Almost exactly a year ago, we wrote in a ZapFlash that the IT department would have to make significant changes to its structure and value proposition to prevent its inevitable demise as a core part of the enterprise. In our conversations with enterprise architects, and venture capital investors (as part of our new ZapThink Startup Insights newsletter), we can now definitively state that the value proposition of the IT department is continuing to erode, and in many cases, we will see the entire department disappear within a few short years.
In many ways, the formation of the IT department starting in the mid-1950s was a direct consequence of the cost and complexity of making computers do what you wanted them to. Back in the day, it literally took armies of highly skilled engineers to corral expensive pieces of equipment to meet the ever-changing needs of the business. And this reality existed well up until early in the last decade. The emergence of the Internet and open source technology didn’t immediately change the realities of the cost and complexity of IT, but over time, successive waves of innovation abstracted greater amounts of complexity, reduced development and ownership cost, and finally put control of IT in the hands of ordinary users rather than specialized technologists.
The average consumer’s IT experience on the web, mobile, and in their daily lives has become significantly more powerful while simultaneously becoming more usable and simplified. At work, however, these very same consumers have an IT experience that is dramatically less capable, usable, and user-empowering. No wonder that many line of business users and business owners are scratching their heads wondering how to justify the sizable IT budgets that seem to provide diminishing returns over time.
The Business is Self-Medicating with SaaS and Cloud
Information Technology is now an indispensible part of our everyday lives. How else can we explain how expenditures in mobile phones and internet service skyrocketed while the rest of the world economy has shown decline over the past two years? Because of this fact, it is now absolutely ridiculous to talk of things like IT-Business alignment. Of course IT and Business are aligned – business simply can’t be done without IT. Take away email, mobile phones, Internet, and desktop applications from business, and most organizations would collapse. So, why do people keep talking about IT-Business alignment? Because the IT organization itself is becoming increasingly more detached from how the business wants to use their technology.
What business users want, they get. If they can’t get it from their own IT departments, they will simply procure it from somewhere else. And there’s more choice now more than ever with how the business can get its IT needs met. The explosion in functionality made possible by Software-as-a-Service and Cloud solutions combined with a business model that is priced on an as-you-go, per user or transaction consumption basis has resulted in an ecosystem that allows business users to “self medicate” their IT needs by simply going online and using free solutions or solutions they can pay for and instantly use with a credit card. No longer do business users have to put up with months (if not years) of delays in IT development, significant upfront procurement costs, and the inevitable confusion and lack of clarity that happens when IT people try to interpret business-people’s needs.
Indeed, many small and medium-sized businesses (SMBs) no longer have an IT department at all. SMBs not only have a lack of budget to sustain IT departments, but they also don’t have the personnel, experience, or time to devote to managing internal IT assets. SMBs have long craved the ability to get IT functionality just as functional, robust, and feature-complete as those of their larger brethren, but at a cost and complexity they could handle. In many cases, these firms were too small to have an IT department in the first place, but now SaaS and Cloud have eliminated any need to have one going forward, even if they grow much larger.
The caveat to all this talk of business users and SMBs “self-medicating” their IT needs through SaaS and Cloud without need of an IT department is that many of the SaaS and Cloud solutions are either not specifically targeted at businesses (many are consumer-oriented), or the specific needs of the business units aren’t being met by existing solutions, or if so, without timely customization. ZapThink’s belief is that where there’s a business need, there will be a solution. While there might currently exist a gap between SMB and business unit needs and SaaS and Cloud application capabilities, this is surely to be short-lived. Our conversations with investors and venture capitalists (VCs) have proven that there’s lots of money flowing into SaaS and Cloud solutions for businesses, and perhaps by the end of the decade, it will seem more unusual not to get one’s IT needs from a third-party SaaS / Cloud provider.
Large Enterprises: Legacy is IT’s Lifeline
So, if SMBs don’t need an IT department, why do larger enterprises need one? The primary reason why IT departments still exist is because they are the Guardians of Legacy. Legacy here is defined as any application that has been built and is still providing functionality to the business, and is too costly or complex to replace with simpler solutions that provide greater business value. Much of this legacy will never truly be replaced by SaaS and Cloud solutions because their business-critical nature requires them to be owned, operated, and controlled entirely by the enterprise. However, as we’ve detailed in numerous white papers, webinars, presentations, and ZapFlashes, there are many ways to extend and enable legacy without having to actually touch the legacy system. In this way, we see SaaS and Cloud even having an impact here.
Yet, the problem with an IT organization whose value proposition is defined by the legacy systems they manage is that they are relegated to a cost-center role. The business side will always be looking to minimize the cost of that legacy to maximize its current value. Given that non-legacy IT needs will be met with resources outside the organization, we see this as a long-term losing battle for the IT organization. In other words, if legacy IT assets are the IT organizations’ sole reason for being, then they will be in for a rude awakening when the business has changed to the point where that legacy is no longer valuable. Think this doesn’t happen? Well, you must have been asleep over the past two years as huge corporations have merged or simply vanished. What might have seemed like legacy that was destined to live forever was turned off at the flick of a switch when the companies went bust. What can change will.
Governance: The IT Department’s Only Reason for Being?
So, if legacy shouldn’t be the IT department’s main reason for being (if it should exist at all), then what should? Simply put: governance and architecture. When most of the IT functionality comes from outside the enterprise, the IT department is elevated to a design and regulatory role. For sure, the IT organization is no longer responsible for implementing things. However, as we have explored in numerous previous ZapFlashes, without control, things can quickly delve into chaos. On the one hand, the enterprise needs to enable business users to meet their needs as quickly and cost-effectively as possible, most likely with external tools and capabilities. However, if this is left unrestrained, companies can quickly find themselves saddled with a morass of security, data integrity, privacy, reliability, integration, and visibility issues. This sounds like the checklist of things that is covered under the governance umbrella.
Since business users will only be concerned about their specific needs, there needs to be some regulatory body within the company that makes sure that these needs are not being met in ways that are detrimental to the organization. The IT department is as good a place as any to place the primary governance responsibility for the organization. Enterprise architects should set for the organization the long-term vision for how its goals can be met using quickly changing, mostly external technology, and governance practices, tools, and processes can then be put into place to make sure the use of such technology happens in a controlled environment. In this way, IT is meeting the needs of the business without the IT department getting in the way. And IT budgets can be downscaled to match the specific governance requirements and exposures of the business and a steady investment in architecture to make sure long-term needs are being met.
The ZapThink Take
We’re not the only ones to prognosticate the demise of the IT department. From our perspective, we don’t care if the IT department exists or not as long as IT is delivering value to the business. But all signs are pointing to a diminished role for the IT department as developer, manager, innovator, and owner of IT assets. The real future of IT exists outside the enterprise – there is simply more money and value being created there on a daily basis than the internal IT organization can compete with. What does this mean for IT departments? We see inevitable shrinkage and focus of IT on governance and architecture. What does this mean for businesses? Greater value for every dollar of IT technology investment. What does this mean for incumbent IT vendors? Unless they are involved in legacy or plan to compete outside the enterprise, they too will diminish in the long-term.