By: Nikki Goth Itoi, Oracle Guest
Imagine that a product team wants to add geolocation sensors to their equipment so that they understand where their products are used. The marketing teams are engaging their customers in new mobile experiences. And HR wants to empower workers with community tools for increased productivity through collaboration. Not far-fetched, right? But it turns out that these groups are not going to IT to fund or lead their projects.
Why are business leaders funding their own technology projects, and how should corporate IT respond? CEB’s (Corporate Executive Board Company) Chris Mixter, senior director of advisory services, addressed these questions in front of an audience of CIOs at the 2014 Oracle CIO Summit. He began by addressing the question, “What exactly is business-led IT?”
Business-led IT is not “shadow IT,” as some have tried to label it. “This is not about the willful or ignorant duplication of core IT services,” Mixter explained. Nor is it another way of saying business is driving requirements. In fact, it is the opposite; your business isn’t inviting you to the requirements conversation. “Your internal business customers are bypassing IT and investing in activities that are driving a critical business outcome.”
According to Mixter, business-led IT projects share three characteristics:
Funding comes directly from departmental budgets.
The ideas do not require IT approval.
Capabilities are delivered using business resources, external providers, and/or the cloud.
Why Are Leaders Turning to Business-Led IT?
No longer the sole domain of corporate IT, technology has become critical across every function of the enterprise. Business leaders expect to play a new role in technology, Mixter said. Why? Increasingly, the business depends on specialized technology, business leaders are more tech-savvy, and the technology is more accessible. In fact, CEB recently found that 78% of business leaders’ priorities for 2014 are dependent on technology.
Business leaders often look to IT for guidance first but get frustrated when their in-house technology experts cannot respond quickly enough. These days, speed matters more than efficiency or cost, and corporate IT will not be the go-to organization if it does not have the bandwidth and the experience to advise the business on new technology initiatives.
Responsive IT organizations recognize they may need to partner for speed, innovation, and technical expertise. According to a recent Harvard Business Review study on The Leadership Edge in Digital Transformation, when IT organizations lack the bandwidth to experiment with new technologies, they partner; 62% of departments go to market with a mix of internal IT and external providers to execute their transformation.
Does Business-Led IT Really Affect Me?
Business-led IT is big, to the tune of 20 to 40 additional cents on every dollar in the corporate IT budget. “And when you compare what corporate IT functions spend on innovation and what the business spends on innovation through business-led IT, in absolute dollars they spend three times as much as we do,” Mixter said. “If you want to hitch your wagon to the horse of innovation, business-led IT is where you go.”
It’s happening in marketing, but also procurement, sales, HR, finance, R&D, legal, and communications. Every corporate function is involved because you can’t be a business leader today if you’re not versed in technology. As one executive told CEB, “Managing technology is my problem, not IT’s…just like hiring people is my problem, not HR’s.”
A New War for Talent
Well funded and often run by top data scientists and analytics experts, business-led IT projects also face fewer talent constraints because functions like marketing and R&D are more attractive to top talent, and these departments can often pay more than corporate IT for the right people.
“Let’s face it,” Mixter said, “the best technology graduates in the world aren’t terribly stoked about working in corporate IT. They want to go work in marketing, R&D, or supply chain. And none of those functions are held accountable to the strict pay scales in the HR hierarchies that we are.”
What Should CIOs Do About Business-Led IT?
If business-led IT is a reality, how should corporate IT respond to the trend? To be sure, there are risks with allowing business-led IT to continue unchecked—duplicative solutions, underestimated support costs, and information risks, for example. “But the best CIOs know that the risks do not mean corporate IT should take over,” Mixter said. “IT will stall them out and lose the advantages they bring to the table.”
Mixter suggested that corporate IT can flourish by evolving from service managers into a role that’s built around consulting, advising, and coaching. He introduced an engagement model that came originally from member company Clorox. It depicts two types of IT:
Shallow IT: Areas where business groups can experiment using rapid test and learn cycles. Think of a pilot product, or a single direct marketing campaign. These are capabilities of engagement that are meant to build relationships and drive loyalty. “A lot of this is going to be disposable,” Mixter said.
Deep IT: Areas where corporate IT takes the lead in sorting out architecture and managing risk and scale. Think about capabilities of record, such as the general ledger, and capabilities of productivity, such as collaboration tools.
This engagement model suggests that technology projects move through a lifecycle. Ideas begin as Shallow IT, so they can be rolled out and tested quickly. As they mature, these projects move into Deep IT, where they can scale for the entire organization. Following this framework, Mixter recommended that companies partner with business units to influence idea generation and delivery, so that ideas can flourish across the enterprise.
Digital transformation initiatives are the primary source of disruption in the marketplace today, Mixter said. Across the enterprise, processes and interactions are being redefined and expanded. The pressure on IT to deliver is high, but the reality is that IT will never have the bandwidth to address so much so fast. Corporate IT thus needs to allow the business to innovate at speed and fail fast—and then add value by introducing efficiency, cost, scale, and risk governance for the new capabilities.
Watch the Video: Harnessing Business-Led IT
Chris Mixter, CEB senior director of advisory services. Source: Oracle