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May

The IT function of the future

Changes in technology, society and the economy call for a stronger power of change of and in the organisation. In this digital age, IT makes the difference, so it is not surprising that the IT department plays a major role in this process of change. What is required in terms of organisation, technology and leadership? Leading Dutch CIOs gave their view before they participated in the discussion.

From the contacts with some of the leading Dutch CIOs in preparation for this meeting, it became clear that the changing IT organisation is still a current topic. The challenges especially pertain to the managerial aspects: the area of tension between the IT function as a cost item and a value source, the selection of objectives you want to meet with IT, the responsibility to be assumed, and the approach (whether or not bimodal).

“How IT is to be organised is primarily a strategic organisation issue rather than a matter of purely technological choices.” With these words the meeting was opened by Walter Bisschop, manager Strategic Accounts at Red Hat, which was one of the initiators of this round-table discussion. “This is why we wanted to submit this subject to a select company of leading CIOs, to learn from each other and to understand the challenges each one of us is facing.” His colleague Jean-Jacques Putters, manager Sales Commercial Accounts at Red Hat, added: “The development of technology remains a fascinating phenomenon. I am really curious about your individual views on IT. Perhaps we can use these views as a basis for sketching the great outline of the IT function of the future.”

During the round of introductions, IT proper, the more technical IT, still proved to be on the agenda. Participants said they were working hard on cloud transformations, dealing with legacy (“even in a greenfield situation you are building a legacy from day one”), integration of environments and the possible role of (often expensive) middleware involved. The present-day dynamic was also mentioned: “Everything we are doing today is provisional,” said Michel van Hout, CIO at Transavia. “Nothing is really finished, and yet we act as if it is.” As a CIO and IT function you have to find your own way to deal with this, according to Michel.

Dissatisfaction
Van Hout reduced the issue to the question of how to translate ‘dissatisfaction about the present’ into the ‘possibilities of tomorrow’. Preferably as quickly as possible, but a couple of obstacles need to be overcome first. How the IT function is looked upon is one of them. The CFO, for instance, looks at the increasing costs, whereas innovation is about adding value. “This is the trick I use,” the Transavia CIO continued. “Separate the costs for run from the costs for innovation to have a better picture of the costs per unit of the installed base on the one hand and the added value on the other hand.”

You can place the one with the COO, and the other might well be accommodated with the IT function of the future. It very much depends on what you want and on what you do. The business has a say in the matter too, and there will always be a role for architects. In consultation, it is decided how time, money and energy can best be divided for an optimal IT operation and innovation focused on best value. “In these portfolio consultations, we do not look further ahead than three months,” said Michel van Hout.
How can you prevent the cost discussion from flaring up again when the value is delivered and innovation becomes part of the run? Van Hout believes continuously recalibrating the installed base is the solution. “It’s like playing the game of Monopoly, you pass the GO field again and again. Every year, calibration is performed on the basis of the costs per unit. It leads to a much sounder discussion.”

Aims and means
The second subject was put on the agenda by PostNL CIO Marcel Krom: what are your IT aims and which resources do you use to achieve these aims? “When formulating an IT strategy in 2013, we used the business strategy as a basis: less post and more parcels. As creating an IT strategy in this way was quite complicated, we analysed some 150 projects in our company. Several generic digital themes emerged from these analyses.”

Krom: “An example: in the future, everybody wants to be able to trace everything. With this idea in mind, we came up with about 80 principles that will be decisive for our future. Every theme was divided into innovation domains which in turn were translated into assets that we build in the context of our digital transfer. Van Hout reduced the issue to the question of how to translate ‘dissatisfaction about the present’ into the ‘possibilities of tomorrow’. Preferably as quickly as possible, but a couple of obstacles need to be overcome first. How the IT function is looked upon is one of them. The CFO, for instance, looks at the increasing costs, whereas innovation is about adding value. “This is the trick I use,” the Transavia CIO continued. “Separate the costs for run from the costs for innovation to have a better picture of the costs per unit of the installed base on the one hand and the added value on the other hand.”

You can place the one with the COO, and the other might well be accommodated with the IT function of the future. It very much depends on what you want and on what you do. The business has a say in the matter too, and there will always be a role for architects. In consultation, it is decided how time, money and energy can best be divided for an optimal IT operation and innovation focused on best value. “In these portfolio consultations, we do not look further ahead than three months,” said Michel van Hout.

How can you prevent the cost discussion from flaring up again when the value is delivered and innovation becomes part of the run? Van Hout believes continuously recalibrating the installed base is the solution. “It’s like playing the game of Monopoly, you pass the GO field again and again. Every year, calibration is performed on the basis of the costs per unit. It leads to a much sounder discussion.”

The digital assets are built across all programmes, for instance with respect to connections based on the API framework, or for ensuring that master data, customer identities et cetera are in order. We are currently in the process of setting up a central portfolio management.”

So those who build the assets under IT responsibility, innovate the company from the IT function. Or do they? Krom: “We speak of reverse engineering the IT strategy, because it doesn’t begin with IT. The digital assets are in line with the business objectives automatically. Another example: when ten people from various departments ask for a bar code, they all want to get their own bar code fast. It is much better to this well in one go. To this end, we have combined all initiatives and business cases. So it all starts with the business.”

Everything has to take place under a central architecture, however, and this requires funding. “As IT, you sometimes make decisions that are too important to be left to the business,” a participant says. Jean-Jaques Putters: “As an IT function, you sometimes play the role of the objectified conscience when it comes to architecture. Otherwise the company, and the business in the first place, is blindly following every hype or hip supplier.” This requires tenacity, perseverance as well as communication.

Basis
How do you, as a CIO, assume responsibility, and how do you create support with the board and the business? Maurice van Veghel is a hands-on expert in this field. Nine years ago, he began at Sligro Food Group, where he had to see to it as a CIO that IT was functioning properly in particular. Little by little, however, the current systems were no longer good enough: everything had to be faster, and new wishes and demands came up, partly because Sligro broadened its activities from B2B to the consumer market and foreign markets.

Van Veghel: “It’s as if you, as a company, are nice and snug in the bus to Italy, while – due to a combination of business ambitions and new technological possibilities – destination Dubai is an alluring option. Next, they look at the IT function, for everything has to be arranged of course. And it can be done. Not by bus, that is, but by plane.”
After the first questioning glances, a slight panic comes over you, for the plane takes off, and it might crash. And the cockpit is crammed with complicated technology, which IT specialists are responsible for. Van Veghel: “To the first mode (the bus) a second one has been added: faster, better maneuverable, more high-tech but also more expensive and riskier. The rest of the organisation cannot lag behind, though.” It is a transformation that can be compared with that from stone into digital and from letters into APIs.
At Sligro, Van Veghel quickly realised that for the journey to the new destination to be successful it had to be explained continuously what IT was doing. Besides, there is an organised dialogue about such subjects as architecture, building ‘minimal viable products’, and a good alignment of business, management and IT. This communication is crucial: “If the CEO doesn’t understand, a project doesn’t stand a chance.”

Organisation
Digital change does not only concern interaction between IT and the top management but also interaction with the middle management, those who have the biggest chance of being at the losing end in digital transformation processes. This middle management – it has already been mentioned – will have to be on board to make the changes a success. Communication as a success factor.

It is remarkable that the discussion is hardly about the question of how projects need to be addressed methodically: devops, agile, cascade and/or continuous delivery. In most cases, a mix of approaches is chosen.

The attendants did not feel very strongly about the widely propagated bimodal approach, a subject about which Univé CIO Frank Dijkstra made some critical comments in the build-up to the discussion. In his view, it is a matter of ‘winning the battle and losing the war’. “There is no such thing as bimodal. Maybe for the very short term at the very most. You can realise a quick gain by separating innovation from the rest and then trying to figure out if something has to be changed.

In his opinion, the focus should be on creating a future for the organisation in the long term. “The slow world no longer exists, not even for the so-called ‘slow’ mode. The current operation is equally flexible and has to deal with change continuously. For me, the real challenge is in transforming the whole organisation, innovation as well as operation. Ensuring that the business understands IT is the big challenge. Simultaneously, you have an IT organisation that has been drilled for many years to complete projects in a process-based way and that has to be able to follow the fast changes all of a sudden. For us, CIOs, bringing about this culture change is the main challenge.

Rosy views
In addition to technology, setting up the organisation is another important aspect of the process of change. Several methods that were talked about during the discussion can be chosen from. They may not be equally effective in all situations, but CIOs can select what is productive in their organisation. Walter Bisschop from Red Hat: “It is unmistakably about people. Technology continues to play a major role too. Specific knowledge of protocols, languages, and details is required. It needs to be outsourced somewhere so that hardware and software can be controlled in their mutual context.”

The CIO has to understand IT to a sufficient extent to be able to play with it without being dogmatic. A considerable part of the technical knowledge is no longer available in-house but has to be sourced from a supplier network, for instance. Frank Dijkstra: “You have to know how to bring it all together, and this is where architects might come in. They should not be overestimated, though, for architects are very good at taking a rosy view. What matters is how you use this technology and how you prevent problems.”
Maurice van Veghel: “As a CIO you are the director on the set.” Dijkstra: “Yes, and I expect the parties around me to keep me alert.” Yet, you take a risk as a CIO. You link your roadmap partly to the supplier’s technical roadmap and business roadmap. Marcel Krom: “You have to be well up in technology to be able to make the right choices.” Michel van Hout: “Especially in matters on the basis of which you differentiate.”

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