Global Forces and the Future of IT Consulting

Yesterday I read an article by McKinsey about the “Global forces shaping the future of business and society”. There was nothing special in the article, but one thing struck me, and not for the first time. Once again the current situation of IT as a branch or professional domain became evident. I could read the attitude of business-thinking people to technology, and the direction where IT goes.

The executives and partners interviewed in the paper talked about increasing agility and global connectedness, decreasing time to market, importance of readiness for ever changing frame and basis of market competition. And I could read between the lines the two trends speaking out loud and clear: commoditization of IT and integration of technology into business.

I saw it in my last research as well. From the interviews with 11 C-level managers, senior and principal consultants I could make several conclusions which come back again now. The interviewed experts mentioned that the new generation of executives is coming, much more familiar with contemporary technology and its possibilities. They want to talk about technology and what it means for business on the one hand. But on the other hand they are much more demanding and want their partners from IT to understand the business ways and to talk about the business value instead of technical details. The interviewees also explicitly mentioned the trends of IT commoditization, its integration in daily life and business and increased outsourcing trends.

So, what does it mean for IT consulting companies? It means that they would need more and more people capable of speaking the business language and understanding what is important for business managers, what is important for business development, while seeing the enablers brought by technological progress. I believe that it is quite a radical step for many IT consulting companies. Because, actually, this way of thinking pushes IT to the background and makes general business consulting or management consulting central. “IT doesn’t matter” – as Carr once already said. Not that many are ready to accept this paradigm.

You can see the proof of the trend in the current development of the strongest strategic consulting companies. McKinsey or BCG come to the “IT” areas and develop their departments dealing with IT. They recognize the opportunity and see that the niche of trusted advisor and strategic partner helping with conceptual technology questions is not filled adequately by existing IT consulting companies. Because those are more often perceived as just “commodity deliverers” or “service providers”.

Thus, the message for IT consulting is clear: stop thinking IT, start thinking business; and make business clients see and believe that this change has happened.

But what will happen with IT consulting companies deciding to stay in “commodity” area? I believe that their market will gradually shrink. If you look back at the McKinsey’s article and the global trends they foresee, you can say that the demand for developed-market productivity together with ever-expanding global networks will drive companies to further outsource the commodity activities, and often – not to the expensive western IT consulting players, but to the providers from emerging economies.

IT Governance - The Community Perspectives

Not so long time ago a great discussion was started by Tru DO KHAC in the IT Governance group in LinkedIn.

Its name said "CHALLENGE: Describe "IT governance" in no more than a 160 characters SMS message (including spaces, punctuations and carriage returns)". And you will find almost a hundred reactions there by now.

Here I will share with you my 10 favorite definitions and make a brief analysis of the challenge results.

My ten personal favorites (not necessarily in the order of mentioning):

• IT Governance is aligning IT processes and solutions with the organization's strategic priorities and objectives to achieve valuable business outcomes. (Jenny Steinmetz)


• The leadership and organisational structures and processes that ensure that IT sustains and extents the organisation's strategies and objectives. (ITGI 2003, "Board Briefing on IT Governance, 2nd Edition" cited by Patrick Soenenрер)


• IT Governance is a subset discipline of Corporate Governance focused on information technology (IT) systems and their performance and risk management. (Wikipedia cited by Andrew N Dowden)


• IT Governance: Specifying the decision rights and accountability framework to encourage desirable behavior in the use of IT. (from Weill&Ross cited by Igor Knezevic)


• IT Governance is the processes and relationships that lead to reasoned decision-making to ensure maximum value is realized from investment in technology. (Steve Romero)


• IT Governance is evaluating IT change against IT Policies and Standards to ensure alignment with the IT Strategy, or when this is not possible or desirable that the discrepancy is identified, quantified and managed going forward. (Kevin L. Smith's)


• IT Governance is an activity of making longterm decisions that concern all key aspects of using IT in the organization. (Mikhail Zyryanov)


• IT Governance is a management framework to deliver efficient and effective IT services which are aligned to core business plans and strategy. (Pete Linforth)


• It is a framework for implementing processes that enable business & IT to align themselves with corporate strategies using standards, approvals and metrics. (Maryellen Evans)


• IT Governance is how IT investments are managed in terms of cost, risk and value to the organisation. (Laurence Lock Lee)

My own contributed definition of IT Governance was "An umbrella encompassing roles, rules and mechanisms at strategic level to enable IT efficiently support the goals and vision of your organization."

Looking at all the variety of viewpoints it's difficult to gather them all under one definition. That is why I believe that IT Governance is rather an umbrella-term than something that can be briefly and precisely defined.

In general all definitions given in the discussion can be divided into six large groups:

• Accountabilities - those definitions talking about control, rules, compliance, and decision rights. Arguably most of these definitions are inspired by the research of P.Weill and J.Ross

keywords: rights, accountabilities, control, rules, decisions, direct, enforce, decisions, ownership

example: "Ernest Rosello: The assignment of decision-making rights and accountabilities regarding behavior in the desirable use of IT"

• BITA (Business-IT Alignment) - the definitions saying about alignment in one or another way - some definitions directly involved the word "alignment" or "Business-IT Alignment"; others mentioned "joined effort" or "support of business goals"

keywords: alignment, enable business, support of business goals, joined effort

example: "Jenny Steinmetz: IT Governance is aligning IT processes and solutions with the organization's strategic priorities and objectives to achieve valuable business outcomes."

• Framework - IT Governance is defined as a framework of principles, practices, standards or other elements; or "framework" is a substantial element of the definition.

keywords: framework, structure, set, umbrella

example: "Pete Linforth: IT Governance is a management framework to deliver efficient and effective IT services which are aligned to core business plans and strategy."

• List - here IT Governance is defined as a sum of its elements. I placed the definitions containing more than 3 elements into this group.

example: "Safdar: IT Governance is relationship of Processes, Structuring and Accountabilities optimized to address Strategic Alignemnt , Value Delivery ,Risk mgmt , Performamnce Mgmt and Resource Mgmt."

• Financial/investments perspective - in these definitions the financial component was explicitly mentioned or was made the focal point of the definition

keywords: investments, money, profit, total cost of ownership, shareholder value

example: "Laurence Lock Lee: IT Governance is how IT investments are managed in terms of cost, risk and value to the organisation."

• Other - all other definitions not falling under any of the previous categories.

example: "Harrell Van Norman: IT Governance is a good way to make sure your are doing the right thing"

Every definition could fall under more than one category. In total at the moment of the analysis there were 97 comments including 16 not providing any definition.

If you are interested in grouped definitions in xls format, you can download the file here.

So, even though the concept is relatively vague and definitions say sometimes about absolutely different things, we can notice the typical line and common understanding which unites the community and allows a professional to say if he or she belongs there.

In a parallel thread in the same group a discussion was started by Miguel Garcia-Menendez about the proper name for the "IT Governance" concept.

It did not get as much attention as the Challenge thread. But the commentors agreed that at least "IT" should not take the first place in the name. The proposed names included:

• Business Governance of IT
• Enterprise Governance of IT
• Corporate Governance of IT

However, just like I discussed whether "Business & IT Alignment" is a proper term, I believe that it is too late to think of a new name. Even though the name "IT Governance" puts too much focus on IT, it is already too much established and has too strong position and recognition as a term to be changed.

In the future I plan to make an overview of how the topic of IT Governance is covered by blogs, by scientific publications, by existing standards and practices. If you have any information on that or have any suggestions, I will be glad to read from you.

Picture source: iStockPhoto

Business-IT Integration Balance Model (Introduction)

Business-IT Integration Balance Model is intended to be used at negotiations between the Business and IT parties as a tool for initial strategic assessment of existing and desired situations in their relations.

The model helps to define the organizational changes necessary for proper Business and IT Alignment.

BUSINESS-IT INTEGRATION BALANCE MODEL

The main idea is that in relations of business and IT representatives different maturity levels of both parties are possible. And for proper balanced relations the maturity of each party has to correspond to each other.

As IT penetrates deeper in our lives and becomes a part of daily routine, you can often encounter a situation when business managers have relatively good understanding of technology possibilities and advantages. And at the same time people from IT (IT department, IT provider, IT managers, you name it) are not that willing to make a step towards understanding of business needs, requests, and of advantages and restrictions brought by technology. They are too much submerged in the technology complexity and their maturity is not sufficient for productive communication with people from the business side.

TYPICAL DIFFERENCE IN MATURITY LEVELS

As a result of this maturity difference we see the difference in mindsets, difference in values, difference in the language used. This is often described as abscence of Business-IT Alignment.

In an ideal situation there is not much difference between a business manager and an IT manager (you can also think about a CIO as a fully-fledged board member here). IT managers take responsibility for the results, budgets and the financial part of projects, notice new business opportunities or threats through the lenses of knowledge of appearing techhnologies and innovation trends. Business managers understand at least the basics, main principles of technologies used and value brought by them, and don't take the arrogant position in respect to IT, like "ah, I have no idea, it's the realm of techno-geeks" or "those IT guys, they can never make it just work". Instead they leverage on the possibilities which IT makes possible and take into account potential limitations or points of failure.

The business and IT realms in such a situation become integrated. And there are examples of companies where you can already find it.

But, of course, not every company can get it to the highest maturity level. And in fact, not every company needs it. A company producing glass bottles for the last 20+ years is not likely to revolutionize its business by introducing some changes in IT.

It is much more important here to watch the balance between the business need for IT, its IT maturity, the understanding of the situation by people from business on the one side, and IT provider focus, mindset, its business maturity on the other side.

If you try to map your company or some example from your experience on this maturity model, it will immediately become evident where and what type of disagreement might be there, and what possible improvements are needed.

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Notes:

Initially the model was introduced in 2006 by Paul Leenards and was based on the models of Nolan and McFarlan. You can find a brief description on his blog.

Resently I made a scientific research to challenge, validate the model and see how well it reflects the real-life situation. If interested, you can download the complete public report here.

Why business-IT alignment is so important?

Why alignment is so important?

Not just in general. Alignment is often said to be an interesting topic only for IT folks and not for business managers. So, why alignment is important from the point of view of the IT Function?

The answer is very simple - because you have no choice. In the open market you select your target group, you shape your proposition based on your strengths, if some clients aren’t satisfied you might not care – they are just not your clients and you should pay more attention to other ones.

At the same time in an organization you still do something which is to a large extent different from the core business, but now you have no choice. You have only one client that you have to please independently of your strengths and propositions. The only solution is to perfectly align with your client, i.e. “business”, and in ideal situation integrate with it.

So, what are the possible solutions?

IT Function has to be organized as a business itself, with three parts (strategic, tactical, operational) and with specific departments like sales, marketing, HR etc. Alignment topic is to a large extent then important WITHIN IT Function, so that marketing which sells the solutions and services understands the possibilities of operation lines, and they understand and accept the strategic vision of IT Function. Of course, in the vision of IT Function the strategy of business must play the central role here.

Different IT Functions can be created to serve different levels of maturity. Innovation and routine exploitation can rarely be done by the same people and same departments. We can see from many examples as well that it worked as a solution. The difficulty here is to establish the smooth flow of ideas and responsibilities between departments. Innovation is only temporary, which means that new ideas should constantly be found, researched and developed. Good ideas should be integrated in operations, less prospective ones should be abandoned.

Innovation is an important necessity for the survival of the more mature organizations. Numerous examples of launching a separate IT Function, i.e. separate business unit devoted to technological innovation, also support this.

And, of course, for smaller organizations, those less mature in terms of IT-awareness, or those representing industries where IT cannot provide any serious competitive benefits, here a possible solution can be to acquire all needed IT services – which are not more than a commodity in this case – from external providers. And internally in such organizations you need only a small group of IT-aware people who will coordinate the providers and, once again, will assure alignment with the organizational goals, vision and strategy.

Business-IT Alignment - is it a proper name?

Business-IT Alignment has always been a hot topic among CIOs, IT managers and consultants. Alignment was in the Top-10 IT management issues from 1980 through 1994, as reported by the Society for Information Management. Since 2006 it has been the topmost important issue on the agenda of CIOs around the world according to research by Luftman.

According to McKinsey after the recession shaking the world in 2008 IT has become even more important to improving business efficiency and reducing costs across the enterprise. One of the main conclusions from their survey of 444 executives representing the full range of industries, regions, and company sizes around the world was that despite the economic crisis, leaders need to continue improving the integration of their business and technology strategies.

Every now and then you can see articles and blog posts arguing that 'Alignment' is not a proper name, that it does not reflect the core of the issue.

This argument can be traced in the scientific publications of the past. Alignment was not the only name in the literature. You could find it by the names of fit (Chan 1992); (Henderson & Venkatraman 1993), linkage (Reich 1993), and integration (Henderson & Venkatraman 1993), as well as bridge (Ciborra 1997), harmony (Luftman & Brier 1999), and fusion (Smaczny 2001).

The same argument is going on these days in the blogs, practice communities, on forums and in whitepapers. Some experts eagerly argue that other name should be used instead of 'alignment'. Other even say that we cannot talk about business and IT anymore, because business is IT.

Well, sure IT is not a golden baby among other departments supporting business, such as Finance, HR or Marketing. But at the same time IT is relatively young constituent of business and technology is changing very rapidly and frequently. This brings up misunderstanding and misalignment problem again and again. So, no matter by what name, the problem has to be addressed.

Personally I can agree with any of the names mentioned. Some of them really highlight specific aspect of alignment. Other show desirable ideal state.

However the whole concept and domain of alignment is so large and at the same time vague and undefined that narrowing it down will not bring much good.

You will not find the exact definition of alignment that will provoke no objections. Some call it a final state, desirable destination while other describe alignment as a process, an ongoing journey. Some see the problem in different language used by business and IT, while other say it is all about organizational structure, roles and responsibilities.

Alignment to a large extent intersects with other urgent topics and areas of attention, such as IT Governance, Information Management, IT/IS Strategy, Change Management... And in different sources you will find different opinions on what is a part, what is the whole, or whether they are just two different domains.

Besides, it is not only alignment between Business and IT. Vertical alignment of strategy, management and operations is not less important and forms a part of the whole 'Alignment' concept as well.

I believe that for such vague concepts there is no sense in adding misunderstanding and disagreement by introducing new 'better' names or just buzzwords. 'Alignment' is a historically formed term and it is the most accepted by experts and scientists.

Maybe it is not the best one. But, same as many other 'large' historically formed names with a large body of knowledge and multiple ideas behind, alignment has a name and it has a spirit, an idea. Idea of coming to agreement, consensus and mutual effort towards the common goal.

There is no formal certification or attemts of setting rigid rules and definitions concerning what is alignment, what belongs to it and what not. Until it happens (which is very unlikely) there is not much reason in trying to fight against it and promote other alternative names. If only for marketing or other very specific goals.