——————————————————————————————————————–
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)
