In a previous article, Netflix IT is no house of cards, I described how the US company that has revolutionised how we consume films and TV shows at home and on the move, was now disrupting the traditional IT model to focus its technology resources on areas where they can add real value to the business.
Mike D Kail, VP of IT Operations at Netflix, summarised the philosophy that is driving this transformation with the comment “don’t build data centres if it’s not your core business.” In other words, Kail explained further, he wants his IT team to focus on being an entertainment company, not on “hardware, network infrastructure and storage systems” which are readily available from service providers. Netflix is realising this objective by moving much of its IT estate to the cloud. By the end of the current year, 100% of its corporate or back-office systems will be cloud-based and even the in-house developed customer applications, which are part of the core business, are deployed in the cloud thereby eliminating the need to acquire, maintain and support the infrastructure that would be needed to host these solutions internally.
The need to reinvent IT is the subject of my new book, Disrupt IT, in which I define a new and radical model for IT in the digital age. Through a framework of seven principles I also provide advice for CIOs and boards on how to design and manage the transformation of the CIO role and the IT function to this new model.
One of these principles prompts CIOs to challenge why their functions are still performing tasks that were taken on many years ago when technology and vendor capabilities were so different to what they are today. This is exactly the approach taken by Netflix. Activities such as building, maintaining and supporting infrastructure, databases and back-office systems are rarely part of an organisation’s core product or a source of competitive advantage yet this is where most organisations’ IT resources are focused. To succeed in the digital era, the organisation needs its IT resources to be focused on the areas where technology will have the greatest impact; customer-facing solutions that differentiate, data and tools that provide insight and intelligence, and technologies that open up new markets or enable new offerings. And this is why another of the Disrupt IT principles requires IT functions to focus their resources on a new set of core competencies that ensure the IT department has the skills it needs to operate in these areas.
I recently came across another organisation that provides a good example of this new model for IT. GPT Group, an Australian property group that manages AUD15.2bn of assets and which is one of the country’s top 50 listed stocks, has recently moved all of its development, test and core production systems to the cloud to free up time and resource to work more closely with the business. Speaking to the Australian edition of CIO Magazine, GPT’s CIO, Greg Baster, said “To me it’s not a change in role, it’s a change in emphasis and allowing the role to be more business-oriented.” And in a comment that captures perfectly the essence of Disrupt IT he explained that refocusing the department means that it is now “solving different problems … they [the problems] are much closer to business outcomes than putting up servers.”
And this is precisely how the IT department should be operating in the digital age: working alongside the rest of the organisation, helping to solve business problems and identifying opportunities to use technology to create value, grow revenue and create competitive advantage. But it cannot do this if the majority of its time and resources are allocated to maintaining and supporting the organisation’s existing systems and infrastructure. CIOs need a different type of IT function, with different skills, resources and ways of working to play this more business-focused role.
GPT Group is reaping the benefits of repositioning the IT function as a technology consultant and broker to the rest of the business. Baster explained that IT is now working on revenue generating initiatives such as Space and Co, which provides office space on very short-term leases: “We’ve been able to focus on what solutions make sense to help operate Space and Co. In the past, we would have had to worry about putting up servers, the timeframes, where they were going to be located, would they be in our data centres or out at a new business location. These days it’s not a problem, we locate those servers in Amazon and it’s easy to provision new services.”
Both Netflix and GPT Group are using the cloud to reposition the IT department as a function that works alongside the rest of the business to create value and generate revenue. This is not to say that cloud will be the right solution for every need within every organisation. But the underlying principles of focusing resources on the competencies and activities that add the most value and using partners for everything else does hold for every business.
As well as ensuring the organisation has the right type of IT function for the digital age, adopting these principles also repositions the CIO role from a purely technical position to one that is more about making things happen that are enabled by technology. This represents a great opportunity for CIOs to become a key member of their organisation’s leadership team as the person responsible for driving growth and innovation through technology.