Leadership investigate

IT department 're-arranging deckchairs on the Titanic' as execs bypass the CIO

Disaster warning for the CIO as frustrated business execs bypass IT and hire their own tech teams.

The IT department is merely "re-arranging deckchairs on the Titanic"  and risks being pulled apart as frustrated business execs start buying in their own tech expertise instead, CIOs have been warned.

IT chiefs that don’t raise their game when it comes to innovation will see their authority undermined within the next three years as execs hire their own staff to build new tech services, bypassing the IT department and creating a two-tier system according to a report by Forrester Research. The IT department could end up looking after the legacy infrastructure while the exciting development work is done by teams in business units.

Forrester warned: “The CIO will potentially be relegated to managing the interfaces to the legacy systems of record and managing the underlying infrastructure."

The analyst firm said the IT department needs to find a way to work with business to cut legacy costs and focus on new priorities such as mobile.

"Without the business signing up for aggressive app rationalisation, IT can never do enough server virtualisation to significantly impact the budget. IT is just re-arranging the deck chairs on the Titanic if it does not engage the business on eliminating applications."

The Forrester report Business execs increase direct IT spend to support systems of engagement is grim reading for CIOs and those working in the IT department.

When business and tech execs were asked to rate IT’s capabilities, in every case IT rated itself higher than the business did. Only 39 per cent of execs thought IT consistently delivered projects on time and on budget, something Forrester described as “the basic building block of IT’s credibility".

Marketing and R&D chiefs also gave the IT department a failing grade because it does not help them to innovate, and the analyst house warned: “Given the pace of technology change and the business’ need to improve products and services and deal with rising customer expectations, this leaves IT at risk of being bypassed for services firms and consultants.”

As a result, business units are taking direct responsibility for IT, cutting out the CIO and the IT department. While the majority (59 per cent) still get their tech from a central corporate IT group, 20 per cent now have a dedicated IT unit in their business unit or department, up from 10 per cent in 2010.

Forrester said this reflects the business' "frustration" with centralised IT and the accessibility of cloud services and mobile technologies that can bypass IT. The research also found that business execs are getting more involved in tech decisions.

Worrying for the CIO is the reason given for this increased involvement, that “technology is too important to the business not to be engaged and that IT does not understand the business well enough to be left to its own devices".

About

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

44 comments
wtburnette67
wtburnette67

Agree with the above comments. This has way more to do with business not doing things correctly and not with how the IT department is operating. If you feel marketing or sales is holding you back, is it okay for your department to outsource that or bring in your own people to handle those functions? No. It's the same with IT.

edelcamp
edelcamp

Rather than facing the truths of the situation, too many of my fellow IT professionals are reacting the same way: let's count all the ways that business makes us angry. That is at the heart of the problem right there. No solutions, just knee jerk emotional responses to a fundamental shift in the business tech landscape. It is a pointless and doomed approach. The IT department no longer has the luxury of being the only game in town, and we will continue to lose out as long as we haven't learned how to compete or to integrate ourselves better with the business.

malcolm
malcolm

I never realised this new trend where the Business know more about IT than the IT department, was so widespread. The major problems which I perceive are : 1. The Business bypass Technology and spend loads of money on software, hardware and services which don't fit in with the company technology strategy, leaving Technology to sort out the mess, incur further costs and require additional support staff to maintain a non-standard product 2. The bypassed Technolgy guys are under-used, even made redundant, thereby multiplying the original cost of the product and putting additional strain on the company's HR strategy. The Business should stick to what they're good at - writing the cheques (old school, I know!) to pay Technology to deliver what they know best.

a1955jw
a1955jw

My question is simple. What is going to happen internally and externally when the network goes down? All of a sudden there is no work being done when you can't connect to the cloud. The people who want to use their own device who is going to stop the various viruses etc? I know the Mac people will jump on this and say by using macs there will be no virus problems. I guess that's true for right now. Just something to think about.

fuller.artful
fuller.artful

Your piece, while prescient, is also wrong-headed, on both sides of the fence. The central problem with organizations that are large enough to have an IT department is that this department is expected to follow rather than to lead. Typically, this department receives work-orders and then responds to them, in a queue, whose positions can occasionally be re-arranged by the rank of the requester. Almost never is the IT department given the opportunity to lead. Even rarer is a visionary leader of the IT department who is willing to take the big leap and say to her workers, "Friday is Your Day. Do anything you want. Think about the Big Picture. Come up with something innovative, outside the sandbox." That is the problem. IT managers, by and large, are wimps, afraid to defend themselves and their workers as crucial elements in the success of their organization. My suggestion: take Casual Friday and rename it Innovation Friday. Encourage the IT staff to come to work in tee-shirts and jeans, or even seriously outlandish garb, and encourage them to stop thinking inside the box, for one day per week. I've been in workplaces where this is the norm, and can attest to two results: a) almost nobody quits the gig; and b) great ideas emerge. I can prove this, but don't take my word for it. Ask Google and Apple and a dozen other leading lights. Gifted workers do not work for money. They work for intellectual freedom and the chance to change history. End of story. Arthur

andrew232006
andrew232006

I think most of the problems come from people trying to manage, itemize or otherwise control an area they don't understand. Managers watch their money disappear into the IT world and they can't see where it's going. And then there's this shiny new consultant box over there that hasn't eaten any of their money. Maybe management positions should require some sort of IT experience. Most of life does these days.

info
info

...are businesspeople washing each other's backs... and they also see it as, how did cwmpers put it, 'ganging up on the IT geeks'? Let's look at things the way they really happen: A) A project is dreamt up involving IT to implement a business solution to help a business unit save money and time. IT announces that it will cost 'X'. The business leader immediately assumes the 'geeks' are overvaluing their time and spec'ing premium equipment and services so they can play with expensive toys, so they claim they can only spend '1/2 X'. In the end, the two compromise on '3/4 X', because noone listens to ITs arguments it can't be delivered for less than 'X'. The business leader claims IT has bungled things again because it took so long (because of the limited funding) and the solution STILL doesn't deliver what it was supposed to (which is now double the requirement given to IT); B) The business leader end-runs IT with their own solution to the project above, using outside expertise and resources; The slick-talking salespeople announce the project will do three times what the requirement is, and only cost '1/2 X'. In the end, the project ends up taking three times as long and costing '3 X' and ends up with a solution that MAY do the original requirement and a ton of things they'll never use. But the business leader is happy, and his bosses and peers see him as successful and innovative. The extra expense and time is forgotten... I've seen it happen. We're not considered to be on a level playing field. When I implemented our $3k wireless solution, one of the more outspoken business leaders claimed he could have done the same thing buying a couple of $50 wifi routers at Best Buy,,, But the other business people don't know enough to know better...

JBrown10
JBrown10

And the SEC fines the company for an SOX failure or some other regulation. Until a legal lawsuit comes against the company, and the advisary can prove your IT didn't turn over all the requested documents ....because of a system they didn't know about in a business unit. And that business unit cloud contract -- turns out to be in another country that refuses to put in the work necessary to extract the requested information, since it wasn't in the negated contract.... all the savings business had in its day to day will be gone plus more in one bad law case or audit failure. Since if you can't produce the documents in discovery, odds are you are not going to win the lawsuit. Or the cost of getting the documents will cost more than any savings in IT.

d3d4E4
d3d4E4

The fatal flaw of IT is that it is a white elephant. Their solutions are enterprise-wide, which means in attempt to satisfy everyone with a single solution. It will be huge, unwieldy, cost fortune and will be inherently obsolete by the time it is implemented, unless it is spectacular failure. But let???s say it will eventually be implemented. IT now has a tremendous stake in it. Almost everybody (there may be one or two sane people) will be totally devoted to it and any complaints from users will be explained as the user???s stupidity. Everybody in IT now hopes that they are set for life by supporting the solution. Any suggestions about another solution endanger this rosy future and therefore will be rigorously opposed. On the other hand, when an individual business unit searches for a solution, it will be by necessity small and cheap. Computing is not a primary function, there are no dedicated support personnel and there are no ???experts??? and most importantly, there is no money. Nothing new there. Departmental solutions always existed along with the gargantuan enterprise solutions which were incapable of solving the departmental problems. Let???s face it, not all the departmental data have to be shared enterprise wide and what has to be shared, could be done easily via cloud.

minstrelmike
minstrelmike

I see biz mgrs making more costly mistakes, especially if they hire contractors (who will _never_ say if you want to actually solve the problem, approach it a different way). It's much 'faster' to use contractors who will do exactly what you tell them and deliver something that meets specs but is useless otherwise, Can you say 'waterfall model?' That's the new model for business and using outside IT help. I don't see true innovation occurring unless managers get a lot more effective with good project management skills (ha ha) or they actually hire IT folks who ask the difficult questions that got the biz mgrs to ostracize central IT in the first place. This is _not_ win-win.

cwmpers
cwmpers

Long before there was centralisation, each business unit / division were owning (& driving) their own IT initiatives - it gives them control & power to decide what they want, how and when they want it (IT). Then came centralisation with its promise of cost-savings, do-more-for-less & all that jazz - which are seldom or impossible to fulfill with the rapidly chaning technologies. Business unit leaders are saddled with IT systems that don't seem to meet their needs (to a T), and worse still, make them lose "control" over what is still deemed as a periperal support service. So, as the wheel turns full-circle, it's payback time to make these IT geeks irrelevant by cut-backs, outsourcing and refusing to compromise on their requirments. Until - perhaps a mish-mashed of un-coordinated cloud functions, mega-leaks, security threats and escalating cloud subscription costs, forces the Business Leaders to again call for centralisation of all IT resources...

bburgess66
bburgess66

I'd have to go along with Tom Marsh here. As well as to say simply: Perhaps the managers of these individual business units should allow their expectations to be set by the CIO, rather than media hype. Everytime I see someone without IT experience/expertise trying to manage an IT team (no matter how small), they end up frustrated and in failure. No surprise there.

Freederic
Freederic

Hi there This is not the first article I read on this topic. Even here in France, there is some change of mindset on going as business projects start buying "IT capabilities" from the cloud and bypass the IT department, claiming IT does not have the required agility (which is true in most case) I definitely think that it is a trend that will re-inforce, unless your company has the critical size to own their own cloud. To make it simple, I would say 3 things: 1) we know the solution for so long : make IT projects that matter for business teams and put the highest priority on them; Concentrate on both near term results + long term vision. Show and communicate your results 2) I have seen so many IT department failing at doing this simple thing that I thought for a while I had to take a deep breath and look for another kind of job 3) something happened (don't know exactly why let's call it an illumination) and now it is all very clear in my mind. It is all about willing to improve, have an actionable action plan, execute it and evaluate it. Then redo the loop again. This should be done by each and every IT people. I am actually doing this for the past 6 months. It works. I can show results and get business engagement to follow up. And I can tell you that the organization I am in is NOT simple, is cutting down IT costs (minus 40% in some countries) for several years now. And yes, we can do better/more with less (money/people). please: stop complaining, be confident, work out your vision and make it happen. Cheers. Fr??d??ric.

kpashuk
kpashuk

Thanks Steve for bringing attention to the importance of IT to remain relevant. Any IT leader who is caught by surprise at being bypassed has only themselves to blame. IT's role and the environment we work in has changed dramatically over the last while, and it will be those who bunker down and expect the world around them to adapt will soon find themselves running underfunded IT departments charged with keeping the "lights on" at the lowest possible cost. This doesn't mean that being banished to maintenance mode is inevitable however. But it will take changing the way we do IT. I've been blogging about the changing role of IT for the last year or so at www.TurningTechInvisible.com

tom.marsh
tom.marsh

After 10+ years of layoff after downsizing after non-replacement of departing staff, is it any wonder the IT departments don't meet the companies needs? All of your senior people have been layed-off, all of your promising young-talent has been over-worked by wearing "many hats" for the last decade, and aren't interested in sticking around, or you've already outsourced his job to some other company and he couldn't care less what happens to yours, as long as he "meets his numbers." CIOs and IT managers have had a gun to their heads to "do more with less" throughout this entire time, too, and that's how we got to a point where nothing is ever finished on time because the people executing the projects are wearing 5-10 "hats" in the organization and can't ever spend an entire day dedicated to anything. One way to keep these projects where they belong (with IT) would be to approach business units about their need and suggest a cost-sharing relationship for employees who might develop the products they want. While there would be the challenge of determining the reporting relationship (managers are notorious about not wanting to pay for people they can't boss around) it would give the business-unit a stake in the survival of the IT enterprise, rather than the alternative, which is a stake in its marginalization.

Tony Hopkinson
Tony Hopkinson

or simply mendacious. If the alignment issue is only down to IT, why does it still exist, given I've been hearing the stupidity you are extolling for two decades. How can an IT department align itself with a business, that either doesn't know what they want, won't tell us what they want or won't admit waht they want? The real disconnect once ether side of the so called Business/IT divide, which is in fact a total fiction, is IT is long term, commercialism is not. It's not right and wrong it's just different, until both sides (and the failings are far more prevalent on the business side of this voluntarily excavated chasm) admit what the real problem is we will all continue to fail to be at least as good as we could be.

AnalogJoystick
AnalogJoystick

I'm going to call the company that put it in, that provides 24x7 response without sitting in the back room searching craigslist and facebook all day.

HypnoToad72
HypnoToad72

We live on money. Also, you cannot wake up one morning, snap your fingers, and say with a big grin that you will be innovative. Real life is never so planned, never is mother nature. Only hubris and arrogance make such mindsets, and are usually told by those with the gift of a silver tongue to make people think they are visionaries. Looking at their histories, they're really quite vulgar (Google's terms of service giving them a royalty-free helping hand to everything customers put in, and will be able to profit it before the user does, and enough of these big companies have all engaged in enough unethical acts to make me go on by individual issues instead of glibly calling x, y, or z companies oh-so-perfect. They are not, and plenty of people would be here all day citing dozens of incidents of unethical acts and some would still choose to be cute little sycophants. Still, since when does ethics lead to profits? Anyway, IT managers love listening to the pied piper. Pity the piper won't take responsibility for what he's encouraging the "management" to do the moment something goes amiss... and it WILL...

d3d4E4
d3d4E4

It is an IT department, which comes with a projest to solve all the company problems and then tries to shoehorn everybody into it. I never saw IT estimates of cost and time to be well below the estimates, partly by trying to fit round peg into round hole to prove that they were right. Some "advanced" IT departments actually set go/no-go points in the projects, but I have yet to see ever abandoning the project when it is clearly in no-go condition. Ther was too much money thrown at it, so it is not allowed to fail even when it is failing miserably.

NickNielsen
NickNielsen

Don't forget HIPAA and PCI (Payment Card Industry) . Last I heard, the fine per HIPAA violation was $12,500...and each discrete record that is potentially exposed counts as one violation. It can add up very quickly. For example, one of my customers misplaced a hard drive containing data for more than 50,000 prescriptions, possibly leading to a potential fine of over $625 million. (Thankfully the hard drive was found, still in the pharmacy, so there was no violation.) And the PCI is cracking down on merchants for security breaches, to the point they are considering denying access to their systems for major breaches or failed audits. If you can't accept credit cards in today's economy, you might as well be a street vendor (and even some of them accept cards).

d3d4E4
d3d4E4

Because it is limited to a business unit, it actually cost less and gets fixed faster!

AnalogJoystick
AnalogJoystick

that got delusions of grandeur and thought they could run the business. So now more and more departments are getting their IT support from Google, Microsoft, Apple, etc. I'll call you if I need you but don't sit by the phone.

d3d4E4
d3d4E4

Let IT manage a real time control systems. It is spectacular!

HypnoToad72
HypnoToad72

Yours is a good post, but there are two ways to succeed in this paradigm humanity is setting up for itself... to remain grounded in reality, or to convince others you're a visionary and even massage their emotional impulses to make them feel nice and warm inside, just to get them to do your bidding or buy your product. I prefer ethics. Maybe I'm mentally ill...

zaq.hack
zaq.hack

Tomorrows business leaders will expect I.T. to function like an App Store. They are already getting useful services "from the cloud." I've personally seen a handful of businesses start the move to Salesforce.com without telling the I.T. department or including them in the evaluation! My nerdy brothers and sisters, we can rail against this change all day long, we can dislike it, we can be vocal about it ... but it will not delay things one single minute. For years, I.T. security, network, storage, etc. have said "no" to various business initiatives (usually for good reason), but now, you will have to weigh the option of the business "outsourcing" that service from the cloud no matter how hair-brained it may sound.

AnalogJoystick
AnalogJoystick

just something you have to work around to get things done.

HypnoToad72
HypnoToad72

IT management did this to themselves and the industry. The next we know, tax money will bail out the companies while the workers (current or erstwhile) are handed the bill... oh, stuff like that's happened already... But if people really want to ask why IT departments are disliked - it's not the money as much as it is people in other departments are fed up with IT going its own route and forcing itself on the others. The others might have their own needs, and when the IT department flagrantly ignores or sidesteps them... you bet customers/end users/sheep/whatever are going to be upset. Worse, if the CFO or CEO is pulling the CIO's strings, maybe the other divisions should be made aware so blame can be put at the root of the problem and not a symptom, magically thinking that eliminating a symptom will cure the problem...

d3d4E4
d3d4E4

It was not the senior people who were let go. IT senior people are attached to their obsolete technologies and illusions of grandeur. IT is on Titanic and good ridance!

pjboyles
pjboyles

Plus 100 to Tom. Why do the senior executives who read all these "white papers" and "reports" that say you can do 10 times more with less never ask "does this apply to our business?" Or more importantly, "how will this impact the business?" There should be review of IT expendatures as relate to operating the business not just cut this amount. Further, who at the top is allowing business units to alocate money internally for IT functions? If there are IT needs then that funding should go to the IT department! (But wait, IT should do it all for less!) You cannot cut every year and expect things to continue to work. At some point your IT infrastructure will implode. I just hope it isn't a business I am dependant upon that has that first implosion. Or the 20th. I think it will take about 20 before most business wake up and realize that IT is an enablement expendature.

tom.marsh
tom.marsh

...And they'll respond... sooner or later. If you perceive that all IT people do is search "craigslist and facebook" all day you are very ignorant of what is actually happening.

tom.marsh
tom.marsh

We do live on money, but part of the process of "getting money" from customers involves creating things they actually wish to purchase, buy, and use. Over the long-term, a company with no eyes looking to the future that fails to innovate will suffer as their products stagnate in the marketplace, and will move on to a downward spiral once their products become useless because they're out of date--or are perceived that way in the market. The overall point (that everybody should be responsible for innovating in some portion of their work-week) is a wise idea, even if dedicating 20% of every FTE to it isn't-as-wise of an idea.

tom.marsh
tom.marsh

Funny, I was thinking that would be a great label for a business department trying to implement a software project on its own. P.s. Only a poorly managed or leaderless IT group "doesn't understand the business."

Tony Hopkinson
Tony Hopkinson

From a developer so in love with their design that they keep rescuing despite it's flaws, to a business owner throwing good money after bad to try and recoup what they've already laid out. To blame it on the IT department is disingenuous at best. I learnt along time ago that I have bad ideas, learnt to recognise them and bin them. I've recomended approaches not be tried, I've recomended that they be ditched, yet still here I am trying "just one more fix" to a flawed project. As for an IT department coming up with a solution to everybody's problems, that's a business head's outlook no competent propeller head would ever say that. If you heard it, you've either employed incompetents or crooks, or much more likely , it was because that was the only thing you were prepared to hear.

NickNielsen
NickNielsen

At least, not without prompting from the C-suites: "Can't you guys come up with something that we can use across the company that will make us more efficient?" And It's not IT that makes funding decisions, it's the bean-counters who continue to throw good money after bad when the project proves to work exactly the way IT said it would if it wasn't funded properly.

NickNielsen
NickNielsen

Sure, it might have been cheaper to start with, but what about the impact on the bottom line when the in-house solution fails and the business unit is stopped dead?

NickNielsen
NickNielsen

You don't even need to go to the cloud. All you need to do is shut down all your IT equipment. Completely. If it's "peripheral", you won't miss it at all...

tom.marsh
tom.marsh

What you describe, (future "business leaders" wanting IT to be like an "app store) isn't that different than what we have now, which is executives viewing IT as a magical black-box, which is really all an "app store" is too--a magical black-box that "safe" computer programs come out of. So, really, how will those unrealistic expectations be any different than the current generation of executives unrealistic expectations that we should all work 60-hour weeks for 40-hours of pay, and be "on-call" at all hours we're not in the office including (but not limited to,) nights, evenings, weekends, and vacations? It's just the next iteration of unrealistic expectations, all being drummed into young business peoples' heads.

tom.marsh
tom.marsh

I realize this is hard advice to take when the implied-threat of every request made to the IT department is "...or else we'll go behind your back and do it anyway..." but I suggest patience and teaching. This is where the good-will you should have been building up by explaining those "No" answers will come in quite handy. If you haven't been doing that all along, this will be a lot harder. You need to explain the risks involved, the costs, and the total lack of flexibility "one-size-fits-all" cloud-based business apps actually represent. In simplest terms, cloud apps work great for simple businesses with a handful of people in them who don't have a lot of "business process," because in essence what business-leaders should be hearing when the words "go-to the cloud" are spoken is "change your business to fit the application." The problem with a "cloud" solution like Salesforce is that while it may fit you today, there's no guarantee the next set of changes that get shoved down customers throats will fit your model going forward. This is the inherent, fundamental weakness of buying business applications this way, and can't be easily "explained away" by a slick salesman or anxious business unit: The vendor has total-control of which "version" you're running, and is free to change any feature that they want, any time they want, in any way they want, regardless of how that affects you: Your only recourse is to cancel your account. When I hear about business units rebelling "because IT says no!" what I really see are spoiled children, whining because they didn't get 100% their way, immediately, in every case, and now seeking a way to strike-back. But that childish mentality will ultimately only damage the business, and leave it stuck with huge expenses owed to a variety of "cloud" service providers who have no clue about your business and may or may not be providing what they've agreed, or what is needed. And, of course, independent IT projects in each department will be far-less efficient because--hey, what happens when sales wants one solution and marketing wants another? Answer: They both get what they want, spending twice as much money, and making it impossible to cross-train those groups. Genius!

jsreilly
jsreilly

We use some java on our website, just like a lot of people do. However, our IT department doesn't let automatic updates of java go through to our computers due to security concerns. So they wanted to know if we could just get rid of java apps on our website and never use them again so that they can get rid of java on our machines. We said "No."

HypnoToad72
HypnoToad72

Normally I think people giving negative votes should provide an explanation. I must congratulate you; yours is the first post that speaks for itself as to why people vote downward. But same your vitriol for politics. It'll be just as useful in that game as well.

HypnoToad72
HypnoToad72

People look at a figure deemed 'authority on subject' and blindly follow it. That's not managing. That's being a blind fool. And you're right - those doing the telling of the new paradigm should take responsibility. But we all know they won't. It's easier, and more fun, to "delegate".

nyssssa
nyssssa

... and I would miss it horribly. That said, if people are expecting to be supported by Microsoft et al, they need to get used to sitting on the phone.

jsreilly
jsreilly

... he does have one valid point: I have met senior IT people, usually who got their job many years ago, who refuse to let go of older technologies. This isn't necessarily a bad trait, but it can be a handicap. I understand comfort, but sometimes comfort becomes a crutch that prevents you from springing on a new opportunity. For example, a local bookstore where I love to go is in trouble. Their desktops are all running Windows 98 as it is the latest operating system that will run their inventory system. The IT guy and the owner are close friends, and both reinforce their dependency on the older system "because it works good enough." I'd see that as a problem, and I wonder if it is why books I order take so long to arrive (note: I still buy there cause the staff are knowledgeable and helpful - despite slow speed!). So obsolete technology, and those who continue to use it do cause problems for IT in the wider world (Heck, my job makes me use IE6 for internal functionality on our "Portal" - sadly not like the game, which would be awesome). As for "illusions of grandeur.." I think every profession has people like that. And once the adoring masses start realizing that I should be Lord Emperor of Earth I'll fix it :D