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Technology goes public changing IT value

by Mark P. McDonald  |  June 3, 2010  |  3 Comments

Technology has gone public. Changes in the technology stack over the last forty years have changed every aspect of IT, including IT’s value.  The figure below provides a summary of the structures within the technology stack.  The model is a little simplistic, but it does illustrate some of the deep structural changes going on in technology.

Slide1

Value is created based on solving problems and enabling opportunities.  The value created is proportional to the problem or opportunity.  The changing nature of IT value becomes clear using this framework to think about the types of problems or opportunities IT addresses.  The figure below summarizes how IT value changes as technology goes public.

Slide1

IT Works!  –  the value of IT at the beginning

At the start, technical feasibility was the foundation of IT value as technology pioneers had to make the technology work.  Would it work, was the problem so getting it to work was the value IT created.  These solutions were the first automation and data processing projects.

Slide3

Today we assume that technology will work.  However, much of the way we think about IT value or how it should be valued is still based in this era.  Think about how IT professionals talk about complexity, how hard it is to bring systems together, the failure rate of projects, etc.  All of these statements seek recognition for bringing technology to life.  They are echoes of this first source of value.

Corporate IT – on time, on scope, on budget

The creation of public substructure helped resolve fundamental technical complexity.  IT value shifted from creating new things from scratch to building out the core technologies that automate business.  These days started with IT skills being scarce leading to the creation of dedicated IT departments and eventually the role of Chief Information Officer.

The value associated with IT at this time, and for many to the present day, rests on managing resources and activities.

Slide4

As the substructure went public it removed many of the complex technical issues associated with IT.  The problem/opportunity for IT shifted to how one could apply computing, communications, storage, etc to business.  The value of automating previously manual processes was huge.  So big in fact that the business cases supporting that automation were almost assumed.  This is the dawn of the Technology for Competitive advantage project that today has become the enterprise transformation initiative.

When you believe the value of automation, or re-automation is so large, then the value shifts from the result you are after to the resources required to deliver that result.  This is a fundamental factor behind scope, cost and schedule being a big part of the standard definition of value.  It is also a factor behind approaches to Program Project Management, the PMO and other things.

The problem was simple, when do we get the technology we need.  The measure of value matched the problem, on time, on budget and on scope.  This remains the dominant paradigm for IT value in many organizations.  Unfortunately the problem and value associated with IT has shifted as technology continued to go public.

Sourcing and services – TCO and QOS

The introduction of outsourcing and IT services helped companies take the infrastructure public.  This coupled with the success of the prior model shifted IT’s problems and opportunity set away from building things to running them.  This shift moved IT from dealing with systems to providing services.  You see this in the modern shared service organization, the move to service oriented architecture, the rise of IT as a profit center.  All of these could not happen if infrastructures remained proprietary.  As soon as infrastructure becomes public, then sourcing and services become possible.

Slide5

The problem and opportunities associated with a public infrastructure and services shifted from building things and automation to managing them in terms of their total cost of ownership (TCO) and the quality of service (QOS) they provide.  The value statement or measurement became the balanced score card and compliance with service level agreements or SLA’s.

Public structure — Business Impact

IT is shifting once again as new technologies seek to move IT structure, the applications, business logic etc, from proprietary to public.  This shift is underway.  Public structure, aka Cloud, SaaS, Social Media is already changing the nature of IT value by changing the problem and opportunities IT needs to address.

Business Impact, the actual change in performance delivered through technology is now the measure of IT value.  Unlike prior corporate measures based on enabling technologies delivered on time, on budget and on scope, the public structure creates competition for IT that CIOs and IT leaders cannot ignore.  The figure below highlights the change.

Slide6Three things dominate the IT value set in an environment where context remains proprietary and all else is public.  First is choice.  Businesses now have more choice in how they provision technology than they ever had in the past.  The success of software as a service and other models that do not involve the captive IT organization demonstrate the early power of choice.  This is a problem for IT.  Value therefore rests in part in proving that IT is the supplier of choice.

The next two items go to the core of IT: Speed and Scale which form the basis of IT’s production function.  Speed, measured in terms of the execution of the company’s strategy, has been a major problem for IT in the past.  Corporate IT and Service IT are not geared for speed and rapid delivery is an exception not the norm.  In a world of choice and public structure – speed is a significant source of value for IT.

Scale is the other factor.  Measured in terms of the ability to drive average cost down through aggregation and the application of technology, scale is one of the few areas where IT is critical.  Early scale benefits came from standardization and automation.  Going forward how IT drives scale in terms of extending global reach and lowering  the company’s cost structure are major sources of value.

Conclusion

The value of IT shifts as technology moves from private/proprietary models to more public delivery structures.  This post provides some high level thoughts on how this value moves and the problem-value connections they create.  This has been a long post, and my apologies.  I will try to spell out more of these issues and provide links to them as I update this and other posts on the issue.

This is just one aspect of the impact of technology going public.  Others include:

Technology goes public and changes the nature of IT

Technology goes public changing the IT organization

Additional Resources

Category: leadership  strategy  technology  

Tags: cio-strategy  it-and-business  strategy  value-of-it  

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




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