——————————————————————————————————————–
During the initial research case-study interviews, participating CIOs shared a consistent approach to centralizing and standardizing infrastructure support structures and processes wherever possible to achieve operational excellence and maximized efficiency. Yet, when selecting a structure for their business-facing functions, they chose different models to improve IT performance and effectiveness in contributing to business success. These structures are more aligned with business structures and processes.
——————————————————————————————————————–
Changes in economic and business conditions create challenges for the enterprise and its strategies and plans. CIOs need to evolve their organizational structure to continually align with the business, improve IT performance and contribute to business success.

How the IT organization is structured has implications for resource planning and management. Well-designed IT organizations focus on building IT capabilities that will maximize the value and contribution of IT to the business. This research will provide a collection of proven design options from high-performing IT organizations for CIOs to consider and will include guidance on how to determine what the right option is for their organization.

There is no one-size-fits-all solution to organizing IT. A variety of internal and external factors goes into determining what the right (and effective) structure is for the organization. Early indications show that the following factors impact the roles and functions needed in IT and how those roles and functions are structured:
• Business-operating-model alignment (e.g., centralized vs. federated)
• Business structure alignment (e.g., processes vs. lines of business)
• Complexity of businesses and geographic coverage
• Role of IT in the enterprise
• Organizational culture and leadership styles
• Current leadership capabilities and the need for development
• Span of control
• Technical architecture (e.g., a single instance of ERP implementation)
• Cost pressures
• Best practices identified through benchmarking with peers

Initial research shows that at a macro level, CIOs choose centralized or federated IT operating models to improve IT operational efficiency. This is reflected in the consolidation and standardization of non-differentiated IT services and processes (e.g., infrastructure support and business processes). Regardless of the macro structure selected, IT organizations must establish an appropriate alignment to the business they support, which is key to improving IT effectiveness.

The early indications from our research show that there are several basic approaches to business alignment. CIOs mix and match these approaches in structuring their IT organizations. The right structure needs the support of formal or informal governance processes, and structures in place to break down barriers between IT and the business, address frictions and drive synergies across the business.

Recommended actions include the following:
• Dedicate resources (e.g., business requirements analysis, portfolio managementand solution development) to each strategic business unit.
• Align resources by common business processes shared across multiple business units (e.g., HR, logistics, manufacturing, sourcing).
• Align resources by core IT services (e.g., application management, infrastructure management, project and portfolio management).

Discussions with the interviewed CIOs also indicate that they align staffing plans with the business plan (three- to five-year horizon) and track day-to-day demand to determine workload and staffing needs. Hands-on support services are typically co-located with users or close to the regions where customers reside and local language support is desired. Business solution development, architecture and project management resources can be centralized or virtualized where skills are available. Centralized service delivery groups (e.g., data center, network) are staffed and placed where cost-efficiency can be maximized.

CIO CALL TO ACTION
The CIOs interviewed in the case study research to date suggest taking the following actions when restructuring IT for success:
• Take time to understand how the business is structured and run, and then align the IT operating model and structure with that business model.
• Identify where you can standardize to drive efficiency and where you need to differentiate to meet business unit needs.
• Have a compelling reason for any structural change (value and efficiency); share and communicate the strategic agenda across IT and the business.
• Organize by competency and enable collaboration across geographic and business boundaries.
• There is no single structure that is right and perfect. When reorganizing to address structural and process frictions, focus on building capabilities vs. solving problems.
• Don’t consider outsourcing lightly.

BOTTOM LINE
Regardless of the macro structure selected (e.g., centralized vs. federated), there isn’t much variation in how CIOs structure their non-differentiated IT services (e.g., data center, network support). What’s different from one organization to another is the mix and match of different approaches used by CIOs to structure their business-interfacing functions (e.g., business analysis and planning, solution development) and governance functions (e.g., architecture, security, project and portfolio management) to improve IT effectiveness, which also reflects different roles IT can play in the enterprise.

Business Impact:
CIOs who design an IT organization best suited to meet business needs while providing IT efficiencies are better positioned to contribute to positive business results for the enterprise.

We invite your comments and suggestions, and encourage your participation in the research process for this topic. Please e-mail the authors with your comments and suggestions. We also invite you to participate in a case study.
Lily Mok: Lily.Mok@gartner.com
Heather Colella: Heather.Colella@gartner.com
Diane Berry: Diane.Berry@gartner.com

Additional Insights:
• “Principles and Options for Choosing the Location and Role of an IT Organization,” John Mahoney, 20 July 2009 (Research)
• “Role-Based Organization Design” Andrew Walker and Diane Berry (EXP HR – Q4 2008)
• “Role Definition and Organizational Structure: Program and Portfolio Management,” Donna Fitzgerald and Audrey L. Apfel, 17 April 2009 (Research)
• “Effective IT Organizations: Design Matters,” Patrick Meehan, David B. Pack, 1 July 2008 (Research)
• “IT Organization Trends: Survey Shows Multiple Ways Forward,” Ellen Kitzis and John Mahoney, 21 February 2008 (Research)

One school of thought suggests that the use of social media should be carefully planned and controlled by government, and that having a sufficiently compelling purpose is strong enough a guarantee that communities will be sustainable and thrive.

Another school of thought says that – in the case of government – no planning is really possible or useful until when you have figured out what exists already. This means that, even if a government organization identifies a compelling purpose, it still needs to look for existing or emerging communities and assess whether to join them, complement them or do something different.

My colleague Anthony Bradley has recently posted about “Piloting Social Media Creates More Risks Than It Mitigates”, where he rightly points out that:

You may only get one shot at catalyzing community formulation. Don’t pilot, test, prototype, or experiment on the community. Don’t artificially restrict participation. The law of numbers is a critical factor in building a thriving and productive community. Why would you only go after a small subset of a target audience when mass adoption is a critical success factor? You will handicap success from the start.

I cannot but agree more with this. But my contention, and the reason why – unlike Anthony – I do like the term “pilot” is that for a government organization is very easy to believe its online presence is relevant just because it has a strong and recognized brand. But what is a compelling purpose for a government organization, may not be so for its target audience. So, before venturing into creating one’s own community, it is imperative to identify whether external communities already exist, possibly join them (as a group of individuals and not as a government organization) and “pilot” participation there.

Is this community valuable to our goals? Can we influence its behaviors? Is it able to generate knowledge that we could not aggregate on a government-branded community? Is there any indication that it can generate public value for our agency? These are some of the questions that employees who experiment with these communities should answer, before doing any planning for a government-driven community.

Over a year ago I published a research note (How Government Can Use Social Networks – access to clients only) that seems to be applicable to most of the cases I have seen, where people are struggling either with finding the compelling purpose to launch a community or with making sure it will be compelling to others and not just to them.

The note suggests a framework called SOCIAL to empower employees to

• Seek communities that are relevant for their job and purpose,
• For communities that seem interesting, Observe their behaviors;
• For communities that seem promising, Complement their content with public information where deemed fit;
• For communities that seem valuable, Involve in deeper discussions (with appropriate disclaimer).
• Up to this point, participation has been at the employee level. It is now time to Assess whether this community can have an enterprise value. If not, it will remain as an individual tool or be discontinued. If yes, then
• Leverage it as an enterprise one

This is the kind of process that government organizations should go through before considering the development of their own external social networks. Seeking, observing, complementing and involving is exactly what I mean by “piloting”. If the outcome of such a process is not satisfactory and the organization still believes it has a strongly compelling purpose, then it can well develop its own presence. However, if such a compelling purpose is difficult to find or to socialize, doing nothing and letting employees pilot new emerging communities is a perfectly legitimate option.

As I’ve said in a recent post, the path to success is from the bottom up, and from the outside in.

• PayPal and Google Checkout Show the Way for Banks’ Payment Operations

• Nonbank Payment Institutions: A Threat and an Opportunity for Banks

• Banks’ Retail Payment Operations at a Tipping Point

Banks need to stop looking at non-bank payment providers as foes. When consumers work with PayPal outside of a banking relationship, the bank completely looses visibility of the customer relationship – and the customer isn’t thinking of the bank either. True, PayPal and others have hijacked Internet payments revenue away from banks. But the real danger for banks is that they loose relevance in the customer relationship and the financial supply chain.

The industry would do well to partner with PayPal and other non-bank payment providers, both to meet the needs of their customers (who want to work with PayPal, too) and to maintain the relationship with their customers (rather than losing site of what happens with payments outside their walls).

IT metrics concentrate on reporting IT value in a point in time.  This is a fundamental weakness in current IT metrics approaches.  Point in time reporting concentrates IT on financial and status measures that fail to capture the changes in performance and productivity created by information technology.

The value of IT at any one point in time is essentially zero at best and often negative.  Take the IT assets on you balance sheet and mark them to the market to see their value. Turn your attention to the IT investment portfolio and you get a similar story as expenditures on active projects that have not completed outweigh the value of completed projects in a given year.

IT creates little value at any one particular point in time.  IT metrics that concentrate on point in time measures naturally have trouble communicating value.  Instead they focus on demonstrating that IT is not wasting money and not disrupting the business.  That is the essence behind reporting project status, systems availability and budget based statistics in IT scorecards.

Enterprises see the value of IT over time.

IT value comes from a sustained change in business performance rather than a single transformation.  You cannot see this performance via point in time measures.  You only see this impact by comparing performance in the current period with past performance.  This enables you to see the impact of new business capabilities on business performance.

A control chart provides a way to see the changes in business performance over time.  Highlighting the release of new capabilities on a control chart gives executives the ability to see the impact of IT and other changes on performance over time.  The figure below illustrates this type of control chart.

A control chart illustrates the relationship between business performance and new IT based capabilities.  Ideally new capabilities would establish a new process performance profile, shown as the new upper/lower limits in the figure above.  The point here is that I can see the value of IT because I can see the change in performance only over time.

A caution when using this approach.

There is a fallacy of “false precision” where business and finance leaders will say that IT cannot take all the credit for these improvements.  They are right.  No one person can take credit for performance improvement because it’s the result of coordinated and collaborative changes not any singe change.  The same goes for when performance deteriorates and falls outside the lower control limit.  The point here is that you want to demonstrate that business performance improves when IT creates new capability over time.

You may want consider a collection of other comments about management pitfalls in this other post  Signs of Weak Management

There is more to showing the value of IT than we can discuss in this single post.  Demonstrating the business value of IT starts with recognizing and reporting on the source of IT value which is changes in business performance over time not IT performance at any one particular point in time.

I noticed a real difference in sentiment between Cannes and Orlando. In the USA there was a lot of buzz and activity around mobile. People had projects under way and a lot of discussion was about implementation as well as strategy. In Cannes the Europeans were less advanced than the Americans, more discussions were about strategy than implementation. Partly this reflects a fundamental difference in attitude between Europeans and Americans. Europeans tend towards interminable analysis before action, which can be frustrating if you’re a vendor trying to sell things to them. This isn’t altogether surprising, Europe includes nations such as France whose primary export for the past few hundred years has been philosophers, so we can hardly blame them for intellectualising. Americans lean towards action before analysis, sometimes followed by action in a different direction if the first action failed to deliver as expected. In the long term things probably even out, the Europeans make less mistakes, but the Americans get places faster. The Europeans in Cannes also seemed less positive and optimistic than the Americans in Orlando, but much of that could be explained by national attitudes; Europe after all includes traditionally miserable and undemonstrative nations such as we Brits. Overall, I think it could be 6 months or so before the Europeans catch up with American mobile optimism.

While I’m on the subject of undemonstrative Brits, Reuters reports a survey from T-Mobile showing the rise of the British metrotextual. Apparently 22 percent of British men are signing SMSs to male friends with a kiss (x). Some of my colleagues think this is positive indication that the Brits are getting in touch with their feminine side and maybe soon grown British men will actually embrace male friends in public as the French and Italians do. I think it’s a sign of serious degeneration of British moral fibre.

The main issue is core sales force automation is commodity. Automating the management of opportunities, contacts, and activities has been around for over 20 years. Once functionality hits a level of commodity status, price becomes a key factor. This market dynamic will place heavy emphasis on a SaaS vendor’s ability to scale its operations and lower its per user cost to serve metrics to maintain margin targets. Those providers who have underinvested in operations will not be in position to be competitive in what will continue to be a very price sensitive market.

Yesterday, the judge granted Gartner’s motion to dismiss the case for failing to state a legal claim. While the plaintiff has a limited right to amend and re-file a complaint, we’re pleased with this result and continue to stand behind the research findings that were the subject of the technology provider’s complaint. While the technology provider is clearly dissatisfied with its placement in the Magic Quadrant, we will not compromise our research or be unduly influenced by threats of legal action.

As I have said on this blog many times, we take the independence and objectivity of our research very seriously. Without it, we wouldn’t have a business. Gartner is not “pay for play.” Influence over research content or the amount of research coverage focused on any vendor, sector or topic is not, and has never been, for sale by Gartner. Period.

We have rigorous research methodologies that ensure our clients can trust the insight and advice we provide. Each piece of Gartner research is subject to a peer-review process by members of the worldwide analyst community, and review by research management is required prior to publication. This process is designed to surface any inconsistencies in research methodology, data collection and conclusions, as well as to fully use Gartner collective expertise on any research topic. Anyone can review our research methodologies in more detail here.

I always welcome feedback on how we can improve our research process, what we can do better and, of course, address any issues or concerns from anyone about what we do and how we do it. Here is how to get in touch with me.

• Personnel has become Human Resources (HR)
• Employees have become associates, partners, colleagues, team members, etc
• Soup has become broth, consommé, bisque – why can’t you just sell me some dang soup?

Ok, that last one was a bit personal… but It just goes on and on. Once good words are being pushed aside due to some inherent flaw in the original word. Sometimes, that flaw is simply the fact that the word has cobwebs. Other times, it’s because of political correctness, a false sense of intimacy, or some need to introduce change. Actually, we no longer introduce change. We now transform, renew and revitalize. Ick! So, when does BPM get the ax?

Perhaps, BPM will be pushed aside and replaced by a jazzier term. BPR was once a term we all used. But, BPR was poisoned with down-sizing and right-sizing, so it had to die. BPM doesn’t seem to have that same bile. But, time marches on…and words meet their doom.

In 2018, we will certainly be talking about the THINGS that we currently call PROCESSES. We will be talking about how they relate to BUSINESS and how they can be MANAGED. But… will be we talking about BUSINESS PROCESS MANAGEMENT (BPM) in one collective mouth-full? I wonder. To be fair, we might be calling cloud by different names; services by new tags; events by jazzier labels. Nothing resists change… er, I mean… Nothing resists transformation.

Labels are the spawn of marketing and we are become a market-driven economy. But, labels are real and powerful, so we cannot ignore BPM’s future, and we cannot leave it to the whims of some Ketel One drinking ad exec to come up with a sizzling new term for us.

What alternative terms can you imagine to describe that which we currently define by BPM? I don’t care about being right. I just want to see where we might go with this.

Think… and thanks for playing.

Iran is an example of the social change that comes through replacement fertility. In 1984, fertility rates were 7, but by 2006 they fell to 1.9 (and just 1.5 in Tehran). That is a huge amount of change in just 22 years. The riots in Iran this year showed the social change that comes lower fertility rates. According to The Economist, about 1/3 of the population is 15-29 years old – they are better educated than previous generations (something that happens with falling fertility rates) and therefore had different expectations than previous generations with regard to elections. The result – a major clash against traditionalists.

What is the impact on banking? Fewer potential customers than if fertility were above replacement level. But that’s not a bad thing. A “bulge” of working adults (which The Economist refers to as a “Goldilocks” generation) fuels economic growth. In 2008, for example, household savings in China reached almost 25% of GDP. It also enables more rapid accumulation of capital per head.

Where should banks look for the Goldilocks generation? In places many banks in established markets have recently exited: Asia, Latin America.

The implications for the environment, unfortunately, are bleaker (because richer countries pollute more). But I’m a banking analyst, so that’s a discussion to have over a pint sometime rather than here.