing has further disintermediated business units from IT. When HR, financial and collaborative applications are accessible in the cloud with a few clicks of a mouse, why go through the IT organization? But, despite these advancements in cloud-based computing and the growth of “shadow IT,” we are beginning to see digital transformation initiatives that are helping cement IT’s value as an enabler – not just a supporter – of growth.
Whether it is connected vehicles in the automobile sector, blockchain in insurance, 3-D printing in manufacturing or virtual reality in healthcare, enterprises rely on IT to help gain competitive advantage. Not only are business units asking IT to help them work more efficiently, they are asking IT to help develop new products and services and reach new markets. Financial services firms that once sold actuarial consulting services are now selling financial modelling software. Manufacturers that once sold long-haul trucks are now selling data insights generated from their engines. This shift places IT at the center of business discussions – not in a support role, but in a starring role.
With heightened prominence in the business comes heightened expectation – much of which revolves around speed and cost.
First, IT must be able to respond quickly to specific needs. The business can no longer wait 18 or 24 months for a new application or solution. The "two-pizza team" approach – in which smaller and more agile teams work quickly to solve business problems – can help IT organizations compete with external providers and engage with the business in new ways.
Second, IT must be able to draw a straight line from its investments to their results. Traditionally, IT organizations have managed and tracked their spending through the enterprise resource planning (ERP) system and its management control processes. But the complexity and diversity of technologies available today render this solution insufficient. IT needs to show how much it spends on operations or "run" and how much it spends on innovation or "plan and build.”
To increase transparency – and prove their value – more and more forward-thinking IT organizations are practicing Technology Business Management (TBM). As a data-driven framework for measuring, managing and communicating the budget, cost, consumption and value of IT, TBM gives enterprises a way to centralize information on costs (including hardware, software, services, human resources), volumes (including servers, storage, workstations) and quality of service (including incident tickets and deployed patches). For enterprises in which the internal IT team is considered a service company, TBM can serve as a broker of digital solutions and can accurately establish the total cost of ownership of its services. TBM not only makes it possible to identify opportunities for optimization, it also produces detailed reports that are comprehensible to business units, helping IT justify already committed or future spend and, most importantly, communicate more clearly how it contributes to the business.
ISG helps enterprise IT organizations improve – and prove – their value. Contact me to discuss further.About the author
Julien leads ISG’s digital practice in the South Europe and Middle East Region. Having been involved in more than 80 successful engagements in IT performance assessment and sourcing strategy, Julien brings his clients long-term experience and insight that draws from working with ten of ISG’s largest global clients. His tight focus on achieving business objectives makes him a trusted partner clients can rely on to deliver expert guidance and measurable bottom-line results. Julien has recently led a digital transformation strategy for IT, a hybrid-cloud computing solution design and a big data benchmark for major European corporations. He is fluent in French, English, and Italian.