By Ronald Paschen, Partner, ISG
Today’s information technology (IT) organizations face a dilemma. On the one hand, the digital economy is accelerating the pace of change in IT. The adoption of emerging technologies, the development of new business models and the consumerization of IT require that it evolve rapidly. On the other hand, IT faces a constant cost pressure and an increasing commoditization of services, which enable new sourcing approaches. In either case, incremental improvements and minor upgrades are not sufficient to meet these challenges; IT needs a transformational change.
Although transformational approaches will certainly differ across organizations, our experience, which is drawn from many transformations that ISG has supported, shows that successful transformations share these Top 5 factors:
1. The transformation champion should sit in the C-Suite. An IT transformation requires radical change to an organization from the top down. Change requires the backing of the top management, and the transformation champion should be positioned at or near the top-level of the organization. This empowers the champion to support the transformation with the right catalysts and address potential inhibitors to the transformation early in the game.
2. Choose the right target operating model. The optimal operating model might look very different for different organizations, depending on the business model and market strategy. We see a handful of operating models that will prevail in the market for the next five years, but only a best-fit model will help an organization to thrive in the market. The target operating model has to be designed with a sufficient level of detail to prepare for implementation.
3. Create a valid business case built on benefit tracking. A transformation requires substantial investment. To gain and keep the momentum, you have to create a sense of urgency within the organization and support that with a solid business case based on the achievable benefits, what some call the “size of the prize” of the transformation. In addition, you need the mechanisms to manage the complexity of the required data and to track the achieved benefits and coordinate the various initiatives.
4. Consider a holistic transformation approach. The design of an IT transformation approach has to address both sides of the story: the technical solution describing the future state of the architecture across all layers of the technology stack and the organizational solution outlining the future shape and governance of the organization. Not all changes have to occur at the same time, but if one of the dimensions is neglected, the overall success will be at risk.
5. Craft a careful service integration strategy. A handful of delivery models will dominate the next few years, and they all share a common trait: a multi-sourcing approach. Each one will require the seamless integration of various delivery units and delivery approaches. Only a few organizations embrace this already.
While transformations offer a huge potential to your organization, they also implicate risks. ISG can help you as a neutral advisor with an unparalleled set of data regarding top-quartile delivery models and best practice service integration models to ensure the successful transformation in a multi-sourced environment. Contact Ronald Paschen to learn more about the ISG transformation approach.