Digitization Trends and Fields of Action for Enterprise IT

Transcription

1 White Paper Digitization Trends and Fields Action for Enterprise IT Dr. Lars Burmester Michael Gschwendtner

2 1. Digitization and Fields Action for Enterprise IT This white paper addresses the phenomenon digitization and its impacts upon Enterprise IT. First, we summarize the core messages the white paper in theses. In the subsequent sections you can find details the arguments behind these theses. Digitization is used as an umbrella term for a multitude trends which will lead to changes in the corporate world. One reaction to digitization trends is ten to call for technological know-how and transparency concerning markets and costs. However, digitization is far more multi-faceted and multilayered than that, meaning a focus on technological aspects would take to narrow a view. The CIO organization can contribute to extracting benefit from the opportunities arising from digitization trends but it can only do so in collaboration with the business, i.e. with the management and the relevant corporate functions. CIOs can position themselves and the organization they are in charge in different ways. However, an active or proactive orientation would have the greatest chance success when it comes to the risks and opportunities associated with digitization. As a rule, current best-practice CIO organizations are structurally well prepared for coping with digitization trends. However, if we look at the strategic orientation, it soon becomes clear that they need to focus on other strategic aspects within the organizational structure. In particular, we have identified IT strategy, sourcing, process organization (build, procurement, transition, service provider management, run, governance, demand management and possibly technology management processes), agile project management, project portfolio management, and stringent IT performance management as fields action in the primary scope the CIO. In order to determine an appropriate approach, the required orientation the CIO organization must be evaluated. These requirements form the basis for determining the suitability the current organization and for deciding which fields action to focus on. Finally, the necessary transition measures and organizational changes must be initiated. 2. Digitization as Collective Term for Multi-Faceted Trends Everywhere you turn, people today are talking about digitization, yet the term actually groups together a whole range trends and phenomena which when looked at individually can already be complex and multi-faceted. Here are some examples digitization trends: Disruptive Technologies Big Data & Advanced Analytics Cloud computing Internet things Augmented reality Interoperability und Convergence De-facto standards & platforms Smart & connected everything Everything as a service Stware market places Fig. 1: Selected digitization trends Digitization Digitization Society Digital consumption Digital culture Agile implementation Real-time management Cybersecurity Compliance and regulations Data protection Digital plant security Digital product security Despite the many discussions about where one trend finishes and another one starts, nobody can deny that many these phenomena and trends are going to have a huge impact upon the corporate environment, upon market and competition conditions, and upon companies themselves. As these trends mature into actual, tangible developments, accompanied by an increasing rate adaptation, there will be considerable changes in the macro-environment, in the supplier and sales markets, and in competitive relations. In the future, these areas will find themselves in a state permanent transition, i.e. it will be normal for them to shift almost continuously between phases volatility, dynamism, heterogeneity and instability. The perceived increase in complexity and dynamism leads to uncertainty in companies, uncertainty which must be counteracted and surmounted. Often, technological aspects digitization are seen as the dominant drivers here, resulting in loud calls for technological know-how and transparency concerning technology markets and technology costs. However, there are a number critical questions which need to be answered: Does it really help colleagues from other corporate functions if they understand technological concepts such as in-memory computing or unstructured and distributed databases? Or if fundamental questions on the application statistical methods are discussed in detail with other functions? Does such detailed understanding counteract the uncertainty triggered by digitization? Or does such a discussion actually exacerbate the perceived complexity? Further questions concerning markets for and the costs such technologies will also not lead to any reduction in complexity. On the contrary: Companies should focus their attention on clearly existing challenges on the markets and fundamental threats to established business models. For many companies, having a dislocated understanding technologies or methodologies is a factor which on its own provides no advantage over the competition unless these technologies and methodologies are incorporated into the product-market concept the company. Understanding technologies and methodologies is instrumental for the implementation solutions in the context other digitization trends. If they are in place, the underlying functions purchasing, sales, production and product development are heavily influenced by technologies and methods. However, Horváth & Partners

3 the drivers for adjusting the product-market concept will be non-technological digitization trends. Technology is a factor which underpins overriding trends; it should be seen as an enabler which in itself, however, creates no value. Accordingly, the relevance IT will continue to increase in the sense being a provider (critical) resources for these functions, but we do not expect value creation activities per se to be fully incorporated into the scope IT. Thus, digitization is not a purely technological and methodological challenge. The provision technologies and methods will, at the most, play an equal role alongside the corporate and competitive strategy challenges facing companies. The bigger question concerns the extent to which CIOs must position themselves and their CIO organization in order to reflect the strategic orientation their company has chosen. 3. Fields Action a Best-Practice CIO Organization The fields action a best-practice CIO organization range from elaborating the IT strategy, through developing the organizational, process, and project organization IT to managing its operative performance. These fields are touched different extents by digitization trends but are not changed fundamentally in the short term. In the following, we look at each these fields individually. Fields Action Effects IT Strategy Expansion strategic analysis Continuity in strategy work Networking with digitization agenda IT Organizational Structure Further separation into Build, Run, Perf. Mgmt. Modeling based on centralization and decentralization Digitization Best Practice CIO Organization IT Operational Structure Build Run Orchestration standard services Pressionalization sourcing, transition, service provider management and integration Polarization IT (bimodal IT) Differentiation governance IT Project Management Pressionalization method selection Expansion agile skills Expansion project portfolio mgmt. IT Performance Management Pressionalization planning and reporting Fig. 2: Influence digitization on fields action a best-practice organization IT Strategy As part the IT strategy, the company s environment and the resources available to it are analyzed, evaluated and consolidated into strategic options. This is coordinated with the corporate and competitive strategy in order to ensure that overall orientation the company is cohesive. Accordingly, the digitization agenda the company is considered and incorporated into the IT strategy. Once the IT strategy has been elaborated, it must be operationalized for individual organizational units using concrete objectives and targets. Strategy work should be a permanent process, i.e. it should not take place as case-based, analytical snapshots, in order to live and foster the dynamism the company environment. IT Organizational Structure At the moment, an organizational structure paradigm prevails which structures the organization in three parts: Demand-based organizational units which constitute the interface to customers and work together with them to develop solutions for which there is a concrete need. Supply-based organizational units which provide and operate the applications and infrastructure for the solutions; at the same time, they assume responsibility for implementing the newly developed solutions. Performance management-based organizational units which plan, coordinate and monitor the functions mentioned above to ensure they reflect the goals and objectives the organization. This fundamental three-way split can be adapted to satisfy the requirements the company by centralizing or decentralizing individual organizational units. We do not expect there to be any short-term changes to this dominant format through the effects digitization. IT Operational Structure Within the largely fixed operational structure there are IT processes which are part further operative adjustments to the strategic orientation and strategic requirements. Against the backdrop digitization trends outlined above, certain process clusters will be more heavily affected than others. For build processes the orchestration from standard IT services to applications and solutions is shaping up to be the dominant draft and implementation paradigm. This will lead to increasing demands and a growing portfolio such standard services; as a result, the procurement processes for these services must be further pressionalized: from strategic supplier qualification, evaluation and selection through to the automation purchasing IT commodities. To the same extent as for IT services, the sourcing IT skills will at least temporarily become a bottleneck until skills priles and education for dealing with digitization trends have been developed. Alongside procurement in the stricter sense, transition management, supplier performance management and the integration services procured on the open markets will become more important. From the perspective run processes, we can assume that the operative business processes will continue to polarize ( bimodal IT, two-speed IT, two-roles IT ). On the one hand, processes will focus on a few large systems which are more attributed to the infrastructure ( tankers ). These are characterized by a high degree change control, long release cycles, the highest requirements for availability and reliability, and a great degree centralization. On the other hand, we can expect the creation a range decentralized, slimmer processes. These correspond to the app approach, i.e. short-lived, very specialized, highly modular, orchestrated applications with fast development and lifecycles. In turn, this approach will impact Horváth & Partners

4 upon the organization demand. Different scenarios can be imagined here, from a close integration between IT and functional organization through to complete hiving f ( manage your own IT, self-service IT ). Accordingly, the IT governance processes the cluster outlined here will have to be much more differentiated than they are today from a rigorously practiced, high degree regulation for infrastructure-related processes to pragmatic governance based on minimum standards (particularly concerning security and data protection) for lightweight applications. Importance CIO organization for the company Infrastructure Provider Business Partner Proactive Orientation Active Orientation Reactive Orientation IT Project Management The scenarios outlined for the build processes and the uncertain developments in the corporate environment mean IT project management will be especially important. Alongside the further pressionalization their project management, companies need to tighten up their method selection and adapt those methods to the specific requirements individual projects. What will be increasingly important is to set up and expand agile project management expertise in order to master the challenges rapidly changing application and system landscapes. Then, project portfolio management must be further developed and pressionalized in order to be able to quickly establish new investments and novel undertakings, manage them stringently and, if necessary, terminate them ahead schedule. IT Performance Management The operative performance management business must be anchored more deeply in the IT organization and in the IT processes by means a complete pressionalization planning and reporting. Alongside mid-term planning and budgeting, it is necessary to expand investment planning and investment controlling in order to manage the commercial performance the increasing numbers technology and innovation projects. Moreover, establishing efficient forecasting and regular reporting processes facilitates the adequate performance management the CIO organization in an increasingly volatile environment. 4. Orientation the CIO Organization in the Context Digitization The main factor affecting the fields action in the CIO organization is the orientation chosen for the digitization trends. Now that the IT function has developed from a pure provider infrastructure to a business partner, the ubiquitous digitization trend seems to present an opportunity for elaborating the function s future positioning. In the following we show three scenarios for a possible future positioning Today Fig. 3: Development the importance the CIO organization Reactive Orientation the CIO Organization 2020 Reactive behavior is characterized by passiveness towards digitization impulses from the corporate environment. Actions are triggered by a cause on a case-by-case basis through demand from the company s functions or through contact from a supplier. In this case, selection the main impulses from the corporate environment is left to the business or selected suppliers, meaning IT does not contribute to reducing complexity. In the context the fields action shown here, this means that there is no emphasis on digitization trends during strategic analysis. This, in turn, means that structures, processes, projects and performance management are also not aligned with the requirements digitization. A reactive CIO organization does not contribute to reducing uncertainty concerning external developments. If this, however, is necessary due to the positioning the company, this behavior can mean the company misses out on the opportunities arising from these developments. Additionally, such behavior has considerable risks such as the creation illegal IT constructs or shadow IT, IT security problems and other ungoverned IT fields. Against the background the consequences the digitization trends, the reactive orientation the CIO organization would appear to fall far short what is needed. In these cases, case-based passive action will lead to IT being barely involved in digitization undertakings or providing too little support too late, thereby delaying, hindering or even preventing them. The consequences here would be a gradual loss know-how in and value IT right through to commodity suppliers and thus outsourcing candidates. Active Orientation the CIO Organization Active treatment the digitization trends takes place by picking up on developments from the corporate environment, evaluating them and consolidating them for further decisionmaking. This, for example, can happen through the active Horváth & Partners

5 investigation relevant trends, testing their suitability for application within the company and joint evaluation the opportunities they fer together with the management. With regard to the fields action mentioned here, this means that the strategic analysis (among other things) is focused on digitization trends which are then evaluated, prepared and proposed to other functions in the company. The use/ don t use decision is down to the functions, which incorporate requirements via the demand-based organizational units. The organizational structure, the processes, and the project management will more or less have to run as described above in order to satisfy strategic demands. Selected, strategically necessary aspects digitization are then reflected within the demonstrated framework for structure, processes, projects and performance management. If it is active, IT takes on the role an expert, advises the business in evaluating trends and participates actively in implementation. This can lead to a reduction in complexity and a real reduction in uncertainty. Such a role will cushion the main risks a dynamic development in the corporate environment. The decision whether to actually make use the opportunities arising from technological change is still the responsibility the other functions in the company, meaning that the development path IT in recent years has still been largely shaped by them and their role. Proactive Orientation the CIO Organization A proactive approach to dealing with digitization phenomena is characterized by actively influencing the company s environment, i.e. the company directly influences the changes taking place in technology, society or security. This, for example, is achieved by developing own products or by developing or further developing industries standards. At the same time, the company continuously evaluates market chances or the commercial utilization own or third-party technologies and their combination. In terms the fields action, this means that strategic analysis is focused specifically on digitization phenomena, their impacts and the ability to influence them. Further, innovations are not only brought into the company from outside but are also actively introduced into the environment. When it comes to implementing strategic undertakings, this means that decentralization into the affected functional departments must take place. In this case, the described processes and projects must be carried out reliably and effectively in order to satisfy the requirements the strategic goals. Finally, the CIO organization will have to be managed stringently and consistently in order to be able to rate the economic feasibility innovative undertakings and, if necessary, to manage and complete them consistently. An active orientation the CIO function can counteract a perceived uncertainty brought about the digitization trend. As such, the position CIO the organization will experience a considerable increase in importance: Services provided by the CIO organization can increasingly become a constitutive component market activities. Activities which until now have been traditionally non-it functions will become more strongly integrated into the CIO organization. To bring about this reorientation the CIO organization, first it is necessary to check the extent to which individual digitization phenomena impact upon the company. If these companies are per se technology oriented, for example if sales, procurement or HR markets are becoming digitized or established business models are threatened by digitization, they have to assess the extent to which the current CIO organization satisfies the demands discussed here upon the required IT orientation. Then the necessary organizational transition measures must be initiated in order to secure comprehensive change supervision and management. Have we aroused your interest? We are at your disposal to discuss ideas on the impacts digitization on the Enterprise IT your company. Horváth & Partners

6 Imprint/Contact Editor Horváth & Partner GmbH Gangherstraße München Tel: Horváth & Partners Management Consultants Horváth & Partners are independent, international management consultants with over 600 highly qualified employees. Founded in 1981 and headquartered in Stuttgart, Germany, we have fices at locations in Germany, Austria, Hungary, Romania, Saudi Arabia, Switzerland and the United Arab Emirates. Moreover, Horváth & Partners are a proud member the Cordence Worldwide global management consulting partnership, which strengthens our ability to undertake consulting projects in important economic regions the world with the highest pressional expertise and precise knowledge local circumstances. Our core competences lie in the fields Corporate Performance Management and Performance Optimization both for the entire company and for the business and functional areas Strategy, Organization, Sales, Operations, Controlling, Finance and IT. Horváth & Partners stand for project results which create sustainable benefit, which is why we accompany our clients through the entire process from developing the business concept through to anchoring via integration into processes and systems. Michael Gschwendtner Competence Center CIO & Project Advisory MGschwendtner@horvath-partners.com Dr. Lars Burmester Competence Center CIO & Project Advisory LBurmester@horvath-partners.com