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What will the IT organization of the future look like? We gathered experts for a virtual roundtable discussion about how CIOs are reorganizing their IT operations to improve customer service and gain a competitive advantage from such emerging technologies as wireless networks, unified communications and service-oriented architectures. Our panel includes: Paul Groce, partner and leader of the CIO practice at CTPartners; Johna Till Johnson, president of Nemertes Research; Mike Jones, CIO of Children's Health System and a member of the executive board of the Society for Information Management; and Jerry Luftman, distinguished professor at the Howe School of Technology Management at Stevens Institute of Technology.
What are the biggest issues holding back IT departments in terms of their organizational structures?
Groce: One of the largest issues CEOs have is a frustration with CIOs not being in touch with the business, and that frequently is a result of the organizational disconnects between the CIOs' organization and the business.
Unsuccessful CIOs may, in the name of greater cost control and production efficiency, pull all IT resources into a shared services group, but as a result they often lose connectivity to the business. You have to be very careful about what you centralize and decentralize.
The issue is this: How can the CIO construct a hybrid model that provides the efficiencies of a centralized organization while still maintaining touch with the business?
One of the more effective solutions appears to be the hybrid model that allows centralized production activities but maintains contact with the business through business-relationship managers, who make sure that business needs are heard.
Luftman: We're really pushing the hybrid or federated organization, which combines the strengths of centralized and decentralized organizational structures.
From my research, it's clear that companies that are federated have a better shot [at] receiving a higher score on alignment of IT and the business. In centralized organizations, the decision makers tend to be reluctant to move to a federated model because they are losing people reporting to them.
Another issue is the career for IT professionals in a federated structure because they now report to the business. Another issue is that it's not just the organizational structure that CIOs need to focus on. If you change your organization but you don't change your governance processes, it's not going to work.
Johnson: The top issue holding back IT departments is mapping the technical expertise to the business issues. The cliché is that IT departments need to better understand business issues.
That's not what I mean. They need to take a more holistic view of when and where IT can become a differentiator or a value proposition, and then focus resources on that.
The second issue would be convergence. What I mean is not just VoIP; it's unified communications. That affects messaging people, help desk people, application people, infrastructure people.
You're looking at something that's critical for the company to run and every user in the company touches. Handling that effectively is very, very critical. The third issue is not new: It's basic management skills. Management breaks down into projects, processes and people. IT people tend to be poor at one of these three things.
Jones: The biggest issue I see holding back IT departments is span of control. How much can you have somebody responsible for on an operational basis and still have them looking at the future and emerging technology? This whole issue of who is responsible for what is going to get more intense. For example, who has responsibility for video conferencing? Is that an application or is that a network? There is a lot of gray.
What trends are you seeing in terms of CIOs reorganizing their IT departments?
Luftman: The trend is to move to federated organizational structures. That's what I've seen clearly in the last five years. But there are some failures because companies don't look at all the things they need to do because this group of IT people now reports to this particular business group.
With a federated organization, you centralize those things that everybody would agree makes sense to centralize: infrastructure, networks, databases, common systems. The things you decentralize are the applications that are directly in support of meeting the business objectives.
Then there's a whole bunch of stuff that people could debate abut whether it makes sense to centralize or decentralize, like help desk and maintenance. With a federated organization you also want a federated governance process.
Such a process says that IT decisions -- such as what projects are done, what projects aren't done, how much money is invested in certain projects -- those decisions are made jointly by the IT and business unit people.
Groce: One of the biggest trends that I see is the move toward functional convergence. This involves taking like processes and like technologies across lines of businesses and placing those in a centralized service factory. The move to functional convergence has led to the evolution of the shared services organization. The CIO has led the way in many areas of business change, such as outsourcing.
The application-development function was one of the first things to go overseas. As a result of that, business processes were outsourced. More and more, CIOs are leading technology outsourcing and business process outsourcing across their companies. The other trend I have seen is a bit of a backlash regarding outsourcing.
Three years ago, people believed you could outsource everything. There's a positive swing towards outsourcing common, noncritical applications, such as data entry or enterprise systems. But there is a push to be very cautious about outsourcing critical business applications, particularly proprietary applications.
Johnson: There's a very strong trend of having the IT department responsible for packaging lots of different technologies into a service. Virtualization is driving this trend, and so is convergence. The other trend is there is an upswing in the number of people constructing five-year plans.
For the past seven or eight years, companies have been digesting the Internet. Now there is a whole new round of technologies that are sneaking up on companies. These include mobility, [SOA], unified communications, virtualization and grid computing.
In the security space, you're starting to see things like identity management and enterprise rights management. There's a certain amount of fear in people's voices when they call us about their five-year plans. They're asking us: What am I missing?
What would your ideal IT organizational chart look like?
Jones: I would have five CIO-level reports at the most. I'd have a manager of special projects, who could be assigned to do anything and would take charge of projects that were not going right. I'd also have a manager of engineering, who would define best practices for the organization. Networks, servers and operating systems would be under one person. I'd break out technology, so that one person would be responsible for identifying and researching technology and seeing how it would fit into the organization. I'd keep application development separate.
Johnson: I would have a CIO and a CTO. I would have the CIO reporting directly to the CEO and have a seat on the board. The CIO would be a p
