Brian Kilcourse, Managing Partner
March 2, 2010
One of the more interesting observations gleaned from RSR’s studies in the last couple of years has been that there’s a slow but steady change in how companies think about their IT application portfolios. In short, we’ve seen a definite move away from hybrid application delivery approaches (a combination of best-of-breed and internally developed code) to delivering IT new functionality as services, either from centrally managed environments, by outside service providers, or from on-demand services. Not coincidentally, with this change there has been greater acceptance of suites or pre-integrated portfolios of solutions.
One cause for this shift is that retailers need real-time access to information, and that requires “one version of the truth” for product, inventory, and customer data across the entire enterprise (today’s high-speed and reliable digital networks are the other key enabler of this shift). Another reason is the quality and flexibility that commercial solutions and new delivery options provide. Companies can develop a roadmap for implementation, but start to implement functionality where and how it makes the best business sense to do so (or as an example, not being required to begin with financial systems, as in days past). This enables businesses to “frontload” the ROI from their software investments.
Our research has shown that retailers are also realizing that it’s the business process that matters, and that IT’s value is in how well it enables the process. For example, in the forthcoming RSR report, Enterprise Workforce Management: Redefining the Boundaries of Customer-Centric Retailing (to be released 3/10/2010), we note that “although nearly all retailers report that they use hourly scheduled labor in the stores, it certainly isn’t the only operational arena where retailers are challenged to efficiently manage their labor spend. But that doesn’t mean that different WFM solutions should be applied to different areas of the business. A majority of this study’s survey respondents felt that having a single suite is very important, and a significant minority further agreed that it is very important to provide a single WFM capability across the different areas of the business that make use of hourly workers.” Inherent in that idea is the notion that the “single suite” must be sufficiently flexible to wrap around different operational models, and not the other way around. Many modern commercial solutions deliver on that promise.
Finally, retail IT departments are under tremendous pressure to deliver more, faster, with less total cost of ownership over the life of the IT assets they manage.
Enter the Change Agents
Although the recession had the side effect of quieting much talk of the CIO as the corporate ”change agent,” it is still true that the IT leader is right in the mix of transformational change in many companies simply by virtue of the fact that technology is at the center of much of that change. In a December 2007 CIO Insight interview, James Canton, CEO and chairman of the Institute for Global Futures and author of The Extreme Future: The Top Trends That Will Reshape the World for the Next 5, 10 and 20 Years, the author stated, “<The CIO is> not just the change agent, which is somewhat an outmoded idea, but the change predictor and the change shaper. There's been a dramatic power shift in the organization. CIOs, for all intents and purposes, have an opportunity to predict changes and to be a force for motivating the rest of the organization, including the CEO and the board, to change.”
“Bosh,” you say? Well, the article was read over 27,000 times and the reader opinion rating was . Someone likes the idea, and since the newsletter is called CIO Insight, it’s a pretty fair guess that all those “someones” are current or would-be CIOs. Even if “the CIO as corporate ‘change agent’” is hard to swallow, there can be no doubt that IT departments are deeply involved in “change” – that’s why they have “developers”.
Shoes for the Cobbler’s Children
A lot of the focus of “alignment” studies, including RSR’s own May 2009 report, IT and Business Alignment in Retail - Benchmark Study 2009, has been on the relationship between IT and the business, and how well or poorly companies adopt a governance framework. But beneath the governance issues is something more fundamental; the May 2009 study concluded that, “Legacy application maintenance still takes up an inordinate amount of IT human and financial resources. IT is in a vicious endless loop.” That is what retailers, presumably guided by the IT leadership, are trying to get past in their newfound enthusiasm for new ways of delivering IT enablement to the business.
The last time that a fundamental shift occurred in the way that IT delivered value began 20 years ago, with the adoption of “open standard” technologies such as IP networks, UNIX, relational databases, and object-oriented programming. I remember one OD consultant telling me, “don’t expect your most senior programmer/analyst to thank you for switching from COBOL to Java – after all, COBOL is what puts food on his table.” Truer words were never spoken.
Today, there’s relatively little discussion in the industry about the cultural changes that have to happen within the IT organization itself as companies make a shift towards pre-integrated solutions delivered as services. In the upcoming workforce management study mentioned earlier, RSR says, “…the basic question that retailers must answer in order to get the full value from an integrated WFM implementation is from the hourly employee: ‘What’s in it for me?’” Isn’t the same true for IT whose companies move away from IT development to delivery organizations? What does the CIO need to do with the IT organization to make that transition?
To help frame the questions that corporate IT leaders need to consider as they transition how the company delivers IT-enabled value, we reached out to Robert Kaplan. Kaplan is a retired senior partner at McKinsey & Company, the famous global management consulting firm. While at McKinsey, Bob was one of the leaders of the firm’s IT practice, one of a group of six partners. Post-McKinsey, Bob was CEO of several companies, including Netliant (software for automating the design of networks), ITM Software (IT governance solutions), and Motif (a business process outsourcing company). Kaplan was also CIO for Silicon Valley Bank (“SVB”).
According to Kaplan, “The really key insight is in the change from IT development to delivery. I think that’s a concept that most CIOs still don’t get in spite of the fact that it’s fairly basic. The switch towards ‘suites’ and a ‘services’ delivery model forces you to think about that, and as a CIO, what you’re really there for.”
What are the key questions for CIOs to ask themselves? According to the management veteran:
1. “Do I have good systems analysts, and if not, what am I going to do to find those people? They are scarce- hard to attract and even harder to retain, because they are in demand.”
2. “Do I have people in place who speak the language of the business? What I did at SVB was to establish a new functional layer called ‘relationship manager’. This was a relatively senior person from IT – typically a program or project manager, who I assigned to each of the business units at the bank. Their role was to understand about the business and to work with the business leaders to understand how IT could be used to help accomplish what they were trying to do, from a business perspective. These people would liaison between the business unit and everything in the IT function. This turned out to be a really hard role to staff and get right.”
3. “Can I break down the structural hierarchies within IT? one of the ways to deal with this is to have smaller projects within the direct control of the business units rather than the IT hierarchy. At Motif, we learned that if we put one or two programmers sitting with 50 or 60 staff, the programmers would learn the business process and start making suggestions for improvement. These were one to two day projects, and we instituted a process where these kinds of changes were under the control of the business leader, and they didn’t need IT approval. We found that a whole series of these things continuously happened, and at the end of the year, we’d look and discover that the productivity of the business had improved 10%. But this also had the effect of breaking down the internal IT hierarchy, which could be very ‘turf’ oriented and worried about power and control. This all moves the organization away from power can control to influence and support.”
4. “Can I deal with the security issues that this kind of move <to a suite> creates? I have to be comfortable that the suite isn’t hackable. We had a suite that had been hacked somewhere else, and the hacker repeated the hack with us. The vendor knew about the hack but hadn’t informed the customer based. Once we heard that we terminated the relationship.”
5. “Do I have the right the management processes in place to manage the suite vendors and the service providers? People frequently underestimate what the real costs of that are going to be.”
RSR plans to conduct its annual “IT” study this October, where we will delve into these questions in more detail. But Kaplan’s experience gives us insight into the changes that must be managed within the IT organization itself, as the business changes how IT value is delivered. So, while the CIO may be right in the mix of transformational change in the company, an important change management process needs to be managed within IT itself.
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