Is enterprise IT falling behind as business strategy turns outside-in?

Successful firms need to harness the skills, capabilities and passions of the external marketplace by becoming more 'outside-in'

Today’s highly interconnected customers, industry ecosystems and cloud computing platforms are pushing the business centre of gravity outside of the walls of the firm.

Although effective internal company systems, processes and value chains will always be essential, successful firms need to harness the skills, capabilities and passions of the external marketplace.

This is what we mean by becoming more “outside-in”.

To gauge the pace of this “inside-out” to “outside-in shift”, in December 2013 the Leading Edge Forum conducted a survey of more than 300 senior IT leaders in large commercial organisations in the US and UK. 

Our Outside-in Barometer research showed that while the rate of change varies considerably by issue, firm, industry and country, the overall migration towards outside-in business strategies and outside-in IT management is now well under way. 

Business strategy findings

We have come a long way since it was trendy to say that “IT doesn’t matter”. Today this sentiment can be career threatening. Consider the key research findings below:

  • In more than half of the US and UK firms surveyed, information technology is the single biggest driver of business change. Just 2% of firms said IT was a relatively minor factor.
  • External, ecosystem-based sources of innovation are either more important than or of equal in importance to internal company innovation in roughly half of all firms.
  • Roughly two-thirds of all firms have embraced the idea of using information “openness” and transparency for competitive advantage.
  • Technology-based customer co-creation is important in roughly half of all firms.

Do the findings above describe the situation in your firm? If they do, you are probably well along in the outside-in journey and have a culture that can look beyond your firm’s internal tendencies and embrace the many opportunities emerging in today’s marketplace. If they do not, it can be useful to understand why.

Technology management findings

The shift toward more of an outside-in technology management approach has also gained considerable momentum, as outlined in the findings below.

  • Cloud computing has broad support, especially for new applications. Only 5% of firms described themselves as “not active” in cloud computing.
  • More than 40% of all firms report excellent results with software as a service (SaaS), with another 40% reporting mixed results. Only 5% describe their SaaS experience as disappointing.
  • There is now relatively little resistance to bring your own device (BYOD) schemes. More than 80% of firms now allow, encourage, or are experimenting with BYOD.
  • While private networks are still pervasive, roughly half of all firms are “increasingly relying” on the public internet.

As with the business strategy questions, companies need to ask themselves whether the trends above describe the IT management situation in their firm. Is there a shared consensus that this is where your firm should be headed?

More firms join the outside-in journey

Summarising a survey that cuts across many different issues presents obvious challenges. But consistent with our barometer metaphor, we felt the need to gauge the strength of the overall outside-in movement. To do this, we calculated the average scores for the business strategy and IT management questions, and then compared these two sets of results.

Enterprise IT is often the most inside-out part of the modern firm, and sales, marketing, product design and other parts of the business are more inclined to have an outside-in orientation

This – admittedly rough – approach showed that firms are slightly more than half way into the outside-in journey. This seems about right, given what we observe in the marketplace. 

A lot of change has occurred and a lot more remains. US-based firms are more outside-in than UK-based firms, and physical goods industries tend to be changing more than information-intensive, but heavily regulated, industries such as financial services and healthcare. 

But clearly, the most notable result of this exercise is the fact that the business strategy scores are slightly – but meaningfully – higher than the IT management results. 

This is consistent with our view that enterprise IT is often the most inside-out part of the modern firm, and that sales, marketing, product design and other parts of the business are more inclined to have an instinctive outside-in orientation.

That this gap has been derived wholly from the opinions of senior IT leadership makes this finding especially poignant, and we will see what senior non-IT business leaders say in our future research. 

But the bottom line is that unless the current gap is closed, Enterprise IT is likely to find it difficult to fully support the wider mission of the firm. CIOs and other IT leaders should seek to lead the outside-in movement, not lag it.

David Moschella (pictured) is research director at CSC’s Leading Edge Forum.

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