In the last couple of years we have seen a trend of shrinking IT budgets. At its best, the IT budget stays the same over time, and the IT department can only focus on “keeping the lights on”. At the same time, the Line-of-Business (LoB) budgets are increasing and the LoB managers are able to make buying decisions on cloud solutions in a subscription model, that offer them new functionality and a solution to their problems. The IT department is struggling to stay relevant when the budgets are shrinking and they are overrun by the LoBs.
But what can the IT department do to regain the control of the IT landscape and win back their relevance? First of all, we have to acknowledge the existing situation and then look for the solution to the problems.I see three immediate problems:
1) There is a clash in culture between the business and the IT departments
The classical role of the IT department is to run the company. For the IT department, efficiency means doing things right.
A Line-of-Business organization is different. Their classical role is to innovate their own department. When making decisions, the key question they ask is: Is it resolving my business issue, my problem, or my growth expectation? In other words, their goal is to do the right things.
So the IT- and business departments have completely different roles, but they also have different KPIs and expectations. This leads to totally different ways of running projects. The IT employees usually have a linear and very structured approach in projects. They are trained to anticipant every single issue they face and resolve them in an early phase of the project, that can run for 18 months or even longer. The Line-of-Business approach, on the other hand, is to run projects in an explorative cycle, where Innovation and business outcome improvement is key. They start the project with a yes-we-can mentality, brainstorm and then run many iterations when planning, implementing and adjusting. Furthermore, they want to see results fast, so having to wait 18 months to see the first prototype is not an option for them.
2) The LoB is depending on the IT department to get real value out of the cloud solutions
Most cloud solutions only have limited value if they are running standalone, without integration to other systems. Once the cloud solution has been purchased, the LoB expects the IT department to take care of the integration and other technical tasks as well as support. Security is often not a top priority for them and handled with ignorance. But companies usually have strict security and compliance standards defined for the existing environment. Any new solution needs to comply with these, which means that both integration possibilities and security standards (just to mention two) need to be evaluated and confirmed before purchasing the new solution. If the LoB buys a cloud solution, without involving the IT department, there is a high risk is that a seamless integration will not be possible, and security standards are not met.
The IT department has a hard time keeping up with the rapid pace of new technologies and solutions entering market. It is also their job to ensure that any new software solution fulfills pre-defined standards. As a consequence, The IT department is being perceived as slow and complicated, which is one of the reasons why the LoB departments buy cloud solutions without involving their internal IT department.
Not long ago, the IT departments had the full control of all the technology decisions that were made. But this has changed rapidly. Money that was once assigned to the IT department is now often ending up in the individual LoB departments instead. With a corporate credit card, it’s easy for an LoB manager to buy Software-as-a-Service without having to go through the formal IT process.
But what’s so bad about shadow IT? Even though there might be benefits such as fast procurement, shadow IT is generally inefficient and unsafe because it implies a non-centralized IT management that strengthens organizational silos, inhibits cross-functional collaboration and increases security risks. IT resources and especially public cloud should be managed with governance and control to the benefit of all.
I’ve brought up three problems that I see relate to each other closely. The clash in culture between the business department and IT department, the high dependency on the IT department to get the full value of cloud solutions, and the problem of shadow IT.
The solution(s) that fix all these problems might not be easy, but I think that the above addressed issues all come down to one thing: The IT department needs to start working closer with the business, and understand their language and their goals, so that they can better support the business priorities and help them be innovative.
The new expectation on the IT department is that not only should they manage the on-premise applications necessary to run the company, but they should also offer possibilities for the LoBs to innovate in order to change the company. If the IT professionals change from a reactive to proactive way of working and go from taking orders and fixing problems, to understanding the overall business drivers, goals and objectives of their company, they will become an important business partner who provides a service with increased value to the organization.
But I’m not saying that only the IT department needs to change. There are two sides of the coin, and the LoBs also needs to approach the IT department and involve them in their needs. The LoB users need to let the IT department be in control of both the internal resources as well as any 3rd party cloud products in use. In the end, one has to find a balance between the usability and new functionalities that cloud solutions offer, on the one side, and the technical topics such as integration and security on the other side. It is important that both IT and business are involved in the evaluation process.
If this shift in mindset can be implemented successfully,I believe that the IT role will shift from a tactical, cost reducing, keeping-the-lights-on approach to a more strategic role, focusing on business growth and improving competitiveness.
The new opportunities driven by innovative technologies utilizing cloud deployment models provide room for a paradigm shift in the relationship of IT and business. Rather than being in the relationship of vendor and customer – a move towards joint value creation opens up and the IT can become a true business partner to the LoBs and by that gain control over the IT spending and the holistic landscape.
This is a topic that will be discussed more in the openSAP course “Transforming to hybrid landscapes” that also covers the hybrid transformation from a technical perspective. This online course is free of charge, runs over 5 weeks and apart from an introduction to the hybrid topic the course covers integration, security, operations and transformation aspects for hybrid landscapes. I invite you to join the course to learn more about this important topic!
In my next blog, I intend to handle the question of HOW the IT department can transform to a strategic business partner, so stay tuned!