Tag Archives: McKinsey Quarterly

The IT department we have today is not the IT department we’ll need tomorrow

The IT departments many of us work in today (either as an employee or consultant) are often the result of thirty or more years of diligent labour. These departments are designed, optimised even, to create IT estates populated with large, expensive applications. Unfortunately these departments are also looking a lot like dinosaurs: large, slow and altogether unsuited for the the new normal. The challenge is to reconfigure our departments, transforming them from asset management functions into business (or business-technology) optimisation engines. This transformation should be a keen interest for all of us, as it’s going to drive a dramatic change in staffing profiles which will, in turn, effect our own jobs in the no so distant future.

Delivering large IT solutions is a tricky business. They’re big. They’re expensive. And the projects to create them go off the rails more often than we’d like to admit. IT departments have been built to minimise the risks associated with delivering and operating these applications. This means governance, and usually quite a lot of it. Departments which started off as small scale engineering functions soon picked up an administrative layer responsible to the mechanics of governance.

More recently we’ve been confronted with the challenge with managing the dependancies and interactions between IT applications. Initiatives like straight-through processing require us to take a holistic, rather than a pieces-parts, approach, and we’re all dealing with the problem of having one of each application or middleware product, as well as a few we brewed in the back room ourselves. Planning the operation and evolution of the IT estate became more important, and we picked up an enterprise architecture capability to manage the evolution of our IT estate.

It’s common to visualise these various departmental functions and roles as a triangle (or a pyramid, if you prefer). At the bottom we have engineering: the developers and other technical personnel who do the actual work to build and maintain our applications. Next layer up is governance, the project and operational administrators who schedule the work and check that it’s done to spec. Second from the top are the planners, the architects responsible for shaping the work to be done as well as acting as design authority. Capping of the triangle (or pyramid) is the IT leadership team who decide what should be done.

The departmental skills triangle

While specific techniques and technologies might come and go, the overall composition of the triangle has remained the same. From the sixties and seventies through to even quite recently, we’ve staffed our IT departments with many technical doers, a few less administrators, a smaller planning team, and a small IT leadership group. The career path for most of us been a progression from the bottom layers – when we were fresh out of school – to the highest point in the triangle that we can manage.

The emergence of off-shore and outsourcing put a spanner in the works. We all understand the rational: migrate the more junior positions – the positions with the least direct (if any) contact with the business proper – to a cheaper country. Many companies under intense cost pressure broke the triangle in two, keeping the upper planning and decision roles, while pushing the majority of the manage and all the do roles out of the country, or even out of the company.

Our first attempt at out-sourcing

Ignoring whether or not this drive to externalise the lower roles provided the expected savings or not, what it did do is break the career ladder for IT staff. Where does you next generation of senior IT personnel come from if you’ve pushed the lower ranks out of the business? Many companies found themselves with an awkward skills shortage a few years into an outsourcing / off-shore arrangement, as they were no longer able to train or promote senior personnel to replace those who were leaving through natural attrition.

The solution to this was to change how we brake-up the skills triangle; rather than a simple horizontal cut, we took a slice down the side. Retaining a portion of all skills in-house allows companies provide a career path and on the job training for their staff.

A second, improved, go at out-sourcing
A second, improved, go at out-sourcing

Many companies have tweaked this model, adding a bulge in the middle to provide a large enough resource pool to manage both internal projects, as well as those run by out-sourced and off-shore resources.

Factoring in the effort required to manage out-sourced projects
Factoring in the effort required to manage out-sourced projects

This model is now common in a lot of large companies, and it has served us well. However, the world has a funny habit of changing just when you’ve everything working smoothly.

The recent global financial criss has fundamentally changed the business landscape. We are experiencing not merely another turn of the business cycle, but a restructuring of the economic order. Many are even talking about the emergence of a new normal. The impact this will have on how we run our businesses (and our IT departments) is still being discussed, but we can see the outline of this impact already.

Companies are becoming more focused, while leaning more heavily on partners and services companies (BPO, out-sourcers, consultants, and so on) to cover those areas of the business they don’t want to focus on. We can see this from the global companies who have effectively moved to a franchise model, though to the small end of town where startups are using on-line services such as Amazon S3, rather than building internal capabilities. While this trend might have initially started as a cost saving, most of the benefit is in management time saved, which can then be used to focus on more important issues. We’re all finding that the limiting factor in our business is management time, so being able to hand off the management of less important tasks can help provide that edge you need.

We’re also seeing faster business change: what used to take years now takes months, or even weeks. The constant value-chain optimisation we’ve been working on since the 70s has finally cumulated in product and regulatory life-cycles that change faster than we can keep up. Nowhere is this more evident than the regulated industries (finance, utilities …), where updates in government regulation has changed from a generational to a quarterly occurrence as governments attempt to use regulation change to steer the economic boat.

Money is also becoming (or has become) more expensive, causing companies and deals to operate with less leverage. This means that there is less capital available for major projects, pushing companies to favour renting over buying, as well as creating a preference for smaller, incremental change over the major business transformation of the past.

And finally, companies are starting to take a truly global outlook and operate as one cohesive business across the globe, rather than as a family of cloned business who operate more-or-less independently in each region.

We can draw a few general conclusions on the potential impact on IT departments of these trends.

  • The increase reliance on partners, the broader partner ecosystem this implies, and an increasingly global approach to business will create more complex operational environments, increasing the importance of planning the IT estate and steering a company’s IT in the right direction.
  • The need to reduce leverage, and free up working capital, is pushing companies toward BPO and SaaS solutions, rather than the traditional on-premisses solutions, where the solution provider is paid per-seat, or might even be only paid a success fee.
  • The need for rapid project turn-around is pushing us toward running large portfolios of small projects, rather than a small number of large projects.
  • A lot of the admin work we used to do is now baked into web delivered solutions (BaseCamp et al).

This will trigger us to break up a the skills triangle in a different way.

A skills/roles triangle for the new normal
A skills/roles triangle for the new normal

While we’ll still take a slice down the side of the triangle, the buldge will move to the ends of the slice, giving it a skinny waist. The more complex operational environment means that we need to beef up planning (though we don’t want to get all dogmatic about our approach, as existing asset-centric IT planning methodologies won’t work in the new normal). A shift to large numbers of small projects (where the projects are potentially more technically complex) means that we’ll beef up our internal delivery capability, providing team leads with more autonomy. The move to smaller projects also means that we can reduce our administration and governance overhead.

We’ll replace some skills with automated (SaaS) solutions. Tools like BaseCamp will enable us to devolve responsibility for reporting and management to the team at the coalface. It will also reduce the need to develop and maintain infrastructure. Cloud technology is a good example of this, as it takes a lot of the tacit knowledge required to manage a fleet of servers and bakes it into software, placing it in the hands of the developers. Rumor has it that that a cloud admin can support 10,000 servers to a more traditional admin’s 500.

And finally, our suppliers act as a layer through the middle, a flex resource for us to call on. They can also provide us with a broader, cross-industry view, of how to best leverage technology.

This thinning out of the middle ranks is part of a trend we’re seeing elsewhere. Web2.0/E2.0/et al are causing organisations to remove knowledge workers — the traditional white collar middle layers of the organisaiton – leaving companies with a strategy/leadership group and task workers.

Update: Andy Mulholland has an interesting build on this post over at the Capgemini CTO blog. I particularly like the Holm service launched by Ford and Microsoft, a service that it’s hard to imagine a traditional IT department fielding.

Innovation [2009-12-14]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

Childhood readers and the art of random

Note: This post is part of larger series on innovation, going under the collective name of Innovation and Art of Random.

Innovation can seem random. We’re dealing with so much change in our daily lives that we miss the long and tortuous journey an innovation takes from it’s first conception through to the delivered solution, causing the innovation to seemingly appear from nowhere. We’re distracted as we’re trying to cope with the huge volume of work our changing environment creates, adjusting to the new normal, while trying to find time to sift through the idea fire hose for that one good idea. However ideas are common, commoditized even, and our real challenge is to make connections.

As Peter Drucker pointed out: insight, the tacit application of knowledge is not a transferable good. The value we derive from innovation comes from synthesis, the tacit application of knowledge to create a new solution. The challenge is to find time to pull apart the tools available to us, recombining them to synthesis new (and hopefully innovative) solutions to the problems we’re confronting today.

While ideas may be cheap, the time and space needed to create insight are not. We need to understand our problem from multiple contexts, teasing out the important elements, bringing together ideas to address each element in the synthesis of an original solution. This process takes time, often more time than we can spare, and so we need to invest our time wisely. Which steps in this processes are the most valuable (or the least transferable), the steps we need to own? Which can we outsource, passing responsibility to partners, or even our social network? And is it possible to create time? Using technology to take some of the load and create the breathing room we need.

Dr. Khee Pang
Dr. Khee Pang

One of the best pieces of advice I picked up at university was from Dr. K. K. Pang, who unfortunately passed away in March 2009. Dr Pang taught circuit theory, which can be quite a frustrating subject. It’s common to encounter a problem in circuit theory which you just can’t find a way into, making it seemingly impossible to solve. Dr. Pang’s brilliant, yet simple, advice was “If you don’t like the problem, then change it to one you do like.”. Just start messing with the problem, transforming bits of the circuit at random until you find a problem that you can solve.

Fast forward to my current work, far removed from circuit theory, and I still find myself using this piece of advice at least once a week. It’s not uncommon to come across a problem, a problem with little direct connection to technology, that needs to be approached from a very different angle. When stuck, take a different angle, make it a different problem, and you might find this new problem more to you liking.

You often bump into the same problem in different contexts as you work across industries and geographies. Different contexts can necessitate a different point of view, making the problem look slightly different. This highlights other aspects of the problem that you might not have been aware of before, highlighting previously hidden assumptions or connections to other problems. However, while this cross industry and geography insight is a valuable tool, the time required to go spelunking for insight is prohibitive. We find ourselves spend too much decoding the new context, and too little teasing out the important elements.

Learning to read, something I expect we all did in our childhood, is a struggle for fluency. We work from the identification of letters and words, through struggling to decode the text, to a level of fluency that enables us to focus on the meaning behind the text. Being fluent means being good enough at identification and decoding that we have the time and space for comprehension.

The ability to change the problem in front of you is really a question of being fluent in a range of environments; understanding a number of doctrines. These might be different industries (finance, public sector, utilities …) domains (logistics, risk management, military tactics, rhetoric …) or even geographies (APAC, EU, US …) as each has its own approach. We need enough experience in an environment to be able to decode it easily. Generally this means in the trenches experience, focused on applying knowledge, allowing us to weed out the common place and find the interesting and new. But building fluency takes time though; we can’t afford to immerse ourselves in every possible environment that might be of interest.

For quite a few years (from back in the day when my email address had a .oz at the end) I’ve been collecting a network of colleagues. Each is inquisitive in our own way, each with our own area of interest or theme, covering a huge, overlapping range of doctrines, while always looking for another idea too add to our toolbox. With the world being small, or even flat, this network of like minds has often been the source of a different point of view, one which solves the problem I’m working on. More recently this network has been migrating to Twitter, making the shared conversation more dynamic and immediate. It’s small networks of like-minds like this which can provide us the ability to effectively outsource the majority of our analysis, spreading the effort amongst out peers and creating the time and space to focus on synthesis.

Which brings us to the crux of the problem: innovation relies on the synthesis, and the key to synthesis is in finding interesting problems to solve. An idea, no matter how brilliant, will not go far unless it results in a product or service the people want. Innovation exists out at the surface of our organisations, or at the production coal face. Just as with the breath strips example, interesting problems pop up in the most unexpected places. Our challenge is prepare ourselves so that we can capitalise on the the opportunity a problem represents. As a famous golfer once said:

Gary Player
Gary Player

The more I practice, the luckier I get.
Gary Player

The world around us changes so rapidly that innovation can seem random. The snowmobile was obvious to the people who invented it, as they worked via trial-and-error from the original problem they wanted to solve through to the completed solution; it didn’t leap from their brow as a fully formed concept. Develop your interests, become fluent in a wide range of relevant topics and environments, use your network to extend your reach even further, and look for interesting problems to solve. In a world awash with good ideas, when innovation relies on your ability synthesis new solutions by finding an new angle from which to approach old problems (possibly problems so old that people forgot that they had them), the key to success is to find our own focus and then use your own own interests to drive yourself forward while effectively leveraging your network and resources around you to take as much of the load as possible. Innovation is rarely the result of a brilliant idea, but a patient process of finding problems to solve and then solving them, and sometimes we’re surprised by how innovative our solutions can be.