A company can stop any further discussion on digital transformation if IT is not put into order. Any project on customer centricity, or gaining actionable insights from data will fail if IT systems and IT organization are not up to it.
About time to get the house in order! But IT is a mess in most companies. Systems are complex and outdated, they restrict the flexibility of businesses to react speedily to new challenges. IT organization is overly administrative. It is so slow to get anything done quickly. IT always excuses itself for all this mess by requesting more budget and time to get the basics straight, only then everything will be fine – until then everyone will have to live with the mess. I guess that resonates with most of the readership.
IT systems and IT department organization is a roadblock to any digitalization attempt. If this roadblock is ever going to be removed, one needs to know the reasons for IT’s inherent transformation problems:
- Stability is prioritized higher than change. IT gets only minimal rewards for delivering changes to systems that have positive business impact. But it gets blamed big time if system fail
- IT is run mainly as a cost center. Any cost reductions are always made first by sacrificing projects, especially in those projects which are invisible to business but provide the infrastructure needed to be more flexible. Cost reductions are never made by sacrificing stability, flexibility is given up instead: IT hunkers down in its trench
- IT runs platforms for business processes. There are two problems with that. First, process changes are complex. In order to change a process, one needs to know the process. As business is split in departments with their singular views, there are only few people, if any in the whole company, available who know the process. There are even less people who know process and IT or have the communicative abilities to get the specialists to link up.
Second, the overwhelming part applications in companies have been build to run integrated processes efficiently. ERP programs have seen their dawn in the 1990’s and still, technology and design philosophy remains unchanged. They emerged at the same time as the theory of business engineering (see Hamer/Champy in Sources). ERP systems are there to run efficient processes. They have never been build for change. Processes implemented there are inherently carved in stone – by design!
Numerous attempts have been made to make IT more reactive to business needs. To name a few:
- IT Demand Management attempts to map out and prioritize business needs – but has resulted more or less in nothing more but elaborated administration of the scarce resource called “change”
- Business Process Management attempts to keep on top of the complexity of processes by cataloging processes, relying on boards of knowledgeable experts to oversee and improve processes. The quest for order and transparency is noble, but business dynamics, time and budget constraints prevent decisive results. After all, a business process manager is just a role and people are mostly rewarded for their line position, not any additional roles they have. In large organizations Business Process Management tends to end up in an ivory tower, with few relations to the front lines.
- Business – IT Alignment aims at delivering a catalogue of services that business can expect from IT, along with terms and conditions (“SLA: Service level agreements)” and most importantly put a governance structure into place to create a better flow of information for all interchanges between IT and business at all hierarchical levels. Business – IT alignment is recognizing the special importance that IT has for all other departments and achieves at least better understanding.
All these methods are useful. But they represent the icing on the cake. They do not solve the root causes for IT’s problems with change.
Do not despair. There are changes underway, that enable IT to transform more easily to business needs. With the digital revolution new types of system classes come into play, which are just being understood. At present, every company uses systems of transaction, classical ERP systems. Some companies, use Data Warehouses for reporting purposes, these are systems of insight. Companies experiment more and more with systems reaching out to customers and supply chain partners, like commerce sites, web-based supply chain platform or even mobile apps – systems of engagement. A most useful topology of systems inspired by Geoffrey Moores work, which had a huge influence on the start-up scene (see sources).
These systems are not only separate in purpose, they are separate in software, hardware, responsiveness, interfaces etc. As these systems have been build and evolved over many years for totally different purposes, they value different things and technologies. In other words: They are specialized. Don’t try to offer an exciting user experience to a customer by getting him to use an ERP system or gaining insights by running repeated drill downs on ERP databases. In both cases, you are not likely to try this effort often. It will drive you crazy both for the lack results and the tediousness of the process.
Currently IT and business more or less know how to work with ERP systems. Only few companies are apt enough to gain much value except standard reporting from data warehouses, although many use them. Fewer still, have deployed systems of engagement at scale. Mostly this deployment is in pockets and designed as an add-on, “Web enabling” of ERP processes. Examples are transportation platform in supply chain or some workflow applications in IT demand management.
These three systems classes act in conjunction: Systems of records capture data, systems of perception interpret data and make data “actionable” so that systems of engagement can use this data to interact with people. My personal guess is that most companies these days spend about
- 85% of their total annual budget (except desktop applications such as MS Office) on systems of transaction,
- 10% on systems of perception and
- 5% on systems of engagement
This will change.
Just 10 years ago, the IT revolution envisioned was centered on the “paperless” office. That was deemed to be one of the main contributions of IT, storing information. Only few thought has been given on making sense of the information and how to engage humans to do something useful with it. Good for the trees, though! But even paper consumption is at an all time high. Can IT get anything straight?
Lets find a way out this mess starting with a look at IT’s contribution to Innovation – in the next post.