Radically reducing ict effort
On the one hand, a need for agility – but on the other hand, a constant battle with IT infrastructures that cannot support the levels of agility required. This is the challenge facing many companies – especially in contracting markets in the business-to-consumer segment. For example, CIO’s in the retail and financial sectors – as well as utility company CIO’s – are all too familiar with this situation. This article outlines an approach to creating space for innovation while keeping legacy environments up and running. The effects of globalization are being felt increasingly farther afield due to mature market saturation and increasing worldwide connectivity. Companies are perceiving a need to compete on issues other than price and are also finding opportunities to do so, e.g. opportunities for market and product differentiation including payment options based on actual added value provided. The internet has made it possible to buy generic products and services at the lowest possible prices meaning that turnover growth can only be achieved by selling unique products. A prime example is the insurance sector, where standard insurance plans can no longer be distinguished from one another. Providers are responding to this by offering new, smart combinations of services aimed at specific target segments. Capitalizing on these new opportunities demands rapid decision-making, agility and a knack for timing – distinguishing traits that are not readily associated with complex organizations!
Organizations that have grown significantly over time become increasingly complex as a result of management professionalization, added layers of decision-making and adherence to procedures. A fine-meshed organizational structure develops that generally causes decision-making processes to become slower and more laborious. It is becoming increasingly difficult for managers to maintain a helicopter view of the entire organization and to meet objectives being set centrally and imposed hierarchically. On examining contracting markets, it becomes apparent that a focus on profitability in times of declining turnover generally results in staff and resource cutbacks. In practice, this seldom translates into a reduction in complexity, i.e. a missed opportunity in terms of faster decision-making, agility and a knack for timing. In most cases, the side effect of such cutbacks is a weakening of the organization, hence even slower decision-making processes. A radically different approach is apparently required in order to cut costs and to simultaneously improve agility. This approach has been outlined in a Quint Practice proposal for reducing IT complexity.
One of the obstacles facing companies striving for innovation and agility is the complexity of the IT systems in use. IT infrastructures have been growing organically for many years now, and systems and applications have become inextricably intertwined with one another. It therefore requires even greater effort to support innovative marketing propositions where time-to-market is of the essence. Commercial departments often respond by seeking hit-and-miss solutions offered by cloud service providers that somehow have to be integrated into existing IT infrastructure. It goes without saying that the resulting proliferation of systems does not constitute a viable long-term solution.
Depreciating costly legacy systems and implementing IT innovations at an accelerated rate – especially in the current economic climate – are no longer realistic options, not to mention fulfilling the core functions that certain systems have reliably been performing year in, year out. Given that simply scrapping legacy systems is not an option, a need exists for solutions that simultaneously safeguard the continuity provided by these existing IT environments and that create room for innovation. The solution presented in this article equates to radically simplifying existing IT infrastructures. The essence of this simplification lies in consistently differentiating between legacy and innovation. This differentiation needs to be made for both systems and applications, as well as for their related admin and development activities. CIOs need to examine matters on a consistent basis when addressing legacy and innovation as part of their decision-making processes, e.g. to invest or not to invest, to subcontract or not to subcontract, etc.? Both categories will be discussed in detail below.
As a pre-requisite, safeguarding continuity should play the lead role, but at the lowest possible cost. This criterion determines the approach that should be taken for both admin and development – 'Operational Excellence' being the motto!
The basic premise for legacy admin should be one that adopts procedures that are as lean as possible. Attention should still be paid to considering whether activities add any value, e.g. whether they help safeguard continuity or help cut costs. The question then arises as to whether activities should continue to be performed if they do not provide any added value. Any factors that hinder processes should be eliminated, wherever possible. Admin departments should also strive for perfection by constantly applying the above-mentioned principles in accordance with the well-known PDCA cycle (plan-do-check-adjust). Continuity and costs should be the major priorities and risks should be mitigated to the greatest extent possible. Admin's principle focus when examining its actual activities should be disentangling legacy and innovation-related IT environments. Administrators should systematically identify where systems have become entangled and interconnected, and then gradually unravel these two environments.
An argument is not being made to sever ties between legacy and innovation-related environments in their entirety, but to minimize their level of interdependence, e.g. by implementing a service bus. Simultaneously, attention should be paid to consolidating the legacy environment by decommissioning systems in a structured and controlled fashion. Outsourcing should remain an item for discussion, wherever applicable. Service providers sometimes have expertise that relates specifically to legacy system management. They may also be able to provide this service more cost effectively. Financial considerations should also play a major role in legacy system management. It should even be a goal to achieve annual budget reductions.
Everything stated above for admin applies all the more to functional development. Maintenance budgets are currently being cut every year, resulting in zero or virtually zero renewal and innovation. If renewal and innovation are still taking place, then it is only where ROIs are rapid. If development activities are to be performed, then it is important that standard solutions be used as often as possible, as they are generally less expensive and less susceptible to risk than custom solutions are. In theory, outsourcing is also a valid option in this situation. External suppliers generally have the specialist knowledge required and can often provide services far more cost effectively.
In the setting of the larger organization, innovation should focus on speed and enterprise. Commercial and IT departments need to join forces if attempts to implement innovation are to succeed. Outdated approaches such as drafting watertight functional specifications and cascading software development can best be abandoned. The vision in this respect should be one where final product or service functionality is defined as late as possible in the process, i.e. open-ended innovation.
Administrators should principally ensure adequate support for innovation-related systems and applications. They should ensure that the required launch platform is available whenever new functionality is delivered, as well as integration with existing innovation-related systems and – if necessary – with legacy systems via a service bus. Organizational integration also needs to be in place, especially with regard to development teams. Ideally, an organization's heartbeats should be pulsing in unison, wherever possible. This aspect has been addressed below in more detail using the terms horizontal and vertical integration.
In terms of innovation, major emphasis should be placed on development. It is critical that cooperation with commercial departments be as close as possible in order to achieve the levels of agility and speed required. This is why horizontal integration should be the initial priority, e.g. commercial and IT departments working together in multi-disciplinary teams to eliminate time-consuming alignment issues. Where innovation is concerned, IT is primarily a commercial function . Agile scrum software development methodologies are ideal for uniting commercial and IT departments. Ideas and visions can be rapidly aligned and agreed upon, and then gradually refined. A vertical form of integration also exists. The localized approach associated with multi-disciplinary teams also has a downside, this being fragmentation of planning, control and project management functions. Vertical integration limits these functions and imposes clear-cut, centrally organized responsibilities. This has a major impact organizationally. Simplification and standardization result in a greatly reduced workload for IT project managers, planners and controllers. A thin governance organization for development-related issues assisting business project managers can be highly effective.
Vertical integration has another advantage. In practice, it is often difficult for developers and administrators to work together. Principal causes are a language barrier and the difference in dynamics between these two groups. Developers focus on rapid innovation, whereas administrators focus on manageability and continuity. The aim of vertical integration is to innovate in short cycles while safeguarding manageability and continuity, thus satisfying both groups' needs. A balance can be established between speed and continuity by setting operational excellence goals and by adopting a lean approach.
The approach outlined in this article is by no means designed to label legacy systems and IT operations departments as outdated. Virtually all experts agree that legacy systems will remain operational for the foreseeable future. Moreover, they fulfil an indispensable role as IT's engine room. However, what this approach does advocate is the acknowledgment of the role that operations play, i.e. a role that provides continuity and stability, and strives for operational excellence. Striving to achieve an annual budget reduction is not a sign of a lack of appreciation, but a natural consequence of achieving operational excellence. Within many organizations, most of the IT budget is spent on keeping systems running at the cost of innovation. Readdressing the balance in this respect is beneficial to all. The proposed approach is certainly no quick-fix solution. Reducing complexity is quite a feat – you can put anything on paper, but reality can be far more intractable. Most organizations are already familiar with lean principles advocating optimization, continued learning, mutual respect, waste elimination and continued improvement. Although lean principles have proven successful, it would appear that weekly progress boards and performance dialogues are gradually relegated to the sidelines or become less high-profile. Why is this? Causes may lie in the fact that attention is not actually being directed outwards and that decision-making processes have not been simplified. Even once an organization has transformed itself into a high-performance organization, complexity still exists nonetheless. If this complexity is too overwhelming, then the organization will once again begin to stagnate.
Genuine change requires a fundamental paradigm shift, whereby the focus should not be inwardly directed, but outwardly directed to the organization's surroundings. This entails that conditions be created to make agility and self-organization possible. Consequently, market segments can then be differentiated according to complexity and volatility. The applicable tool can then be selected based on the quadrant in which a market segment is located (see Fig. 2). Boonstra – author of the article 'Ondernemen in allianties en netwerken' ['Enterprise in Alliances and Networks'] in the journal M&O ['Manpower & Organization'], Part 3 (2007) – refers to this as the plural organization. For example, parts of one and the same organization can be managed with a major focus on high quality at the lowest unit cost (operational excellence), whereas other parts can be managed with a focus on time-to-market. It is essential that each individual part of the organization be able to respond in its own way without this ultimately resulting in operational processes becoming incompatible.
We have shown how complexity makes it very difficult for organizations to respond rapidly and agilely to market dynamics. The solution most commonly adopted – especially in contracting markets – is to cut staffing and resource levels. This cuts costs, but weakens the organization without doing anything to reduce complexity. Even a lean approach is inadequate, even when effective in its own right. It would appear that an inward focus makes it impossible to conquer market complexity on an ongoing basis. What is needed is a fundamental decision to accept external complexity as a given and to allow each individual part of the organization to respond in an appropriate manner without creating any operational incompatibilities. The approach outlined in this article for IT goes a long way to meeting this requirement. Differentiating between legacy and innovation can help set appropriate goals. Horizontal integration aids the ability to deal with complexity and dynamics. Vertical integration helps prevent inefficient working practices and excess layers of management being implemented. Consequently, IT is increasingly becoming a part of organizations' commercial functions – armed and ready to do battle with the complexity and dynamics of the marketplace.