I was in a long conversation with the CIO of Fortune 500 company recently and invariably the conversation turned towards how much it is becomimg difficult for IT organization to continue to delight the business – the world of business itself is undergoing massive changes while the world of technology is also changing very fast. The IT organization is supposed to be on top of these whirlwind of change and continue to support the current and also be the enabler of change for the future. All this when dollars and cents spent on IT matters more than ever. This week, as I finished by keynote address at PSGTECH and sat for questions, more and more of this began to look clear to me.
Let’s look from the outside – what are the contours of deep change that need to be understood to remain relevant for today and stay competitive. Starting from the dawn of this new century, there has been a deep rooted shift in the sphere of IT innovation. Earlier, the new technology/product/systems that hit the market set their foot mostly at the Fortune 500 companies ( typifying high spend, highly mature, high growth areas of applied IT innovation). Then the medium sized enterprises would try and adapt those systems and the SOHO, Consumer segments would get to use them in time. This flow seems to have reversed noticeably in the last decade. It may not be an overstatement to say that today we see that more cool and modern technology tends to get adopted and popularised at the consumer, SOHO end of the spectrum before moving onto the late adopter class : medium and large enterprises.
It may be too tempting to dismiss such claims as outlandish or not based on limited set of data – but unargualbly the trend is set and widely recogniseable. This can also be seen by some as not a matter of great concern ot the large enterprises. For some inside the large enterprises for decades such things have never nothered them – after all they are the biggest spenders of IT and have traditionally leveraged IT substantially with proven methods of success. For some inside the enterprise, the consumer centric services like social sites games are all mindless distraction and these should find no place inside the large enterprises.
Whats my view on this? Are the large enterprises correct in taking such a “Prim & Propah” view? No – An emphatic and clear “NO”. What’s happening in the Consumer, Social, Mobile space is nothing short of creating a new paradigm of doing business – it’s like as if a new set of DNA strands are coming together to create a new organism per se, Nothing sort of this. Those enterprises that fail to recognize this or choose to not participate in this journey would be missing out a huge chance of business success potential.
Let’s look deeper here: The Twitter, Facebook. Google Plus and Mobile are actually creating a new sort of connected world, wherein new rules of presence, social relationships and collaborations are getting shaped. Needless to say that these new rules would be the drivers/enablers of innovation and competitive success for tomorrow. And that big enterprises would approach that tomorrow faster than they have seen at any point in time in the past would approach The digital natives who are at the forefront of this revolution, would never allow this journey to be slowed/halted. For big and medium enterprises that is following a “Wait & Watch” attitude, they will be failing demonstrably in their abilities to reach out to a new generation of customers/stakeholders, who are beating their drums to a different future. And inside these enterprises, a phenomenal opportunity to redefine ways of working and foster effective collaboration would get lost if large and medium enterprises don’t adopt this quick enough.
Enter the world of connectedness: by Social - from car buying to university selection to travelling to holiday shopping to medical concerns, the world is getting engulfed with social tools and mechanisms. Look deeper, at the heart of the social phenomenon: In one sense, the people who matter, the consumers – they are connecting with one another in an unprecedented manner, creating a vast and efficient network of information that shapes and steers experiences and markets. What do they get out of this: The participants are beneficiaries of a new genre of collective intelligence that informs and guides people in real time in a myriad number of ways. By making available a platform that is universally accessible – which facilitates discussions of the experiences consumers have had with brands, businesses, a new we have created a new world of consumer influence.
The consumer world has adopted this world much faster than expected right from Googling to get an instant answer to points of interest, doing comparative shopping, assessing medical facilities to electronics shopping to university education comparison. One can see a pool of like oriented people sharing their views, out of which any information seeker can draw appropriate inferences. All at a click away, in a realtime basis.
Now lets turn our attention to look at the enterprise in the same perspective.
From the industry supply side, it can be seen that the enterprise software industry can't avoid the glaringly noticeable trend therein. This is an industry - seen as ever-maturing by some and "never maturing" by others - and an ecosystem that is demonstrating growth indicators which are now becoming visible to all observers. A range of data clearly supports the notion of growth: starting from value added by the industry over the last few years - take the number of people that the industry employs, the projected growth rates, the capital outlay for the industry, and so on.
The consumerization of the enterprise is moving ahead at full speed and may become irreversible. While some enterprises are experimenting with this –wherever adoption has happened the surge in interest appears high promising to make the adoption of such technologies faster and deeper within enterprises. The interesting part of the equation is that a number of newcomers are coming with a variety of solutions but enterprises see before them humongous opportunities for differentiation and for fostering competitive advantage in adopting such technologies.
Most of the enterprises are still in a slow adoption mode. Are enterprises looking at moving beyond email as the standard way of communication? Most of the CIO’s/ IT department take a big breath before trying to introduce any new technology inside their enterprise. It’s a classic problem – 75% or more of the enterprise IT spend goes towards supporting investments/assets built in the past aka legacy systems. How does enterprise get to attack this cost structure. What’s the magic wand to make the enterprises adopt technology at the same speed as the consumer world is embracing.
Clearly the answer lay in a combination of vendor lock-in mechanisms and data lock-in mechanisms. Vendor lock-ins are getting manageable with the body of knowledge in how to manage them having improved substantially over time, question that begs an answer is what is data /information lock-in? It’s clearly the system of record. In a number of conversations with CIO’s who want to move ahead and try new technologies the defining question that gets raised is my backbone systems should not be tinkered with while you build a jazzy front office apps using collaborative tools and mechanisms and then the question is how much more can the whole thing put together be more effective.
If you examine closely, the system of records that anchors the enterprise system internally ( which used to help in creating leading edge enterprise solutions) though may look to be working fine may not be necessarily perfect in their composition. So much of maintenance spend has to be committed to make this perform continually, a challenge that lock-ins always bring to the fore. All cost optimizations inside enterprise IT have been traditionally focused on infrastructure, outsourcing etc.
In this flat economy and a maturing IT discipline, the common denominator across the board is that enterprise suffer from a serious commoditization curve effect and to create and sustain a competitive advantage through IT would call for looking at getting their core business processes get architected very differently and in a manner that competition may not find it easy to imitate or catch-up. Such core processes would in areas like customer support, supply chain, channel management etc. Here the IT system needs to be more flexible and adaptive for varied forms of collaboration as against a rigid form of communication. Such a type of arrangement where new forms of collaborations can be enabled to provide high quality enablement for business would be a strong leading edge differentiator for any enterprise.
The underlying factor here is being able to tap new order of productivities not just the glamour of a new tool being brought in and this is precisely the next orbit of progress for IT inside enterprises. Here the role IT plays goes beyond setting up the information backbone to helping in creating intelligent business by business empowerment – starting all the way from the bottom to the top of the organizations, particularly by empowering more and more operational executive better, transcending all the barriers of language, geography just as the consumer world has shown how effective it could be .
Obviously, these mechanisms won’t replace the existing investments but co-reside with focus on collaboration and engagement rather just on plain transactions. This evolution can be seen as part of the progress from paper based communications to email to real time connectivity of minds as against just a process led workflows and system. Mobile devices, video communications, ever increasing bandwidth, multi-lingual support, new forms of enabling technologies like social and in-memory databases all would help the right IT setup for organizations that would put a premium on engagement to deliver better business results.IT Today, in the competitive global business ecosystem cutting across almost all industries, there is an extended value chain that needs to perform efficiently to make business successful and that’s where more and more enablement needs to go – it’s like pouring gas at the tip of the hockey stick curve. We see huge opportunities for the next wave of gains for business with such a focus.
As enterprises concentrate on growth, they remain vigilant about costs and operational efficiencies – coming out of recession, even in times of high growth and radiant optimism. Such a model of growth provides IT with a lot of fresh opportunities to adapt and innovate . More than ever, this new model of growth mandates IT to raise its strategic importance to the business rather than just be content to focus on delivery of generic business plans. In many ways the tenor of change is set in with such changing context – With the continuing tight budgets, the CIO’s are now getting forced to” think and act different” – one of the critical ways that can be tried is to follow the time tested model of being creative in discarding the past while taking a bold and fresh approach in creating a new future of IT within enterprises.
The classic way of looking into conceptualizing a new IT organization and its contribution to the enterprise starts by thinking aloud typically by asking the question “What If?” Now in the radar of every CIO and IT organization, Cloud happens to be mostly at the top where some expect more than half of new workloads to naturally move to the cloud besides the expectation that a majority of applications and infrastructure inside the enterprises would move to the cloud over the next few years. That forces the hand of enterprises in ensuring quick think through of the future possibilities for IT in terms of alternate models and the cloud.
Let’s face the facts : CIO’s of large organizations have to manage the burden of the past in terms of legacy systems, data and the processes set in there. They come with huge costs in terms of maintenance and in many cases impose restrictions on flexibility and extensibility. More importantly, in many cases, these systems come in the way of contributing to business agility in an increasingly dynamic world of business across industries,
The cloud model is increasingly being adopted by companies looking to lower cost and improve scalability and enhance flexibility. Many different models of cloud adoption abound varied by size, maturity, expectations, nature of the industry etc. But all agree on one need – cloud services need to be well integrated with existing legacy systems. Some are choosing a hybrid approach between online and on-premise services as a low-risk way to test the benefits. To work, these cloud services need to be well integrated with existing legacy systems.
Possibilities include selectively letting go of the past and unlocking resources and in realigning priorities and setting new directions towards creating more space for innovation and greater business value. Some CIO’s see this as an opportunity to look beyond delivery models towards getting strategic advantage to business through sophisticated information and insights. Cloud centric technologies are a big driver in enabling IT to take center stage in support of innovation, business growth and delivered value.
For enterprises and the CIO, this journey is replete with possibilities, challenges where the upside swing could be alluringly high but the downside fall could be steep if not carefully strategized and executed on those strategies well enough. After all, we are living in an era where technology edge is almost equivalent to business edge and this warrants a new approach to business technology architecture and strategy. That’s when Saugatech came with the interview with Mike Wilens, on Fidelity’s cloud journey , I got real interested.
In a very detailed discussion Mike covers a series of topics and brings out the fact that while people talk a lot about lock-in, reliability, and security in the cloud , these are manageable with good engineering and good planning and it’s not really all that scary – cloud is indeed doable and can be a key enabler for business innovation and enterprise agility. The key here is that the cloud is indeed revolutionary in how we think about application delivery and infrastructure.
In discussionspublished as part of cloud leadership strategies, Mike outlines the approach to the cloud, the execution plan and alignment to business needs. Covering all aspects of cloud journey within Fidelity, there are lots of important insights coming out of actual experience. Starting with foundational issues, such as standards, cost avoidance and experimenting with new capabilities in the Cloud, the discussion then extends to centralization versus decentralization. Inside Fidelity, the cloud model is slowly altering the degree of decentralization with a view to lower costs but not compromise on ability to innovate around business needs. The key insight here is dealing with reducing risk and cost while not inhibiting innovation that can lead to top line growth. Moving onto the more interesting aspects of cloud and business the discussions revolve around business innovation, governance frameworks and balancing opportunity and risk. In areas like collaboration and social computing tools, the logic behind determination of what can be used internally and taking into account the regulatory standards, the usage of such tools externally requires very carefully considered solutions. Wilens points out that the standards that are evolving to help public clouds power down the economies of scale are now becoming available for private clouds as well.
Cloud can be a big platform for testing out /piloting new ideas and can be scaled out and scaled up – at any point in time this pilot footprint on cloud should be actively pursued. For example, he believes that migration to mobile devices and the related implications for the presentation layers of any technology infrastructure will be implemented within the cloud based technologies, private or public. Similarly co-opting the startup partners to try out new operational/innovative models and make them scale up on the cloud infuses new dynamics in developing partnerships and new offerings. Fidelity has found that private Cloud portals can deliver to its clients access to financial information, while still maintaining the on-premise, legacy, mainframe record keeping systems. Here comes the reinforcement, that hybrid solutions leveraging the data of on-premise systems will soon become the norm.
The best practices talked about ranges from adopting de-facto cloud standards, for example cloud infrastructure could be coalescing around the LAMP stack. Some other notable insights include: - Creating shared services with a common platform, look and feel - Use of cloud as testing environment - Portioning of clouds – confidential /mission critical data where to keep -on-premise or outside - What volumes of new workloads to be pushed onto the cloud – particularly in long standing industries like financial services where lot of data tend to be in old but reliable platforms
Operating at both ends of the stacks with a robust risk management plan and governance makes cloud an indispensable framework for IT, Innovation and Business Agility. I recommend reading this for demonstrating that with a good strategy and well laid out execution on such strategy, even in a fast moving but highly regulated industry with a lot of legacy system in place, clouds can be successfully and progressively deployed with demonstrable results in providing flexibility and making business agile.
One of the challenges for enterprises in adopting new technology is the effect of unintended consequences – no am not talking ofserendipity here but of excess or extended usage in ways totally unintended. I was in a corporate discussion recently where someone was mentioning within his enterprise business has empowered the users the most,in ways where IT could have never done. I probed a little further to find that he was referring to . user self-provisioned applications and even user self-provisioned migrations to new operating systems such as Windows 7, made possible by a client hypervisor. This very thought that users could successfully self provision Windows 7 migration would send shivers down the spine of corporate IT – what about security , compliance issues. What about configuration and app compatibility issues- whose responsibility would things like these become, screamed an IT guy –my job there was to just to listen. This conversation set me thinking a lot (thought this was an open issue when self provisioning apps became a reality).
In the early days of SaaS implementation (not long ago –say 5- years back), I found that several departments wanting to cut throught the perceived inefficiency of internal IT, would opt for departmental SaaS applications ( either surreptitiously or in a brazen manner irritating corporate IT) – Their argument was that they are just paying for a service and they havenot moved any IT assets internally and so don’t see the need for involving internalIT.I know ofsales guys in those days talking amongst themselves how their strategy of carefully avoiding IT and going directly tobusiness helped them win deals! The practice ( of under the radar SaaS investments)hit roadblocks when the need to extend and integrate those departmental apps arose and in some cases CFO began to see how to align those departmental apps with the compliance frameworks ( corporate IT role becomes important therein).
Today I see this trend repeating itself in cloud services adoption. s for cloud computing services, business users tired of waiting for IT to provision a new application or service are tapping cloud providers and bypassing IT along the way, much as they have for many Software as a Service applications over the past few years. And some cloud providers are having a field day. They are not calling on the IT department, but rather going to department heads to pitch their wares. Technologies in some way allow these first level indiscretions, so to say. Powerful virtualization techniques allow IT to be disaggregated in a way to pass control from the vendor lockdown model to the IT department, but more practice centric approach would do enterprises more good. Vendor pitches today promise an Amazon like iTunes like facilities to configure solutions and businesses –mostly long tired from IT inertia tend to jump at these – atleast in the early stages of cloud adoption. Some IT departments are not exactly thrilled with this prospect of user control -- or the cloud, for that matter. Business in many cases tend to think of this differently. Not only is this entry made easy, some in the business side of things begin to think that this is a journey where power gets transferred to the users and this satiates their instant gratification or genuine needs depending on which camp you listen to.
As I see it, as business begin to invest moreand more in cloud computing,amongst a few things that get underinvested in attention and efforts is the central role of IT chargeback. The metering solutions are very critical in cloud solutions assessment –in the contest of one s own business, the ability to measure when you are using resources, at what level, and for how long, becomes very important IT cost allocation becomes a different ballgame in adopting cloud for specific business purposes. Now businesses are asking for the same “IT as a Service” approach that they get in the consumer world from their IT organizations as well. Today, corporate IT precisely use this as a weapon of defence and veer business to look at willingly pay more to set up and run the internal / hybrid clouds than the public cloud price in order to get the security and manageability of an internal cloud service – at least for now. See now cloud is now slowly modulating itself to act and behave in a varied form, In any cloud journey - irrespective of the nature of the cloud, it becomes very important to layout in advance as an agreement between business and IT in terms of how to measure, monitor and charge for cloud services- clearly what you see in brochures and slide decks do not convey the actual cost of embracing clouds-its not just do-it-yourself stuff – in so far as larger and medium business are concerned. The nature of business that such IT supports can also influence in many ways the type of chargeback that needs to be put in place. For example, for those wanting to use IT to close the loop – transaction-analytics-decision- transaction, the mechanisms can be quite different. Many tend to ignore taking these carefully taken steps before embracing clouds, only to find them hitting hard to get this fixed. It would be more prudent to look into such issues beforehand and have them laid out comprehensively.
Traditional chargebacks divides budget by number ofunits served – the inequity there is quite unknown.With cloud, the problem gets more complex – like in an energy grid,the rate and time of consumption can tend to vary the charge rates. In heavily virtualized environments ( Read-most corporate IT today), both metering and system failure possibilities need to be interlinked – many virtual clusters crash when overuse so one way to prevent overuse is to charge heavily for oveuse - so one can see the level of complexity and sophistication needed to design a right process and solution. An ideal scenario envisages setting up a service catalog with all pricing published in advance for business users to know the full details and help them take right decisions to evaluate, track, and audit their internal cloud expenses.
Having a good process that captures accurate usage details, precanned, predefined, monitoring and billing processes , a good dispute monitoring mechanisms all are part of what enterprises need to demand as they begin to embrace cloud. Bringing more transparency to IT costs is a cherished but that involves preparation, well laid out IT plans and a mature IT and Business Organizations to effect this. Its very important for IT to demand these even if business does not care for at the start of the program – as again many times the service level expectations can potentially bring about many changes in the choices that can be exerted be it storage, access, collaboration etc. Making these changes at the start of a cloud project can be far less expensive than making them retroactively. Now this one is for chargeback – extend this for security, compliance, integration, analytics etc.. the choices and issues are enormous- this where consulting firms bring in a lot of value, Based on global experience, best practices, success stories, processes and assessment on supply side- how different technology players and features pan out – their future roadmaps etc , good consulting firms can help institute good cloud governance mechanisms. Enterprises wanting to jump headlong without adequate foresight and planning , will end up having to endure lot of pain and too often they may turn to be very costly fix later or on an ongoing basis. Bottom line – getting good planning, governance mechanisms are key ingredients in creating a successful cloud program.
As IT's importance grows inside organizations, with more competition and concerns about ROI and BVIT, pressures on resourcing, offshoring strategies and heightened sense of expectations from IT by business, all enterprises undergo such changes and an appropriate framework with a three year rolling plan perspective for IT strategy and planning is absolutely essential for any medium sized to large sized IT user organizations.
Just read this nice interview in the WSJ of MIT’s Peter Weill on IT Savvy, his (excellent) recent book, co-authored with Jeanne Ross. A nice interview –in essence this covers the main ideas of the book, standardization for innovation, IT as strategic asset vs. liability, creating digital platforms, and the importance of connecting projects. A couple of excerpts:
BUSINESS INSIGHT:Your newest book is about IT-savvy companies. How do you define IT savvy? DR. WEILL: IT-savvy companies make information technology a strategic asset. The opposite of a strategic asset, of course, is a strategic liability. And there are many companies who feel their IT is a strategic liability. In those companies, the IT landscape is siloed, expensive and slow to change, and managers can't get the data they want. IT-savvy companies are just the opposite. They use their technology not only to reduce costs today by standardizing and digitizing their core processes, but the information they summarize from that gives them ideas about where to innovate in the future. A third element is that IT-savvy companies use their digital platform to collaborate with other companies in their ecosystem of customers and suppliers. So, IT-savvy companies are not just about savvy IT departments. It's about the whole company thinking digitally. BUSINESS INSIGHT: You've done some research that suggests IT-savvy companies are more profitable than others. Tell me a bit about that. DR. WEILL: The IT-savvy companies are 21% more profitable than non-IT-savvy companies. And the profitability shows up in two ways. One is that IT-savvy companies have identified the best way to run their core day-to-day processes. Think about UPS or Southwest Airlines or Amazon: They run those core processes flawlessly, 24 hours a day. The second thing is that IT-savvy companies are faster to market with new products and services that are add-ons, because their innovations are so much easier to integrate than in a company with siloed technology architecture, where you have to glue together everything and test it and make sure that it all works. We call that the agility paradox—the companies that have more standardized and digitized business processes are faster to market and get more revenue from new products. Those are the two sources of their greater profitability: lower costs for running existing business processes, and faster innovation. DR. WEILL: The real secret to IT-savvy companies is that each project links together—like Lego blocks—to create a reusable platform. IT-savvy companies think reuse first. When they have a new idea, the first question they ask is: Can we use existing data, applications and infrastructure to get that idea to market fast? When we look at the impact of reusing processes and applications, we see measurable benefits in the top and bottom lines.
The book also covers defining your operating model, revamping your IT funding model, allocating decision rights and accountability, driving value from IT and leading an IT Savvy firm.
This is a book highly regarded by the cognoscenti and it starts by asking what does being IT savvy mean and answers as the ability to use IT to consistently improve firm performance. The book encapsulates very powerful observations and statements that matter:
- You have to stop thinking about IT as a set of solutions and start thinking about integration and standardization. Because IT does integration and standardization well.
- IT Savvy firms have 20% higher margins than their competitors.
- An operating model is a pre-requisite before committing sound investments in IT
- IT funding is important, as systems become the firm's legacy that influence, constrain or dictate how business processes are performed. IT funding decision are long term strategic decision that implement the operating model
IT Savvy is based on three main ideas with some commentary from the reviewer.
1- Fix what is broken about IT, which concentrates on having a clear vision on how IT will support business operations and a well-understood funding model. In most places, IT is delegated and benignly neglected in the enterprise with disastrous consequences of underperformance/poor leverage.
2- Build a digitized platform to standardize and automate the processes that are not going to change so focus shifts on the elements that do change. The platform idea is a powerful one and can drive significant margin, operational and strategic advantage.
3- Exploit the platform for growth by focusing on leading organization changes that drive value from the platform. With a platform built for scale, leverage efficiencies that scale can deliver. Ironically many enterprises fail to do one of these two!
Don’t miss the IT Savvy assessment methodology and over all a very important book to be must read.
Fellow enterprise irregular Michael Krigsman has a great writeup on a failed ERP implementation and how it critically affected business performance. Obviously tremendous efforts have gone behind publishing the note. While, I do not know enough about this particular seemingly bothched implementation, Michael's findngs are very insightful. While he highlights the responsibilities of both the vendor and customer in making ERP initiative successful, I want to highlight the finding,
"The ERP problems were managerial, not technical, in nature. The list of ERP and data problems cited in the filings suggest poor project management, rather than technical issues, were at the root of the difficulties. Since the division of labor between customer & vendor IBM is not made clear in the filings, it's impossible to discern where responsibility lies".
In my view, process view, so critical rarely gets constant attention during the implementation cycle and change management - we call it the soft track and is often the hardest to acheive. These make a huge difference. Amongst various other things, the key success factors for any enterprisewide implementation include :
1. A rigorous focus on business processes and enough efforts to get the requirements first. Often, Platform centric capabilities seem to restrict adoption of an enteprise system - that's where the process view helps amongst other things.
2. Business to have reasonable expectations on implementing enterprise systems. Get to the facts in terms of lifecycle costs and expected benefits. Never rush into signing a deal unless both the vendor and customer are in a state of full readiness. Go the whole hog in assessments of investments, efforts and timeliness of these. Get sensitised to the fact that any short circuiting of these can have consequences - marginal to drastic. Extend this to cover all the phases of the engagement and that incudes post implementation phase.
3. Management support in a timely basis, project management, resource co-ordinations and quick decisions are non-negotiables in large implementations and strong change management processes put in place can help some of these bind together in mostly unknown ways. Keep and eye-on-the ball and never allow it to be dropped during the course of the implementation.
I wrote an op-ed piece for sandhill.com on the emerging role of the CIO. Successful CIOs – and their vendors – must understand and embrace the dramatic evolution of the technology leadership role in order to remain a productive part of enterprise management. Globally, the business demands are increasing. Recent surveys show, three out of every five enterprises are looking to expand their market share. Their executives expect the CIO and the IT organization to play a significant role in improving current business processes, controlling enterprise costs and raising workforce performance.
These are the near-term business expectations. Longer term expectations for IT call for building new strategic capabilities that will use information to attract and retain customers and create new market opportunities. Outside the enterprise, an increasingly sophisticated market in outsourced IT services is offering efficient, low-cost enterprise IT operations on demand — and at unimaginably massive scale. Inside the enterprise, the IT organization is applying sourcing decisions to move away from lower-value activities and towards higher-value ones. This is pushing the CIO beyond the traditional role of improving existing business processes to a more strategic role of activities aimed at improving growth, innovation and competitive advantage. Proactive CIOs are looking to grow IT’s contribution by connecting with growth and competitive advantage in substantial ways.
In the course of time, clearly some CIOs may need to shed—partly or wholly—their dominant focus and energy on the supply realm. The call of the age is to relentlessly get better business value from IT and this needs technologically savvy business leaders. Now is the time for CIOs to step up to the role—the challenges are many, but the opportunity has never been more ripe. IT is now becoming clearly relevant to enterprises and is receiving its due share of recognition as in the “dotcom” era. Please read the full article here
Just came across this interesting article on the state of the enterprise software industry. The article raises the question, Is enterprise software just too complex to deliver on its promises? After all, enterprise systems were supposed to streamline and simplify business processes. Instead, they have brought high risks, uncertainty and a deeply worrying level of complexity. Rather than agility they have produced rigidity and unexpected barriers to change, a veritable glut of information containing myriad hidden errors, and a cloud of questions regarding their overall benefits Cynthia Rettig, the author adds, “The way most large organizations actually process information belies that glorious vision and reveals a looking-glass world, where everything is in fact the opposite of what one might expect. Back office systems — including both software applications and the data they process — are a variegated patchwork of systems, containing 50 or more databases and hundreds of separate software programs installed over decades and interconnected by idiosyncratic, Byzantine and poorly documented customized processes. To manage this growing complexity, IT departments have grown substantially: Impressive statistics to support the point: As a percentage of total investment, IT rose from 2.6% to 3.5% between 1970 and 1980. By 1990 IT consumed 9%, and by 1999 a whopping 22% of total investment went to IT. Growth in IT spending has fallen off, but it is nonetheless surprising to hear that today’s IT departments spend 70% to 80% of their budgets just trying to keep existing systems running. Software’s supposed flexibility and unending ability to manage complexity contributed to the discrepancies between the great expectations and mediocre reality that plagued the first round of implementations of enterprise resource planning systems. The upcoming promise of SOA does not give any substantial relief. SOAs become additional layers of code superimposed on the existing layers. That means it is possible that a process will fail at some point due to some fault in the layers below, and in order to understand and fix that problem, software engineers will need to deal with the layers of enterprise applications below the modular business processes. The advice to CIOs is to get more deeply involved in the business issues and educate executives on what IT is and what it actually does. Corporations see in software’s seductive invisibility and seemingly open-ended flexibility a never-ending frontier of promise, where hope triumphs over reality and the search for the next new thing trumps addressing difficult existing problems”. All these are not going to stop the increase in IT spending. The adviceto business is : - What do business do now to stay protected for now and to be prepared for the future? - While context can provide more meaning to answers to such questions, a few guidelines may be in order for the user business.
From a Technology Standpoint: -There are no more standalone initiatives – look at all initiatives as part of a larger program and assess readiness and commit resources - Make it a mantra to adopt stronger emerging technologies faster: the likes of mobility solutions, Enterprise 2.0 solutions, BPM etc. - Business case if non negotiable even for technology assessments - Security management - at all levels becomes very important - Technology governance and standards adoption are changing fast – enterprises need to ensure that they follow the progress in adoption. From a Management Standpoint: - Rigorous assessment of all investments with strong business case as the anchor. - Investing in developing and using in industry wide IT value approach is a good practice for enterprises to follow. - Focus on metrics in value measurement: count the tangibles and intangibles vigorously - Assess risks for all programs with more rigor – risk mitigation plans, cost benefit analyses all need to be instilled as a discipline for IT investment committees to carefully assess while clearing investments - An integrated view of costs, risks and benefits need to be made and constantly reviewed – this include, setup and ongoing costs
In reality, misaligned investments and uneven absorption of technology are contributing to the rise of inefficient business and technology architectures. Enterprises need to be focused on service orientation to meet the future needs and ought to focus on innovation around processes in order to stretch IT capabilities to its limits. Global growth & innovation shall fuel IT spending. As I wrotehere, the consumerization of enterprise technology has the potential to open up new powerful combinations. The possibilities of such fusion of different worlds may open up good chances for disruptive innovation - this provides a platform for such an ideal fertile ground that can lead up to a potential business model innovation – so enterprises need to be well prepared to capitalize on such possibilities. What should the CXO’s do in such contexts: Embrace such technologies faster and in innovative ways align them to their business growth plans. Consumer technologies are not a taboo to be shunned - these need to be constantly assessed for their potential for innovative leverage in growing business.
In an age where the accepted wisdom is IT Is Business, Andrew McAfee argues that productivity growth is a critical measure, but it's not the only one managers care about. He is right in pointing out that Productivity growth, in other words, doesn't tell us anything about competitive balances or competitive dynamics. And it's perfectly possible for IT to have no impact on aggregate productivity at the same time that it's having a substantial impact on competition.
The data analysis by MIT's Erik Brynjolfsson, HBS's Michael Sorell and Feng Zhu along with Andrew McAfee makes insightful reading. I agree with Andrew & Erik about their recommendations to executives as to how IT can be leveraged. For executives, the key lesson is to treat information-technology efforts as opportunities to define and deploy new ways of working, rather than just projects to install, configure or integrate systems. The three broad areas of focus for top managers: - First, they need to look at how the company should be doing business differently. That means deciding what new tasks should be enabled with technology, and how widely they should be deployed. - Second, managers need to lead the deployment of new procedures to success. People don't like changes to their jobs dictated from outside and embedded in software. Overcoming this inertia and resistance requires skillful leadership. - Third, managers need to foster innovation by encouraging experimentation, collaboration, dialogue and all of the other activities that generate good ideas. That means building a technology infrastructure and an accompanying set of practices that reduce the cost of creating and replicating process innovations. Good friend and fellow irregular, Jason Wood points out the updated views of Andrew on this theme and writes that the real-world fact that information technology is such a ubiquitous part of the economic model now that you HAVE to measure its impact through multiple, coincident variables. Fully agreed. As I see it, In today’s hypercompetitive world ,simply put innovation is non-negotiable and innovation streak is of very high value to enterprises and of course much of this would be mainly based on leveraging IT. Business and Technology are getting so integrated; calling by a different name simply does not matter. Absolute truth needs no attorney or an analyst to argue its case. Any productive discussion and insightful analyses such as above would help the cause of business and IT a lot better.
I was looking at some available data(collected from various sources) on IT spending geographically – sometimes it is indeed counter intuitive to see the distribution of the spend besides its scale. While the delta in maturity levels are quite easy to understand, a number of factors like cost of service, currency rates, investment lifecycle, sunk investments in legacy,historical returrns on investment etc contribute to the huge difference in the spend composition. Fig I shows the scale difference. Approximately UK is expected to spend twice as much as china on IT, while the US is expected to spend 10 times more.
Fig II shows the distribution of the IT expense. Look at the huge diversity in the composition of the mix –while developed nations spend almost 40% to 50% on services alone, emerging nations like china spend about 15% on services. Hardware spend in china is almost 75% of the total IT spend whereas the spend in US/UK hovers around 30%.
Next time, when you hear various tech players talk about booming economies in emerging nations, use this insight to find in what specific ways their product/service offering could benefit - ofcourse, an assessment of next level drill down of spend categories is crucial there.
If at anytime you wanted a proof for the moniker, IT Is Business, then do not look beyond the example of ICICI Bank, India’s largest private sector bank. With assets around $56 billion, ICICI Bank is the country’s largest private bank, with a vast consumer base served from more than 614 branches and 2,200 ATMs in 13 countries, it is growing very fast –growing at an astronomical pace in the last 10 years. The bank customers believe that technology is at the forefront of this dramatic growth, a view confirmed by K.V.Kamath, Managing Director & CEO of the bank. In an interview with the Mckinsey Quarterly, he shares the ideas and beliefs that helped shape the growth of the bank.
The technology journey in the bank started by noticing that garage start-ups in Silicon Valley were taking products from concept to market in 90 days because if they didn’t, somebody else would and asking the question, “Why can’t we?” That helped shape the rule: no project was to extend beyond 90 days. This was achievable, and it gave the bank a huge competitive edge.Emphasizing the need for executive support, he says he shared his vision that iIf the technology fails, it’s his fault; if it succeeds, then good for the organization. The best part is the decision to run technology in a radically different way from anyone else, so there’s no technology department or a glorious title like chief information officer. There is no CIO. Technology is embedded in every business, and the head of the business runs the technology. Ringing endorsement to the adage IT is Business,Business is IT. As George F.Colony wrote ,”If you are the head of IT, you are no better than a glorified librarian, dispensing information. In contrast, if you are the head of BT, you are shoulder-to-shoulder with fellow executives who are running the operation. You're focused on improving process and finding new sources of revenue. You apply technology for business results, not as a way to create information of questionable value”. Emphasizing on the practicality of things, he believes that for banks focusing on retail customers, clearly user technology is a mind-set issue, but it can get turned into a structural issue because the platforms and the people around them make you rigid. Importantly the bank broke out of this and embraced technology that allows us to migrate and avoid older technologies like mainframes which would have locked the bank in. An early belief that technology would be a great hit in India and making appropriate investments meant that investing heavily in ATM’s, at a time when there were fewer than 100 ATMs in the whole country and the bank planned to roll out 1,000 ATMs in the first year. All this has helped the bank grow tremendously – from having 10,000 banking customers in 2000 to close to 20 million today. Six years ago, maybe 95 percent of all transactions took place in the branch and 5 percent at the ATM. Now branch transactions are down to 15 percent, ATMs have gone up to 48 percent, the Internet is 21 percent, and the call center is 5 percent. Instruments that go directly to the back office for processing, without hitting a branch, account for about 10 percent. What’s the difference between ICCI Bank & other competitors– in one line : Every other bank was skeptical about technology, whereas ICICI Bank wholeheartedly embraced technology as the engine for growth and integrating technological operations as part of business. But the best part comes here – Kamath believes that his technology costs are 10 percent of those at other banks!! Attributing this to right hardware selection that facilitates migration as business grows, right vendor selection and getting new software wherever needed ( he says that the replacement software costs substantially less than maintaining old software) – well this is very interesting –many would like to understand these further but the point is taken – tech as a strategic competitive differentiator does not mean it will end up sucking all resources. The bank’s next focus besides international expansion is “banking for the unbanked.” Taking banking to the 600 million people in India with no banking facilities at all – they live in 600,000 villages spread over 600 districts. Again technology is at the heart of the solution here – “this will require new technology platforms at a fraction of the costs of current technology. A new delivery architecture is needed too—not based on branches, but using a partnership model. To work in 600 districts, we’ll need at least 200 microcredit institutions, each working on 3 districts” says Kamath. This is interesting at a time when most business around the world blame technology for coming in the way of its growth and coming in the way of avoiding business model changes, ICICI bank is spearheading new business models for different classes of users with technology as the core differentiator!! On a personal note, I find that while ICICI bank’s focus on technology is yielding results and is there for all to see, it has to focus on customer service lot more- its telesupport for servicing complex requirements is pathetic to say the least – it must do well to study how the global banks measure up on this front and innovatively use technology (though part of the problem may be cultural) to excel in that dimension as well.
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld "All views expressed are my personal views are not related in any way to my employer"
