The 3 Stages of IT Transformation: Efficiency, Innovation, and Growth

The shift in IT priorities over the last five years is truly exciting. Recent studies by Gartner and others on CIO priorities in 2014 have clearly put digital innovation at the top of everyone’s list. The IT department is transforming from an internal “vendor” to the business to now becoming an equal partner in the C-suite and helping to craft business strategy.

The IT department has the exciting task of figuring out how to use technology to not only dominate their current market, but how to expand into new markets that didn’t even exist 5-10 years ago.

That’s the dream anyway.

The reality is that we all have our own tortured paths to get to this IT nirvana. Our job is to assess where we are right now, determine where we want to go, and plan the best route to get there. And that route is never a straight line.

From what we’ve seen there are three stages on the way to IT transformation: 1. IT efficiency, 2. Growth enablement and 3. Business Innovation.

Let’s review each one briefly.

IT Efficiency: Cutting Costs to Fund Innovation

Despite the rosy goals to become digitally innovative and nimble enterprises, most IT budgets have barely grown, or are staying the same. It seems that only the usual suspects, the traditional market leaders, seem to have the allocations to fund their innovation.

But most enterprises have allocated between 80 - 85% of their budgets just to keep the lights on. How can a company innovate with numbers like these?

Time to cut the cost of keeping the lights on.

1. The bulk of the cost of maintaining servers is energy consumption, not the cost of the servers themselves. But the advent of hyperscale technology has enabled low-energy machines to save between 38% and 89% of energy costs.
2. The topic of virtualization has been beaten to death, but there is still a lot to do in this space.
3. Consider labor arbitrage, use of public and private clouds, and application outsourcing
4. To cut costs while managing an ever-changing application portfolio look to third parties that offer ever-evolving SLA agreements

Keeping the lights on shouldn’t consume as much as 85% of your budget. Even if you feel you’re cutting costs, there may be areas you aren’t even aware of where you can still cut costs. Conduct a thorough audit of your current IT environment and identify areas where you can immediately have an impact.

Digital Innovation as Business Innovation

The holy grail for today’s CIO is digital innovation as business innovation. This is the exciting part of being an IT leader in 2014 and beyond. But proceed with caution.

1. Using technology to dominate your current market or to enter new, exciting markets is the promise of current technology trends that level the playing field for enterprises as well as for small companies. But this requires skillsets you might not have yet.  This type of growth requires both entrepreneurial as well as new technical skills. Consider how you’ll acquire or recruit the business creativity and technology talent to fill this gap.
2. Employee demand for mobile and desktop apps that mimic their favorite social media sites is spurring the creation of application ecosystems and corporate app stores. But exposing legacy functionality through consumer-like apps is easier said than done. Your mainframe data is your company’s lifeblood. These are the “pillars” that keep the walls standing – be careful you don’t accidentally knock down a pillar or two.
3. Data is the lifeblood for modern, technology-enabled businesses. But despite the heavy drumbeat to remove data silos over the past few years, this is still a major challenge. Make creating a data supply chain with a data services platform a priority.

This is far from an exhaustive list of the challenges you’ll have to overcome to be truly innovative. But performing an internal assessment to determine where your current people, processes and technology can help or hinder your drive to digital innovation is the best place to start.

Keeping Up to Enable Growth

Now that you’ve turned your company into a well-oiled machine by making your IT department more efficient, and you’ve reached your goal of becoming a digital innovator, your firm might experience fast growth.

But is your IT department in the best position to support that growth? Are your systems, processes and human resources ready for the growing needs of your company?

1. Fast-growth companies are constantly adding new employees to the payroll. Desktop virtualization and employee onboarding applications are examples of the types of services you can use to make your new employees productive right away.
2. If your firm delivers a virtual service or sells online, ramping up new capacity to avoid downtime can be aided by Platform-as-a -Service vendors (PaaS) with flexible “pay-as-you-go” plans that offer elastic computing capacity to accommodate spikes and lulls in usage.
3. Fast-growth companies can be hampered by the small percentage of customers that are considered “difficult”: slow pay, no pay, heavy use of customer service lines. Leverage your analytics program to identify the customers who put a drag on your bottom line and hamper growth, and jettison the dead weight.

Creativity and resourcefulness can help you quickly build the technology infrastructure to keep up with – and enable – your fast growth, and can continue to help your business with the digital innovation goals you set for it in the 2^nd stage.

Conclusion

If achieving digital innovation nirvana seems like a lot of work, it is. I don’t want to give you rose-colored glasses.

But to get from here to there isn’t complicated. Assess where you are right now, determine your gaps and resources, plan the path you’ll take considering your current situation, and execute.

In the next few posts we’ll cover each area in detail.