The Chasm

Some IT organizations think they have the wherewithal to do everything in-house. They manage their projects, hire some consultants and run their own datacenters. Around 80% of the IT budget is allocated to keeping existing systems running, which has little or no impact on company growth. Managing legacy applications is labor intensive, as it typically involves a Babylon of languages, applications and systems. The fact that this hodgepodge functions at all can be called a miracle. If a business process changes or a new product is introduced to the market, the IT department takes months, sometimes years, to bring about the necessary changes. There are too many dependencies and complexity is too high to have the application-base adapt rapidly. The transition to ERP packages such as SAP and Oracle did not the resolve the flexibility issue. Implementing SAP is seen by many as “pouring super expensive concrete in the foundation of the corporation”. Rich in functionality, high in cost, but agility is not a characteristic. Most organizations are better served by simplification and modernization of their existing systems, rather than the addition of new features (this also applies to Microsoft Office).

Large software projects remain unpredictable. The root causes of projects that are running way over budget and over time can be typically found on the fault-line of business and technology. If CIOs continue to behave like true cost center managers and keep holding on to a technology view of the world, IT will remain neutral at best and a value drain at worst. The technology providers that can provide relief are few and far between, as they tend to suffer from the “hammer syndrome”, i.e. they see every problem as a technology problem that can be killed by throwing more abbreviations at it. SOA, BI and BPM are all helpful tools, but only if they are used in the proper business context. “The business hasn’t given us clear requirements; they keep changing their minds all the time”. This type of statements indicates a chasm between business and IT. In 2008 the Hackett Group published a report which showed that companies where the IT discipline is weaved into the fabric of the organization have 40% higher margins than their peers who don’t. According to Faisal Hoque, of the BTM Corporation, the convergence of business and IT is a key driver for growth and profitability. This implies that every IT person understands the business value of the application she is working on and every executive has a grasp of the importance of technology for the company direction. Key technology decisions are business decisions. IT is managed using financial models that continuously measure value added to the organization. Applications are grouped in portfolios and directed on value, cost and risk.

In the last couple of years we have seen some dramatic changes in the IT world. A new generation of applications built for the Web and utilizing open source and collaborative development models, are allowing companies to implement flexible applications much faster and cheaper. Applications like Salesorce.com are shared among multiple companies (so called multi-tenant systems) and offer a web-based platform to integrate with existing systems. Applications that “live in the Cloud”, as this is euphemistically referred to, negate the need to manage infrastructure. In general it doesn’t make sense for most companies to own and manage their own technology infrastructure. They lack the expertise and scale to do this effectively. This is better left to specialists like HP and IBM or new players like Amazon.

Web technologies allow organizations to interact and exchange knowledge effectively. Business analysts, architects and project managers will remain close to the business, but there is no need to have developers, testers and configuration managers within the walls of your organization. Using collaborative development tools and methodologies it is possible to get the right talent at the right moment, independent of location and time-zone. When the project is well managed and scope and specifications are under control it doesn’t matter if the code is being cut in Bangor, Maine or Bangalore, India.

To sum it up, there is a plethora of wonderful new models and tools to make IT more efficient. In the end it’s only going to be effective if the barrier between business and IT disappears and IT becomes a true enabler of business value.