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Emerging Models for Retained IT

What would Enterprise IT do if it could offload its commodity infrastructure and applications, and focus on new ways to apply IT to the firm? What new missions would emerge, and what new skills would be required?

Retained IT

Too many outsourcing deals proved to be problematic, and thus the remaining internal (or Retained) IT function had to focus on making its existing contracts work

People have been asking these questions since the early days of large-scale outsourcing some 20 years ago. But for most of this time, the general answer has been "if only". Too many outsourcing deals proved to be problematic, and thus the remaining internal (or Retained) IT function had to focus on making its existing contracts work. Many firms chose not to go down the large-scale outsourcing path at all. Our 2004 report, Dynamic Outsourcing, outlined the deep-rooted challenges, and even the pathologies, behind these shortcomings, and identified a number of ways to mitigate them.

Since then, the situation has improved considerably. Today, there are far fewer stories about big deals gone bad, and hardly any firms are giving up and bringing everything back in-house. In addition, an ever-improving array of multi-sourcing options – cloud, Software-as-a-Service, offshore, industry-specific, etc – has made expanded sourcing the default IT strategy at most firms. As third-party relationships become more productive, Retained IT is evolving and better aligning itself with emerging business needs.

Over the last six months, we have been researching these issues, seeking to understand how the mission and skills of Retained IT are changing in firms that have had many years of experience with large-scale sourcing. While we believe the changes we have identified will tend to affect every firm – whether they aggressively source third-party IT services or not – we chose to speak mostly with firms that do a lot of sourcing because in these cases Enterprise IT's need for a new mission is more immediate.

Our recently released report identified four emerging missions and models:

The Studio model

The metaphor is that of a Hollywood studio where a variety of skills – directing, acting, cameras, sound, lighting, etc – are brought together in flexible, ever-changing teams to take on sophisticated projects. In this model, IT will be increasingly expected to work seamlessly with scientists, engineers, marketing professionals and others to deliver projects of high strategic value to the business.

The DIY model

Stores such as Home Depot in the US or B&Q in the UK provide a huge range of goods (like the IT marketplace itself), but a key part of their value proposition is their knowledgeable staff who provide 'free' information and advice. Analogously, many employees and departments will increasingly do their own IT, but will occasionally need expert support.

The Process model

No one understands the details of many key business processes better than Enterprise IT. In most cases, it is the underlying sequence of information processing steps that defines how a business process actually works. Increasingly, IT will take responsibility, and even ownership, of end-to-end business processes, greatly strengthening the CIO/COO relationship.

The Stewardship model

The word 'steward' has many connotations, but we particularly like its root meaning of a 'keeper'. In the past, this role has been largely focused on information security and associated risks, but going forward, it will expand to include issues such as information architecture and master data management, especially in firms that seek to be information and data-driven.

These models are emerging because they reflect real business needs. In this sense, they will happen whether Enterprise IT gets closely involved or not. Importantly, all four areas tend to be more about value and less about cost, although this is not always the case.

The Studio model will prove most important in those industries where Product IT has the most potential. In contrast, the DIY model is most needed in firms that are committed to consumerization and workplace empowerment.

Clearly, each of these models is very different from the traditional IT factory that provides basic infrastructure and back-office services. Each also requires a different set of skills. Not surprisingly, the balance of interest in each model will vary greatly by firm. For example, the Studio model will prove most important in those industries where Product IT has the most potential. In contrast, the DIY model is most needed in firms that are committed to consumerization and workplace empowerment.

While the Studio and DIY models tend to require more collaboration and shared decision rights than Enterprise IT is accustomed to, the Process and Stewardship models are grounded in logical systems and controls, and thus are much more compatible with traditional Enterprise IT cultures. As you might expect, in our research interviews, these latter two models were the most frequently identified future roles. While this is certainly understandable, we think the Studio and DIY models will prove equally important to many firms and we recommend clients to give these areas equal attention.

Our recent report explores the implications of these four models in detail. Over the next 12 months, we will explore related issues such as organizational structures, recruiting and retention challenges, case examples, and their many implications for the future of Retained IT. Clients interested in learning more about our recent and future work should contact me, or Kirt Mead or Alex Mayall, our two lead researchers in this important area of Business/IT Relationship Management.

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AUTHORS

David Moschella
Research Fellow
David Moschella, based in the United States, is a Research Fellow for Leading Edge Forum.  David's focus is on industry disruptions, machine intelligence and related business model strategies.  David was previously Global Research Director of the programme. David’s key areas of expertise include globalization, industry restructuring, disruptive technologies, and the co-evolution of business and IT.  He is the author of multiple research reports, including Disrupting the Professions through Machine Learning and Digital Trust, 2016 Study Tour Report: Applying Machine Intelligence, There is Now a Formula for Machine Intelligence Innovation,  Embracing 'the Matrix' and the Machine Intelligence Era and The Myths and Realities of Digital Disruption. An author and columnist, David’s second book, Customer-Driven IT, How Users Are Shaping Technology Industry Growth, was published in 2003 by Harvard Business School Press.  The book predicted the shift from a supplier-driven to today’s customer-led IT environment.  His 1997 book, Waves of Power, assessed global competition within the IT supplier community.  He has written some 200 columns for Computerworld, the IT Industry’s leading publication on Enterprise IT, and has presented at countless industry events all around the world. David previously spent 15 years with International Data Corporation, where he was IDC’s main spokesperson on global IT industry trends and was responsible for its worldwide technology, industry and market forecasts.    

CATEGORIES

21st Century
Adaptive Execution
Assets/Capabilities
Identity/Strategy
Proactive, Haptic Sensing
Reimagining the Portfolio
Value Centric Leadership

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