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The rules for IT are changing and for good reasons

by Mark P. McDonald  |  October 21, 2009  |  9 Comments

This post is coming from Gartner’s Annual Fall Symposium in Orlando where more than 1,500 CIOs and another 5,000 other IT executives are gathering to discuss what is going in IT.  I had the privilege to talk with them in a session focusing on the 2010 agenda for CIOs.  Here are a few thoughts.

It is October 2009, and I think back to the way the world was in October of 1999 the height of the dot com/Y2k boom in IT.  Back then people were talking about how great the world would be when we automated all of our key processes, we integrated and reengineered those processes end-to-end and we drove information from these processes in to operational and management decision making.  At each stage the call was, the world will be better when we …

That world has largely happened in the last 10 years.  CIOs report 80 – 90% of their major business processes are automated, many are integrated, most are enabled via the Internet and we have business intelligence.  What can we say about the accomplishments of the past ten years?

CONGRATULATIONS IT, you have won the war, won the battles that 10 years ago you said needed to be won.  But that also raises a question?

Why are we so stressed out?  Why is IT under pressure like never before?  The answer is simple.

First IT is suffering in the current economic recession – just like every other operating unit inside a company.  Everyone is hurting and therefore some of our stress needs to be divided off into general economic stress.  If you are pressured by lower IT budgets, head count reductions and consolidations, then you feel the stress from the economy.

Second and most important is the stress we feel outside of what can be attributed to the fact that the effectiveness of what we do in IT, the power of our management solutions and processes is waning.  If you seek a new approach to IT strategy, you need new metrics to demonstrate the business value of IT, or your are asking how am I going to get all of this work done, then you are feeling stress related to the fact that …

THE RULES FOR IT HAVE CHANGED

The logic is simple.  IT won the last war.  We are deeply embedded in the enterprise.  They cannot change without changing systems.  It is no fun to play the same game over and over again when you know the outcome.  That is part of the reason why many no longer play tic-tack-toe, except with young children who have not figured out it is easy to create a stalemate.

When one side wins the war, the others change the rules and want to play a new game.  Its only natural, they want to compete, they want to be interested, they want to be engaged and a new game creates all of that.

The rules of the game are changing for IT based on the following important developments:

First, IT has largely built out the ‘information platform’ by automating key processes.  This means that there are few green fields to automate and therefore the nature of work shifts from building things to getting a yield on the assets I already have.
Second, the technology model is changing rapidly away from owner operated heavy weight solutions like data centers to light weight technologies like the cloud, SAAS, web 2.0, etc.  These technologies have an asymmetric investment pattern, requiring investments in the thousands of dollars to create value in the millions.  They also give the business unprecedented levels of choice on how they provision their technologies.

Third, the finance model is playing increased emphasis on variable cost, scalable cost structures and the ability manage resources to match revenues.  The financial model for IT has traditionally involved large fixed capital investments, budgets tied up in contractual services and generally low levels of variable costs.

Taken together these and other factors are changing the rules for IT.  While the rule changes are complex, and subject for other blog entries, think of it this way.

For 30 years IT was rewarded for building new things.  IT has turned vacant lots into apartment buildings.  Now that they have built the apartment building, IT needs to get a return on that investment – a yield on its technology platform.

The disciplines I use to build an apartment building are different than the ones I use to run it, get tenants, renew the building etc.  This is not about running IT, its about gaining the yield on IT investments across the enterprise.  The operation of the whole apartment building not just the actions of the building maintenance staff.

That’s one way to think of the new rules.

Category: cio  personal-observation  strategy  

Tags: it-leadership  it-strategy  new-rules-for-it  strategy  

Mark McDonald, Ph.D., is a Vice President and Fellow Emeritus in Gartner for General Managers Program.




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  3. Mark says:

    Sigh – “CIOs report 80 – 90% of their major business processes are automated”. Not in the Medical industry (if you do where you work, lucky you).

  4. Oy!
    Maybe I could glean something important here on closer reading but the post is making my hair hurt.

    Accept the analogy [for argument’s sake only] that there is a “war” between business and IT and that IT won the last decade. The import of the accomplishments you cite, 90% of major processes automated, integrated, web-enabled, is that all competitors have this and thus the accomplishment is not strategically distinctive.

    It was for those who got there first. Since “we’re all here” there is no distinction. A business can’t afford to let the capabilities lapse, but unless there’s something new to come from IT the cannot be on the driving edge of a company’s strategy. That spot is always reserved for that combination of “process and function” or “people, process and technology” or “fill-in-you-model” that makes a material competitive difference.

    ps – One comment above suggests that CIO self-rating of 90% automation may be overblown (cites medical industry) does not come as a shock. The number screams “piffle.” Perhaps they’ve automated 90% of what USED TO BE strategically distinctive…. maybe. Even then the number is too large. Its like an Iranian election.

  5. Mark McDonald says:

    Doug and Mark

    Thanks for your comments and I apologize to all readers as I dashed this blog entry off during symposium and it should have been clearer and better written.

    The basic argument is this.

    1. IT created tremendous value for its first 30 or so years by implementing technologies that transformed manual and unstructured processes into processes that are automated and structured. This was a long term goal for IT and the world was expected to be different when this happened. I am arguing for many companies, this has now happened with their core processes. There will always be some portion of processes that are poorly automated, but the major ones are automated for most companies.

    Note: that is the ‘war’ I was talking about, there is no war between the business and IT just a war on non-automated processes. It was an unfortunate metaphor.

    2. The rules for running IT when the name of the game was automation centered on effectively managing IT and tech resources. As IT completes automating processes the power and effectiveness of these rules begins to decline not because they are wrong but because IT work has changed from building out automation to changing business performance.

    3. The new rules of IT are associated with changing business performance to increase the return or yield on IT investments. this means that increasingly you cannot build your way to success, but rather need to lead and manage IT differently.

    4. Those new disciplines are the subject of future blog entries.

    I hope this helps.

  6. Mark Brewer says:

    Excellent post. Right on. I read this days ago and keep thinking about it.

  7. Lui Sieh says:

    Thanks for this….I feel a lot better because I thought I was getting it all wrong. The value of IT to the business needs to factor in these points and I couldn’t agree more with your points 2 & 3.

    For Point 2, business performance as categorized by staff productivity – effectiveness and efficiency. Can less staff do more without impact profitability?

    For Point 3, the mind-set change to look at things incrementally, in a deep-dive mode, is hard. I like your building metaphor because it’s about the people inside – not the building itself and many IT folks sometimes forget it. The IT guy/business architect built “the Matrix” but needs to know how his “subjects” are running around in his world.

    Using another analogy, CIOs need to see the forest for the trees, yes. But now, the CIOs do need to know what kind of eco-systems are running about in his “forest”.

    Cheers,

  8. Mark McDonald says:

    Lui

    Thanks for your comments and I will try to build out these ideas on a few other posts.

    Mark

  9. […] | Tags: collaboration, value | [3] Comments  Mark McDonald wrote an excellent article on the Rules for IT Are Changing and I wanted to highlight it here.   I read this weeks ago and keep thinking about […]



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