IT needs a rethink. Cliff Saran finds out what IT 2.0 will entail.
The status quo cannot continue. IT is a cost centre, and CEOs often believe IT is a necessary evil. Why does it cost so much to run an IT department? Why do so many projects fail to deliver? Such questions have dogged CIOs and IT directors for the past two decades and the industry has done little to make IT more palatable to business executives, who still question the massive expenditure on Y2K and complain when the CIO argues for a PC refresh to support the next version of Microsoft's "desktop productivity".
Writer and innovation consultant Charles Leadbetter says business needs radical innovation. "The best way to have a new idea is to bring an old idea and a new idea together," he said.
The adage of IT business alignment is as old as IT, but industry initiatives for data standardisation, the service-oriented architecture and, most recently, cloud computing, put technology leaders in a strong position to rethink IT's role within an organisation.
How technology can drive growth and deliver value
Khalid Kark, a research director in the CIO group at Forrester, believes CIOs must adapt their behaviour to take control of their destiny by driving growth and revenue within their organisations.
Forrester describes this as "Empowered Business Technology". It is about getting IT people to be the business, rather than merely aligned to the business. "CIOs need to develop IT capabilities and organisations that are less to do with running technology and more about understanding the business and providing business value," said Kark.
Given that over 70% of an annual IT budget is already spent on maintaining existing IT, CIOs must be prepared to give up control of many of the traditional IT functions. Does IT really need to retain control over the Exchange email server, the desktop PC infrastructure or even the core business application or mainframe system?
"IT that is only focused on delivering technology dictated by the business is not delivering value. IT needs a governance mechanism to determine when to hand over systems to outsourcers and how to manage the risk and value within the contract," said Kark. Governance must also stretch to security, he said.
It is no longer feasible, or even beneficial for IT to control access to IT resources, given the consumerisation of IT. IT departments need to hand the responsibility of provisioning devices to users.
At a recent Forrester event, Statoil CIO Magne Frantsen noted that IT is often spread too thin. "We need to focus IT on where it matters and where it gives us a competitive advantage," he said.
Innovation requires change
Tesco's UK CIO Rob Hattrell said that to be successful as a technology leader, CIOs need to be clear on their vision and have the confidence to challenge their business counterparts. "IT needs to be more comfortable to lead the business than sit behind process change. Be prepared to take risks, experiment with ideas and accept that some will fail," he said.
But change is a fundamental aspect of any business innovation. "Without change you don't get benefits," said Joe Peppard, professor of information systems at Cranfield University school of management.
To succeed at driving business forward, a CIO must not solely rely on a strong business case. "Business benefits need to be clearly articulated and the CIO must have a clear picture of how the business benefits will be achieved," he said.
For instance, a few years ago Rolls Royce introduced the concept of "Power by the Hour", which enables airlines to pay for Rolls Royce engines based on hourly usage, instead of making outright purchases. Such a system can only work with complex IT.
The mobile apps market is another example. If the IT architecture is right, businesses can reap major benefits by strapping on mobile apps, geo-location and contextual information to provide recommendations. Such technologies allow the business to engage with customers in a deeper way than would previously have been possible.
Given that staff are now far better equipped to take on at least part of the responsibility for their IT requirements, together with outsourcing and cloud computing, there are plenty of opportunities for IT directors to drive business development.
There seems to be a shift in focus to the entrepreneurial use of technology to make a business, according to Nick Wilson, UK managing director of HP. He said the UK desperately needs more people who understand how to link business and technology.
"Children do not realise you can set up a business easily in IT," he said, relating to the fact that ICT training in the UK has a poor track record. In fact, the number of students gaining ICT GCSE qualifications fell by 23% this year, from 61,022 in 2010 to 47,128 in 2011.
Wilson criticised the government for not doing enough to promote IT. "Government gets jobs and the route to growth argument, but it does not entirely believe how IT can be an enabler to growth," he said.
Wilson warned that if not enough is done to attract and retain business and technology talent in the UK, people will set up businesses elsewhere.
HP takes on 400 interns each year, who work on various projects. Most recently, the interns organised HP's Comic Relief Day, where the entire board wore red robes for charity.