Demise of enterprise IT departments: A pending crisis point
This guest post comes courtesy of Ronald Schmelzer, senior analyst at Zapthink.
By Ronald Schmelzer
In ZapThink’s deep conversations with CIOs and other IT decision makers, we find that there’s 
broad agreement on the multitude of forces conspiring to change every aspect of the way the enterprise does IT.
Yet at the same time, everybody’s in denial that these changes will happen to them. For us as outsiders, it certainly looks like many enterprise IT decision-makers acknowledge that the world is changing -- but deny that they are part of that same world.
Of course, such executives simply have their head in the sand. If change is to occur, it will happen to the vast majority of enterprises, not just the minority.
This realization drives the Crisis Points of the ZapThink 2020 vision. However, ZapThink is not advocating that organizations should adopt any of the crisis points. Rather we are observing that these crises are coming, whether or not companies are ready for them.
In particular, we believe that companies will reach a crisis point as they seek to outsource IT. However, we aren’t advocating that companies outsource all their IT efforts. Rather, we are observing that siren call of offloading IT assets in the form of cloud computing and outsourcing is a significant trend that is leading to a crisis point.
And without a strong rudder, many companies will indeed be dashed on the rocks. This ZapFlash blog post provides greater detail on this particular crisis point: The pending demise of the enterprise IT department, or what we’ve called in previous ZapFlashes the Collapse of Enterprise IT.
Outsourcing and cloud computing: Different parts of same story
Part of the reason for the visceral response to our Crisis Points ZapFlash is that there’s inherent fear when talking about outsourcing IT functions. Part of the fear comes from the fact that many people confuse outsourcing with offshoring.
Outsourcing is the purchasing of a service from an outside vendor to replace the performance of the task within the organization’s internal operations. Offshoring, on the other hand, is the movement of labor from a region of high cost (such as the United States) to one of comparatively lower cost (such as India).
People fear the latter because it means subcontracting existing work to other people, thus displacing jobs at home. However, the former has been going on for hundreds of years. Indeed, many companies exist solely because they are completing tasks that their customers would rather not undertake themselves.
Almost six years ago, we talked about how service oriented architecture (SOA) and outsourcing go hand in hand, for the simple reason that SOA requires organizations to think about their resources, processes, and capabilities in ways that are loosely coupled from the specifics of their implementation, location, and consumption. Indeed, the more companies implement SOA, the more they can outsource processes that are not strategic or competitive for the organization.
But it’s a mistake to assume the collapse of the enterprise IT department is due entirely to outsourcing the functions of IT to third parties.
Furthermore, the more companies outsource their functions, the more they are motivated to implement SOA to facilitate the consumption of the outsourced capabilities. So, therefore it should be no surprise that the combination of SOA and a challenging economic environment has motivated many companies to see outsourcing as a legitimate strategy for their IT organizations, regardless of whether they move to offshoring.
But it’s a mistake to assume the collapse of the enterprise IT department is due entirely to outsourcing the functions of IT to third parties. Outsourcing is a part of the story, but so is cloud computing. In much the same way that third-party firms can offload parts of IT in the outsourcing model, cloud computing offers the ability to offload other aspects of the IT department. Cloud computing provides both technological and economic benefits for distributing and offloading resources, functions, processes, and even data onto location-independent infrastructures.
While many enterprises are currently pursuing a private model for cloud computing, there are far too many economic benefits of the public model to ignore. Most likely, we will see hybrid cloud approaches, where organizations keep certain mission-critical features behind the firewall on the corporate premises while they shift the rest are to lower cost, more agile, and less costly third-party locations. The net result of this shift is continued erosion of the scope of responsibility for internal IT organizations.
The holistic perspective of the five supertrends
The demise of enterprise IT crisis point emerges from the fact that companies will rush into this vision of outsourced IT without thinking through first the dramatic impact that this transition will have throughout their organization.
For such organizations, the value of our ZapThink 2020 vision is that it pulls together multiple trends and delineates the interrelationships among them. One of the most closely related trends to the demise of the IT organization is the increased formality and dependence on governance, as organizations pull together the business side of governance (GRC, or governance, risk, and compliance), with the technology side of governance (IT governance, and to an increasing extent, SOA governance). Over time, CIOs become CGOs (Chief Governance Officers), as their focus shifts away from technology.
As the enterprise owns fewer and fewer of the organization’s IT assets, the role and responsibility of enterprise IT practitioners will be less about the mechanics of getting systems to work, integrating them with each other, and operating them, and more about the management of the one resource that remains constant: information. After all, IT is information technology, not computer or systems technology.
If you can successfully tackle these questions with a coherent, holistic strategy, then you have defused the risk inherent to movement to outsourcing and/or cloud computing.
With this perspective, it’s essential to view the shift to outsourcing and cloud computing holistically with all the other changes happening in the enterprise IT environment.
For example, the move to democratization of technology means that non-IT practitioners will be utilizing and creating IT capabilities and assets without the control of the IT organization. How will IT practitioners manage the sole enterprise IT asset (information) given that they cannot manage the systems in which that asset flows? As organizations realize the global cubicle vision of IT, how will enterprise IT practitioners and architects enable distributed information without losing GRC visibility?
As systems become increasingly interconnected with deep interoperability despite their increasing distributed nature, how can enterprise IT practitioners make sure the systems as a whole continue to provide value and avoid chaotic disruptions despite the fact that the organization doesn’t own or operate them? As organizations move to more iterative, agile forms of complex systems engineering where new capabilities emerge from compositions of existing ones, how will movements to cloud computing and outsourcing help or hurt those efforts?
If you can successfully tackle these questions with a coherent, holistic strategy, then you have defused the risk inherent to movement to outsourcing and/or cloud computing. On the other hand, if you rush into cloud computing and outsourcing strategies without thinking through all the issues we’ve discussed in this ZapFlash, you’ll be sunk before you know it.
The ZapThink take
Just like the Sirens calling to Odysseus in Homer’s Odyssey, the call of outsourcing and cloud computing will lead many enterprise IT ships to wreck on the rocks unless they can lash themselves to the masts of a holistic perspective of where the industry as a whole is heading. More importantly, the broad shifts in the industry that ZapThink’s 2020 vision of enterprise IT illuminates compels companies to think more broadly about their constant enterprise IT asset: information.
If it no longer matters where your IT is physically located and whether or not you actually own or operate the IT systems you depend on, then what IT department do you really need and what are they really doing? The answer: less hands-on technology and more governance, a sea change that represents the demise of the enterprise IT organization. Whether or not this transition develops into a full-blown crisis is entirely up to you.
This guest post comes courtesy of Ronald Schmelzer, senior analyst at Zapthink.
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