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A new IT operating model for the digital age (Part 1 of 2)

BI_Guest

By Erik van Busschbach

As consumers, we live in an exciting time. Just take a moment to realize how you and everyone you know, every day, is using digital services like video streaming, ride and house sharing, or paying parking fees. The appeal of simply getting what you need, wherever you are and only paying for what you use is too compelling to ignore.

CEOs now realize that customer focus is key to their growth plans and that digital transformation is key to customer satisfaction and market share. Eighty-four percent of CEOs said that they expect digital change to bring higher profit margins, and they are choosing to head up digital change in the business. And, if this wasn’t already challenging enough, the evolution from an internet-of-information to an internet-of-value powered by block chain technology will drive even more fundamental changes. Technology, and hence IT, is a critical success factor. When CEOs delegate primary responsibility, the next most likely leader is the CIO.

Transforming the IT operating model

It’s clear that digitization is forcing a change in how IT is being run by driving a clear focus on business outcomes. Internally, lines of business are pushing for innovation and agility and are taking matters into their own hands. This is evident by the continued growth of the buying power outside IT, with 42% of IT spending funded outside the IT budget.

Externally, IT is challenged by cloud providers who are offering compelling alternatives, but in reality, there has been too much investment gone into ‘traditional’ IT for cloud to simply replace everything. The most successful organizations have found a balance between exploiting the old and exploring the new. Strategies like Bi/Multi-mode IT, hybrid IT, cloud (service) brokerage all refer to different aspects of addressing this challenge.

IT has historically been the domain of deep technology experts, working in competency centers that were by-and-large independent silos. Today it’s common knowledge that IT needs a new, value driven, customer centric and service oriented operating model, which is a very different from the traditional ‘engineer-to-order’ oriented plan-build-run model that IT has operated for decades. Tailor-made software solutions seemed great at first – but became slow and expensive over time – creating inefficiencies and technical debt. Adoption of cloud is only part of the answer, as it will evolve like any other technology.

Digitization requires us to abandon this paradigm and move to a new IT operating model where the focus is on generating customer value, while maximizing the use of standards and automation when implementing technology.

How does IT4IT enable digital transformation?

IT4IT ™ is a prescriptive standard for running the business of IT. It addresses the deficiencies in information accuracy along the service lifecycle caused by the functional silos and disjointed systems used to run IT. It is based on Porter’s value chain and lean value stream management, emphasizing a relentless focus on customer value-add and eliminating waste. Let’s explore how IT4IT enables key aspects of transforming the IT operating model:

  • Customer satisfaction requires delivering services you customers actually want. You need a Strategy-to-Portfolio (S2P) value stream where you continuously assess the performance of your portfolio and make smart tradeoffs: developing highly differentiating services while brokering standard services where possible. Offering composite services will enable services releases to be better, faster, cheaper and safer.
  • Digital security strategy is data centric, instead of data-center perimeter security centric. The ErikvanBussch.pnggovernance, risk and compliance (GRC) supporting function is where you ensure security requirements are based on the data flow in line with government regulations and record retention policies.
  • Budgeting practices require re-thinking when moving from allocated budget to offering subscription based services, managed by the Finance & Assets (F&A) supporting function.
  • Efficient and effective execution demand an agile Requirements-to-Deploy (R2D) value stream, where requirements turn quickly into new services. This should cater for both developing and releasing services in-house and continued tactical refreshments of existing services, as well as onboarding 3rd party vendors and their services.
  • The Request-to-Fulfillment (R2F) value stream should be optimized to fulfill smoothly requests made by users for services. This includes all the controls needed to support proper governance: approvals, change control, and with the as-a-service model, chargeback and showback
  • Lastly, with all the options now open to users, customer satisfaction depends heavily on the quality of experience. Detecting issues before they impact customer and automatically correcting them, through a Detect-to-Correct (D2C) value stream is key to boosting IT’s profile as the preferred service provider.

While optimizing your value streams is mostly about process and technology, one should not underestimate the role culture plays in success. Culture needs to pivot towards customer centricity, where IT professionals constantly evaluate what they do by asking “how does my activity contribute to satisfying customers” and “what can I do to improve it, by eliminating repetitive tasks and focus my energy on value added activities?”

When planning the transformation, the focus should be on the aspect that has the biggest gap between current state and the desired goal – this could lead to prioritizing a catalog assessment and training, before automating the processes. In a recent customer engagement, IT4IT yielded immediate benefits by improving communications across silos, identifying gaps in IT domain solutions. This enabled management to focus improvement efforts across the value chain rather than within domains.

To learn more go to http://www.hpe.com/software/it4it

HPE and IT4IT were named Architecture Methodology winner at the ICMG  Global Awards 2016.

About the Author

BI_Guest

Comments
tonyprice

Great blog Erik.   It really important in these relatively early days of IT4IT that experts like yourself show how applicable IT4IT is and you do that very well.   I really like the fact that you have shown a very balanced set of examples from the Digital Enterprise to Customer Centricity.  I hope lots of people read this  as it is so useful and already looking forward to part 2

 Thank you

Andrew Campbell

Erik,

I like where you are going with this piece.  Thank you.  A couple of thoughts/confusions.  I think of IT4IT as being the IT systems that support IT.  What you seem to be talking about is ITOM - IT Operating Model: one part of that operating model will be the systems that support it. 

You emphasize the importance of a focus on customer value - but you do not suggest that IT should be organised around customer segments.  For example there are managers who work with the integrated enterprise system.  There are other managers who need desk tops and phones and service for these bits of hardware and their applications.  There are other managers who need communications pipes,  etc.  To get a focus on customer value, surely these different lines of service that IT provides need some status within IT, like business units would in a larger organisation.

I have just been doing an ITOM example for my book on operating models - The Operating Model Canvas - so these issues are front of mind.

Erik van Busschbach

Hi Andrew,

Thanks for your reply.

On your first question - The Open Group forum (http://www.opengroup.org/IT4IT) defines IT4IT as the reference Architecture for managing the business of IT. The standard integrates 2 main aspects - the prescriptive definitions for the information systems across IT and the IT value chain (porter) and value streams to manage the business of IT. But i fully understand that an (IT) operating model includes more aspects than the ones defined by the formal standard.

From the start of contributing to this standard, I have focused on highlighting the business value and IT operating model aspects of this standard - which in my view al all about improving/redefining the IT operating model.

In my daily practice I meet with customers who are looking for guidance on how they can improve their IT operating model to cater for the pressures digital transformation puts on them.  With software becoming (a significant of digital) products, the IT operating model and Business Operating model need to be more closely aligned than ever. 

This is why in my blog posts, I am emphasizing the operating model side of the IT4IT standard.

On your 2nd question -

Very much agree that knowing your customer (segment) is a vital aspect of realizing successful products/services. How can we create relevant products if we don't know who the customer is and what functions they would value? Thanks for pointing out that I missed this aspect!

Question for you - While the theory is of this is well known for decades (e.g. marketing mix, Lean Startup (Eric Ries), Business Model Creation (Ostenwalder, Pigneur)) I notice my customers are struggling to take that customer first / outside in POV.

Do you recognize this gap between the theory and day to day reality?

Erik

 

Andrew Campbell

Eric,  Yes I do recognise the gap/problem ... and I think that the reference architecture is partly at fault.  In fact I criticise all reference architectures for this.  By having a reference architecture, managers are discouraged from thinking through "who are my customers", "what do they want" and "how to I deliver in a clever way that gives them what they want at low cost".   Imagine trying to do strategy for a business using strategy architectures rather than developing a unique solution to the circumstances at hand.

On the IT4IT topic, I think it is wrongly labelled.  It shoud be OM4IT as one aspect and IT4IT as a subset of OM4IT.  Other subsets could be Org4IT and Suppliers4IT and ....

Thanks for engaging.

Andrew

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