By Sean Harris
For a number of years the perception among businesses that internal IT is unable or incapable of delivering to their needs (particularly for new and emerging requirements) has led them to bypass internal IT and source their solutions directly from external vendors. This is commonly referred to as Shadow IT.
According to most analysts (see references below), the shadow is now bigger than original object that cast the shadow, which only happens during the final hours of sunset (an interesting analogy) and has brought about the joke that the title CIO stands for “Career is Over”. Synonymous with this is the rise of the Chief Digital Officer (CDO), Chief Technology Officer (CTO) and application development teams, who are becoming more embedded in the lines of business.
How and why has this happened and what can Enterprise IT and the CIO do to reverse this trend? Or is it too late?
Why is Shadow IT So Prevalent?
Ten to fifteen years ago, for the vast majority of businesses, IT and technology ran the business. By this I mean they ran the business systems, such as HR, CRM, inventory management, financial systems and logistics. There were a few notable exceptions such as mobile operators, media companies, investment banking and the likes of Thomson Reuters, for whom IT and technology was/is the business. In those cases, the revenue generating services that they provided were dependent on IT and technology.
This is even more true today. There are few, if any, businesses that do not rely on technology and IT of some sort to deliver business services to their customers, partners and channels or use IT to provide technology or IT services to enhance the customer experience. This is part of what is often referred to as the Digital Revolution. So why haven’t internal IT departments benefited from the increasing dependence of the business on IT and technology
There are a number of reasons for this. In no particular order these include:
- A focus on the stability and reliability of IT systems, and the processes and procedures that support them, at the expense of agility has led to a perception that in-house IT is unable to react at the speed of business. This is despite the fact that technology has moved considerably in the direction of delivering agility combined with reliability and availability.
- Organisational silos in IT make the organisation rigid and unable to react to the changing needs of the business.
- A one size fits all approach to IT operations. The push for standardisation and shared services to improve IT operational efficiency has led to a one size fits all approach to IT operations, governance, security and application development/delivery.
- A focus on IT operational efficiency rather than focusing on end to end business benefits and linking IT investment to business gain (market share, margin and revenue). This is often at the expense of user experience and business outcomes.
- A lack of clear understanding of the IT and technology needs of the business and the clear articulation of this to all in IT. Without this, it’s impossible to articulate to the business of the value that internal IT delivers.
This has led to the lines of business looking elsewhere to fulfill their technology and IT needs. Most CIO’s and IT departments that I speak to complain of ever increasing pressure to reduce spending on IT and cut costs. However, many analysts point to an increasing spend on technology and IT (see references below). So where is the money going?
The answer is what we call Shadow IT, but so we can hardly call it “Shadow” any more. Most analysts point out that Shadow IT spend is now greater than the CIO’s IT spend. It is well and truly mainstream.
5 Steps To Reverse This Trend
It may sound blindingly obvious, but the first step is to get a clear understanding of the needs and KPIs of the business and how IT maps into that. From this it is possible to start mapping IT spend into business benefits and making the case for IT investments.
The next step is to understand that not all applications are equal. Simon Wardley does an excellent job of explaining what I mean in his blog. Organisations need to take a good look at their application portfolio, what categories they drop into, what their natural lifecycle is and where they are in that lifecycle. This will help to build a multi-modal IT strategy based on the needs of the business and the applications that support the business services.
Next we need to switch to a user experience and business outcomes approach to defining and developing IT services rather than features and functions and a sole focus on IT operational efficiency.
Next recognise that in-house is not always the best answer. Sometimes the best solution is a third party service and so you need to build an architecture to support a service broker function. In this way IT can ensure that the business gets the best solution for its needs while ensuring that corporate governance, security, audit and compliance requirements are all meet, something that is often compromised by Shadow IT.
The final step is to build an organisation and multiple sets of operational procedures and processes (reflecting multi modal operational requirements) to support all of the above. A key part of this transformation is a clear focus on a service-driven organisation designed around the need to support business services and needs of the business.
To be clear this is not a case of tweaking minor parts of the IT organisation of a typical enterprise. This is a major transformation, but this is your only hope to stop the increasing marginalisation of internal IT and the role of the CIO.
If the IT organisation is able to make this transformation it will lead to a massive increase in investment in the IT organization, redirecting the business IT spend away from third party vendors and back to the IT organisation. This leads to a massive change in perception of the contribution of the IT organisation to the business.
If you need help applying these principles to your orgnaisation, VMware’s Advisory Services can help you build a strategy and roadmap to undertake the transformation needed to move to a business focused IT delivery organization, maximising the value (and perceived value) of the internal IT organisation within the business.
- Avanade – Global Survey: What’s creating tension between IT and business leaders
- Forbes/Tech – 40% of IT Spending is Outside CIO Control
- GARTNER -By 2017 the CMO will Spend More on IT Than the CIO
- Simon Wardley – Pioneers, Settlers and Town Planners
Sean Harris is a Business Solutions Strategist in EMEA based out of the United Kingdom.