The Future of IT

This week's UCStrategies Industry Buzz podcast is a reaction to a recent article proclaiming "IT is Dead." Here to discuss the future of IT departments are moderator Dave Michels, and Jon Arnold, Kevin Kieller, Marty Parker, Michael Finneran, and Steve Leaden.

The transcript of the conversation is included below. Please feel free to join the discussion through the Comments area at the bottom of the page.

Dave Michels: This is Dave Michels from the UCStrategies team, and today we have a bunch of experts who are going to discuss the topic of IT and its future relevance. The IT department has been under fire, or experiencing an unusual amount of competition than it's had historically with a lot of various services available that various departments can download and try directly off of the internet without having to go through a formal procurement process, and it's put a lot of pressure on IT departments and enough pressure that people are actually questioning whether IT has much of a future or not. So today we're going to discuss this topic. Let's go ahead and start off with Jon Arnold. Jon, what are your thoughts on this?

Jon Arnold: Thanks, Dave. I will be fairly brief. This isn't my core focus, but it does speak to so many things that we all look at every day. And I think others may speak a little more extensively to that general article you directed us to Dave, because it really does touch on these topics with some numbers. I think the big thing that I certainly see in this space is the idea that, as you say, the competition is coming from all kinds of places, not the least of which is the end user. I think there are a lot of parallels here to what we went through with just straight up telecom, when VoIP kind of came on the scene and really kind of shifted the balance of power away from the core network obviously to the end users where the intelligence keeps getting pushed further out and the ability to self provision really changed the nature of how IT interacts with end users. And I think UC definitely it takes that up a few levels. And there are so many things attached to it that we were all trying to figure out and of course we talked extensively about BYOD and mobility and then all the cloud stuff. All of these forces are just coming from outside of IT. And I think the main message I want to just leave to set the table here is that it's making it very difficult for IT to show a clear financial business case benefit to the organization. It's always been used as a resource, as a cost center, and now with so many pieces of any organization today being viewed as revenue centers by any means possible, it's getting very difficult for IT to do that.

And to that point you mentioned earlier, Dave, the idea that the individual departments within an organization now can access so many of the tools on their own without IT. They're really running a danger of having a real viable value to add to this whole thing. So I think there's a big disconnect there and I think coming back to our readers, what can the UC vendors do? I think there's a pretty substantial opportunity there to help IT become more relevant in the board room in terms of explaining how these technologies bring value, but more importantly, the value of a centralized resource especially when you start getting into topics about security when you have to do enterprise-wide things that go beyond what any one department can or wants to do. That's the real critical area where IT, I think, can bring a lot of value. And whether it's cloud-based or premised-based is maybe secondary to the idea that there is a centralized body that kind of takes control of these things. And I think that's going to be ultimately their challenge for survival, and the way things are going, but again as I said, I think there is opportunity here for vendors to really work more closely on that level beyond just the actual technology solutions that they're selling.

I'll leave it at that and I think there are a lot of branches here that people can pick up on from here.

Dave Michels: Thank you, Jon. The ramifications are huge, because from a UC perspective, who is the buyer? It's traditionally been the IT departments, and maybe that's not the buyer moving forward, but it's hard to imagine, at least from UC, that it wouldn't be IT. You can see that from various different types of applications.

Let me go to Kevin here and Kevin let me ask you. What is the purpose of the IT department, and is it more of a happenstance or a necessity, or is it more strategic in your mind?

Kevin Kieller: Thanks Dave. Kim Stevenson, the Intel CIO, was quoted as saying, "There are no IT projects; they are all business projects today." What I see is that was really the purpose of the IT department all the time. There were always supposed to be business projects. It's just that lots of members of IT somehow didn't get the memo and so they were busy upgrading to release 4.1.5, and they thought that that was strategic, and they forgot that it was actually supposed to be helping out the business. I think, like all of our home budgets, when times are good we can spend, and we don't really have to look at what we're spending on, but as times have been tough and certainly I think many of us and many organizations have seen that over the last several years. People start saying, "what are we spending it on, and what value is it providing?"

So I think that the purpose of the IT department, like many of the departments that you have, whether you run a small business or a large business, is supposed to benefit the organization overall. And this change in IT is simply because people either didn't understand that and now consumers are able to call IT's bluff. So when IT used to get away by saying this is going to take us three weeks and cost us $40,000 to implement, consumers are now tech savvy. They go out and sign up for a cloud platform, buy a device at their local electronic retailer, and bring it in.

The Harvard Business Review did a survey where almost half of CEOs rated the CIO's understanding in terms of the business as being poor. And I think that just really goes to show that not only is it the techy people in IT who perhaps had lost sight of the fact that they're supposed to be aiding the business, but it seems like at least half of the CEOs believe that their CIOs or the leader of the IT group has lost their way. And I think, to bring it back to the UC space, for a long time UC was in that quagmire of not being able to demonstrate the value to the business. And I think that what it comes down to is, IT is supposed to provide options. It's supposed to outline clearly the impact of those options. That includes cost. That includes return on investment, and then it is supposed to make recommendations to the business. So the solution to me is not to have anarchy and everybody in the organization create all these multiple shadow IT groups, because they run into the same problems if they don't address the business objectives and measure them and put costs associated with them. So I think the solution is, IT needs to do what it was always meant and supposed to do. And there really are no IT-only projects because they were always supposed to be about business projects, and if people are waking up and figuring that out, that's a good thing for me. And back to you.

Dave Michels: Thanks, Kevin. It's not just UC. Some of these articles that are talking about IT's decline in importance are also pointing to a problem for Microsoft and they suggest that since Microsoft is traditionally sold to the CIO, whereas say Apple who sells to end users, the Microsoft model's in danger, too. Do you agree or disagree with that thought, Kevin?

Kevin Kieller: Well, I absolutely think that where people just bought all that Microsoft's offering, and they didn't really have to identify what the value of it was, certainly I think we're seeing that in terms of some of the bundled offerings organizations are saying, "Well, wait a second. If we don't use a good portion of this bundle, is it really a better deal to buy the bundled price, because we're getting components for free?" But a free component that you don't use has no return on investment...

I do believe that Microsoft and its bundling and other vendors and their bundling, will have to do a better job of helping purchasers prove the value of each of the individual components. And perhaps pro-actively, if Microsoft actually was able to say, "Look, here's an option. We'll break out the individual components, and here are the core ones, and if you only bought the core ones it would cost you X, and this is the value that your organization would derive; and here is a bundled price, and it gives you some additional things and look at that as another option. And then try to help the purchaser make the business casethat buying more and paying a little bit more - they'd have to prove it had value to an organization. I think that could be something that Microsoft will increasingly either choose to do it proactively, or they will have to do it reactively because people are looking at these bundles very closely now.

Dave Michels: Thanks, Kevin. It seems that core infrastructure pretty much has to go to IT. And so the question is really more around the sizzle stuff or the stuff that sizzles.

One of the things that comes up regularly in this conversation is I think it goes back to Gartner; a quote about the CMO having a bigger technology budget than the CIO. But I'm not sure I really understand or agree with the conclusion on that because it just seems that marketing now has becoming digital. I mean it used to be a Superbowl ad. Now, it's ads online; it's webpages; it's Facebook; and those are becoming technologies and you're hiring developers to create that. What are your thoughts on that, Marty?

Marty Parker: Well, let me start from a different place and I'll come back to the marketing budget in a minute. This is a very interesting discussion from my perspective, because I've been in the industry long enough that when I worked for IBM several decades ago, they were educating. They had executive education centers where they brought in chief executive officers and taught them the importance of having a "VP of DP," they called it; a vice president of data processing. In those days, computing, as we know it today, lived in the accounting department. That is all that it did and IBM led the charge to bring that up to the attention of the executive officers. And they continue to lead that charge today with their big data initiatives; some of the things they're doing with their Watson high capacity intelligent computing are really transformational. So it leads to this question of, "What is IT?" I'd like to go back to that.

I think that IT has two purposes: strategic expertise and operational management. And the top IT executives in companies such as Walmart, and Walmart by the way, is entirely focused on the information they have about you and the information about what people buy in their stores. There was a great article 10 years ago about their use of information as a strategy. That's why they put bananas in the cereal aisle, in addition to putting them in the fresh produce area. They have bananas in the cereal aisle because that's where people decide to buy bananas. So there's a strategic expertise that IT brings to the table. In today's world it's about changing the shape of the organization. And I'll come back to that which will bring us back to marketing.

The other is operational management. And this is mostly - once the strategy is in place - is a matter of economics and mostly a matter of service of the strategy but after that economics. Therefore, if I've got something that's very routine and very non-strategic, I'm going to get it out of the building and one of the best example of that is payroll. Almost no company runs their own payroll anymore. You can get it done so much better by ADP, by Quickbooks, by all sorts of people. And payroll is a complex thing. It has to follow a lot of tax laws, a lot of laws about administration of pay and that sort of thing. So why not just let one company know all that stuff in great, great, great detail and don't bring it into your building. And I think we'll see continued decisions along that line in terms of atomizing. "Atomizing" the applications and deciding which apps have strategic value - that is, should be in my building, inside under my roof, inside my enterprise, and which don't have to be. Interestingly, if you recall General Motors thought that all of IT was a commodity and they outsourced it entirely to EDS about 12 years ago, maybe 15 years ago. And after about eight years of that they brought it back in-house because they realized that building a car was an information technology problem, not a metal bending problem. And so they brought it back in-house. So you see that the closer to the core of the business you get, the more important it will be to have control.

Now cloud computing may let you host your servers up in the cloud more economically than you can own them on premise. That's another whole conversation, but that's IT putting the infrastructure where it best fits economically, not IT being outsourced. So I think there's this very interesting distinction. Now we come back to unified communications, and by the way, I'd say that apps in the cloud can look like they're really exciting and fun and easy, but they're not the cheapest, for sure. You start paying on a per-app/per-user basis, it will really drive the budget up. And, they're definitely overly simplified because they're not integrated to your enterprise data. And if you start letting people integrate the enterprise data to those mobile devices and so forth, then you've got all sorts of other issues and if you're smart, your IT manager will be overseeing, because it's a strategic issue of who owns the data and what kind of privacy you're going to be able to maintain on it.

Now what that leads to when you come to Unified Communications, I believe, is the question of is unified communications strategic or operational. And by golly, the way most of the vendors are selling it, it's operational: "I can give you cheaper phones; I can give you easier mobility with UC without any thought." Maybe there's some thought, but without any sales motion around "andthiscanchangeyourbusiness." And if you're not changing the business, then you're not strategic, and if you're not strategic, then you're going to go on the outsourcing heap along with everybody else, and it's going to be commoditized in the cloud. UC will be as many different pieces as the cloud hoster decides to put in the offer, and they'll sell that to you as a bundle. You'll have no strategic levers to it. So my encouragement, as you know I've been saying for years now, is you have to get it out into the lines of business. And many of these articles that had been written, they come to the right answer for the wrong reason. They say IT is obsolete or purposeless or lost or whatever, therefore, you have to go to the lines of business. Well, you should go to the line of business because that's your business. Duh...that's where your business will find strategy. So you need to really focus on it from a strategic view and then you can decide what kind of an enterprise you want to have in the future.

Dave Michels: Marty, how do you go to the lines of business? And which lines of business? Is there a general rule that had to champion UC or is it just too widely varied? What are your thoughts on that?

Marty Parker: I think it's a simple question. If I were advising the CEO, and I were in the CEO's management meeting, I would ask this question: "Which of you think that the technology that you're seeing around you, the stuff you're seeing even personally, the stuff you hear others in the industry doing, could differentiate your business function for our company against the competition or to provide some radical economic advantage?"

Walmart answered that question, by the way. Just go and look at it. But that's the question. By the way, you could ask, "And then I want to you to rate it on a scale of one to 10. I want you to describe it to me or maybe in two dimensions. One dimension of how much differentiation can you get against the competition, and the other is how much can you provide economically?" And the LOB with the highest score would be the one I'd start with. And they won't all be the same. Some lines of business are actually in, I'll say, very "mature" industries, maybe selling to demographics that aren't susceptible to technology change. Others are in very dynamic areas where technology could give them huge transformations. So I think that's the kind of question to ask, Dave, is to get at these LOB leaders because they're the experts and they've got people working for them who know their business really, really well. And when we do this, by the way, and we did this with an insurance company and we were talking to the enterprise architects who were surrogates for the lines of business but it turned out that in this particular insurance company, it was the claims process where IT could make or unified communication could make the most difference because claims was the most volatile, the most communication intensive, and the most time sensitive, and the faster you settled a claim, the less it cost you. So it was an obvious decision.

Dave Michels: But Marty, UC tends to be an organizational-wide implementation, so how can a claim service for example or a claims function, drive a project to that magnitude?

Marty Parker: Well, it turns out that it's not an organization-wide decision. It's only organization-wide if you think of it as a commodity back to the operational side. When you think about UC strategically, it is very easy. This particular insurance company had 70,000 employees. They only bought 20,000 UC licenses based on that decision. And they only needed it for the 10,000 field people, but they figured that those people would be interacting with 10,000 people in the back office so they bought 20,000 licenses. That was the footprint of that application. And you can plug UC into what you already own without going enterprise wide. And you could even, by the way, if you find that one brand of UC is really great for claims and another brand of unified communication is really good for underwriting, you could have two different sets of UC technology in your company. Maybe they're hosted so you don't have to stand up two sets of servers but you can do that and they can inter-operate through federation. So there's so much flexibility. But the question is, "Has anybody thought about the strategy?"

Dave Michels: Very interesting.

Marty Parker: Now you come to marketing. Marketing would raise their hand when I asked that question. They would raise their hand and they would say, "We can get huge differentiation if we can master this technology." Look at what mobile apps are doing for people's marketing. Look at what some of the other web tools are doing for people's marketing, and you start saying wow - the guys that get on that bandwagon first are going to rule their industry. The extreme example would be

Amazon. What did they do? They took retail marketing, which used to require a store, and they took the store away.

Dave Michels: So Marty, what is your advice to a CIO?

Marty Parker: Good question, Dave. The CIO should be strategically creative and competitive and should challenge his or her team to be the same.On the strategy side, have business process analysts on the team to help the lines of business find the opportunities for optimization through creative application of technologies. Also, have skills available to customize applications and the user experiences where appropriate.

On the operational side, hone the skills of competitiveness, including skills in make-buy analysis that will allow an optimal balance of strategically differentiating technology, which is likely going to be run in-house, and commoditized services which may be in-house or outsourced to the cloud.

Dave Michels: Okay. So one of the proof points that IT is less influential as it was is BYOD. And I think some would argue that BYOD is actually strengthening IT's role to bring in all these resources. So let's turn to Mr. Finneran and see what he has to say about this.

Michael Finneran: Thank you, Dave. Yes, certainly in one regard BYOD is reinforcing IT and another of course, it's the prime example of... business users going outside of the traditional IT channels in order to get what they need. But I enjoy this topic as well. It brought me back to Nicholas Carr's classic article back in 2003, "IT Doesn't Matter." And I think, though, IT will remain. Certainly it is a victim of bad user perception, as Kevin had pointed out. I still recall my son having his first job in a big organization came home after about two weeks, stepped into the kitchen and shook his head and said flat out, "Are all IT people a-holes?" ...having had his first run-in with corporate IT. But certainly there's a certain set of core skills that are required. Certainly the infrastructure, the bandwidth, and some core applications. Some of those like payrolls, as Marty pointed, out are being outsourced but things like general ledger, there's just a certain amount of core stuff we have to do. But key in those responsibilities along with infrastructure will be security and compliance which is where I'm spending a lot of my time now because if you go to a BYOD environment, regardless of who owns the device, it is still the general sense that IT is responsible for the security and the information and applications that are on that device. So we spend a lot of time figuring out how to do that effectively without being a real thorn in the user's side.

But certainly knowing about the business is key. And that's one of the points from the article that you'd sent around earlier that really struck me was that successful organizations have a real partnership between the CIO and CMO. And it brought to mind one impressive CIO that I've met is Bill Schlough, who is the CIO for the San Francisco Giants who worked with the CMO to come up with a flexible pricing plan. Turns out for decades baseball tickets cost the same regardless of whether it was a day game, a night game, a weekday, a weekend and who we were playing. The Giants have come up with a pricing strategy that looks at just how valuable that particular game is. When the Dodgers come to town those are going to be expensive tickets. So to reinforce and wrap up on a point that Marty made, really the key for the CIO is to know your business as well as you know IT. There's great value, we found, in outsourcing to specialists, and well, you only have to look at salesforce.com to see how successful that model has become. But knowing your business as well as you know IT I think is probably the biggest lesson CIOs can take away from this. Back to you, Dave.

Dave Michels: Great, thank you, Michael. So it seems that for years IT was under the efficiency model. How to create more efficiencies for an organization. But more recently, with everything being connected and BYOD and whatnot, the model is more around collaboration. Do you agree with that, Mr. Leaden, or what are your thoughts on that topic?

Steve Leaden: Absolutely, to the Nth degree there Dave. So interestingly, a quick story here. We're involved in two needs assessments for two major universities right now as we speak. And it's very interesting, the emphasis with the user community, because we're having a chance to meet with heads of different business units exactly to some of the talking points as part of this podcast here. It's all really about the front-end user and those people and operations who really spearhead the actual operations of the institution. And so from their point of view, a phone is just phone; voice over IP is just another way of getting that conversation from point A to B; it doesn't have any value relative to making their business process more efficient. So we've developed an internal slide preso to talk about it, and of course, what always starts with, voice over IP is just a telephone communications over the internet or quality service networks, but unified communications is communications integrated to optimize business processes - which is obviously what we as UCStrategies totally endorse here.

So interestingly, we really talked to the end user about how we can use unified messaging, unified communications including IM, chat, audio video conferencing, white boarding, and mobility aspects, etc. And even notification tools such as emergency notification in general; notification as ways to improve the business process. So really, as you can hear in this particular conversation, we've been sent out by the CIO's office in both cases to meet with the various business units and gather not just their needs, but introduce to them some of the newer technologies that are being introduced out into the market and basically to leverage it. So as you can hear, the CIO's office is not just being tactical and just maintaining. They're actually becoming strategic here. I'm finding that quite interesting, Dave.

So as Marty was saying earlier, it's critical for IT to be a conduit to forge relationships with the various business units. And realize that they're working for them, and in a sense not working for them. And at the same time you have to look at elements as the IT department, such as innovation, leveraging these technologies we've just been talking about, and managing the cost through ROI analysis. We just did one for another client that actually looked at UC tools in a call center and FTEs around that and basically saved the client a million dollars a year ongoing in operations just by using these UC tools and contact center tools to better the full time equivalent flow within the call center.

And then finally just really supporting the operations. In the end, Dave, it's really about business transformation, business efficiency, as the article alluded to. And it's not just about IT being tactical any longer. If IT is not strategic in supporting the overall business unit, I think they're in trouble.

Dave Michels: Very good. Thank you, Steve. I think that IT's importance, for me, falls on the pendulum theory where its importance and lack of importance will swing back and forth, decades at a time. And I think we've seen it swing toward lack of importance. I think we're at the peak of that. I think this pendulum is beginning to swing the other way. We've seen this app economy, we've seen so many great services and ideas, but they come and go or they change dramatically, and I think that the role of IT or the importance of IT will begin to increase again as we start moving forward but certainly an interesting topic. Thank you very much and we'll be back next week.