A couple days ago, Ronald Schmelzer published the next perfect as usually ZapFlash about emerging transformations of IT departments. Well, what he talks about is not only a transformation, it is more of the conversion of "base metals into gold or silver". The only problem is that the "base metals" disappear during the conversion.
In short, this issue of ZapFlash concludes that small and mid-size businesses are and will ridding off the internal IT departments replacing them by SaaS and Cloud based solutions. For the large organisations, internal IT stays, according to Ronald, mostly as a keeper of the legacy systems that still play a mission-critical role for the enterprise business. He says: "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."
While I agree with Ronald regarding to the final position the IT occupies, I think that cutting functional capabilities of internal live IT and outsourcing them will meet strong resistance, especially in the areas of core legacy systems. This can put the entire enterprise under the risk of existence. Also, Ronald prognoses that the IT governance function performed by the Enterprise Architecture will become the only one or the only important one function of internal IT while the realisation of the technical solutions on modern technologies will be externalised. Such shift requires a non-trivial knowledge transfer form IT development teams to the corporate architects since the Institute of Enterprise and Solution Architects is still amateur itself and many organisations are still not sure what is it for.
At the same time, if we look at the IT landscape drawn in this ZapFlash, it is not difficult to notice that the notion of service appears everywhere - for small, medium and large companies. In the book "Ladder to SOE: How to Create Resourceful and Efficient Solutions for Market Changes within Business and Technology", I construct a service-oriented organisation for the corporate IT. This organisation fits very well with all small-mid-large types of businesses and related IT. As shown on Figure 1, the organisation consists of three major categories of technology units: 1) cross-functional cross-divisional architectural team; 2) technology teams distributed per functional business units and concentrated on the specific business needs of these units; 3) a team responsible for shared technology assets. The latter may be also split into the sub-team supporting regular technologies like e-mail, Internet, desktops and alike, and a sub-team dealing with legacy mission-critical systems that must stay under the full control of the corporate business.
Whereas you can read details about such organisation in the book, the key consideration here is that IT follows the corporate functional business structure, which is the closest if not the full realisation of the service-oriented business model. This is the most perspective model providing for maximum flexibility in adopting business changes by corporate business and IT.
The major benefit of described organisation is that the IT becomes much closer to the business and its needs. Moreover, the business in the functional units gets into the position where it can compare the quality of internal and external IT services in particular business domain. If the internal IT service looses the competition, it can be easier replaced by an external provider. If this provider starts failing the SLA, the business unit can easily replace this provider by another one or by restoring internal IT in given business area. In all cases, expansion of the IT within the business functional unit or outsourcing IT happens under the strict control of the cross-functional cross-divisional architectural team. This is the mechanism that Ronald describes as the business capability "to 'self-medicate' their IT needs".
Thus, the Service-Oriented Enterprise (SOE) is the model for the future IT driven by the business needs. SOE is in the best position to deal with internal or external IT via the means of service orientation and architectural governance that guard the corporate business interests.
How to predict the future of IT? Google "I.T. WARS" - it's the oracle (a source of wise counsel and prophetic opinion). Honestly, when I'm carrying this book EVERYONE asks me how I heard of it and where I got it. Free reading online at Google Books and Amazon.
Michael, do you believe that business-oriented SaaS offering will ever become so smart, that business users will be able to simply plug such solutions in and satisfy most of their requirements?
You might agree that business processes vary greatly from company to company. It's obvious that COTS product offering that could "absorb" such variability must be very flexible and configurable. For what I have learned, every powerful and flexible configuration capability very closely resembles special-purpose programming environment (I've actually architected some of them).
It is not the case for customer-facing SaaS offerings because a) most customers have very similar requirements; and b) people are generaly more adaptive than organizations.
Therefore it seems that adoption and maintenance of complicated and flexible software packages will always require some "programming", which demand dedicated personel in IT department. Of course such activity might be outsourced, but anyway somebody in the enterprise must be responsible for it. It is unclear how this might change in five years from now.
Do you and Roland forsee some dramatic change in B2B software adoption practice? Or am I missing something?
I agree with you, Igor. A CTO without staff makes a little sense.
Based on my experience, the right staff consists of architects and business analysts.
As of customisation of SaaS, 'some programming' may be outsourced as well and, de facto, SaaS can serve not the business directly but hired outsource. Also, I know, it's possible to use a SaaS as a plug-in - this depends on the business case. For example, an Accounting Department of a company may use some financial SW in the SaaS form. However, the scope of such plug-ins is quite limited because it is applicable to relatively standardised business functionality (which is seldom). So, relatively small companies may be satisfied with 'standardised'/unified SW solutions but for more complex cases, business certainly requires visibility into SaaS (I'd say that even for the unified SaaS smart business will not throw its financial data into the Cloud based just on a 'gentleman word' of the Cloud provider)