Two news stories about major decisions made by CIOs have caught my attention recently. The two articles in question highlight one of the key issues facing the CIO role at the moment; in the digital age, with technology playing a key role in enabling new business models, products and services, and with non-IT functions becoming more involved in IT decisions and holding their own IT budgets, what is the role of corporate IT?
The first story covered Rio Tinto’s decision to move its core systems to the cloud in a deal with Accenture. The move is part of the global mining company’s shift to a public cloud first policy and will include the organisation’s ERP system. The firm will also switch to a consumption-based pricing model that it claims will lead to significant cost savings. It also believes that moving systems to the cloud will increase business agility and support its digital transformation programme.
The second article described how Solihull Metropolitan Borough Council had approved the construction of a new data centre to “house servers, data and equipment needed to run the council’s software and other processes.” The facility is expected to provide the council with the capacity it needs for the next 10-20 years and the council claims the new data centre will “improve the quality of digital services provided to staff and the public” as well as reducing energy consumption.
So we have two organisations seeking to reduce costs whilst at the same time supporting their digital ambitions. Yet we also have two completely different approaches to meeting these objectives; one has opted to use the cloud while the other is building a new data centre.
So which CIO is right? Or are they both taking the correct action given the context and requirements of their respective organisations? Just under a year ago I wrote the article CIO: what business are you in?, in which I advised CIOs to focus IT resources and their own time on the organisation’s core business and hence where they can add real value. The rest of the business is focused on how technology can be used to enable new products and services, grow revenue, and establish a competitive advantage. To be relevant, this is where the CIO and the IT function also need to be spending their time.
Hence CIOs should only allocate time and resources to building a new data centre if building, owning and maintaining this type of infrastructure is part of the organisation’s core business. It is hard therefore to understand why a local authority has taken such a decision. Does Solihull Metropolitan Borough Council really need to own its data centre to reduce costs and improve digital services? Could it not have used a partner to host its systems or, like Rio Tinto and plenty of other organisations, moved its applications into the cloud?
Unfortunately Solihull Metropolitan Borough Council is not alone in taking this approach. Many IT departments still allocate the majority of their resources to activities that are not part of the core business. So whilst other functions are thinking about how they can use technology to enable new capabilities or enhance the customer experience, much of the IT department is still focused on back-office systems and infrastructure. This immediately puts the CIO and the IT function out of step with the rest of the business and may well lead to them being bypassed as a result.
Digital markets move quickly, they are more dynamic than traditional markets and they can be disrupted more easily. To survive and succeed in the digital world, businesses need to be agile; they need to be able to respond quickly and easily to changing market conditions, customer preferences or competitor activity. They cannot wait for their IT function to finish performing upgrades, apply patches or other such tasks before responding.
Which of the two IT functions covered by these news stories is most likely to be able to respond quickly to a change in business needs? The one that has resources focused on maintaining servers, storage, cooling systems and power supplies in its data centre? Or the IT function that is managing a cloud provider that has taken all those tasks away? And which is likely to have more resources with the skills, knowledge and experience needed to work alongside the rest of the business to identify opportunities where technology can be used to create value and drive growth? Answer: it is very unlikely to be the one with the data centre.
The role of the corporate IT function is moving away from being the gatekeeper of the technology budget and the provider of all technology to a broker role. The rest of the organisation does not expect its IT function to have the resources and skills of an IT service provider. Instead, it needs its IT function to act as a partner that provides advice, guidance and access to the technology it requires.
This broker role is described in my book, Disrupt IT, along with a framework of seven principles to help organisations build the right IT capability for the digital age. One of these principles prompts CIOs to challenge why their IT functions are performing tasks that could be provided by an external partner. I suggest assessing each service provided by the IT department to determine whether it is key to the organisation’s ability to differentiate, innovate or respond quickly to changes in its markets. Where a service is not deemed to meet this criteria then it should be transferred to a partner so that the CIO and the IT function can concentrate on applying technology in the areas where they can add real value to the organisation.
Had Solihull Metropolitan Borough Council applied this test to the proposal for building a new data centre then it is very unlikely that it would have approved the project. Instead it is likely to have taken a similar route to Rio Tinto and decided to use cloud solutions so that its IT function could focus on adding real value to the organisation’s core business.
If you are a CIO that wants to reposition their own role for digital or who wants to create an IT function that meets the needs of a digital business then please contact me or visit my website, axin.co.uk.