Reshaping IT Management – by cutting it into two halves?

The McKinsey quarterly just published an interesting and very readable piece on “reshaping IT for turbulent times”.  In the article they analyze what seems to be a dichotomy for today’s IT management: How to balance running an efficient IT factory with being a responsive customer focused provider.

In the article (which is freely accessibly after registering) Roberts, Sarrazin and Sikes describe two models, an efficient factory approach and a more enabling, innovation oriented approach.  However, their suggested approach of applying two models, splitting the organization effectively into two separate parts — a mainstream factory and a boutique — seems less than optimal. This split very much resembles the traditional split of IT into development and operations, something that is also turning out to be less than optimal and too slow for today’s markets. Hence the emerging of a new IT discipline called DevOps. 

It is understandable they use two models as traditionally efficiency and innovation require different approaches. There is an old analogy that makes this very clear. Think of the organization as a sponge. If you want more efficiency, you centralize (squeeze the sponge and any excess water pours out); however, if you want innovation and new ideas, you need to let go of the sponge, creating room to suck up water – new ideas. Squeezing and letting go at the same moment seems impossible.

Addressing both efficient production and customer responsiveness at the same time seemed an insolvable issue in traditional manufacturing, as well. Until management innovations – such as just-in-time (JIT) supply chain optimization – gave management the tools needed to address this. The main difference between the new supply chain and the traditional manufacturing-oriented approach was that the goal shifted from efficient production to effective end-customer delivery. This leads to vastly different decisions when put into an optimization model. The IT equivalent of this JIT innovation is cloud computing.

Splitting the IT organization into a back-office grinder shop and front-office boutique will turn out to be a temporary solution at best. Not just because a dual-model approach – almost by definition – prevents any optimization across the two, but also because experience shows that in cases like these, the low cost grinding part will soon move to a low-cost provider (for example, manufacturing moving to China), after which pretty soon the innovation part is likely to follow (again look at what is starting to happen in China). Traditionally the best innovation labs are near factories, except maybe for fundamental research (which most commercial have lost interest in or can no longer afford). 

It took the manufacturing industry several decades (and fierce competitive pressure from pioneers such as Japan) to make the transition to be both efficient and responsive at the same time. IT can learn from these experiences. The competitive pressure required to make such a transition has already arrived. Cloud computing enables users to bypass IT completely and source solutions directly from outside service providers, a practice sometimes referred to as “Rogue IT.” In my post “On empowered users, rogue and shadow IT, stealth clouds and the future corporate IT“ I wrote on the valid need for IT to be closer to the business again, which in my view can be achieved without cutting it in two.

By taking an integrated approach – based on aforementioned IT supply chain thinking, with a large emphasis on sourcing – IT organizations will be able to both have their cake and eat it too.