Despite decades of increasingly intensive use of information across industries, IT has remained a black box for many executives. Too often, the link between spending and performance has been unclear, if not problematic. As a result, leaders felt that their only course of action was to hire a competent CIO, throw increasing amounts of money at IT, and hope for the best. The economic disruptions of recent years, however, have tightened budgets and placed a premium on action, forcing companies to rethink IT’s fundamental role.
In most organizations, IT began as a support function, leading to a one-dimensional management approach. However, technology-enabled products, interactive communications, and an “always on” information environment have thrust IT to the forefront, with critical implications for business growth and customer engagement. In addition, established practices, such as lean-management techniques, have highlighted the value of IT in reducing waste and increasing productivity.
This deeper recognition of IT’s potential has given rise to a new management model consisting of two categories: “Factory IT” and “Enabling IT.” Factory IT encompasses the bulk of an organization’s IT activities, applying lessons from the production floor—scale, standardization, and simplification—to drive efficiency, optimize delivery, and lower unit costs. Enabling IT is focused on helping organizations respond more effectively to changing business needs and gain a competitive advantage by spurring innovation and growth.
This approach goes beyond simply relabeling functions to include broader leadership, governance, and organizational changes, and IT leaders will need very different skills to manage each model. Business leaders will have to engage with IT in new ways. For instance, while IT standardization and consolidation increase responsiveness, speed to market, and cost effectiveness, managers may have fewer options to customize solutions. Likewise, more transparency and better metrics may come at the expense of unrestricted choice for configuration and architecture. In return, business leaders would get a new type of IT partner to support innovation, with skills to deliver IT-enabled capabilities quickly that drive both top- and bottom-line growth. But they’ll need to treat such IT staff as full members of their group, offering incentives and rewards for exceptional performance.
The core elements of the typical IT function have changed radically over the past decade, and this evolution has enabled the Factory model. Ten years ago, a company might have felt compelled to create its own software to manage the supply chain and other activities; today, many configurable products can meet those needs. Similarly, expensive, single-purpose servers and the dedicated support staff they require can be replaced by commodity servers, often managed from half a world away.
Moreover, these standardized platforms can now be coupled with mature processes for managing broad swaths of IT, including basic infrastructure and many of the business applications. Under this configuration, IT activities can be restructured and continually improved much as any other business process, using a combination of lean techniques, automation, and outsourcing or cloud computing to drive down costs and improve quality. Results from our latest technology survey demonstrate how companies have already begun to implement some of these practices.
Source: http://www.mckinsey.com/
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Nikolina Gavroska
EMBRA Corporation
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