Paul Lewis

Digital Transformation: IT Innovation and the Case for Verticalization

Blog Post created by Paul Lewis on Jun 19, 2017

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The case for IT standardization was simple: eliminate the complexity of IT operations, and ease the activity of IT management.

 

And it worked.

 

For decades the IT team only had one brand or product to buy or implement, one process to follow, one set of SLA’s to guarantee and one set of controls to which they had to comply. Oh, it was a simpler time.  Consider the process:

  • Business wants to implement a new product or service, they fill out a convenient word document with a detailed spreadsheet of functional requirements and send to the generic IT mail stop
  • IT, delivering on their two week window to respond to such a request, puts it on the pile
  • IT finally reviews the request, determines it needs “programming” and “hardware”, prescribe the need to write new code and buy new equipment, the same code they have always written and the same equipment they have always bought.  But they buy new, just for this specific project, so it doesn’t ill effect the ongoing operations of any other application or project
  • Estimates are created, doubled by project management, adjusted up by leadership at 50% and sent to the business to “signoff”, because of course they don’t have the ability to decide
  • Put new found project approval on the pile of the other project approvals to be scheduled, and eventually, hopefully, completed
  • Business waits

 

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Sound about right?  Of course, its not always that amazing.  Sometimes the project gets bogged down in politics and governance, and budgetary infighting where the business gets to decide WHICH of the 20 projects are really the priority because IT only has allotment for your department for 4.  Did I write “sometimes”?  Oh, I meant “most of the time”.

 

The problem with standardization, of course, is while very practical and convenient and orderly for IT, its an IT ONLY concern.  While it purports to keep the lights on and save the company from risk and exposure, it really sets the standard as the “lowest common denominator”.  Of course I use that term facetiously. I don’t really mean that is the bottom of the barrel process and product, I mean that the set of standards is set to be common to all the business, regardless of what each individual business requires.  Maybe a better term would be “most common denominator”  (even if doesn’t make a lot of mathematical sense).

 

The shift away from standardization is obvious with a simple evaluation of products being bought in marketplace, and where the IT budgets seems to be augmenting over time.

 

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The maturity models have been shifting for some time now from ad-hoc to fully services based, or at least an attempt.  IRL (in real life), rarely does one achieve a full column displacement in maturity.  Most organization (as they should be) are satisfied with a Process and Financial shift, leaving Technology changes as budget permit and people changes as necessary.

 

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What seems abundantly clear though, is the MAJOR driving factor away from compete IT standardization, is the need to create value for Digital Transformation, align the need for the business to be Agile with a distinct difference in how Agile IT must be to deliver on those business objectives.  This cant be a wholesale M.O. change for IT, that’s not only difficult, but impossible given the size of the mountain IT climbs and the potential risk of failure to the operations. 

 

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What has been most effective, is not in process-change alone, but a direct and complete alignment of IT, with a specific department or Line of Business because of course, not all line of businesses have the same needs.  Take Financial Services as an example.  The core retail banking will likely continue to be largely “centralized” in its maturity because they control and manage the ATM’s. You know what happens with the ATM’s are down for 10 minutes?  Your name gets scandalized in social media within minutes.  However the investment side of the bank, well, they need a new product every day to compete with the bank across the road.  And they are perfectly willing to implement the agility and potential failure of a highly “Service Based” model, if as soon as the system comes up, they have that new product to sell. 

 

IT Innovation is the mean to look beyond the IT Process and People maturity models and realign what they do, to deliver on IT Agility.

 

I’m reminded of a recent award by VMWare to Hitachi Data Systems at the annual Partner Leadership Summit (Hitachi Data Systems Wins Two VMware Innovation OEM Partner of Year Awards | HDS).  Hitachi won the OEM Innovation award in part due to the work with IDC to create the Programmable Data Centre (https://www.hds.com/en-us/pdf/analyst-content/hitachi-idc-infographic-programmable-datacenter.pdf) and of course the long term partnership and product innovation collaboration with VMware.

 

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The necessary (and example) IT Innovation delivers an IT Agility implementation as a delivered and operating software defined data centre, a programmable data centre if you will.  The software determines what and how the infrastructure is used, and software controls and manages the environments to the specifications of the individual applications and the individual requirements of the line of business.  Software creates the financial and metric transparency for the Line of Business to make their own effective IT decisions.  The data centre becomes programmable to the needs of the business, versus standardized to the common need of all lines of business.

 

Realigning people, process, financials, and technology to the line of business allows them to work independently and in many ways like smaller, more nimble individual companies within a company.  A brand within a brand of sorts.  Large conglomerate organizations then look like an amalgamation of industries or verticals and can make vertical based decisions.

 

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Most future IT decisions will be vertical decisions.  Most future IT Innovation will be Vertical Innovation.  That might seem like a strong statement, but let me make the case:

 

  • Each line of business within an organization will operate an independent brand, with external competitors different than the conglomerate as a whole.  Line of business will operate in their own vertical eco systems.
  • Now well over 50% of the IT spend within any individual organization is at the discretion of the business, not IT.  IT maintains the platforms, security and governance, but the business decides their own application fate.
  • Most organizations will implement new Digital Transformations aligned to Customer Experience, how their customers ant to buy versus how the company wants to sell.  All decisions will be market/vertical-in.
  • Given the amount of VC money going into IoT, a significant portion of innovation will be to extend the IT service offerings into the physical world to create IT/OT service offerings.  Understanding machines, the data they create, and their autonomous strategies, several vertical collaborations will be required.
  • Reviewing the current IT spend in analytics, machine learning, and artificial intelligence, IT’s appreciation and understanding of the subject matter of the business becomes the biggest people-centric gate to hurdle
  • Communities are being created (Cloud 2.0, Industry 4.0, Smart Cities 5.0) that a vertical and industry specific to solve large scale Social Innovation problems effecting humanity as a whole.
  • And web-scale IT companies are reorganizing to provide far more innovation to a vertical problem:  Amazon with transportation, Google with automobiles, Apple with home automation, Facebook with News dissemination, and SAP with vertical module segmentation and best practices.

 

We have a little time for IT to make that giant leap of a change, just not a lot of time.

 

For a few more months we can still think of two industries of having common IT or OT problems.  They both require software, hardware and services configured for their business needs.  They both use small-and-simple to large-and-complex machines to deliver on those services.  They both require an in depth knowledge of the data they produce and the external data they source to create informative business insights, and potentially even predictive models in the future.  You could use those generic and standardized statements.

 

You might even say that the only difference between exploration of space and exploration for natural resources is:  One goes up and one goes down.

 

But do you really think that’s true?

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