The topic of this Executive Insights podcast is the changing role of IT in enterprises today, as described in two new white papers from Dimension Data. Joining UCStrategies' Jim Burton are the two authors of the white papers, Ian Heard, Group Communications Principal Director: Collaboration, and David Danto, Principal Consultant for Collaboration. Refer to the links below to access each of the papers referenced in the podcast.
Transcript for Bimodal IT & Collaboration: The Perfect Storm for the CIO
Jim Burton: Welcome to UCStrategies Executive Insights. This is Jim Burton, and today I’m joined by a couple of gentlemen from Dimension Data: David Danto, who I did a podcast with recently (Discussion About “Why Can't We All Just Get Along; Unifying Communications”) is back joining us, and new to this podcast is Ian Heard. Ian is Group Communications Principal Director of Collaboration and David is Principal Consultant for Collaboration, both of course, at Dimension Data.
So David, let me start with you. Clearly, our last podcast was discussing the changes in the organization, and the two white papers that I’ve got in front of me, one written by you and one written by Ian, really talk about the changes in the IT organizations – the bimodal IT, and yours is, “Changing Your IT Department From Rule Police to Business Partner.” It’s a fascinating read, and we’ll of course, have these both posted with the podcast, but why don’t you jump into this and explain the changes that you’re seeing in the organizations that’s really creating (this) and why you wrote this white paper.
David Danto: Sure, and I don’t want to take too much time…thanks very much for having us here again, as always. The idea is, based on the conversation we had last time, in that we wanted collaboration and communication and IT in general needs to be a people-first activity, not a technology- and technologist-first activity. That’s leading to some significant organizational changes in the enterprises that we speak with and work with on a daily basis.
It used to be IT’s role to pick the technology, decide what’s the best thing for the firm – they know better than everybody else – put those processes, and procedures, and equipment details in place and then have everybody in the organization conform to them because IT knows better. What we started to see with that trend of consumerization, is that product and services and technologies are now pitched directly to the end user and the end user isn’t just given a very brief menu, what we have and nothing else, by an IT organization. The end user can pull out a smartphone, or an app store, or a tablet and do anything they want to do. So, in order for IT organizations to remain relevant, they need to now partner, understand what users need, and create applications and services that actually meet those user needs instead of the other way around. It kind of reverses the process.
What we’re finding in a lot of organizations are those terms – “shadow IT” is one of them, and “bimodal IT” is another – where you’ve got the IT organization operating the core infrastructure for the good of the firm, and in many cases end users, lines of business, operating their own IT services, hiring and commissioning their own IT services because the ones that are coming from their IT department don’t necessarily meet. How we transform IT into a functioning group that works hand-in-hand with the users is really the challenge and bringing it forward into this new transformation and new way of doing business.
Jim Burton: I think your title says a lot of it, too, and I want you to go there a little bit. The title of it is “Bimodal IT: Changing Your IT Department From Rule Police to Business Partner.” I think that’s an important statement. You might want to talk about your observations about how the rule police are now changing and becoming a business partner.
David Danto: Absolutely. One of the points I make in the story is about a historical experience that I had when an end user tried to download some consumer-driven software in the early 2000s and was almost fired by the organization we were with because they were doing something on their own…how dare they load their own software onto a company-owned laptop! You look at that now and think about how anybody could be considered having an actionable offense by simply going to an app store and doing something – how many people we’d have to fire for using Dropbox and things like that…it would be outrageous.
The IT Department’s role, in order to really become meaningful and functional, needs to transform to being a business partner, to providing relevance to the users in the organization. And instead of saying, “No, you can’t do that…” saying, “Well you know what? I understand what your needs are. Let’s talk about what your objectives are and I may have some better options for you. Instead of this consumer app which doesn’t meet our security or compliance requirements, why don’t we try this app which might actually do what you’re looking to do but be more in line with what we need?” And developing that compromise from a role of yes, we really need to meet the user’s needs. Because, if we come up with a solution and the users won’t use it, what good are we? And where do you put that line? That’s really the art and the skill about what we’re talking about and where we’re going.
In the past it might have been IT organizations saying, “This is our line of death and you will not cross it,” and now we’ve got a situation that absolutely must be collaborative. Because what I’ve found in observing a whole bunch of companies as a consultant and dealing with multiples of firms over the years, is that the more restrictive an IT Department compliance requirements are, the more the staff will simply do what they want anyway. People want to be compliant. They want to follow the rules, but if the rules are too Draconian they won’t. So really finding that line and creating that collaborative environment is the key to moving forward.
Jim Burton: Great, well thanks for that. Ian, let’s move on to you. You’ve got a white paper as well, and yours is, “Bimodal IT: The Changing Role of IT and the Shift in Technology Decision Making.” Give us a little bit of background of where you’re coming from in your white paper.
Ian Heard: Yes, thanks for having me on the podcast today. I think the big push for my white paper and the driver behind it was…I can’t agree more with the sentiments that David had there, and I think what I was looking to do with my white paper was really dig into, okay, what are the practicalities from a business planning perspective of that rapid change that is being driven from the advent of user choice, from the advent of user maturity? Fundamentally, what does that mean for the shape of IT going forward?
David mentioned about the behavioral change, moving from being a blocker to an enabler. How do you set your business up to be that enabler? The reality is what we’re seeing is that buying cycles over the next few years, we’re expecting technology budgets…at the moment they’re about 73% of technology budgets sits in IT…we’re looking to see that probably level out to 50/50 between IT and the line of business over the next two years. What that means is that we’re expecting a big hit on IT budgets. We’re expecting them to come down by a compound of around 30% to 35% over the next two years where line of business budget is going to increase by about 85% over the same period. That is a massive shift in the dynamics within organizations and how they’re structured for success.
The goal of my white paper really was just to share some best practices and war stories that we’re seeing from organizations who’ve done it well and done it badly and how they’re restructuring their entire technological environment to address this change that we’re seeing: the advent of the mature user, the advent of choice, the advent of bimodal IT strategies and the advent of shadow IT.
Jim Burton: That’s great stuff and it’s a good read, too, and, as I said, we’ll have these both posted with the podcast. One of the things that it just begs the question of is it cloud, is that what’s changing our world? Is it the fact that that’s being introduced, it’s giving the shift from IT budgets over to the departmental business unit budgets?
Ian Heard: I think it’s interesting, obviously cloud is probably the latest buzzword after we went through the cycle of managed service previously, and then cloud, and then I’m sure another will come along in a couple of years as a buzz term that’s used for a whole raft of things. Let me take, if you like, the macro view.
What we’re seeing is a massive shift in business, in general. We’re seeing this, if you like, this digital revolution happening within organizations. We coined the phrase, “Go digital or die” as far as contact center benchmarking reports this year, and what that meant realistically is when we look at the massive disruption we’re seeing in the digital world and linking that together with the massive change that we’re seeing in user behavior, what you’re left with now is almost a perfect storm for the CIO where you have extreme change in macroeconomic dynamics within their organizations, so do you want to be the next Blockbuster as Netflix comes along?, is the CEO’s thoughts. Do you want to be the next mini-cab company when Uber comes along like a tidal wave and blows you out of the water? Do you want to be the next hotel chain that sees, like the Parisian hotel industry last summer, which saw 30 billion wiped off its revenues in one summer because of Airbnb?
This whole digital revolution is coming, and the CIO is left with this perfect storm where he’s left with this digital dilemma where the CEO is saying, “We need a digital strategy; we need to be able to enable the productivity of our employees.” Their employees are saying, “We want to be able to use this app, that app, another app,” and at the same time the CIO sat there going, ”Right, well, I need to drive down my costs, I need to drive up security, I now need to drive up flexibility, I need to be able to have a much more diverse vendor environment than I had before and as I’ve said at the same time, my budget is being cut…” So it’s really creating the perfect storm now.
What they’re doing now is saying, “Okay, what are the big trends?” Well, the big two from a user perspective are driven because of user demand. So users are now… typically if we look at working patterns, 80% of the time users are working either in different time zones or maybe the same time zones but certainly different locations, so we’re seeing the advent of things like social technologies where you’ve got to store content, have data repositories and then you’ve got to be able to link that to real-time communication, so we’re seeing tools like Cisco SPA or Yammer coming into the enterprise, which drives that functionality off the back of the WhatsApp revolution of the last couple years.
Then the other side is mobile…any device, any location, anywhere. That great diversity means a huge amount of delivery risk for the CIO, so that’s why they’re looking at cloud. I think too many times we’re seeing organizations looking at cloud as a substitute for strategy, and it’s absolutely not. Cloud is not two things and the things that it’s not are a substitute for strategy, and it’s not cheap. What we do see is organizations taking a strategic view on cloud where they’re going, “Okay, this is a great way of getting risk out of my organization, of de-risking the structural side of my business and also providing me with flexibility to be able to onboard new applications, new devices, new technologies in a linear commercial model that de-risks the growth or decline in the requirements for those applications.” That’s really where we see the role of cloud today.
Jim Burton: David, I’m going to add a little bit to this and you can finish and follow up on your thoughts about cloud but it really begs the question of is the IT organization going to be outsourced? I’ve heard that from a number of people. Clearly, the size of the IT organizations are shrinking. In fact, in our discussion before this, Ian, you had a really great example of an IT organization that is changing and shrinking, so I throw that question out there. David, by the way, feel free to follow up on the cloud question but what are we going to see in the IT organizations? Is it all, or a large part of that going to be outsourced?
David Danto: I think amplifying what Ian said, the pace of change right now is faster than we’ve ever seen before. There is no opportunity to simply wait for a trend to happen because if you’ve waited to see the established trend you’ve probably already been obsoleted and put out of business. The reality is there is no one size fits all answer. If you’re a pharmaceutical company, if you’re an insurance company, if you’re not into technology at all, there is a real legitimate question as to whether or not you need to have an organization of a dozen, or two dozen, or three dozen people within your offices that you hire and you employ that need to have an area of expertise that are completely not within your company’s core competence. That’s a legitimate question to ask. In some cases the answer is yes. In many cases, and more and more of them, the answer is no.
We’re seeing organizations say, “Look, we’re really good at insurance,” or “We really understand the pharmaceutical market but we are not technology experts. We don’t know cloud. We don’t know collaboration. We don’t know infrastructure. Why wouldn’t we go to an outside firm to provide us with those specialists and pay for it by the drink as opposed to having to pay the salaries and everything else that’s involved in that?”
I completely agree that we’re at a turning point right now and the most important piece of that to understand is that it’s moving very rapidly. This is not something where you can simply sit back and wait for change to happen. Change is going to happen and the question is, are you going to remain relevant or not?
Jim Burton: Yes. Ian, you want to weigh in on that, too?
Ian Heard: Just to touch on the conversation you referred to earlier, we are just seeing a massive organizational shift in IT departments now. Whether it will all be outsourced or not I think is probably open for debate. I think, to David’s point, that probably needs to happen on an organization-to-organization basis…that decision. I think the big shift we’re seeing is the changing role of IT. What we’re seeing now is organizations go…no longer are we an organization within IT that delivers technology solutions. We need to be able to be an organization that enables business outcomes and measures the supplier of those business outcomes to make sure that we’re relevant to the line of business as humanly possible, because if we’re not relevant to the line of business, we’re redundant…we’re dead. They’ll go out and make their own technological decisions and typically they’ll make them in silos and the whole of the IT or technology arena within our organization will go out of control.
What we’re seeing is progressive organizations restructuring the whole shape of their IT division. I was just referencing earlier a customer of ours who, granted, they significantly downscaled their IT department, but what I think they did much more significantly was restructure it. Pretty much their IT department was split into two. One was Client Services, so basically people within the IT division sitting in the line of business, understanding the business requirements, translating them into technology solutions, and then going out to the market with their vendor management team who also sat within IT, who were basically the other half of the IT department, going out to technology partner and solution partners to be able to provide the best-of-breed solutions to be able to enable the line of business and accelerate the line of business. The really important role for IT there was to be able to also break down the silos within the organization to be able to drive the thing that IT drive really well: reliability, security, governance, cost reduction, etc. They do that better than anybody else in the organization. So I think this is where we’re seeing the logical balancing out now of the role of the next generation IT department, moving away as I said from delivery of technology solutions to enablement of business outcomes.
Jim Burton: This kind of gets back to the podcast David and I had earlier. Are you finding that organizations are coming to you to help them understand some of the changes they should be considering in their organizations to better deal with all the quick changes in both technology and the need for an organizational structure to help better adopt those technologies?
Ian Heard: In short, yes. I think when we meet CIO’s in an organization, it’s the biggest thing on their tongue. The big feedback that we get from CIO’s is the largest amount of relevance we can tell them is the changes that we’re seeing in organizational structures. It used to be what’s the next greatest technology? I think now frankly they’re interested in that but more importantly now I think the role of IT with it changing as it moves away from being the bastion of innovation to actually now being the enabler of innovation. Accepting that the innovation will now sit and rest with the user, not with IT, and really you can’t foresee that future. Without a doubt it is the most regular conversation that we’re having with CIOs now: what does my IT Department look like in five years’ time or what does it even look like in twelve months’ time? Yeah…without a doubt.
As I said, the four big areas that we really press home on from a Dimension Data perspective is, look, if you’re going to move to that bimodal view where in effect Mo2…the line of business are the innovation centers and IT are the enabler of that innovation, then you need to look at four key areas. One is driving down commodity costs – the costs that provides very little business benefit and when you look at the technology, especially in the communications tower, so in the arena that I’m in, collaboration, 60% of spend on average is still in carriage ??? _____ [17:51] to anybody’s mind today. You can get it from anywhere and it’s pretty well provided in most parts of the world. We need to definitely attack that cost and drive down that cost. We’re still seeing far too much unnatural behavior in the market in that space and far too much spend in that space.
The next area is the risk out area. How do we take the risk out of your organization? What we see is that about 30% of spend within the communications tower today, 30% of IT spend is on infrastructure and operations. We’ve already identified that the vendor landscape, the application landscape and the predictability of change and variation of change is very, very high, so it’s a very risky position to be in. What we’re seeing is that 30% of communications tasks are spent in that infrastructure and operations and I think that’s where discussions around managed services, outsourcing, cloud, etc. start becoming really relevant. How do you de-risk your position?
The last two areas then are speed up, and innovation in, and I believe that goes, how does IT provide a platform that delivers governance? How do they provide a platform that offers things like mobile device management, etc., but also drives cost reduction whilst also enabling that platform to onboard rapid enablement of applications, devices, etc. We really see that whole enterprise mobility areas as being a key enabler to be able to deliver innovation within organizations. Without a doubt cost down, risk out, speed up, innovation in, are the four key areas that CIO’s want to talk to us about today.
Jim Burton: That’s great stuff. I’m sitting here thinking…we have a conference called the UC Summit that’s in the middle of November in La Jolla, California, so I know both of you’d love to go there. I think this would be a great panel discussion for us to have. We’ll have a number of end users attending, and I think a discussion around this would be a fabulous thing, so I will extend to you both an invitation to come and participate in our event in mid-November and I’ll follow up with you accordingly.
I want to thank you both for your time. This has again, been very enlightening. I think this is such an incredibly important area. As you pointed out, some of these organizational structures are as important as the technologies that people are adopting these days and clearly Dimension Data is working and on top of that and able to help a lot of people with it, so thank you for your time today. Quite frankly, I look forward to another podcast sometime in the near future.
David Danto: Thanks very much for having us.
Ian Heard: Thanks for your time.