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Digitization of Everything and the role of Central IT


The Digitization of Everything will mean a lot more than the digital replacement of existing analog products and the introduction of new, digitally-based ones. It will, I believe, mean the disruption of the retail banking, the music, the video, the energy, the transportation, and the wellness and health industries. I talked about this in my last post.

These new products and the industry transformations will be fuelled by applications. Someone has to write these applications, both the applications within the digital products and the applications that support them and, almost certainly, that redefine industries. Who writes these applications? Is it central IT or is it business IT groups, or is it a combination of the two working in cooperation?

This post is arranged as follows:  

A. We created Centralized IT for better price/performance

B. Why Digitization of Everything requires a very different style of IT

C. To expect Central IT to instantly become fluid it unfair

D. Why can't Central IT and Fluid IT simply exist in parallel?

E. What should we do with Central IT? - The need for Two-speed or Bimodal IT

F. Replated Blog Posts

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A. We created Centralize IT for better price/performance

How and why did we create centralized IT? In order to answer that question, let’s go back in time. 

15 to 20 years ago, we had central IT, but each business group tended to have its own IT too. In HP, for example, we had a PeopleSoft instance for each business group, and a number of SAP instances for each business group.

Such a setup wasn’t optimal - it wasn’t optimal in terms of price / performance of IT services, and it led to fragmented IT expertise - each business group had its own SAP experts, each business had its own PeopleSoft experts.

And so we entered a phase of IT centralisation. This brought more efficient delivery of services and higher IT service quality. “Shadow IT” - IT groups within business groups doing their own thing - was frowned upon and was stopped. This made sense - there was little point in having duplication of functionality between central IT and the shadow IT groups. 

B. Why the Digitization of Everything requires a very different style of IT

Central IT would probably continue to be the best way to arrange IT were it not for the Digitization of Everything. But the Digitization of Everything requires a different style of IT to that that we have asked central IT to perform.

We need IT that is close to the market and to their customers 

The kind of IT that the Digitization of Everything requires needs us to be close to the business and close to our customers. Central IT is literally that - centralised, and “hiding behind a service desk”, something they needed to do to deliver the efficiency and IT service levels we demanded of them.

We need IT that is measured and paid the same as the business teams

Central IT is not measured on the goals of the business. If I’m creating a new locomotive packed with sensors and big data-based predictive software, I don’t need someone on my team who is measured on IT systems’ efficiency. I need someone who is measured on innovation. I don’t need someone who plans on an annual cycle and is careful not to make mistakes, something we demand from our central IT group. I need someone who moves quickly, who is prepared to experiment - who is constantly trying new things, who is prepared to bend a few coding standards in order to get something out quickly.

We need a funding model that is fluid

And I don’t want the application development team to be funded using a “communist”, annually planned funding model. If planning is done in March and my team has a cool idea in April, I can’t afford to wait 11 months until the next planning cycle. I need a more speculative funding model - let me try something, come back in 6 months with a minimum viable product (ref), and maybe get more funding or maybe stop. Who knows? - innovation is a fluid thing.

C. To expect central IT to instantly become fluid is unfair 

To expect central IT to instantly morph into the fluid IT group needed to capitalize on the Digitization of Everything is simply unrealistic. And to blame central IT because they can’t adapt is unfair - we set them up and goaled them in a centralized way, we can’t turn around and then complain because they behave in the way we set them up to do. 

For this reason, business teams are doing their own IT, often using cloud services, often without even telling central IT what they are up to. This isn’t really Shadow IT in the old sense of the word from 15 years ago. It’s not setting up systems in competition to central IT - it’s creating totally new applications and cloud services, the like of which central IT has never created.

D. Why can’t central IT and fluid, business IT simply exist in parallel?

So why can’t we simply have central IT and fluid, business IT existing in parallel, never talking to each other? We can’t for a number of reasons.

1. Fluid IT needs to talk to the Systems of Record

Firstly, and probably most importantly, our fluid, business IT will, at some point, need to talk to the “Systems of Record” that central IT owns. It’s great having a smart kitchen with a smart cooker and smart table, but at some point, this smart kitchen is going to need to know about the customer who bought it, and to maybe order or reorder from the kitchen maker. This requires access to central IT’s Systems of Record.

2. We can’t afford to have duplicated data sets

Secondly, and very much related to the first point, we end up with duplicated data sets. I’ve been working with our Big Data team over the last year, and one of the key things I’ve learnt is that the value of analysis on one data set is limited. It’s when you connect up the datasets that you get the insights that help the business (we call this “Connected Intelligence” - insights, prediction and the ability to augment humans thru analysis across a series of datasets).

If there is no integration between central and business IT, then their datasets will be separate and un-related - we don’t know that, say, a social media interaction refers to a customer, the records for whom we have in the central customer database. The insights we could glean therefore remain locked in their unconnected data stores.

3. We can’t afford to have siloed management

Thirdly, we end up with siloed IT management. To the business group, this may not seem like a big deal, but 10 years of experience working with customers who have siloed IT management have taught me that this is far from optimal for the organisation as a whole. We get siloed availability and performance management, siloed security management (i.e. the ability for hackers to attack one part without the other part knowing about it), manual compliance checking, un-automated provisioning and change control, and siloed data protection (which is not really data protection at all!)

4. We can’t afford to throw away 30 years of Central IT’s experience in running systems

Forthly, over the last 20 or 30 years, central IT has leant a thing or two about running critical systems. They have learnt how to apply automation to testing, to release and to manage. They have learnt how to do change and updates in a reliable way. They have learnt how to support customers thru a service desk. They have learnt how to signup, monitor and manage suppliers. If business IT exists in parallel, all this knowledge goes untapped - “those who don’t learn from the mistakes of history are destined to repeat those mistakes”.

E. What should we do with central IT?

So, is the answer to get rid of central IT, re-goal them, re-train them and tell them to forget the bevhaviours we’ve demanded of them over the last 15 years? No, we can’t do that. We still need the Systems of Record that central IT has been running for us. These systems don’t go away, nor do their availability and performance, compliance, security, change management and data protection requirements.

One department can’t be both solid and reliable, and fast and fluid at the same time

Nor can we ask central IT to be both managers of the Systems of Record and fluid, business IT at the same time - the goals and measures, the behaviours, the tools, the cycle times and the funding models are all so different.

In fact, Gartner estimates that any IT organization that tries to be both do solid, “Systems of Record IT” and fluid “Digitization of Everything” IT at the same time will fail 80% of the time. By “fail”, we mean that business IT will end up doing their own thing in an isolated fashion - the exact situation we didn’t want in the first place.

We need Bimodal or Two-Speed IT

So what do we do? We admit and embrace the idea of two types, type “modes”, of IT. McKinsey calls this “two-speed IT”. I prefer Gartner’s term, “Bimodal IT” because there is a lot more to it than the different speeds of the two organizations.

In the next post, we’ll look at what the two modes of IT need to do and how they need to operate. We’ll also look at how we ensure that this setup works - the guardianship and governance of the arrangement.

F. Related posts

Below is a list of related blog posts on The Digitization of Everything and Core / Fluid IT:

1. The Digitization of Everything and A New Style of Business : digitally-based, software-powered products allow the business to do things very differently. We can release "minimum viable product", we can experiment with new products we can "continuously innovate". 

2. Digital Disuption: From Transforming a Product to Disrupting an Industry : digitization starts with a digital product that replaces the analog one. Think CD or DVD or home thermostat. But, once products are digital, the business model can be disrupted - think Spotify, think "the connected home", think Uber, think AirBnB. This blog looks at this disruption for a number of industries including transportation, retail banking and the connected home. 

3.  Digitization of Everything and the role of Central IT (this blog post) : digital disruptions are "software powered". Which is great because IT creates software, doesn't it? But it's a very different style of software development to that that we used for our Systems of Record. 

4.  Capitalize on The Digitization of Everything with two different IT modes : IT can't be innovative, cool, experimental and reliable, careful and solid using the same people, the same behaviours, the same processes, the same supplier relationships. We need to split IT into two - Core IT and Fluid IT.

5.  The Guardian Function - making the Core / Fluid IT co-operation work : If the two parts of IT, the Fluid and the Core, don't cooperate with each other, we'll eventually become uncompetitive and inefficient across the whole organization We need to ensure that the two parts of IT work well together. This is part technology (as discussed in the next blog post) and partly about governance, finance and attitudes. This blog post talks about "The Guardian Function"; that function that ensures the cooperation works. 

6.  The Five Areas of Cooperation between Core and Fluid IT : I've broken the technical aspects of cooperation between Core and Fluid IT into five areas : i. Service Brokering, ii. Continuous Delivery, iii. Creating a best-in-class user experience, iv. Big Data and v. Protecting your assets. This blog post looks at these five areas in overview.

7.  Service Brokering for Core and Fluid IT cooperation : This post dives into what customers tell me is the most important of the five cooperation areas; Service Brokering. 

8. How to get to Continuous Delivery and thus, Continuous Innovation : This post looks at the second cooperation area; getting Continuous Delivery of new functionality. This entails a flow of new releases from Fluid across to Core IT. It is, of course, DevOps, but I've put a Core/Fluid IT spin on it. 

9. How to create an Engaging, Best-in-class  Digital User Experience : Digital products pretty much always mean either a mobile application and / or a smart device like a smart cooker, a smart thermostat, or a smart shopping trolley. We need to ensure that the user experience of that mobile application or smart device is best-in-class. How do we do this across our Fluid and Core IT teams? 

My "" topic on the Digitzation of Everything - a couple of times a week, I post interesting articles on what's happening in the world of "the Digitization of Everything".

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Everything I post releated to The Digitization of Everything I also tweet  -  @mike_j_shaw.

Or, you can "connect" to me on LinkedIn - Mike Shaw at HP.

Mike Shaw
Director Strategic Marketing

linkedin.gifMike Shaw

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About the Author


Mike has been with HPE for 30 years. Half of that time was in research and development, mainly as an architect. The other 15 years has been spent in product management, product marketing, and now, strategic marketing. .

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