How to prepare central IT for digital transformation

CIOs that aren't able to develop an understanding of business and lead the IT services broker function either won't be CIOs for long or will be relegated to the strictly technical role of keeping the lights on.

Is your IT department getting in the way of your digital transformation?

To help businesses succeed in the digital age, IT departments can no longer be stodgy gatekeepers of applications and services. Instead, they need to be nimble brokers of whichever internal and external services are required to enable new mobile, social, analytic, and cloud-based capabilities.

There's a lot involved in making this shift. It may require organizational changes. IT staff will often need training in less technical skills, such as communicating with the business. You'll need to choose the right applications and services to host outside the business and manage outside vendors.

Digital disruption impacts every industry. Here's how to win in an era of constant change.

It always helps to starts small with proofs of concept to build credibility. Above all, your central IT function needs to understand that its job is less about managing technology and more about driving business capabilities.

Think like an IT services broker

An important step for IT departments is to start thinking of themselves as IT brokers. Rather than providing all IT services itself, an IT broker evaluates its own as well as external capabilities, identifies alternative vendors to the business, protects the organization from cyber and other threats, and avoids organizational silos by discouraging separate business units from purchasing similar technologies from different vendors, says Lindsey Anderson, chair of the MIT Sloan CIO Symposium.

IT organizations are being forced into this new role as business units push to deliver more digital services more quickly, and with less risk and cost than is possible using only internal IT. By curating third-party IT services, central IT can also help businesses achieve greater agility, reduce risk, and lower the cost of replacing on-premises infrastructure with cloud-based applications and services. 

Lines of business (LOBs) often purchase outside services directly because they are unwilling to wait for central IT to provide them, says Ali Din, chief marketing officer and general manager of cloud service provider dinCloud. But when the LOB realizes that the service is not something “to just set up and forget about, [but something that] requires rigor,” it turns it over to central IT. As a result, many IT organizations wind up acting as project managers or vendor management hubs for numerous providers. 

Over the next two years, the percentage of IT infrastructure and application workloads hosted in corporate data centers will decline from 59 percent to 47 percent, according to a 2016 IDG Research Services survey sponsored by IT services provider Datalink. Much of the lost workload will shift to public clouds. Two years from now, outsourced service providers will host 25 percent of corporate workloads, up from 18 percent today. 

Cloud or on-premises?

So where should you host your applications and services? There's no simple answer, but your goal should be to identify the platform that will best accelerate your business-critical applications and workloads, says Ed Konopasek, vice president of consulting and managed solutions at IT services provider Logicalis.  

The next step is to consider what IT “broker” role best suits your organization, says digital strategy consultant Peter Nichol, managing director of Oroca Innovations. Choices range from pure self-service models where business users choose whichever services they want to IT offering a selection of preapproved services tailored to the needs of each LOB. 

You also need to decide which workloads to host externally. The best early candidates, says Din, are those that can be clearly defined by workload size and number of users. This makes it easier to allocate computing resources and measure the provider's performance.

Din also recommends starting with services that touch fewer parts of the business, as they require less coordination in terms of approval processes, business requirements, and service levels. 

Other candidates for outside hosting may include applications or workloads that are either running poorly or require old and cranky hardware or software, says Baron Wolt, president and co-founder of managed IT services provider TMPros.

Look for business requirements that exceed your organization's infrastructure and staff capabilities, Wolt says. And when you're weighing the costs and benefits of outside providers, take into account the hours you spend administering applications internally.

As IT moves toward a brokering model, Konopasek recommends starting with a low-cost proof of concept you can use to obtain additional budget. It's also crucial to build strong relationships with business leaders so LOBs call the CIO instead of a service provider. To maintain its integrity as a services broker, IT must "objectively share the pros and cons of internal vs. external services," says Anderson. 

Business leaders need to know that if a digital experiment doesn’t work out, there will be "minimal loss and no lingering costs." IT must also make clear that because all outside services have been pre-vetted, there’s no threat that they will fail to meet regulatory, security, or performance requirements in three or six months. 

Communicate, document, evaluate

How do you communicate the requirements of internal business units to outside service providers? Start by documenting the policies and processes that govern, for example, how many virtual machines a user may spin up in the cloud, and whether central IT or a line of business is responsible for migrating data to the cloud, says Din.

As outside service providers manage more of the IT infrastructure, internal IT staffs will need to shift their skills from specific technical platforms to areas such as evaluating and selecting external service suppliers, negotiating and managing service-level agreements (SLAs), and ensuring compliance with internal policies, says Félix Fernández, head of marketing portfolio, software services, at Hewlett Packard Enterprise. 

IT staffers often see the increased use of outside services as a threat to their jobs. Konopasek argues, however, that the most effective IT organizations help employees understand that they can enhance their professional value and job security by transitioning from being "master at some given technology” to helping reduce costs or boost revenue. 

Success may also require organizational changes.

“IT needs to structure its services so it can compete with external vendors on price, service level, and other criteria.

Lindsey Anderson chair of the MIT Sloan CIO Symposium

In addition, Fernández recommends that IT departments install customer relationship managers who can help LOBs set realistic expectations for what they can expect from service providers and translate their business requirements into SLAs and technical standards. 

Transforming IT: Lessons for leaders

  • To meet digital transformation needs, IT departments must tap outside service providers to supplement in-house IT offerings. 
  • Becoming a “service broker” means less focus on specific technologies and more on finding the right mix of internal and outside services to meet ever-changing business needs.
  • Good early candidates for outside hosting include easier-to-define applications and services, and those that touch fewer parts of the business. This reduces complexity and risk, and makes it easier to track results.
  • Start small with proofs of concept. Build trust and credibility through early successes in service brokering.
  • As outside providers manage more of the underlying infrastructure, retrain internal staff in areas such as vendor evaluation, negotiating and managing SLAs, ensuring compliance, and communicating with business users.

Digital disruption impacts every industry. Here's how to win in an era of constant change.