Time to transform your IT department

Time to transform your IT department

Outsourcing core enterprise IT services frees up resources to develop the specific tech capabilities your business needs

As the scope of digital economy evolves, traditional IT departments are rarely compatible with the pace of technological evolution required in business.
As the scope of digital economy evolves, traditional IT departments are rarely compatible with the pace of technological evolution required in business.

Technology is no longer an aspiration for many enterprises; it's a fundamental foundation of a modern business. This essential transformation is something the Boston Consulting Group explored in its 2017 publication "Designing the Tech Function of the Future". As the scope of digital opportunity evolves, companies need to seriously consider the substantial and far-reaching implications.

Traditional IT departments are rarely compatible with the pace of technological evolution required in business today. They lack the niche skills and operational agility needed to respond to rapid shifts on business-critical timescales. Many are still operating in a very fragmented legacy landscape -- built over decades, spanning multiple business units, making it even harder to adapt and change.

This poses an existential challenge to your IT department: Do you transform it to collaborate with business units in developing differentiating technologies, or do you funnel IT into a silo responsible only for mission-critical infrastructure?

At BCG, we believe that for the majority of business, it's time to transform the IT department, based on five key imperatives, as follows:

1. Develop product and service technologies close to the business: Agility is key in the new world of tech. Embedding a structure that positions your technology function as close as possible to customer products and services helps it become a critical differentiator.

Outsourcing core enterprise IT services frees up resources to provide agile and decentralised tech capabilities. Engineering teams focused on key business units can deliver faster iterations of offerings and shorter time to market, with strategic oversight channelled directly through the head of that business unit. Meanwhile, a team focused on central functions can deliver business-wide solutions and core infrastructure.

Thai energy giant PTT adopted this approach as a core driver of its own digital transformation, embracing data-led but customer-driven adoption with its PTT Blue Card loyalty programme.

The company utilised a familiar loyalty card approach, but with a strong foundation of data insight, recording over 150,000 customer transactions daily which then feed into strategic oversight to improve customer service at an enterprise level. This is a great example of how IT evolution can powerfully transform existing business practices.

2. Integrate technology and business: IT has to move from an order-taker to a true business partner, influencing decisions and being a thought leader. Co-located, cross-functional teams can optimise collaboration and promote digital understanding.

One leading Thai telecoms operator offers a key example of how to reap the benefits of an agile working practice. It carried out successive initiatives to promote the generation of disruptive ideas and strength-based learning that helped empower a tech-driven and tech-ready cross-functional operating environment.

3. Make software engineering a critical differentiator: An IT evolution will necessitate a transformation of the skills available. Many IT organisations will need to move from generalist skills to build specialist skills in key disciplines such as software engineering, UI/UX design, DevOps, cloud and analytics to unlock new capabilities that impart a competitive advantage. At the same time, they must keep strengthening core IT skills such as program managers and enterprise architecture.

Businesses must take a strategic and holistic view of the type of differentiated skills they want to build, while considering outsourcing non-differentiating functions such as enterprise technologies, so that internal resources can be focused on the differentiating benefits that offer a competitive advantage.

4. Ensure powerful governance: An effective tech function requires powerful central governance and steering. That's a crucial consideration in several key areas.

  • Enterprise architecture management: Ensure enterprise-wide interoperability and take advantage of scale for applications and infrastructure.
  • Data management and governance: Securing data through its entire life cycle through strong architecture and robust policies while enforcing the right data governance through ownership and stewardship.
  • Vendor and ecosystem management: Move from transactional vendor management to a strategic partnership approach.
  • Security and cybersecurity: Embed a business-wide approach aimed at minimising risk of attack while focusing on organisation, people and processes.

5. Create a cloud-based digital foundation: Many organisations are now adapting to the reality of managing a hybrid cloud environment -- balancing the benefits of public cloud-based applications and keeping core sensitive or legacy applications on a private cloud. This requires a better integrated, end-to-end cloud management approach.

The sugar and bio-energy producer Mitr Phol has adopted this cloud-based foundation, utilising IoT-enabled technologies and cloud functionality to transform its agricultural business. With a substantial geographical footprint and complex operating environment, it uses cloud-based solutions to track and unify data on an enterprise-wide scale. This results in inventory savings alongside other operational and customer service benefits.

TIME TO EVOLVE

A recent survey revealed 95% of Thai businesses feel technology is changing their business landscape. But with disruption comes opportunity, and embracing that opportunity is a question of choice.

In this shifting ecosystem, the IT department is experiencing unprecedented change. It's up to you as a business to decide what that transformation might look like.


Luc Grimond is a Partner and Managing Director with Boston Consulting Group. To download 'Designing the Tech Function of the Future', visit https://on.bcg.com/2MbiY6a


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