Is it time to reconnect offshore?

Posted on : 15-01-2020 | By : john.vincent | In : General News, Innovation

Tags: , , , , , , ,

0

At the end of last year I travelled to India to assess the capability of a potential supplier for our clients. Over the years I have always both enjoyed and been impressed with my trips India. The culture, capability of the people I meet, their client focus and general level of friendliness have always made my trips ones that I look forward to.

This trip was no different and reconfirmed my views. However, I did return with one nagging question;

Why do many corporations not extend their technology services operating model to include partnerships with offshore providers?

Our Broadsheet publication has discussed the changing face of sourcing models many times over the years. Through the late 90’s and over the subsequent 20 or so years much of the focus was on cost reduction. As the efficiency agenda bit into available budgets, many leaders looked towards the labour arbitrage benefits that India could offer, either through their own captive operations, or via sourcing partners to help address the squeeze.

Offshoring business cases often paid lip service to the potential added benefits in areas such as access to skills, quality of delivery or agility, and innovation was often not mentioned at all

So companies transformed their operating model to offshore delivery models throughout this period. Initially the focus was on Business Process Outsourcing (“BPO”) and Information Technology (“ITO”) with back office operations roles and development forming the lion share of the skills transfer. As the model matured, more sophisticated roles in each were shifted offshore in more “value add” areas such as research development and production, as well as infrastructure operations to manage the emerging cloud delivery models through Google, Amazon and Microsoft platforms.

However, with the acceleration in technology innovation over the last few years in areas such as Artificial Intelligence, Machine Learning and Automation, there does appear to be a huge opportunity to harness the talent that the offshore providers have developed?

The first movers in the India offshore business have both an advantage and disadvantage in the new digital  economy. Labour arbitrage largely fuelled wave one of the model, enabling companies like TCS, Infosys, Cognizant and HCL to grow their workforce dramatically (TCS now employ c.425k staff at the top end and HCL have c.120k at the lower). However, whilst this is growth has been good on one hand it also means that these organisations will have a difficult transformation to go through with their own operating model through areas such as automation. Their capability is without question, but they now face the same challenges as their clients in how to introduce the new technology without eroding their core business.

So let’s look at the next tier of offshore providers. Here we find companies such as MindTree, UST Global and Zensar, all of which still have significant staff numbers, but sub 30k. Naturally these providers have focused their service offerings around digital rather than increasing headcount.

In my view, this puts them at a significant advantage when it comes to engaging with clients for the delivery of new disruptive technology. By building new platforms to automate operations they can take on new clients without the need to hire at the rate required by the previous Indian offshore pioneers, thus limiting the challenge of what to do with what may become a significant surplus of skills.

So what about tapping into this capability for new technology? Offshoring is something that still divides opinions a lot. Yes, there are probably as many tales of woe as there are of delight. However, this is something that we also find with the more traditional onshore models. In truth, when both sides enter into the model as a partnership and understanding what needs to change in the engagement, roles and responsibilities, strengths and weakness and a shared ambition, then it can really benefit both the client and offshore partner tremendously.

One of the key success factors is to set up the operating model with a common shared interest, irrespective of organisational and geographic boundaries

One of the things that struck me on my visit was just the depth and scale of the talent in new technology, not only within the providers I visited, but also in the very visible growth for big name companies, consultancies and technology mainstays. AI, Dev Ops, Cloud and ML are core to this revolutionary growth.

In our view, the next few years will bring opportunities to develop partnerships, or even new “captive” type models, with those organisations that are on the pioneering end of the digital growth. Organisations should ask themselves “Why build the capability themselves?”. Often the answer to this question has been coloured by the perceived overhead of managing service provider delivery, through vendor management, security oversight, service delivery management etc.

However, organisations should take a “green field” thought approach to tapping into the offshore provider capability. Core platforms can be delivered by technology and service providers with business services layered on top. Also, this should not be structured as a linear end-to-end service chain, coupled together with hand-offs between the parties, but through a Joint Product Led team. This helps to drive efficiencies, a more agile delivery and an end product aligned more closely with expected business outcomes.

We should say something about the wider macro considerations to using Indian offshore talent. Firstly, from a security perspective there is a noticeable increase in the level of physical security when entering almost all establishments (in response to events over the last 10-15 years). This used to be consigned mainly to corporate access, but this is now visible at hotels, shopping malls and the like. Not an issue, just an observation.

Secondly, India is under pressure to retain its offshore status not just from the nearshore providers, but also from areas such as the Philippines and most notably China. However, this is simply a natural evolution and the competition will provide more choices.

It certainly seems like this decade will bring further opportunities to tap into this offshore digital talent for those that chose to look for it.

Extreme Outsourcing: A Dangerous Sport?

Posted on : 27-09-2019 | By : kerry.housley | In : Uncategorized

Tags: , , , ,

0

Recently I’ve thought about an event I attended in the early 2000’s, at which there was a speech that really stuck in my mind. The presenter gave a view on a future model of how companies would source their business operations, specifically the ratio of internally managed against that which would be transitioned to external providers (I can’t remember exactly the event, but it was in Paris and the keynote was someone you might remember, named Carly Fiorina…).

What I clearly remember, at the time, was a view that I considered to be a fairly extreme view of the potential end game. He asked the attendees:

Can you tell me what you think is the real value of organisations such as Coca Cola, IBM or Disney?

Answer: The brand.

It’s not the manufacturing process, or operations, or technology systems, or distribution, or marketing channels, or, or… Clearly everything that goes into the intellectual property to build the brand/product (such as the innovation and design) is important, but ultimately, how the product is built, delivered and operated offers no intrinsic value to the organisation. In these areas it’s all about efficiency.

In the future, companies like these would be a fraction of the size in terms of the internal staff operations.

Fast forward to today and perhaps this view is starting to gain some traction…at least to start the journey. For many decades, areas such as technology services have be sourced through external delivery partners. Necessity, fashion and individual preference have all driven CIOs into various sourcing models. Operations leaders have implemented Business Process Outsourcing (BPO) to low cost locations, as have other functions such the HR and Finance back offices.

But perhaps there are two more fundamental questions that CEOs or organisations should ask as they survey their business operations;

  • 1) What functions that we own actually differentiate us from our competitors?
  • 2) Can other companies run services better than us?

It is something that rarely gets either asked or answered in a way that is totally objective. That is of course a natural part of the culture, DNA and political landscape of organisations, particularly those that have longevity and legacy in developing internal service models. But is isn’t a question that can be kicked into the long grass anymore.

Despite the green shoots of economic recovery, there are no indications that the business environment is going to return to the heady days of large margins and costs being somewhat “consequential”. It’s going to be a very different competitive world, with increased external oversight and challenges/threats to companies, such as through regulation, disruptive business models and innovative new entrants.

We also need to take a step back and ask a third question…

  • 3) If we were building this company today, would we build and run it this way?

Again a difficult, and some would argue, irrelevant question. Companies have legacy operations and “technical debt” and that’s it…we just need to deal with it over time. The problem is, time may not be available.

In our discussions with clients, we are seeing that realisation may have dawned. Whilst many companies in recent years have reported significant reductions in staff numbers and costs, are we still just delaying the “death by a thousand cuts”? Some leaders, particularly in technology, have realised that not only running significant operations is untenable, but also that a more radical approach should be taken to move the bar much closer up the operating chain towards where the real business value lies.

Old sourcing models looked at drawing the line at functions such as Strategy, Architecture, Engineering, Security, Vendor Management, Change Management and the like. These were considered the valuable organisational assets. Now. I’m not saying that is incorrect, but what often has happened is that have been treated holistically and not broken down into where the real value lies. Indeed, for some organisations we’ve heard of Strategy & Architecture having between 500-1000 staff! (…and, these are not technology companies).

Each of these functions need to be assessed and the three questions asked. If done objectively, then I’m sure a different model would emerge for many companies with trusted service providers running much on the functions previously thought of as “retained”. It is both achievable, sensible and maybe necessary.

On the middle and front office side, the same can be asked. When CEOs look at the revenue generating business front office, whatever the industry, there are key people, processes and IP that make the company successful. However, there are also many areas where it was historically a necessity to run internally but actually adds no business value (although, of course still very key). If that’s the case, then it makes sense to source it from specialist provider where the economies of scale and challenges in terms of service (such as from “general regulatory requirements”) can be managed without detracting from the core business.

So, if you look at some of the key brands and their staff numbers today in the 10’s/100’s of thousands, it might only be those that focus on key business value and shed the supporting functions, that survive tomorrow.

What will the IT department look like in the future?

Posted on : 29-01-2019 | By : john.vincent | In : Cloud, Data, General News, Innovation

Tags: , , , , , , , , , ,

0

We are going through a significant change in how technology services are delivered as we stride further into the latest phase of the Digital Revolution. The internet provided the starting pistol for this phase and now access to new technology, data and services is accelerating at breakneck speed.

More recently the real enablers of a more agile and service-based technology have been the introduction of virtualisation and orchestration technologies which allowed for compute to be tapped into on demand and removed the friction between software and hardware.

The impact of this cannot be underestimated. The removal of the needed to manually configure and provision new compute environments was a huge step forwards, and one which continues with developments in Infrastructure as Code (“IaC”), micro services and server-less technology.

However, whilst these technologies continually disrupt the market, the corresponding changes to the overall operating models has in our view lagged (this is particularly true in larger organisations which have struggled to shift from the old to the new).

If you take a peek into organisation structures today they often still resemble those of the late 90’s where capabilities in infrastructure were organised by specialists such as data centre, storage, service management, application support etc. There have been changes, specifically more recently with the shift to devops and continuous integration and development, but there is still a long way go.

Our recent Technology Futures Survey provided a great insight into how our clients (290) are responding to the shifting technology services landscape.

“What will your IT department look like in 5-7 years’ time?”

There were no surprises in the large majority of respondents agreeing that the organisation would look different in the near future. The big shift is to a more service focused, vendor led technology model, with between 53%-65% believing that this is the direction of travel.

One surprise was a relatively low consensus on the impact that Artificial Intelligence (“AI”) would have on management of live services, with only 10% saying it would be very likely. However, the providers of technology and services formed a smaller proportion of our respondents (28%) and naturally were more positive about the impact of AI.

The Broadgate view is that the changing shape of digital service delivery is challenging previous models and applying tension to organisations and providers alike.  There are two main areas where we see this;

  1. With the shift to cloud based and on-demand services, the need for any provider, whether internal or external, has diminished
  2. Automation, AI and machine learning are developing new capabilities in self-managing technology services

We expect that the technology organisation will shift to focus more on business products and procuring the best fit service providers. Central to this is AI and ML which, where truly intelligent (and not just marketing), can create a self-healing and dynamic compute capability with limited human intervention.

Cloud, machine learning and RPA will remove much of the need to manage and develop code

To really understand how the organisation model is shifting, we have to look at the impact that technology is having the on the whole supply chain. We’ve long outsourced the delivery of services. However, if we look the traditional service providers (IBM, DXC, TCS, Cognizant etc.) that in the first instance acted as brokers to this new digital technology innovations we see that they are increasingly being disintermediated, with provisioning and management now directly in the hands of the consumer.

Companies like Microsoft, Google and Amazon have superior technical expertise and they are continuing to expose these directly to the end consumer. Thus, the IT department needs to think less about how to either build or procure from a third party, but more how to build a framework of services which “knits together” a service model which can best meet their business needs with a layered, end-to-end approach. This fits perfectly with a more business product centric approach.

We don’t see an increase for in-house technology footprints with maybe the exception of truly data driven organisations or tech companies themselves.

In our results, the removal of cyber security issues was endorsed by 28% with a further 41% believing that this was a possible outcome. This represents a leap of faith given the current battle that organisations are undertaking to combat data breaches! Broadgate expect that organisations will increasingly shift the management of these security risks to third party providers, with telecommunication carriers also taking more responsibilities over time.

As the results suggest, the commercial and vendor management aspects of the IT department will become more important. This is often a skill which is absent in current companies, so a conscious strategy to develop capability is needed.

Organisations should update their operating model to reflect the changing shape of technology services, with the closer alignment of products and services to technology provision never being as important as it is today.

Indeed, our view is that even if your model serves you well today, by 2022 it is likely to look fairly stale. This is because what your company currently offers to your customers is almost certain to change, which will require fundamental re-engineering across, and around, the entire IT stack.

Selecting a new “digitally focused” sourcing partner

Posted on : 18-07-2018 | By : john.vincent | In : Cloud, FinTech, Innovation, Uncategorized

Tags: , , , , , ,

0

It was interesting to see the recent figures this month from the ISG Index, showing that the traditional outsourcing market in EMEA has rebounded. Figures for the second quarter for commercial outsourcing contracts show a combined annual contract value (ACV) of €3.7Bn. This is significantly up 23% on 2017 and for the traditional sourcing market, reverses a downward trend which had persisted for the previous four quarters.

This is an interesting change of direction, particularly against a backdrop of economic uncertainty around Brexit and the much “over indulged”, GDPR preparation. It seems that despite this, rather than hunkering down with a tin hat and stockpiling rations, companies in EMEA have invested in their technology service provision to support an agile digital growth for the future. The global number also accelerated, up 31% to a record ACV of €9.9Bn.

Underpinning some of these figures has been a huge acceleration in the As-a-Service market. In the last 2 years the ACV attributed to SaaS and IaaS has almost doubled. This has been fairly consistent across all sectors.

So when selecting a sourcing partner, what should companies consider outside of the usual criteria including size, capability, cultural fit, industry experience, flexibility, cost and so on?

One aspect that is interesting from these figures is the influence that technologies such as cloud based services, automation (including AI) and robotic process automation (RPA) are having both now and in the years to come. Many organisations have used sourcing models to fix costs and benefit from labour arbitrage as a pass-through from suppliers. Indeed, this shift of labour ownership has fuelled incredible growth within some of the service providers. For example, Tata Consultancy Services (TCS) has grown from 45.7k employees in 2005 to 394k in March 2018.

However, having reached this heady number if staff, the technologies mentioned previously are threatening the model of some of these companies. As-a-Service providers such as Microsoft Azure and Amazon AWS have platforms now which are carving their way through technology service provision, which previously would have been managed by human beings.

In the infrastructure space commoditisation is well under way. Indeed, we predict that the within 3 years the build, configure and manage skills in areas such Windows and Linux platforms will be rarely in demand. DevOps models, and variants of, are moving at a rapid pace with tools to support spinning up platforms on demand to support application services now mainstream. Service providers often focus on their technology overlay “value add” in this space, with portals or orchestration products which can manage cloud services. However, the value of these is often questionable over direct access or through commercial 3rd party products.

Secondly, as we’ve discussed here before, technology advances in RPA, machine learning and AI are transforming service provision. This of course is not just in terms of business applications but also in terms of the underpinning services. This is translating itself into areas such as self-service Bots which can be queried by end users to provide solutions and guidance, or self-learning AI processes which can predict potential system failures before they occur and take preventative actions.

These advances present a challenge to the workforce focused outsource providers.

Given the factors above, and the market shift, it is important that companies take these into account when selecting a technology service provider. Questions to consider are;

  • What are their strategic relationships with cloud providers, and not just at the “corporate” level, but do they have in depth knowledge of the whole technology ecosystem at a low level?
  • Can they demonstrate skills in the orchestration and automation of platforms at an “infrastructure as a code” level?
  • Do they have capability to deliver process automation through techniques such as Bots, can they scale to enterprise and where are their RPA alliances?
  • Does the potential partner have domain expertise and open to partnership around new products and shared reward/JV models?

The traditional sourcing engagement models are evolving which has developed new opportunities on both sides. Expect new entrants, without the technical debt, organisational overheads and with a more technology solution focus to disrupt the market.

Extreme Outsourcing: Should companies just keep the tip of the iceberg?

Posted on : 30-09-2014 | By : john.vincent | In : General News

Tags: , , , , , , , , , ,

0

Recently I’ve thought about an event I attended in the early 2000’s, at which there was a speech that really stuck in my mind. The presenter gave a view on a future model of how companies would source their business operations, specifically the ratio of internally managed against that which would be transitioned to external providers (I can’t remember exactly the event, but it was in Paris and the keynote was someone you might remember, named Carly Fiorina…).

What I clearly remember, at the time, was a view that I considered to be a fairly extreme view of the potential end game. He asked the attendees:

Can you tell me what you think is the real value of organisations such as Coca Cola, IBM or Disney?

Answer: The brand.

It’s not the manufacturing process, or operations, or technology systems, or distribution, or marketing channels, or, or… Clearly everything that goes into the intellectual property to build the brand/product (such as the innovation and design) is important, but ultimately, how the product is built, delivered and operated offers no intrinsic value to the organisation. In these areas it’s all about efficiency.

In the future, companies like these would be a fraction of the size in terms of the internal staff operations.

Fast forward to today and perhaps this view is starting to gain some traction…at least to start the journey. For many decades, areas such as technology services have be sourced through external delivery partners. Necessity, fashion and individual preference have all driven CIOs into various sourcing models. Operations leaders have implemented Business Process Outsourcing (BPO) to low cost locations, as have other functions such the HR and Finance back offices.

But perhaps there’s are two more fundamental questions that CEOs or organisations should ask as they survey their business operations;

  • 1) What functions that we own actually differentiate us from our competitors?
  • 2) Can other companies run services better than us?

It is something that rarely gets either asked or answered in a way that is totally objective. That is of course a natural part of the culture, DNA and political landscape of organisations, particularly those that have longevity and legacy in developing internal service models. But is isn’t a question that can be kicked into the long grass anymore.

Despite the green shoots of economic recovery, there are no indications that the business environment is going to return to the heady days of large margins and costs being somewhat “consequential”. It’s going to be a very different competitive world, with increased external oversight and challenges/threats to companies, such as through regulation, disruptive business models and innovative new entrants.

We also need to take a step back and ask a third question…

  • 3) If we were building this company today, would we build and run it this way?

Again a difficult, and some would argue, irrelevant question. Companies have legacy operations and “technical debt” and that’s it…we just need to deal with it over time. The problem is, time may not be available.

In our discussions with clients, we are seeing that realisation may have dawned. Whilst many companies in recent years have reported significant reductions in staff numbers and costs, are we still just delaying the “death by a thousand cuts”? Some leaders, particularly in technology, have realised that not only running significant operations is untenable, but also that a more radical approach should be taken to move the bar much closer up the operating chain towards where the real business value lies.

Old sourcing models looked at drawing the line at functions such as Strategy, Architecture, Engineering, Security, Vendor Management, Change Management and the like. These were considered the valuable organisational assets. Now. I’m not saying that is incorrect, but what often has happened is that have been treated holistically and not broken down into where the real value lies. Indeed, for some organisations we’ve heard of Strategy & Architecture having between 500-1000 staff! (…and, these are not technology companies).

Each of these functions need to be assessed and the three questions asked. If done objectively, then I’m sure a different model would emerge for many companies with trusted service providers running much on the functions previously thought of as “retained”. It is both achievable, sensible and maybe necessary.

On the middle and front office side, the same can be asked. When CEOs look at the revenue generating business front office, whatever the industry, there are key people, processes and IP that make the company successful. However, there are also many areas where it was historically a necessity to run internally but actually adds no business value (although, of course still very key). If that’s the case, then it makes sense to source it from specialist provider where the economies of scale and challenges in terms of service (such as from “general regulatory requirements”) can be managed without detracting from the core business.

So, if you look at some of the key brands and their staff numbers today in the 10’s/100’s of thousands, it might only be those that focus on key business value and shed the supporting functions, that survive tomorrow.

 

How much now do we need to “Run the Bank” ?

Posted on : 27-03-2012 | By : jo.rose | In : Finance

Tags: , , , , , , , , , ,

0

The economic challenges of recent years have brought with it an increased focus on efficiency. Indeed, since the early 2000’s, technology organisations within financial services have been delivering cost reduction programmes on behalf of their client business units. In the main these have been successful, certainly in terms of meeting short term objectives.

The criticism leveraged at banks from a front office perspective over recent years is well documented and accepted ( by most ), both internally and externally. What is less opined is that the phenomenal growth with the Financial Services ecosystem also had side effects both culturally and structurally – many developed complex, and sometimes cumbersome, technology services organisations, the legacy of which will take time to re-engineer.

Now, there will many in FS technology leadership roles that will disagree, but there is an argument that at some point CIO organisations became detached from their clients. Indeed, many claim this to be part of the strategy…i.e. an internal services function which operates on a commercial basis, with defined business services, billing engines, contracts etc… maybe also coupled with outsourcing, offshoring and managed services. However, was it completely business aligned ?

There are two main organisational and cultural issues:

  • Agility: Two of the common phrases in the FS technology vocabulary are “Run the Bank ( RTB )” to represent baseline activities and “Change the Bank ( CTB )” to represent project activities. All very well, and a good way of dividing baseline versus discretionary resources respectively. However, you rarely hear the words Demand and Supply, Consumption Based Delivery, Unit Pricing, Commoditisation or the like. That’s because the internal services function, even if acting as a conduit to vendor delivery, cannot flex in the appropriate way or in a timely manner ( nor do they really have the incentive to ). The result is a resource baseline provisioned for close to “peaks” of demand.
  • Market Value: This is a bit tricky ( and will upset a few ). Whilst internal technology organisations provide an undeniably valuable service, there is only a small percentage that provide real enhanced business functionality, real competitive advantage and real innovation. Most are in the engine room – Running The Bank. The measure of success here is stability, time to market and efficiency. So with Business revenues under pressure, margins being squeezed and new regulation to comply with, the Front Office should quite rightly be asking questions related to the value and cost of RTB services.

But really…there is a serious point here. For the majority of technology staff the intricacies of business process, underlying instruments, competitive advantage and what drives revenues passes them by. So why such a large compensation premium ? And whilst we’re at it, how many Managing Directors in IT do business clients actually need ? ( told you you’d be upset… ).

Another area that has driven technology costs is the sheer volume and complexity of applications and infrastructure. We talk to many FS clients and their portfolio ranges typically from 1000 up to 6000 applications!

There are many reasons for the growth in applications to support business processes. However, whilst the efficiency programmes we touched on earlier removed people, renegotiated contracts and consolidated infrastructure etc…success stories in application rationalisation are more difficult to unearth.

Granted, it’s not easy. Portfolio rationalisation requires both time and investment…and that’s the issue. Business cases without a short term return don’t get out of the starting blocks. Besides, with objectives being set on a yearly basis, who wants to put themselves in the frame to deliver a multi-year programme of change when all the main stakeholders are on a short term incentive programme. Again, the application costs only go one way…and this needs to change.

The other major point in the application domain is that there needs be stronger evaluation and alignment of exactly what functionality is required to meet the business needs. Often, vendors will bring new versions to market with a whole raft of enhancements, many of which are hardly either used ( or wanted ). Of course, from a support perspective it is difficult to lag behind. But what about alternatives that offer what is actually needed and ignores the “nice to haves” ? Are some upgrades and enhancements technology for technologies sake ? Same applies to infrastructure.

With technology commoditising and Software as a Service gaining more traction, this is a perfect opportunity for businesses to redress the balance. As the market matures we see a much more agile, on-demand delivery of applications and infrastructure which is better aligned functionally and more focused on delivering business value. Of course, there are also downsides…CIO’s will need to manage differently, as more of a broker to external services, with a strong focus on vendor / demand management and dealing with more rigidity in functional enhancements.

The result will be a much leaner technology organisation which can focus on delivering real business value in a more efficient way. Whether they continue to Run the Bank ? …Well that remains to be seen.

Cloud Service Delivery – Part 3: Organisational Impact

Posted on : 26-01-2012 | By : john.vincent | In : Cloud

Tags: , , , , , , ,

0

So far we have looked at Hosted ITSM solutions and End-to-End Service Management relating to cloud based deployment. In our final part we look briefly at the organisational aspects.

Pros and cons of cloud aside, what we do see is an increased awareness and acceptance that for most organisations, a journey towards some form of cloud based computing is either underway or imminent. Whilst technology departments wrestle with this in terms of infrastructure, data, security, financials and the like, one aspect that receives less attention is the impact to the traditional IT organisation. Let’s explore some of this.

Business users are demanding more speed and agility for provision of services in an increasingly competitive market place. We still hear anecdotes from both IT and Business along the line of “Getting a test server takes several weeks to provision…”, “Finally got my login ID and laptop after 10 days…” etc. Familiar ? It’s not a criticism, just an observation ( and they’ll be a lot of colleagues claiming “not here sir” ).

At a recent roundtable we heard of the business user who, fed up with waiting, bought some compute power on his credit card and expensed it.

From the organisation aspect this has a real adverse effect. IT departments have been traditionally configured as internal, captive providers, both in terms of people and assets ( granted, sometimes services are outsourced, but again this is driven from an internal perspective point and often lacks business alignment in structure ). It is therefore very difficult for an internal IT provider to reconfigure itself based on;

  • Operating Model: the capability to shift in terms of flexibility of costs in both baseline and discretionary, offering market comparative / benchmarked technology delivery and economies of scale. Internal organisations are also often still domain aligned, so particularly shared infrastructure services prove challenging from a customer relationship perspective. It often requires external change to optimise these factors and drive efficiencies.
  • Motivation and Desire: job security plays a large part of the challenge. Staff join company technology organisations for a number of reasons, from financial through to technical. Creating and engineering solutions is in the DNA of many teams. Indeed, there are many internal technology departments building huge enterprise class private clouds “on behalf of their business”. Really ?
  • Commoditisation of Technology: the evolution of IT products and services is such that there is a much stronger value proposition for “Buy” vs “Build” and a reduction in configuration and customisation. Changing this ethos and reconfiguring the internal organisation takes some time.
  • Commoditisation of Resource: this is a big issue and often the “elephant in the room”. Business technology innovation and enablement is as important as ever, if not more so. However, the “entry level of expertise” at both a technical and business level, particularly lower down the stack, has reduced. This may cause a few discerning cries, but it is a fact. Is a 30%/40% compensation premium for a desktop engineer in capital markets over someone in retail justified now ?

All of these aspects require careful thinking from an organisational change perspective. Much as with outsourcing capability, there is sometimes the view that simply drawing a line between the retained and transitioned resources is sufficient. It isn’t.

To be successful, the end-to-end operating model should be clearly defined and likewise the roles and responsibilities within that. As more cloud services come on stream, Service Management, Domain / Enterprise Architecture and Commercial & Vendor skills, as opposed to technical and operational, will be more key to maintaining the service integrity and delivering business value. Attention to the training, development and realignment of roles should not be underestimated.

So what about the CIO ? Well we wrote before about how the cloud may elevate the role closer to the business. In the meantime, perhaps we will start to see the emergence of the Chief Service Broker ?