IT organizations today are on a collision course that promises to significantly diminish their performance and effectiveness. The impact of this collision will further crowd out investments in strategic, innovative and value-creating IT initiatives, commoditizing careers and undermining IT’s authority in the eyes of senior executives. The question is whether forward-looking IT executives will see the dangers ahead and change course in time to reposition their organizations for the impressive opportunities that also are emerging.
The collision will take place when today’s data explosion meets the coming implosion of talented professionals capable of managing this data. That day may not be far off. In a recent CIO Canada article (‘Is Trouble Brewing in ITland?’, May, 2006), based on the results of IT World Canada’s Salary Survey 2006 for IT Professionals, it was revealed that, “IT professionals responsible for hiring predict a mini-boom in hiring this year, with average growth in their IT departments estimated at a whopping 23 percent.”
This and other predictions of a tightening IT job market suggest that IT executives must now confront an impending talent crunch if they are to ensure the strategic success of their organizations and demonstrate that IT still matters a great deal.
These trends threaten to hit the IT world particularly hard. Over the next two to three years, the laws of supply and demand will push up the cost of IT talent in the areas that are most critical to strategic differentiation and enterprise value. While overseas outsourcing may be an option in some commoditized forms of IT work, it will not address the overall IT talent implosion to come. Job turnover, salary escalation and a dearth of many relevant skills are all challenges associated with the overseas outsourcing option that may hinder its viability in many cases.
All indicators suggest talent costs will continue to rise over the next few years. This will be particularly true with respect to professional roles – such as program managers, project managers and business analysts – that are considered crucial to the execution of high-impact, innovative and competitively differentiating IT initiatives. But the costs of talent also will rise for many roles that add no competitive advantage at all.
In many companies, the growing costs of talent will exceed the growth in IT budgets, assuming that budgets will grow at all. This will force IT decision-makers to face some difficult near-term decisions. Certain roles will probably be eliminated, automated or outsourced to accommodate the new investments that must be made in higher value IT work. IT professionals that hope to advance their careers will be forced to upgrade their own personal skills and capabilities.
In the realm of data professionals and data infrastructure, the choices are becoming increasingly stark. IT organizations will see costs escalate to meet the growing demands associated with enterprise data, but they will not see an accompanying expansion in budgets or in the labor pool that is consistent with these expansive data demands.
In the next four to five years and beyond, the costs of IT talent will increasingly crowd out vital investments in many companies. IT organizations that are mired in operational activities and infrastructure maintenance will have fewer and fewer resources to invest in initiatives that strategically differentiate their companies. In many cases, wholesale IT infrastructure outsourcing – much of it pushed overseas – will become an inevitable scenario. Given that the promise of “transformational outsourcing”, whereby outsourcers provide continuously growing levels of business value over time, is yet to truly play out, this may be the end of many IT operations as anything but support organizations.
Some companies will more actively weave IT into the fabric of their enterprises. Through service-oriented architectures (SOA), open source advancements and effective data management, they will make (or continue to make) IT a strategic enabler. But while companies such as Wal-Mart, FedEx and others will continue to view IT as a competitive weapon, many others can be expected to lose ground as IT becomes permanently positioned as a commodity resource and cost center.
Previous IT investment decisions will have compounding effects for many years after. CIOs that invested heavily in strategic, differentiating activities will be reaping the rewards of their investments, while senior IT executives that remained focused on the maintenance of outmoded infrastructures will find themselves increasingly vulnerable to escalating costs. It will be clearer in retrospect that some of the key decisions influencing these outcomes will have been hiring decisions, particularly in data-related areas.
As competition becomes more focused on operationalizing analytics and information on the front-lines of the business, the ability of IT to successfully scale, maintain and monitor its data management infrastructure will be a given. IT organizations that leverage this data by investing heavily in analytical, project and application-focused roles – as opposed to administrative roles – will be better positioned to compete effectively in the marketplace.
Business strategy issues
These projections raise a host of business issues which concern executives at all levels of an enterprise. Recognizing the fact that there will always be tactical fires to fight, CIOs and other IT leaders are now confronting the strategic challenges that talent trends represent. The decisions they make in the short-term will largely influence the direction of their organizations over the longer term.
Will IT be perceived in the eyes of executive leaders as a tactical, support organization, forever committing resources to activities to that are below the line? Or will it recognize the coming collision in time and take the steps necessary to remain or become a strategic partner to the business, investing in innovative, core activities that are perceived as competitively differentiating?
Geoffrey Moore, author of the book “Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution” (The Penguin Group, 2005), argues that one of the greatest mistakes that organizations make is confusing “mission critical” activities with their “core” capabilities. As he explains, “Core is the ability to differentiate for competitive advantage; mission critical is the property of having very high risk, very high consequences when things fail.”
The phenomenon that Moore and others have observed is that IT organizations tend to sink escalating amounts of their precious capital in mission critical activities. Their hiring budgets are increasingly weighted to these types of efforts. After all, CIOs can’t afford to fail in mission critical areas. The trouble is that budgetary decisions of this sort come at the expense of more strategic actions; they inevitably diminish the IT executive’s status and credibility as an enabler of proactive, innovative, competitive differentiation.
What seems apparent is that intensifying waves of competition and commoditization are forcing senior IT leaders to make complex investment decisions of ever greater consequence. The coming talent implosion only heightens the risk of remaining reactive.
–John Bostick is president and CEO of dbaDIRECT, which provides data infrastructure management services to Fortune 1000 and Private 500 firms.