Is it a joke, or is it a myth?
“Size matters”. Well to some people it clearly does, and whether you are crowing
about your in-house IT Empire or trying to recruit someone to run one, the size
of that estate – in terms of the numbers of people who work there – is often
quoted as the boast / carrot. Perhaps that used to be relevant in the days when
you had to do everything yourself, but in our brave new world of Cloud,
outsourcing, managed services, comprehensive composite service providers,
applications-as-a-service and the like, surely the measure is less relevant
than it used to be. Indeed, I suspect its partner measure of ‘size of budget’
may (or should) go the same way too, usurped by some kind of assessment of
business value or benefit delivered.
So if we resist the temptation to
think that ‘big is beautiful’ in terms of in-house IT functions, what about
going to the other extreme? Just how small could your team be and still have
all the bases covered? I suspect pretty minimal – but it will take a mind-set
change and the acceptance of some risk to get there.
But is any attempt to ‘downsize’
simply an intellectual exercise? Well only in part. There are now a number of
things in play that might legitimately drive us this way:
·
Complexity.
The IT landscape is becoming increasingly more complex and the days when an
in-house IT function could truly cover all bases is probably long past. For
example, Telephony used to mean just ‘phones’; now it’s a whole complex
eco-system of its own!
·
Breadth and
depth. Even if we do try to operate the entire portfolio, it is
likely we will run into skills issues, both in terms of breadth (numbers) and
depth (knowledge) within the resources available to us in our organisations. We
will find we can’t have all the expertise we need, or that we will be
single-handed in some key skills, or perhaps know just enough to keep the
lights on but not move anything forward.
·
Business
drivers. One answer would be more people, but this is against a
backdrop of severe business drivers that continually want us to ‘do more with
less’ and where having smaller IT functions (both people and budgets) is often seen
as a sign of success – at least from the CEO’s or Finance Director’s
perspective.
·
Innovation.
If we don’t have the people and the knowledge, then our capacity for innovation
– at a very time when innovation is critical and the pace of change is
frightening – will be negligible, we will always be playing catch-up, and our
business competitors who have made the change and who can adapt and be more
agile will always win.
So the challenge is as much one
for the business as it is for IT, because that is where the end impact will be
felt. And it forces us to ask a fundamental question.
If we accept that we can’t do
everything in-house, then it follows that there are choices to be made. We need
to decide what we ‘keep’ and what we ‘let go’. And the way we do that is to ask
where we add value. Take everything else off the table, where do we in
IT make the difference for the company in which we work? Where is there true tangible
benefit in us owning, operating, supporting, hosting, managing etc. as opposed
to third party service providers who are able – because of scale and expertise
– to offer those things back to us as homogenous commodities?
I suspect it may be in no more
than three main areas:
·
Business
knowledge. No-one should know our business – and how IT relates and
contributes to that business – better than we do. This is knowledge gained over
years of experience and interaction. You can’t buy this, in spite of what some
consultancy organisations might say.
·
Areas of
intellectual property. It is entirely possible that we have
applications or uses of IT that are unique to us, and that this IP is valuable.
It might be, for example, more in the area of business process and the way we
utilise IT to support those business processes; or it could be in the way we
have configured our network to support a diverse geographic organisation. It
could be the way we manage risk, or assets, or how we have set up our Project
Office. Anything which is demonstrably ‘better’/’tailored’ than a
generic norm (but resist thinking that means everything!).
·
Areas of
competitive advantage. It could be that we have developed specific ‘best-in-class
applications’ (in the broadest sense) that give us the edge over our
competitors. Most likely this will be in the area of business applications, and
should be considered across the widest spectrum i.e. including web- and
mobile-based applications.
Taking all that as read, where do
we start?
As with many things, it would
make sense for us to adopt a structured approach when analysing our overall IT
offering with a view to making the in-house component as ‘minimal’ as possible.
But we must make sure we are doing it for the right reasons – or, more
explicitly, that we are not doing it for the wrong ones! And the most wrong of
these is to save cost. If we assume that the breadth of responsibility and
workload does not go away (indeed it may increase), outsourcing more of our
service provision will not necessarily save money. Yes, the internal headcount
will fall and thus the wage bill, but the amount of money we spend with third
parties will go up – and may increase by more
than the reduction in salaries. The right reasons for undertaking the exercise
(at least to see how things could
look) will be to address some of the challenges to which we have already
referred: complexity, breadth, depth, meeting business demands / drivers (e.g.
being faster to market, more agile etc.), and innovation.
To keep things simple, I’ll
assume that outsourcing IT entirely (i.e. having no in-house IT staff at all) is not being considered. And
we’ll focus on the activity that gets us to a picture of what our minimal
organisation could look like.
One basic principle is that,
whatever discipline we are talking about, we need to retain management of it.
This is simply saying that whoever
does the work, the responsibility for IT remains with “us”. Therefore the most miniscule
IT organisation would be a small management team with functional responsibility
for each discipline. If everything else were outsourced, that’s your entire IT
team; ten people? eight? six? four?
And why not?! Well hopefully
because you do have some ‘value add’ to offer somewhere: business knowledge,
intellectual property, competitive advantage… So here’s a detailed method you
could try to get you to a potential ‘minimal IT function’.
Step
1 – Break down your function into the range of disciplines that
works for you in your industry and business environment. There is no perfect
organisational shape, but it could for example comprise of these things: Infrastructure
/ hosting; Networks & security; Service support; Application development; Project
management; Governance; Procurement.
Step
2 – For each function, assess what you actually do. This could be in terms of the activities you perform (database
administration, service desk call handling, project reporting etc.), and the
‘things’ you support (the telephone system, the ERP application, the demand
management process, the computer room!). Hopefully it will be a large and
comprehensive list; you should be impressed at the end of the exercise – “Do we
really do all that?!”
Step
3 – Next, you need to take that comprehensive list from Step 2 and
assess each item in terms of ‘value add’. Which elements are actually generic
or homogenous activities – perhaps Windows administration or firewall management
– and where do you genuinely
contribute business knowledge, intellectual property, competitive advantage?
The answer is unlikely to be black-and-white; you may need to scale your
response e.g. high-medium-low or some such. If in doubt, ask the tie breaker
question: could you get a third party to carry out the work for you? Honestly?
Ignore cost, knowledge transfer and any other automatic objections you might
come up with. Take that old legacy, in-house built bespoke application; surely
there’s no way anyone else could maintain that?! Well be careful to divorce the
mechanics of code building, testing etc. – which is an execution of skill and
development process – from the design and analysis of solutions – which is
where engrained business and application knowledge comes into play.
Step
4 – Finally, for each activity in your list, roughly allocate the
amount of effort (in full-time equivalents) that is provided from your existing
team. When you first do this, you are likely to end up with a bigger FTE number
than the actual people you have – that’s wishful thinking! Your current
headcount is your very real checksum and the total you need to arrive at.
Step
5 – One could now argue that, in theory, your minimal IT
organisation will simply be made up of the people needed to continue to provide
the high-rated value services (activities and ‘things’) from your detailed list
(not forgetting to ensure you have overall management responsibility covered).
However, you are likely to find that you will be dealing in fractions here. For
example, one value-generating activity requires just 25% of one individual;
organisationally that just won’t work. So you will need validate that it is
truly high-value activity, and if so, then think through how you might be able
to sensibly combine other activities to create a meaningful and practical FTE
role. This is where some of the medium-rated activities will be included back
into the picture – or where a high-rated activity is left out! Take some time
and care over this step. If you rush it two things could happen: one, you end
up with the organisation you have now; or two, your final structure will have
left something out or be taking too many risks with service provision (e.g. inadequate
cover for out-of-hours support).
Step
6 – Now review. Stand back and, perhaps after a few days, take a
look at what you’ve come up with. Could it work? Are all the bases covered? Are
the risks manageable? Is the scale of change likely to be enough to stand up to
scrutiny? Does it make a good business case? And then look at it from the
outside-in. Those parcels of responsibility that you now wish to buy-in from
outside; are they going to be attractive to a service provider? Will you be
taking an impractical proposition to market? Are you going to outsource
activities that are already well-managed and under control – or are you simply
trying to give your chaos to someone else?!
At the end of this process, the
key questions will be:
·
Is the outline proposition practical?
·
Is it different enough?
·
Is it commercially attractive / does it stand up
to scrutiny?
·
Can you sell it?
·
Do you want to sell it?!
Oh, and if Steps 2 through 6 are
a little too much for you, then take your output from Step 1 and decide at the
macro level what’s in or out. It will be quicker for sure, but too crude to
give you the best chance of getting to the right answer. And even worse if your
breakdown in Step 1 is actually flawed…
-*-
About the author / copyright
Ian Gouge is widely experienced in business-driven
Information Technology, culminating in significant achievements majoring on
organisational and process change, and with a proven track record in turning
around / re-engineering IT functions. He possesses in-depth experience of
change, transformation, IT delivery, customer and supplier engagement, and
broad International exposure. Also the author of management books on the topics
of IT Strategy and Project Management, the impact on IT of e-Business, and the
IT Organisation.
This material is copyright of Ian Gouge © 2012. All rights
reserved. Any similarity to actual IT or business organisations is entirely
coincidental and unintentional.
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