CIO The Future of Corporate IT Volumes 1 To 5

INFORMATION TECHNOLOGY PRACTICE
The Future of Corporate IT

How to Prepare for Five Radical Shifts in IT Value, Ownership, and Role
Executive Directors Shvetank Shah Warren Thune Managing Directors Jaime Capella Christian Conti Brian Foster David Kingston Allen Mueller Jay Shankavaram Kavitha Venkita Practice Managers Deb Goldberg Andrew Horne Bart Kaplan Gregg Rosenberg Mark Tonsetic Senior Directors Eve Koopman Alex Stille KD Weitzel Miles Gibson Chris Mixter
Director Tim Kelso Consultants Shalini Das Leda Nelson
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TABLE OF CONTENTS
Executive Summaryiv The Future of Corporate ITvi Does the IT Function Matter?vii INTRODUCTION: THE FUTURE OF CORPORATE IT 1 Which Way Forward?3 Four Internal Trends5 Ten External Trends That Will Change Corporate IT9 The Future of Corporate IT11 What to Do Now?30 SHIFT 1: INFORMATION OVER PROCESS37 SHIFT 2: IT EMBEDDED IN BUSINESS SERVICES51 SHIFT 3: EXTERNALIZED SERVICE DELIVERY69 SHIFT 4: GREATER BUSINESS PARTNER RESPONSIBILITY79 SHIFT 5: DIMINISHED STANDALONE IT ROLE95 APPENDIX113
iv
EXECUTIVE SUMMARY
The Corporate Executive Boards investigation into the five-year outlook for corporate IT points to fundamental changes in how the function is organized and managed. The IT function of 2015 will bear little resemblance to its current state. Many activities will devolve to business units, be consolidated with other central functions such as HR and Finance, or be externally sourced. Fewer than 25% of employees currently within IT will remain, while CIOs face the choice of expanding to lead a business shared service group, or seeing their position shrink to managing technology delivery. After interviewing and surveying hundreds of IT and business leaders, we find that these changes are already underway. Many IT leaders are optimistic, seeing changes as no more than the usual swings of the centralization pendulum or a fad resulting from recent buzz around consumer technologies. This study argues that the changes will be rapid, permanent, and radical. We have advocated for a decade that IT leaders become demand shapers, not order takers. Similarly, we now recommend that IT leaders devote the time, energy, and resources to actively shape the coming transition. Backdrop Five years ago, less than 25% of business leaders rated their organizations IT function effective at delivering the capabilities they needed. Today the number hasnt changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting moremore efficiency, more innovation, more valuefrom technology. Unasked Questions Among all the talk of engagement, alignment, and being part of the business, one assumption is never challengedthat for information technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option, and the functions resources and responsibilities were better located elsewhere? To answer these questions we launched an exhaustive review of business, social, and technology trends across the next five years, and interviewed and surveyed hundreds of business and IT leaders. Our work revealed five emerging shifts in IT value and role that make these questions necessary and urgent. Shift 1: Information Over Process The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio, and critically, exploits the information the services generate. The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growthinnovation, marketing, sales, customer serviceup to 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured. Shift 2: IT Embedded in Business Services The corporate center is in flux. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support. The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact
INFORMATION TECHNOLOGY PRACTICE www.executiveboard.com/IT 2010 The Corporate Executive Board Company. All Rights Reserved.CIO6012110SYN
EXECUTIVE SUMMARY (CONTINUED)

that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to build things right, or management resources that ensure IT builds the right things. The need for efficiency and joint accountability for execution and outcome will change the IT functions delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions. Shift 3: Externalized Service Delivery Externalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the factory side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers. Shift 4: Greater Business Partner Responsibility Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill. A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, userfriendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units cannot customize cloud applications but neither can the IT function. Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need for integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making. Shift 5: Diminished Standalone IT Role As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adopt an agile operating model to allow rapid value delivery and resource mobility. Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too, the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunity is also significant. Leading a business shared services organization offers new levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thrives on exploiting technology for competitive advantage.
vi
THE FUTURE OF CORPORATE IT

Five Radical Shifts in IT Value, Ownership, and Role
Value Low
The IT Function Focuses on Enhancing End-to-End Customer Experience The IT Function Focuses on Boosting Knowledge Worker Productivity The IT Function Focuses on Delivering Information Analytics Capability Information Technology Converges with Production Technology
Risk High Low High
1. Information Over Process

Competitive advantage from information technology shifts toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.
2. IT Embedded in Business Services

Centrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.
Information Technology Is Delivered as a Service
The Central IT Function Becomes Part of Business Shared Services
3. Externalized Service Delivery

Delivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.
Most of the Infrastructure Portfolio Will Migrate to the Cloud Back-Office Business Processes Will Become Entirely Commoditized and Outsourced
4. Greater Business Partner Responsibility

Business unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization.
Business Units Plan and Procure Their Own Technology End Users Acquire Their Own Collaboration and Knowledge Sharing Tools End Users Provision Their Own End-Point Devices
The Infrastructure Group Focuses on Contract and Vendor Management
5. Diminished Standalone IT Role

IT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.
Security Moves Away from Securing Physical Devices Project Management and Business Analyst Roles Move to BUs The Applications Group Shrinks to Legacy Maintenance All Technologists Move Outside the Organization
n = 127 IT leaders.
The importance of information technology to business success will continue to grow, but the importance of the IT function will not keep pace.
The growing importance of technology does not equate to a growing strategic role for the corporate IT function.
DOES THE IT FUNCTION MATTER?

Strategic Importance of Information Technology and the IT Function
Conventional Wisdom
Technology becomes ever more critical to business success, but the strategic role of the IT function starts to decline.
For information technology to grow in strategic importance, so must the IT function. Our View The strategic importance of the IT function declines as:
Potential Strategic Impact of the IT Function
Demand for technology shifts from process to information and collaboration, Technology is delivered via business shared services, Technology is sourced from the cloud, and Business partners take greater responsibility for technology.
Criticality of Technology to Business Success
vii
viii
Introduction: The Future of Corporate IT
There is no shortage of analysis into the future of corporate IT. However, conventional wisdom misses the impact of external change and tacitly assumes that the basic shape and remit of the IT function will remain the same.
In response, this research looks beyond technology trends to understand business, economic, and workforce changes that will affect how organizations use information technology. This research also explores the future structure and remit of the IT function relative to other groups within the organization. It does not assume that the growing importance of technology to organizations equates to a growing future role for the IT function.
WHICH WAY FORWARD?

Conventional Wisdom on the Future of Corporate IT What Conventional Wisdom Misses
Technology on Demand Greater externalization and the rise of the cloud will reduce the IT functions in-house technology delivery role. Increased Business Alignment The IT function must work ever more closely with business partners to be effective. A Strategist and Innovator The IT function (and CIOs personally) must refocus on business strategy, customer enablement, and business innovation. Wanted: Business Skills IT staff will need business-centric skill sets and will often have business backgrounds.
Tacit Assumption: The IT function will remain a strong central function, led by a CIO, and grow in importance, if not in size.
Which Business Changes Will Impact Corporate IT? Most analysts describe the impact of technology trends but miss the impact of changes in the economy, customers, or the workforce. How Will Technology Create Business Value in Future? There are many theories about how IT enablement will create valuedata analytics and customer enablement are often mentionedbut there is no consistent view. How Will Ownership and Accountability for Information Management Change? Most analysis ignores structural changes elsewhere in the business that, in turn, will change the location and ownership of many IT roles.
WHICH WAY FORWARD?
FOUR INTERNAL TRENDS
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
Without change, a set of emerging internal and external trends mean that corporate IT risks becoming a significant drag on competitiveness by 2015.
Cost and capability will both lag competitors who have selectively migrated to the cloud. The divide between IT and business will widen as the IT function is increasingly seen as a roadblock, not an enabler. The divide will prevent effective needs identification and change management. End users and business leaders alike will increasingly circumvent central policies and technologies. The IT function will lose the most talented staff to vendors but struggle to attract business-skilled staff into what is perceived as a difficult and uncompetitive role.
THE CIOS REPORT CARD IN 2015?
Department: Group IT Leader: Chief Information Officer Date: December 2015
nds 10 l Tre Extern erna al 4 Int Trends
Cost In-house provision means we have higher IT costs and lower cost scalability than our competitors. Value Creation Our core business processes are stable and efficient, but our ITenabled customer experience is not competitive, nor are our collaboration and analytics capabilities. We have failed to keep up with new functionality used by our competitors.
Current SOP Corporate IT
Project Performance New functionality is underused. Our largest IT was delivered on time but failed to meet its business case due to change management problems and user resistance. Operational Performance Operational performance falls significantly below benchmarks available in the cloud. We have had several security incidents due to unauthorized applications and devices. Customer Satisfaction Business LeadershipBusiness unit leaders believe that IT is holding us back and show frustration with ITs inability to experiment. IT costs are viewed as opaque and hard to predict. End UsersUsers give low marks on the devices and collaboration tools provided by IT and express a strong desire to obtain better capabilities externally. Our poor IT brand is damaging our employee value proposition. Talent Management The latest employee survey found low IT staff engagement and performance (tied for last with Finance). We have lost our best technical talent to vendors, and we cannot attract or retain staff with business skills.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
The IT function is asked to do many roles that are difficult to do simultaneously and are often more closely related to being central than to being IT.
CENTRIFUGAL FORCES
Sources of Tension Between Roles Played by Corporate IT
IT

Central
The IT function combines operational roles with roles related to business strategy and consulting, despite the different skills and incentives required. Key central IT roles, such as program management and business process design, are not directly related to technology. The ownership of these roles by the IT function has as much to do with ITs position in the corporate center as it does with ITs technology capabilities. Increasingly, these roles are duplicated elsewhere in the corporate center. Many of the IT functions operational roles are being externalized so thinking roles will predominate.
IT Strategy Innovation Enterprise Architecture Requirements Definition In addition to ITcentric roles, the IT function assumes a set of central roles that have no natural ownership.
Corporate Strategy Business Process Design Information Management and Analytics
Think
Thinking and doing roles require different skills, incentives, and business relationships.
Many central roles are now duplicated in Finance, Procurement, Supply Chain, and other corporate functions.
Software Development and Maintenance Infrastructure Operations Vendor Management User Support
Program Management Change Management Business Shared Services Procurement
Do

IT doing roles are being externalized faster than other central doing roles.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
The growing range of functionality available in the cloud erodes traditional sources of competitive advantage from information technology.
The ability of competitors to access the same functionality and processes is potentially most threatening to industry leaders, while the ability to obtain the same scale threatens the largest industry players. Differentiation can only be achieved through better organizational change, the use of data, and the ability to integrate processes endto-end.
NARROWER SOURCES OF COMPETITIVE ADVANTAGE

Evolution in the Sources of Competitive Advantage Provided by IT
Build/Buy and Customize (Before 2005) Business Process Design Application Functionality Testing Data Analytics Integration Organizational Change Operation Scale and Quality Maintenance and Upgrades
Buy Vanilla (20062010)
Buy Cloud (2010 Onward)
Start-ups and niche players will use the cloud to obtain the same IT functionality and scale that now give competitive advantage to industry leaders.
Sources of Differentiation Accessible to Competitors
ITs contribution to competitive advantage shifts from process enablement to data, integration, and change.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
As demands on the IT function proliferate, IT staff feel disengaged and conflicted about their role.
The percentage of IT staff putting in high discretionary effort has declined from 17% to 4.3% since 2006, meaning that the organization now has about a quarter as many workers giving high levels of effort. Moving from low- to highdiscretionary effort can result in an improvement in employee performance rating by up to 20 percentile points. A further symptom of IT staff confusion and disengagement is the lack of consensus on the role and name of the IT function.
STRUGGLING TO KEEP THE TEAM ON BOARD

Decline in Employee Effort
Percentage of Employees with High Discretionary Effort 12.3% 9.6% 10.5% 7.4% 8.2% 6.5% 6.3% 4.6% 4.3% 6.6%
IT Employees All Employees
Second Half 2007
First Half 2008
Second Half 2008
First Half 2009
Second Half 2009
n = 10,373 IT employees.
Source: Engagement Survey and Analysis Tool; The Wall Street Journal; Bureau of Labor Statistics; Organization for Economic Cooperation and Development; Corporate Leadership Council research.
Does the Name of Your IT Function Accurately Reflect Its Roles and Responsibilities?
44% Yes Less than half of IT staff believe that the IT functions name reflects its role.
56% No
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
Business partners and end users remain broadly dissatisfied with the ability of the IT function to provide the capabilities they need.
Despite much effort, key measures of business partner perceptions of the IT functions effectiveness have not risen in five years.
NOT WHERE WE WANT TO BE

Business Leaders: Percentage Rating the IT Function Effective at Providing Functionality to Advance Business Capabilities and Strategy End Users: Because of the New System, My Job Performance Has Improved (2009)
24%
23%
24% Agree
76% Do Not Agree
2005
2009
n = 5,325 end users.
n = 4, 172 business leaders at 44 organizations.
Source: CIO Executive Board Business Alignment Diagnostic.
Source: CIO Executive Board business productivity database.
The IT traditional implementation process is no longer an option. Many IT professionals are being driven from this organization for the lack of a sense of urgency.
General Manager Automotive Supplier
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Ten external trends in IT demand and supply will change how organizations use technology to create value, and the roles, structure, and skills of the IT function.
Trends that are important but will likely not significantly change ITs value drivers, structure, or skills include green IT and greater government intervention in the economy.
TEN EXTERNAL TRENDS THAT WILL CHANGE CORPORATE IT

Demand-Side Changes
1. Rise of the Knowledge WorkerWidespread transaction automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker. 2. Ubiquitous DataThe rise of smart mobile devices and ubiquitous sensing will drive an exponential increase in data volume and throughput. 3. Social MediaThe way customers and consumers learn about products and interact with companies is changing fundamentally. 4. Emerging Market GrowthShifting global demand means emerging markets will be main source of growth, eventually reaching the scale of developed markets. 5. Efficiency ShortfallsThe corporate center (IT, Finance, HR, Supply Chain, Procurement, etc.) is reaching the limits of efficiency in its current functionally oriented form. 6. Tech-Savvy WorkforceTechnology knowledge and confidence in the workforce is broadening but losing its depth (more employees understand how to exploit technology, fewer have a deep technical expertise).
Supply-Side Changes
7. Technology as a ServiceInfrastructure and applications are increasingly available as virtualized, configurable, and scalable services in the cloud, or will to adopt licensing structures that mimic a service. 8. The Industrialized, Externalized Back OfficeIndustry standards will emerge for back-office business processes that are then delivered by external providers. 9. A Blueprint for Service DeliveryITILv3 provides a pathway to reorienting IT around service delivery. 10. Desktop TransformationA convergence of virtualization, SaaS, and unified communications combined with greater workforce mobility is triggering a transformation of the desktop that will enable deviceagnostic service delivery.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
10
SIXTEEN HYPOTHESES TO TEST

Value Low 1. The IT Function Focuses on Enhancing End-to-End Customer Experience 2. The IT Function Focuses on Boosting Knowledge Worker Productivity High Risk Low High
I. Value Drivers
3. The IT Function Focuses on Delivering Information Analytics Capability 4. Information Technology Converges with Production Technology
5. Information Technology Is Delivered as a Service
II. Delivery Structure

6. The Central IT Function Becomes Part of Business Shared Services
7. Most of the Infrastructure Portfolio Will Migrate to the Cloud
III. Sourcing Model

8. Back-Office Business Processes Will Become Entirely Commoditized and Outsourced 9. Business Units Plan and Procure Their Own Technology
IV. Business Role
10. End Users Acquire Their Own Collaboration and Knowledge Sharing Tools 11. End Users Provision Their Own End-Point Devices 12. The Infrastructure Group Focuses on Contract and Vendor Management 13. Security Moves Away from Securing Physical Devices
V. IT Function Role
14. Project Management and Business Analyst Roles Move to BUs 15. The Applications Group Shrinks to Legacy Maintenance 16. All Technologists Move Outside the Organization
n = 127 IT leaders.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?

Five Radical Shifts in IT Value, Ownership, and Role
Current State 1. Value Drivers Business Process FirstBusiness process automation absorbs the largest share of IT investment. Business process design is used to define future capabilities and drive competitive advantage.
The Future of Corporate IT Information Over ProcessCompetitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design. IT Embedded in Business ServicesCentrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization. Externalized Service DeliveryDelivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers. Greater Business Partner ResponsibilityBusiness unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization. Diminished Standalone IT RoleIT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.
2. Delivery Structure
IT as a Service ProviderApplications and infrastructure are bundled into services that directly reflect business partner technology consumption. The IT function is increasingly centralized as a standalone shared service. Right-Sourced ITDelivery combines external provision with significant internal resources as vendors are uncompetitive for many critical tasks. Pressure for Central ControlLiaison and governance guide business units and end users away from obtaining their own IT capabilities.
3. Sourcing Model
4. Business Role
5. IT Function Role
Fully Functional IT FunctionThe scope of central IT function encompasses strategy, governance, and delivery with direct control of almost all ITrelated resources and activities vested in the CIO.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
11
12
IT leaders are confident about shifts in sources of IT value from process to information but more doubtful about shifts that affect the scope and role of the IT function.
In particular, they question the value and risk of 1) externalization and 2) of expanding business unit and end-user responsibility for technology.
AN IT LEADERS VIEW OF VALUE AND RISK

IT Leader Opinions on Relative Value and Risk of Potential Changes in IT by 2015
Percentage Ranking Each Change as High Value and High Risk
Zone of Angst
Business units plan and procure their own technology. Information Over Process IT Embedded in Business Services IT as Technology Broker Greater Business Partner Responsibility Diminished Standalone IT Role
100%
All technologists move outside the organization.
Most of the infrastructure portfolio will migrate to the cloud. Back-office business processes will become entirely commoditized and outsourced. IT converges with production technology.
80%
End users acquire their own collaboration and knowledge sharing tools. Applications group role shrinks to legacy maintenance.
Percentage High Risk
60%
End users provision their own end-point devices.
Security moves away from securing physical devices.
IT is delivered as a service.
Infrastructure group focuses on contract and Central IT becomes part of business shared services. vendor management.
40%
Project management and business analyst roles move to BUs.
IT focuses on enhancing endto-end customer experience.
IT focuses on delivering Information Analytics.
20%
IT focuses on boosting knowledge worker productivity.
Zone of Confidence
0% 0%
n = 127 IT Leaders.
20%
40%
60%
80%
100%
Percentage High Value
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
13
14
To assess the speed of approach of the five shifts, organizations must constantly reevaluate their sources of competitive differentiation and risk, and the maturity of alternative delivery options in their industry.
WHEN WILL THE FUTURE ARRIVE?

Key Questions to Determine the Speed of Approach of the Five Shifts
1. Where in our business model is differentiation more valuable than standardization? Which processes and technologies confer competitive advantage? Which of our business units have unique technology needs? 2. How effectively are we managing our risk exposure? Do we fully understand the costs, benefits, and vulnerabilities of externalization? Is in-house provision really safer than external providers such as Google? 3. How mature are cloud and business process outsourcing (BPO) offerings in our sector? Are cloud services ready for enterprise-scale applications? Can a BPO provider beat internal cost and quality? 4. When will we be able to replace our legacy platforms? What operations must we run internally in the center, and for how long? 5. What could stop or accelerate the shifts in our industry? Do we face regulatory constraints or customer mandates that slow or hasten any of the shifts? What are our competitors doing?
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
The impact of the five shifts depend on the intensity of the organizations use of technology and the degree of diversity in products and operations.
DEFINITIONS
INDUSTRY VARIATIONS
Impact of the Five Shifts by Type of Organization
Non-Diverse/ Intensive 1 Information Over Process 2 3 1
Non-Diverse/ Non-Intensive 2 3 1
Diverse/ Intensive 2 3 1
Diverse/ Non-Intensive 2 3
Non-DiverseThe organization has one line of business, or multiple lines with similar markets or products. DiverseThe organization has multiple lines of business with diverse business unit markets or products. IntensiveThe organizations products have a high information content. IT is used for production or delivery. Examples include Financial Services, Media, Telecom, and Transport. Non-IntensiveThe organizations products have a low information content. IT is primarily used for administration. Examples include Chemicals, Energy, Government, Manufacturing, Mining, and Retail.
IT Embedded in Business Services
IT as Technology Broker
Greater Business Partner Responsibility
Diminished Standalone IT Role

Impact: 1 Low, 2 Medium, 3 High
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
15
16
The majority of IT enablement opportunities in innovation, sales and marketing, and customer service do not involve traditional process automation.
Analysis of 550 level three and four processes determines whether and how each process could be IT enabled. Overall, almost half the opportunities do not involve process automation. In innovation, marketing and sales, and customer service processes, enablement opportunities are mainly at the customer interface or using business intelligence and collaboration. For full details of this analysis, please see the companion document on Process Enablement Value Maps.
INFORMATION OVER PROCESS

Breakdown of IT Enablement Opportunities by Business Process
15% 27%
9%
18%
28%
12% 14% 11% 3% 14% 4%
13% 16% 20%
34%
30%
44%
13% 46% 54% 28%
13% 3%
18% Marketing and Sales
13% Product/ Service Innovation
Finance and HR
Production and Supply Chain
Customer Service
None Collaboration Business Intelligence
Customer Interface Process Automation
In customer service, marketing and sales, and innovation, more than half the opportunities for IT enablement are at the customer interface or involve business intelligence or collaboration.
Source: Analysis based on APQC Process Classification Framework v5.0.
Note: May not equal 100% due to rounding.

WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
17
18
The business shared services group subsumes many IT activities within business services, or in overarching service strategy and service architecture groups. A smaller, more operational IT function remains within the business service group.
Account management and help desk are shared across all business services, not just IT. IT development and operations are externalized to outsourcers or the cloud. Remaining internal IT resources are organized into groups for build and run.
IT EMBEDDED IN BUSINESS SERVICES
1. IT strategy, architecture, and risk are owned by groups under the head of business services.
Business Service Strategy and Portfolio Management Service Architecture (Business, Information, and Integration) Risk Management and Security Group IT Design/procure applications and technology Integrate Test Manage external run and maintain Retire PMO and Change Mgmt. Service Account Managers Supply Chain HR Finance 6. Business service managers define their IT requirements and work directly with external providers. Business Units Help Desk
Business Services
2. Services requiring business knowledge to realize value are managed outside IT. 3. Technology services are managed by functionally aligned IT resources.
Business Analytics Service
Sourcing and Contracting Service
Communication/Collaboration Service
Connectivity and Hosting Service Integration Layer and Standards
5. Account managers and help desk are shared by all business services.
4. External providers deliver commoditized business processes and technologies.
External Service Providers (IT/Business Process Outsourcers and Cloud)
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
19
20
Greater business leader responsibility does not entail a swing of the pendulum back to local or rogue IT functions.
It is a shift in responsibility from the IT function to business partners, not a shift in resource from central to local.
GREATER BUSINESS PARTNER RESPONSIBILITY
What Greater Business Responsibility Entails + Business-Led Opportunity IdentificationBusiness leaders are responsible for identifying technology enablement opportunities and defining needs. + Business Responsibility for Processes, Programs, and ChangeBusiness process design, project management, and change management become business roles. + Selective Business-Owned Technology SourcingBusiness leaders can obtain IT capabilities directly from the cloud when the value of differentiation outweighs standardization.
What Greater Business Responsibility Does Not Entail Rogue Local IT StaffNo local, rogue IT groups of dedicated IT headcount. Servers Under the DeskNo business unitowned, on-premise application or technology portfolios. Unintegrated DataNo relaxation of central information and integration standards when the value of integration outweighs differentiation. Security RiskNo relaxation of central security policy where business unit actions create organizationwide risk.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
21
22
The role of the central, standalone IT function will diminish, with activities migrating to business shared services, business units, end users, and external providers.
A residual central IT function will remain within the business shared services group to design, procure, test, and integrate applications and infrastructure. Other roles such as project management and data analytics will become business services while IT strategy and architecture become part of broader service strategy and architecture.
DIMINISHED STANDALONE IT ROLE

Current Location of Role
Central IT Office of CIO

Future Location of Role

End Users
Set IT strategy. Liaise with business units. Identify opportunities. Prioritize the portfolio. Recover costs. Create roadmap (process, data, apps.). Manage project/program. Set requirements. Design business process. Design application. Procure/build applications. Integrate. Test. Manage data. Maintain. Retire. Design technology. Procure/build technology. Run. Support users. Set security policy. Manage compliance.
Procure technology (user devices only).
Procure applications (BI and collaboration only).
Business Knowledge
Business Units

EA
Identify opportunities. Manage project/program. Set requirements. Design business process.
Procure applications. Manage change. Procure technology (cloud only).
PMO
The relative scope of business unit and shared service roles depends on business diversity. Business units focus on capabilities only they need, but the business shared service center has the same roles for services used by all. Business Shared Services Group

Applications Development

Identify opportunities. Manage project/program. Set requirements. Set IT strategy. Liaise with business units. Prioritize the portfolio. Create roadmap. Design/procure application. Design/procure technology. Integrate.
Design business process. Manage change. Recover costs. Manage data. Support users. Set security policy. Manage compliance. Manage external run and maintain. Test. Retire.
Indispensible IT

Infrastructure

External Providers
Information Risk
Build/provision applications. Build/provision technology. Maintain.
Enhance. Run. Support users.
IndustryWide Scale
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
23
24
Headcount in standalone IT roles will likely shrink to 25% or less of current totals by 2015 in organizations where the five shifts have taken full effect.
In many cases, the number of staff in standalone IT roles will be less than those with responsibilities related to technology in the business shared services group. See the appendix on page 116 for full details of the analysis
NOT MUCH LEFT

Estimated Reallocation of IT Headcount at Progressive Organizations by 2015
As a Percentage of Total Central IT Headcount in 2010
4575% 20% External
25% 80% Internal 1325%
1025%
Central IT Function in 2010
Externalized
Business Units
Business Shared Services Groups
Indispensible IT
Source: Analysis based on CIO Executive Board 2009 IT Budget Benchmark.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
25
26
The evolution of the IT function amplifies contradictions in a traditional CIO role, which are resolved by segregating the responsibilities of a business service provider, head of technology, and technology-savvy business unit leader.
The CIO role can expand to become head of a business shared services organization and oversee business service strategy and architecture. Managing technology procurement and integration still requires leadership, but is likely to be led by a report of the head of business services, and with a stronger focus on technology and operations. CIOs may also transition to a leadership role in a business unit that derives competitive advantage from technology, or to a senior role at an external service provider.
CIO ROLEWHAT NEXT?

Future Roles for CIOs
External Service Provider Executive
Head of Business Shared Services
Develops new service offerings Manages development, operations
Advisor to business units on exploiting technology Responsible for business service development and provision
Scale of Role
Oversees shared technology operations Manages vendors and integration
Leads business unit in exploiting technology for competitive advantage
Technology Leader (Reporting to head of business shared services)
Business Unit Manager
Business Impact
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
27
28
ROADMAP TO THE FUTURE

Within Three Years
1.
Beyond Three Years
Endstate
Migrate IT spend to new sources of value.

Spend on customer experience, business intelligence, and collaboration rises relative to process automation. Online platforms increase share of interactions with customers and consumers. Process automation refocuses on end-to-end process integration. IT and production technologies become more integrated, increasing data volumes.
All enterprise structured and unstructured data is captured and integrated. Information management and analytics are delivered as business services.
An enterprise-wide customercentric information architecture to enable knowledge worker productivity, improved customer experience, and business decision making
2.

Embed IT in business service delivery.

Service management methodologies embed technology within services. IT organizational structure realigns around end-to-end service management. IT function integrates into multi-functional shared services group with a shared help desk, liaison, and management structure. Business shared services introduced for a limited set of enterprise processes.
Primary alignment of business shared services group shifts from function to service. Scope of business service offerings expands.
A Business Shared Services organization with centrally provided IT embedded within business services
3.

Externalize infrastructure, most applications, and back-office processes.

Back-office operations are commoditized and outsourced. Business units acquire capabilities directly from a growing base of niche SaaS providers. Organizations adopt private cloud infrastructure.
Organizations migrate to public cloud solutions.
Central IT role changes to technology broker and vendor and contract manager
4.
Transfer responsibilities to business units and end users.

Organizations identify IT capabilities that can be sourced externally and owned by business units. Business analyst and project management roles move into business units. End users are given freedom to provision their own end-point devices. End users individually combine internal and external collaboration platforms.
Business leaders drive own technology strategy with guidance from the center.
Improved IT agility for techsavvy business leaders, individual end-user preferences satisfied, and central IT investment focused on shared business services
5.

Upgrade IT skills and responsibilities to support the new model.

IT staff develop service management skills (design, build, and deliver). Architecture team refocuses on business, information, and integration architecture. Program and change management become business services. Information security increases integration with other corporate risk groups.
Role of internal infrastructure group becomes vendor and contract management. CIO roles expands to include business services or contracts to manage residual internal IT delivery. Remaining IT resources form build and run groups.
Small central IT team within business shared service IT group focuses on coordination, integration, and partner management
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Five short-term actions and investments pave the way for the five shifts.
In addition to these five intermediate steps, the following pages provide comprehensive to-do lists for CIOs, IT Leadership teams, and business stakeholders.
WAY STATIONS
Key Intermediate Steps Toward the Five Shifts
1. Information ArchitectureReemphasizing information architecture and data management creates a foundation for future investment in business intelligence and collaboration. 2. ITIL v3The development of management processes, structures, and metrics for technology services paves the way for subsequent moves to business services. This can be done through selective adoption of ITIL v3 or by defining a similar model internally. 3. Private CloudsVirtualized internal infrastructure allows organizations to gain shorterterm scale advantages and prepare for eventual migration to the public cloud. 4. New ITBusiness Divisions of LaborEmerging capabilities for business architecture and program management readies business units for greater responsibility. 5. Agile DevelopmentGreater use of agile development concepts (formally or informally) allows greater rapid service enhancement and mobility for remaining internal IT resources.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
29
30
CIOs should take immediate action to prepare for the five shifts.
WHAT TO DO NOW?
A To-Do List for CIOs
Immediate 1. Convene a subgroup of the IT leadership team and a few mid-level, high-potential employees to examine the five shifts. Ask them to think forward five years, identify implications for your organization, and develop scenarios for how your organization may change. 2. Include discussions related to the five shifts as a standing agenda item in meetings with the CEO. 3. Discuss implications of the second shiftIT Embedded in Business Services in the next meeting with the CFO, head of HR, head of Procurement, and other corporate function leaders. 4. Discuss implications of the first shiftInformation Over Process and the fourth shiftGreater Business Partner Responsibility in the next meeting with business unit general managers.
This Year 5. Embed the implications of the five shifts in the IT strategic plan, defining how they affect the project portfolio, the IT functions structure, role, and skills requirements. 6. Add metrics to the IT balanced scorecard to track changes related to the shifts. 7. Coach business unit management to help them take greater leadership in their technology decisions. 8. Describe the five shifts and their implications for the IT functions structure and role, and for individual career plans, in IT team meetings, conference calls, e-mails, and newsletters. 9. Reevaluate IT leadership team succession plans to ensure that the organization is developing leaders with the right skill sets including service management, vendor management, and information and business architecture. 10. Explain how the IT function and its sourcing model are changing in meetings with vendor partners.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
IT leadership teams should take immediate action to prepare for the five shifts.
WHAT TO DO NOW? (CONTINUED)

A To-Do List for IT Leadership Teams
Shift 1: Information Over Process 1. Develop a strategy for managing unstructured information and selectively merging it with structured information. 2. Work with the CFO and business unit leaders to set portfolio targets for investments in knowledge worker productivity, business intelligence, and customer interface. 3. Analyze how technology affects your organizations customer experience and isolate the most significant impacts. 4. Invest in capabilities to enhance usability and user experience. 5. Develop a plan for convergence between information technology and other technologies used in the organization (for example, process control, shop floor automation, back-office operations). Shift 2: IT Embedded in Business Services 6. Evaluate methodologies such as ITIL v3 as a first step toward business services provision. 7. Identify which of the IT functions capabilities are replicated in other corporate functions, and which can be commoditized and externalized. 8. Invest in resources for business and information architecture.
Shift 3: Externalized Service Delivery 9. Begin to develop a private cloud as an intermediate step toward migrating to the public cloud. 10. Dont sign or renew contracts for on-premise software, end-user devices, or user support that last more than three years, and avoid infrastructure investments such as data centers that have payback periods of more than five years. 11. Educate vendors on which technology sourcing decisions will be taken by IT, business shared services, or business units. 12. Classify applications based on differentiation and scale (enterprise level, business unit level, individual use) to identify eventual ownership.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
31
32
IT leadership teams should take immediate action to prepare for the five shifts.

A To-Do List for IT Leadership Teams
Shift 4: Greater Business Partner Responsibility 13. Collaborate with the leadership of sales, marketing, product innovation and customer service to develop strategies for collaboration, business intelligence, and customer experience. 14. Collaborate with the procurement and legal functions to establish policy for business-led technology acquisition. 15. Collaborate with legal, communications, and other interested parties to establish policy for end-user acquisition and use of SaaS, social media, and collaboration tools.
Shift 5: Diminished Standalone IT Role 16. Adopt agile methodologies to enable greater resource mobility. 17. Reevaluate CIO succession plans to ensure candidates are prepared to run a business services group. 18. Orient skills roadmaps, recruitment efforts, and development plans toward service management, information management, and vendor management. 19. Design build and run groups and define the processes and governance to connect them. 20. Dont recruit extensively for purely technical skills or qualifications.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
The IT functions business stakeholders must also take action in anticipation of changes to IT.

A To-Do List for IT Stakeholders
CEO and Board of Directors 1. Set expectations for which technology management capabilities (strategy, vendor management, program management, etc.) should be developed within business units and monitor progress to remedy gaps. 2. Identify capabilities at the corporate center (IT, Finance, HR, Procurement, etc.) that can be shared across functions. 3. Ensure clarity around the organizations sources of competitive advantage and isolate which of these are enabled by technology. 4. Reach consensus on which business processes can be commoditized and externalized. 5. Reevaluate succession plans to identify who in the corporate leadership team has the capabilities needed to run a multifunctional shared service organization. Business Unit General Managers 1. Pinpoint which business unit strategic goals and sources of operational risk and competitive advantage rely on technology. 2. Short-list which business processes must differ from the rest of the organization to support competitive advantage. 3. Identify which members of the business unit leadership team understand how technology can drive competitive advantage and how to lead change programs. 4. Define a plan to develop or recruit staff with vendor management, business architecture, and program management skills. Corporate Functional Heads 1. Identify which of your functions capabilities can be shared across other corporate functions and which can be commoditized and externalized. 2. Define a model for delivering your functions capabilities as business services, either alone or combined with capabilities from other functions. 3. Help members of your team develop vendor management, business architecture, and service management skills. 4. Identify, prioritize, and enhance the most valuable information and analysis produced by your function.
WHICH WAY FORWARD?
TEN EXTERNAL TRENDS
WHAT TO DO NOW?
Introduction
33
34
The Corporate Executive Boards Information Technology Practice can help you to exploit the trends explored in this research.
For more information on any of the resources described on this page contact your account manager or the Member Support Center at +1-866-913-8101 or EXBD_ Support@executiveboard. com.
HOW TO USE THE RESEARCH

Uses for the Research Which Shifts to Look At How We Can Help
1. Update Your IT Strategic Plan Use The Future of Corporate IT to refresh your three- to five-year strategy for IT value delivery.
All
Initiate a Strategic Planning Engagement with the CIO Executive Board or have us lead a discussion on The Future of Corporate IT findings at your strategy off-site. Benefit from CEBs cross-functional reach to keep up-to-date on parallel organizational changes in other corporate functions through our work on the Business Insights for IT.
2. Broaden the IT Organizational Design Conversation Initiate conversations with company leadership on the future role and structure of IT and ITs relationship to other corporate functions. 3. Pressure-Test Your Sourcing Model Ensure your sourcing strategy is ready for greater externalization and a move by providers to the cloud.
Shifts 2, 4, 5
Shifts 3, 5
Use the Emerging Technologies Roadmap from the Infrastructure Executive Council to get real-world data on adoption rates and risk assessments for new technologies and sourcing models. Provide your team with targeted training on the skills they will need most with our online training modules and IT Business Leadership Academy.
4. Clarify IT Staff Career Paths Accelerate development and boost engagement by giving IT staff clear direction on the direction of the function and the skills they need to succeed.
Shifts 2, 5
We would like to thank the IT and business leaders who helped guide our work through interviews and survey responses.
The ideas and opinions contained in this research are those of The Corporate Executive Board and do not necessarily reflect the views of the organizations listed here. The research harnesses The Corporate Executive Boards unique perspective: Cross-Functional: Serving all members of the executive suite Cross-Industry: Serving all industries Practitioner-Driven: Focused on the practical implications of trends and insights
WITH SINCERE THANKS

Partial List of Participating Organizations
Introduction
35
36
Shift 1: Information Over Process

Competitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.
37
38
Four business and technology trends will change the way organizations derive value from information technology.
See page 9 for a full list of the Ten External Trends That Will Change Corporate IT.
OVERVIEW: INFORMATION OVER PROCESS

Business and Technology Trends Impact Implication
1. Social MediaThe way customers and consumers learn about products and interact with companies is changing fundamentally.
Technology at the customer interface and in marketing and sales becomes critical to competitive advantage.
2. Ubiquitous DataThe rise of smart devices and ubiquitous sensing will drive an exponential increase in data volume and throughput.
The scope and importance of data analytics increases significantly.
3. Rise of the Knowledge Worker Widespread process automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker. 4. Commoditized ProcessesThe growing range of functionality available in the cloud erodes competitive advantage from process automation.
Collaboration and business intelligence becomes critical to productivity.
Competitive advantage from information technology will shift toward customer experience, data analytics, and knowledge worker enablement; consequently, information management skills will rise in importance relative to business process design.
Differentiation from process automation shifts from unique functionality to implementation effectiveness and true global end-to-end integration.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Information Over Process
39
40
The way customers and consumers learn about products and interact with companies is changing fundamentally.
Using social media, customers and consumers will educate each other about products and services. The company producing the product or service loses control of its messaging and must learn how to participate, shape, and learn from these interactions. More than 70% of organizations are already using social media, and most are planning to increase their spending on social media across the coming years.
TREND 1: SOCIAL MEDIA

Traditional Customer Communications
Customer Requests for Information
Customer
Customer
Product Messaging Company
Each customer directly interacts with the company. Company controls product messaging. Web is only one of many channels. Interactions occur in company Web channel.
Customer Communications with Social Media
Customer Requests for Information Customer
Customer Product Messaging
Customers interact with each other. Customers control product messaging; company can only influence the conversation and learn from it. Web becomes the primary channel. Most interactions occur in third-party Web channels.
Company
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The rise of smart devices and ubiquitous sensing will drive an exponential increase in data volume and throughput.
TREND 2: UBIQUITOUS DATA

Sources of Data Growth Information Technology (e.g., ERP, CRM) Will Converge with Production Technology (e.g., Shopfloor Automation)
Percentage of Respondents B2C

Presence information from mobile devices Vehicle and consumer device telemetry Web traffic monitoring POS
19% Not Likely to Happen 49% Within Three Years 32% More Than Three Years
B2B

Process control and shop floor automation data Logistics tracking Asset performance and maintenance monitoring Automated replenishment
Estimated Rise in Global Data Volumes, 20102015 (Indexed to 100)

60% CAGR
1,050
n = 57 business leaders.
660 410 260 100 160
2010
2011
2012
2013
2014
2015
Source: All Too Much The Economist, 27 February 2010.

SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
41
42
Widespread process automation and outsourcing, and the resulting shift in retained skills, mean almost everyone is becoming a knowledge worker.
An ever-growing percentage of employees use information technology to support their daily work. IT leaders may be underfocused on this topic, as a higher percentage of business leaders than IT leaders rate boosting knowledge worker productivity as a high-value role for IT.
TREND 3: THE RISE OF THE KNOWLEDGE WORKER

Drivers of Expanded Knowledge Work Percentage of Employees Support by IT
??% 100%
Automation and/or externalization of production processes Increased information content in products and services Growing range of internal and external collaboration capabilities impact more roles
72%
80%
2006
2009
2012 (E)
Source: 2007 and 2010 Budget Benchmarks; CIO Executive Board.
Percentage of Business Leaders Describing Each IT Role as High Value Minus Percentage of IT Leaders Doing Likewise
5%
End-to-End Customer Experience Knowledge Worker Productivity
(15%)
n = 127 IT leaders and 58 business leaders.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The growing range of functionality available in the cloud erodes traditional sources of competitive advantage from information technology.
The ability of competitors to access the same functionality and processes is potentially most threatening to industry leaders, while the ability to obtain the same scale threatens the largest industry players. Differentiation can only be achieved through better organizational change, the use of data, and the ability to integrate processes endto-end.
TREND 4: COMMODITIZED PROCESSES

Evolution in the Sources of Competitive Advantage Provided by IT
Build/Buy and Customize (Before 2005) Business Process Design Application Functionality Testing Data Analytics Integration Organizational Change Operation Scale and Quality Maintenance and Upgrades
Buy Vanilla (20062010)
Buy Cloud (2010 Onward)
Start-ups and niche players will use the cloud to obtain the same IT functionality and scale that now give competitive advantage to industry leaders.
Sources of Differentiation Accessible to Competitors
ITs contribution to competitive advantage shifts from process enablement to data, integration, and change.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
43
44
The four trends will lead to an increase in the relative value and importance of technologies at the customer interface, and for business intelligence and collaboration.
The four types of enablement are defined as: Process Automation Processes enabled by enterprise systems such as ERP, PLM, HRIS, and CRM Customer Interface Systems used directly by customers or consumers Business Intelligence Systems for aggregating and analyzing structured information CollaborationSystems for synchronous and asynchronous collaboration and knowledge sharing within the organization and with external parties
IMPLICATION: A DIFFERENT TOOLSET

Impact of the Four Trends on Different Types of IT Enablement
ITEnablement Categories Process Automation 1. Social MediaThe way customers and consumers learn about products and interact with companies is changing fundamentally. 2. Ubiquitous DataThe rise of smart devices and ubiquitous sensing will drive an exponential increase in data volume and throughput. 3. The Rise of the Knowledge WorkerAlmost everyone is becoming a knowledge worker. 4. Commoditized Processes The growing range of functionality available in the cloud means competitive advantage comes from sources other than process automation.
The use of technology for business intelligence, customer interface, and collaboration all increase in importance relative to process automation.
Business Intelligence
Customer Interface
Collaboration
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The majority of IT enablement opportunities in innovation, sales and marketing, and customer service do not involve traditional process automation.
Analysis of 550 level three and four processes determines whether and how each process could be IT enabled. Overall, almost half the opportunities do not involve process automation. In innovation, marketing and sales, and customer service processes, enablement opportunities at the customer interface and using business intelligence and collaboration predominate. For full details of this analysis, please see the companion document on Process Enablement Value Maps.
IMPLICATION: SOURCES OF NEW OPPORTUNITY

Breakdown of IT Enablement Opportunities by Business Process
15% 27%
9%
18%
28%
12% 14% 11% 3% 14% 4%
13% 16% 20%
34%
30%
44%
13% 46% 54% 28%
13% 3%
18% Marketing and Sales
13% Product/ Service Innovation
Finance and HR
Production and Supply Chain
Customer Service
None Collaboration Business Intelligence
Customer Interface Process Automation
In customer service, marketing and sales, and innovation, more than half the opportunities for IT enablement are at the customer interface or involve business intelligence or collaboration.
Source: Analysis based on APQC Process Classification Framework v5.0.
Note: May not equal 100% due to rounding.

SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
45
46
Collaboration, business intelligence, and the customer interface are all less linear, more datacentric, and more diverse than traditional process automation.
These attributes have implications for the role of IT as business process declines in importance relative to data.
IMPLICATION: INFORMATION TAKES THE LEAD

Differences Between Process Automation and Other Forms of IT Enablement
IT Role in Business Process Design Nonlinear processes and diversity of needs means business process mapping is less useful for customer interface, collaboration, and business intelligence. Other functions acquire greater business process design skills.
Process Automation
Customer Interface, Business Intelligence, Collaboration
Structured processes Value from process efficiency, quality, and integration Commonality of needs Standard functionality In-house provision
Nonlinear processes Value from information sharing and analysis Diversity of needs User-defined functionality Use of third-party platforms
IT Role in Information Management + Information management becomes vital for customer interface, collaboration, and information management. + No other function is a natural owner for information architecture.
The past few years were about business process. In fact, we recently hired computer science graduates who barely knew data modeling or master data management. Our future plans relate to data, so we have to correct this imbalance.
Head of Applications Global Transportation Company
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Unstructured information accounts for 85% of all information in an organization, and its share continues to grow.
Consequently information management roles will increasingly emphasize the management of unstructured information.
IMPLICATION: LEANING TOWARD THE UNSTRUCTURED

Percentage of Structured and Unstructured Data and Related Information Management Roles (2010)
15% Structured Information
17% Flowing Outside Channels (e.g., Gmail, LinkedIn)
68% Flowing Inside Corporate Channels (e.g., E-Mail)
Structured Information
Unstructured Information
Manage a minimum set of standardized, enterprise data. Help users interpret data. Establish alerts and triggers based on data thresholds. Integrate structured with unstructured information.
A key role is to integrate both types of information for better decision making.
Establish lightweight structures to capture and share unstructured information. Provide tools to mine unstructured information. Set usage and security policies for information sharing on internal and external platforms. Integrate unstructured with unstructured information.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
47
48
Improved information management capabilities will enable end-to-end process visibility where existing efforts at process automation have created islands of integration.
IMPLICATION: END-TO-END PROCESS VISIBILITY

Two Examples of End-to-End Processes
Vendor diversity and the process evolution both mean that organizations struggle to integrate information across end-to-end processes. Two examples are in the supply chain and HR. In the supply chain, true global optimization remains elusive, with no one vendor providing end-to-end visibility. In HR, managers do not have a holistic view of the recruitment pipeline due to 1) the process automation of applicant tracking and alumni management and 2) the emergence of new processes such as forming pools of potential candidates in advance of need.
Global Supply Chain
SRM
Global Trade Management
ERP
WMS
DRP
CRM
1. One core system such as ERP or HRIS covers much but not all of the end-to-end process. 2. Additional, niche applications provide superior functionality but are not fully integrated. HiretoRetire
Proactive Talent Pool Creation Perf. Mgmt. System
Applicant Tracking
HRIS
Alumni Database
3. The process continues to expand, requiring new, hard-to-integrate functionality, often developed by a start-up, not an existing vendor. Little ability to see, manage, or optimize the process end-to-end
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Process automation and process design skills will retain greater value in IT intensive organizations.
While customer experience, business intelligence and collaboration will rise in importance in all organizations, the shift away from process automation will be less marked in IT intensive organizations. The shift toward integration of end-to-end processes is likely to occur in all organizations.
INDUSTRY VARIATIONS
Impact of Change by Type of Organization
Non-Diverse/ Intensive 1 Customer Experience, Business Intelligence, and Collaboration Become Relatively More Important 2 3 1
Data Skills Become Relatively More Important Than Process Design
Information Management Enables End-to-End Process Visibility

Definitions

Non-DiverseThe organization has one line of business, or multiple lines with similar markets or products. DiverseThe organization has multiple lines of business with diverse business unit markets or products. IntensiveThe organizations products have a high information content. IT is used for production or delivery. Examples include Financial Services, Media, Telecom, and Transport. Non-IntensiveThe organizations products have a low information content. IT is primarily used for administration.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
49
50
KEY FINDINGS
1. Four business and technology trends will change the way organizations use information technology to create value:

The use of social media in customer and consumer interactions Growing volumes of data from smart devices and ubiquitous sensing The rise of the knowledge worker The erosion of competitive advantage from process automation as a broader range of functionality becomes available in the cloud
2. These trends will create a greater number of opportunities for IT enablement at the customer interface, and using business intelligence and collaboration. 3. The customer interface, business intelligence, and collaboration represent the majority of opportunities to enable innovation, marketing and sales, and customer service. 4. The new opportunities for IT enablement are characterized by non-linear processes, and so the importance of information management in IT will increase relative to business process design. This trend will be most pronounced in less ITintensive organizations and will include both structured and unstructured information. 5. Information management capabilities will also enable organizations to integrate siloed processes, as the current generation of process automation does not provide the ability to see, manage, or optimize end-to-end processes.
SHIFT 1: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Shift 2: IT Embedded in Business Services

51
52
Four business and technology trends will change the way information technology is delivered.
OVERVIEW: IT EMBEDDED IN BUSINESS SERVICES

1. Efficiency ShortfallsThe corporate center is reaching the limits of efficiency in its current functionally oriented form.
Further efficiencies will come from merging standalone, back-office functions into multifunctional shared services groups.
2. Emerging Market Growth Shifting global demand means emerging markets will be main source of growth, eventually reaching the scale of developed markets.
On-the-ground and in-language support can best be provided by a multi-functional shared services group as standalone functions lack scale and expertise.
3. The Industrialized, Externalized Back OfficeIndustry standards will emerge for back-office business processes that are then delivered by external providers.
A rising percentage of back-office processes and the technology that supports them will be delivered as standardized services by external partners.
4. A Blueprint for Service DeliveryITILv3 provides a pathway to reorienting IT around service delivery.
Service orientation in IT paves the way for business service delivery by developing the necessary service management processes, skills, and charging mechanisms.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
53
54
The corporate center (IT, Finance, HR, Supply Chain, Procurement, etc.) is reaching the limits of efficiency in its current functionally oriented form.
Companies with sustained track records of cost reduction have seen their cost to sales ratios decrease relatively more slowly over the past few years, indicating the potential for further reductions in costs may be limited. Year-on-year variable cost reductions run their course eventually and create pressure for restructuring fixed costs by eliminating duplicative activities across functions.
TREND 1: EFFICIENCY SHORTFALLS

Average Annual Decline in Cost to Sales Ratio for Elite Cost Cutters Sample List of Activities That Can Be Consolidated Across Back-Office Functions
0.78% 0.58%
Procurement and vendor management Business process design Business liaison Service desk Financial controlling Analytics and reporting Program management Talent management Offshore service centers
19952005
20052008
n = 102 organizations.
Our central functions are running out of room to cut costs. The only way to get step-change efficiencies is to start merging them.
CIO and Head of Supply Chain European Chemical Company
Note: Elite cost cutters refers to companies with negative average annual growth of expense to sales over both the 19942000 and the 20012008 periods.
Source: CFO Executive Board.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Shifting global demand means emerging markets will be the main source of growth, eventually reaching the scale of developed markets.
As emerging markets increase in importance and complexity, IT and other central functions will struggle to 1) balance local with global standards and 2) provide sufficient onthe-ground and in-language support.
TREND 2: EMERGING MARKET GROWTH

Changing Shares of Global GDP Key Questions for IT Leaders to Consider in Global Organizations
29.7%
22.5%
22.8% 21.4% 19.7%
Are our IT management resources located in the right place to support global growth? Do our global standards meet the needs of our emerging market operations? Can our service providers support our global operations?
7.1%
1980 1990 2000 2010
Developing Asia Europe United States
Source: IMF World Economic Outlook Database.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
55
56
Industry standards will emerge for back-office business processes that are then delivered by external providers.
TREND 3: THE INDUSTRIALIZED, EXTERNALIZED BUSINESS PROCESS

Back-Office Business Processes Will Become Entirely Commoditized and Outsourced
Percentage of IT Leaders
Characteristics of Externalized Business Processes
34% Not Likely to Happen
External provider executes the business process using its own technology. Processes are industry standard for scale and quality. Delivery combines onshore and offshore resources. Processes are modularized to allow for customization.
30% Within Three Years
37% More Than Three Years

n = 124.
Note: Charts may not equal 100% due to rounding.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The latest ITIL (IT Infrastructure Library) v3 framework focuses on services that create value as opposed to older versions that focus on processes.
Released in 2007, the ITIL v3 standard has emerged as the most popular approach to IT Service Management. It allows for expanding collaboration across functions, recognizing that the next layer of opportunity to find efficiencies lies in processes that span across traditional functional verticals.
TREND 4: A BLUEPRINT FOR SERVICE DELIVERY

The ITILv3 Services Lifecycle Model Adoption of ITILv3 Service Design Processes
Percentage of Respondents
Continual Service Improvement Service Transition

24% Unsure
Service Strategy Service Design Service Operation
Continual Service Improvement
6% Will Not Be Aligned
71% Will Be Aligned in 18 Months
n = 22 IT leaders.
Continual Service Improvement
Source: IT Infrastructure Library; Office of Government Commerce.
Note: Graphs may not equal 100% due to rounding.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
57
58
The majority of IT and business leaders believe that technology will ultimately be delivered as part of business services but disagree on the value and risk.
There is a gap between IT and business leaders opinions on the likelihood and impact of embedding IT into business services. IT leaders are more positive about both the likelihood and the value of a servicebased approach. IT leaders are also more concerned about the risks, with 54% of respondents describing the move as high risk.
IMPLICATION: IT DELIVERED WITHIN BUSINESS SERVICES

IT Delivered Within Business Services IT Leader Perspective
9% No Plans Yet
RiskReturn on IT Delivered Within Business Services IT Leader Perspective

High
6%
48%
Risk
18%
n = 127.
28%
Low Low Returns High
Business Leader Perspective

High
13%
24%
39% No Plans Yet
Risk
34%
Low Low Returns
29%
n = 57.
High
SHIFT 2: OVERVIEW
TRENDS
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INDUSTRY VARIATIONS
KEY FINDINGS
A typical business service is an end-to-end integrated black-box service with a single customer interface.
The service is SLAdriven and is charged for by usage. The underlying applications and infrastructure are provided and charged for as part of the service.
BUSINESS SERVICES EXPLAINED

Example 1: New Supplier Installation Service
Help Desk
Supply Chain
Legal
Finance
IT
Business Partner
Receive from business partner.
Complete due diligence. Conduct contract negotiation.
Review and approve supplier contract.
Create Accounts Payable for supplier.
Create new supplier record , ID, and extranet log-in.
New Supplier Installed
Underlying Technologies Help desk ticket system Collaboration space for negotiating teams Contracts database ERP Account Payable Supplier relationship management system and extranet
Example 2: Employee Relocation Service

Help Desk
Finance
HR
Admin.
Manager
Receive from manager.
Action expense reimbursements for move.
Move payroll and update employee information.
Provide logistics for transport and housing.
Employee Ready to Move
Underlying Technologies Help desk ticket system Expense management system Payroll system and HRIS Travel portal
SHIFT 2: OVERVIEW
TRENDS
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INDUSTRY VARIATIONS
KEY FINDINGS
59
60
The scope of business shared services expands beyond the back office via 1) opt-in and versioned services and 2) service components that business units can integrated into unique business processes.
The service delivery models will be used for processes where business units need a degree of differentiation such as sales, customer service, supply chain, and manufacturing. The models may also be used to support differentiated needs in emerging markets. Diverse and ITintensive organizations will make more use of these differentiated service delivery models than will organizations that are non-diverse and nonintensive.
IMPLICATION: EXPANDED SERVICE SCOPE

Delivery Models for Standardized and Differentiated Services Scope of Core and Expanded Shared Services
Diverse/Intensive Organizations
Unique Business Unit Needs Opt-In Services for a subset of business units Service Components to embed in unique business unit processes A small core of enterprise services plus many versioned services and service components
EnterpriseStandard Services HR Finance Procurement
Versioned Services to reflect business unit diversity
Non-Diverse/Non-Intensive Organizations
Expanding Beyond the CoreThe scope of business shared services expands via optional or versioned services and service components in areas such as sales, customer service, supply chain, and manufacturing.
Most services are enterprise standard.
SHIFT 2: OVERVIEW
TRENDS
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INDUSTRY VARIATIONS
KEY FINDINGS
Business services integrate technology with the resources to deliver a business process and enable a business outcome.
EXAMPLES OF BUSINESS SERVICES

Representative List of Business Service Titles and Services
Business Service Name Enterprise Standard Acquisitions/Divestitures Communications/ Collaboration Content Management Financial Processing Hospitality Human Resource Processing Meetings People Management Purchases Travel Differentiated Billing Consumer Solutions Customer Solutions Information Delivery Product Innovation Supply Chain Solutions
Description
Due diligence, integration/disintegration E-mail, Internet, telephony, mobile devices Conversion and/or storage of hard copy documents in digital formats, allowing improved workflow to store, organize, manage, and deliver business information Accounting, budgeting, investing, production of financial statements Dining, entertainment, employee wellness/retention services Payroll, benefits, recruiting, staffing, performance management, and succession planning Rooms, technology and scheduling, audio and video conferencing, events Compensation planning, relocation, employee management tools Strategic sourcing, supplier relationship management, procurement service Booking, expense accounting, credit cards, group meetings
Bill generation and presentation, payment collection Prime prospect research, CRM systems, advertising and media measurement Shopper intelligence, in-store action planning, trade fund management systems Analysis, management reporting, decision making Bioinformatics systems, product imaging and modeling systems Demand planning systems, total order management, physical distance systems
Source: Governance of Global Shared Solutions at Procter & Gamble, Weill, Peter; Soh, Christina; Sia Siew Kien; Research Briefing Vol VII, number 3B, Center for Information Systems Research, December 2007; Seven Steps to Better IT Service Economics, Infrastructure Executive Council (2009).
SHIFT 2: OVERVIEW
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KEY FINDINGS
61
62
Approximately 65% of organizations have already built or are planning to build a multifunction shared services model to include IT and other corporate functions.
IMPLICATION: MULTIFUNCTIONAL SHARED SERVICE ORGANIZATION

Expected Migration to Multifunction Shared Service Organization IT Leader Perspective RiskReturn Perspective on Multifunction Shared Service Organization IT Leader Perspective
High
IT and business leaders agree about the likelihood and the potential risks and value of a multifunction shared service model. The biggest challenges in proposing a multifunction shared service strategy is resistance to change, and fear of loss of control. Comparing this data to the data on page 58, it is clear that IT leaders are more comfortable with the idea of technology being delivered within business services than they are about the IT function becoming part of a business services group.
33% No Plans Yet
18%
23%
Risk
40%
n = 127.
19%

High
23%
36% No Plans Yet
21%
If we become part of a business shared service organization, I worry about IT being seen as a back-office utility.
Head of Applications Global Airline
Risk
31%
n = 58. Note: All graphs may not equal 100% due to rounding.
26%
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
As organizations exhaust efficiencies from functional consolidation, the next opportunities lie in integrating across functions, and ultimately aligning horizontally around the delivery business services.
Ninety-one percent of IT leaders believe that technology will be delivered within business services, and 67% believe that the IT function will integrate with a business services organization. Examples of business services include customer intelligence, new supplier installation, employee relocation, or acquisition integration.
IMPLICATION: FROM VERTICAL TO HORIZONTAL

A Path to Business Services
1. Decentralized Functions
BU IT Finance HR Supply Chain BU IT Finance HR Supply Chain
2. Siloed Shared Services

Supply Chain Shared Services
IT Shared Services
Finance Shared Services
HR Shared Services
4. Integrated Business Services
3. Multifunctional Shared Services
Integrated Business Services
Multifunctional Shared Services IT Finance HR Supply Chain
IT is Employee Services embedded in each Customer Services business Supplier Services service. Horizontal services become the predominant organizing principle.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
63
64
The integrated multifunctional shared services model combines accountability for the service outcome with service design and control of all technology resources needed to deliver the service.
IMPLICATION: FUSING ACCOUNTABILITY AND EXECUTION

Traditional Model: Divided Accountability and Execution
Accountability for Service Outcome Service Design Service Execution Central IT Function Business Functions (e.g., Finance, HR)
Business Shared Services Model: Fused Accountability and Execution
Business Shared Service Group
External Partners Service design and execution are shared by business function and IT. Business function leadership is accountable for service outcome but lacks control of execution. Relationship management is required to connect business and IT. External providers are two steps removed from business owner.
External Partners IT is embedded in business shared services group. Business shared service group leadership owns outcome, design, and execution. Relationship management overhead is eliminated. Single step is between business owner and external providers.
SHIFT 2: OVERVIEW
TRENDS
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INDUSTRY VARIATIONS
KEY FINDINGS
The business shared services group subsumes many IT activities within business services, or in overarching service strategy, service architecture, and risk groups. A smaller, more operational IT function remains within the business services group.
Account management and help desk are shared across all business services, not just IT. IT development and operations are externalized to outsourcers or the cloud.
POTENTIAL BUSINESS SHARED SERVICES MODEL
1. IT strategy, architecture, and risk owned by groups under the head of Business Services.
Business Service Strategy and Portfolio Management Service Architecture (Business, Information, and Integration) Risk Management and Security Policy Group IT Supply Chain HR Finance 6. Account managers and help desk are shared by all business services.
2. Business service managers define their IT requirements and work directly with external providers.
Business Services
PMO and Change Mgmt Service 3. Services requiring business knowledge to realize value are managed outside IT.
Business Units Help Desk
Account Managers
Sourcing and Contracting Service
4. Technology services are managed by functionally aligned IT resources.
Connectivity and Hosting Service Integration Layer and Standards
5. External providers deliver commoditized business processes and technologies.
External Service Providers (IT/Business Process and Technology Outsourcers and Cloud)
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
65
66
An IT shared service offers cost efficiency from centralization, but additional savings are available from integrated multifunction shared service organizations.
Creating an integrated business services organization can provide additional cost savings of up to 23% compared to standalone siloed shared services. The savings result from the ability to share infrastructure, management overhead, staff, facilities, IT systems and from greater scale in outsourcing and/ or offshoring.
THE ECONOMICS OF BUSINESS SERVICES

Savings from Migration to Integrated Business Services (Indexed)
100
5060 4454 3744
1. Decentralized Functions
2. Siloed Shared Services
3. Multifunctional Shared Services
4. Integrated Business Services
Source: Shared Services Roundtable; CIO Executive Board.
Additional Benefits of Integrated Business Services:

Improved quality and consistency of service Process standardization and integration Best practice sharing Agility in responding to business change
Better cross-functional data integration and visibility Job enrichment opportunities and high-potential talent sharing Improved support for M&A integration
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The shift toward delivering technology as part of business services will be more complete in non-IT intensive organizations.
INDUSTRY VARIATIONS
However, the creation of a multifunctional shared services group including the IT function is likely in all organizations. For IT intensive organizations, a shared service group may lack scale or maturity without IT. In nonIT intensive industries, IT may lack scale unless it joins a shared service group. Program management will be offered as a service except where local units are intensive users of IT and have their own program management capabilities. In non-intensive organizations, IT strategy and architecture may merge with broader business service strategy and architecture.
Non-Diverse/ Intensive 1 Technology Is Delivered as Part of a Business Service 2 3 1
The IT Function Becomes Part of Business Shared Services Group
Program Management Is Offered as a Service
IT Strategy and Architecture Become Part of Broader Service Strategy and Architecture
Definitions

SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
67
68
KEY FINDINGS
1. Four business and technology trends will change the way centrally provided applications and infrastructure are delivered:

Corporate functions are reaching the limits of efficiency in their current functionally oriented form. Shifts in global demand mean emerging markets require more intensive and differentiated IT support. Back-office business processes are being industrialized and externalized. The growing popularity of ITILv3 offers a viable framework for service delivery.
2. Many IT activities will be subsumed within business services so that business units consume and pay for business outcomes enabled by information technology. 3. The scope of shared business services will expand beyond the back office as organizations offer opt-in and versioned services and service components that create scale while permitting business unit differentiation. 4. Single-function shared service groups such as IT, Finance, or HR will evolve into multifunction groups to deliver business services. This move will expand economies of scale, provide higher service quality, and increase agility. Account management and user support will be shared across all functions. 5. Business analytics, program management, and vendor management may be offered as services in themselves. 6. In organizations that use information technology less intensively, IT strategy and architecture will become part of broader service strategy and service architecture groups. A smaller, more operational IT function will remain within the business services group to 1) design and procure technology and 2) oversee testing and operations.
SHIFT 2: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Shift 3: Externalized Service Delivery

Delivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.
69
70
The emergence of cloud computing and the growing availability of industry-standard business processes drives further externalization and prompts a shift in internal roles from providers to brokers.
OVERVIEW: EXTERNALIZED SERVICE DELIVERY

1. Technology as a Service Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.
The cloud provides an additional approach to external provision that will lead to the externalization of assets and activities that were not viable with other forms of outsourcing.
2. The Industrialized, Externalized Back Office Industry standards will emerge for back-office business processes that are then delivered by external providers.
A rising percentage of back-office processes and the technology that supports them will be delivered as standardized services by external partners.
Delivery will be predominately externalized as vendors expand service provision and internal resources become brokers not providers.
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Externalized Service Delivery
71
72
Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will begin to adopt licensing structures that mimic a service.
Software-as-a-service (SaaS) is predicted to reach mainstream adoption in 2010, with infrastructure-asa-service (IaaS) following after 2012. However, IT leaders predict that IaaS will not account for the majority of infrastructure until at least 2015.
TREND 1: TECHNOLOGY AS A SERVICE

Software-as-a-Service Adoption Timeline Infrastructure-as-a-Service Adoption Timeline
9% Deployed by 2009 25% No Opinion 47% Deployed by 2009 12% 2011 Onward 16% Planned 2010 38% No Opinion
25% Planned 2010
50% Mainstream Adoption Threshold
28% 2011 Onward
Source: 2009 Vision for Infrastructure Survey; Infrastructure Executive Council.
Key Characteristics of Cloud

ElasticCapacity scales up and down automatically based on need. MultitenantCustomers share the same underlying resources, forcing commonality and generating greater scale. On DemandServices are internet-based and can be consumed as and when needed. Usage-Based MeteringBilling is based on usage or a subscription (without long-term contracts or licenses). Self-ServiceServices are simple to use and can be directly consumed from the user interface on an application programming interface, thus reducing ITs role in implementation.
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Industry standards will emergence for backoffice business processes that are then delivered by external providers.
TREND 2: THE INDUSTRIALIZED, EXTERNALIZED BUSINESS PROCESS

Back-Office Business Processes Will Become Entirely Commoditized and Outsourced
Characteristics of Externalized Business Processes
External provider executes the business process using its own technology. Processes are industry standard for scale and quality. Delivery combines onshore and offshore resources. Processes are modularized to allow for customization.

n = 124.
Note: Chart does not equal 100% due to rounding.
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
73
74
With substantial externalization of business processes and technology, the majority of IT leaders predict that contract and vendor management will become the main infrastructure role.
Slim majorities of IT leaders believe that this transition carries high risks and high value.
FROM PROVIDERS TO BROKERS

Contract and Vendor Management Will Become the Main Infrastructure Operations Role
RiskReturn of Contract and Vendor Management Becoming a Infrastructure Role

High 39% Within Three Years
22%
34%
Risk
19%
n = 124.
25%
We will become technology brokers. Our job will be to know what the business needs, find the right offering in the market, and then integrate.
CIO Global Media Company
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
The economics of cloud significantly increase the percentage of spend that is externalized, a trend that will be compounded as cloud services expands deeper into applications and infrastructure.
MOVING SPEND OUTSIDE

Estimated Vendor Share of Total Lifetime Spend1 on an Application On Premise Cloud
20% Internal
50% Vendor
50% Internal
80% Vendor
Potential Expansion of Cloud Services

Cloud
Softwareas-a-Service Communicationas-a-Service Securityas-a-Service Integrationas-a-Service

1
Infrastructureas-a-Service Databasesas-a-Service Storageas-a-Service ComputingCapacityas-a-Service
Platformas-a-Service Desktopsas-a-Service Testingas-a-Service
Includes all costs for licensing, implementation, maintenance, support, and operations.
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
75
76
Outsourcing will remain as one of a portfolio of sourcing options.

Sourcing decisions will be guided by degree of commoditization. Shared external services from the cloud and industry-standard business process outsourcers will fulfill commoditized needs. Traditional outsourcing will provide technical resources to build and run internally built or customized technology.
OUTSOURCING, ONE EXTERNALIZATION CHOICE AMONG MANY

The Portfolio of Sourcing Options
Business Process
Applications
Infrastructure
Degree of Commoditization
High
Business Process Outsourcing
SaaS
IaaS/PaaS
Low
Business Shared Service Center
IT Outsourcing
Review of IT Outsourcing and Offshore Trends
Shrinking Vendor PoolVendor consolidation continues, reducing leverage and choice. Shorter, Smaller DealsThe multiyear mega-deal is replaced with a range of smaller, more flexible contracts. Service-Based PricingNon-cloud outsourcing adopts consumptionbased charging models. From Cost to IPDeclining cost differentials mean offshore centers reposition around unique skill sets or IP. End of the Captive Offshore Centers Captive offshore centers refocus on local market support or are transferred to external providers.
Source: TPI, Equaterra, Everest, Shaw Pitman, CIO.com.

SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
All organizations will maintain a portfolio of sourcing options, however, ITintensive organizations will make greater use of traditional outsourcing models and on-premise applications.
INDUSTRY VARIATIONS
Non-Diverse/ Intensive 1 Adopt Software-as-a-Service 2 3 1
Adopt Infrastructureas-a-Service
Outsource Applications Development and Infrastructure Retain On-Premise Applications
Definitions

SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
77
78
KEY FINDINGS
1. Cloud offers benefits for both vendors and users, and therefore will emerge as a significant sourcing option. 2. Back-office processes will continue to be commoditized and outsourced. 3. As a result of the move to the cloud and back-office outsourcing, a significantly higher percentage of IT spend will be externalized. 4. Internal roles will shift from technology provider to technology broker, concentrating on 1) identification and qualification of vendor capabilities and 2) the definition and management of contracts and service levels. In some instances, help with vendor selection and management may be offered to business units as a centrally provided business service. 5. Sourcing decisions will be guided by degree of commoditization, with the cloud used to obtain commoditized services, and outsourced resources used to develop and run technology where differentiation remains important.
SHIFT 3: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Shift 4: Greater Business Partner Responsibility

79
80
Four business and technology trends will enable business unit leaders and end users to procure and exploit technology by themselves.
OVERVIEW: GREATER BUSINESS PARTNER RESPONSIBILITY

Business and Technology Trends
1. New Sources of Opportunity The impact of information technology is expanding through business intelligence and collaboration, and at the customer interface, enabling new processes in customer service, marketing and sales, and innovation. 2. Tech-Savvy Workforce Technology understanding and confidence is growing among business unit staff and leaders.
Impact
The criticality of technology to business unit success and the need for differentiation within the organization both increase.
Implication
Business unit leaders become more capable of defining their own technology strategy, and end users of obtaining their own capabilities.
3. Technology as a Service Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.
Technology becomes easier for business units to provision and use.
4. Desktop TransformationA convergence of technologies is triggering a transformation of the desktop that will enable device-agnostic service delivery.
End users will find it increasingly easy to select and integrate capabilities from internal and external sources on the desktop or equivalent device.
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
81
82
The majority of IT enablement opportunities in the areas most critical to business unit success are characterized by user- and customerdriven requirements that may vary across the organization.
On average, 63% of business processes in innovation, sales and marketing, and customer service can be enabled via collaboration, business intelligence, or technology at the customer interface.
TREND 1: NEW SOURCES OF OPPORTUNITY

Collaboration, Business Intelligence, and Customer Interface as a Percentage of Total IT Enablement Opportunities
63%
28%
30%
The majority of IT enablement opportunities in areas of greatest value to business units are shaped by user or end customer needs that may vary across the organization.
Back Office (HR and Finance) Low
Production and Supply Chain Criticality to Business Unit Success
Innovation, Sales, Customer Service High
Source: CIO Executive Board analysis based on APQC Process Classification Framework v5.0.
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Basic technology understanding and confidence is growing among the business staff and leaders.
TREND 2: TECH-SAVVY WORKFORCE

U.S. College Graduates Attitudes on Technology Skills
80% 60%
Expect to Encounter New Technologies in Their Future Jobs
See a Need to Increase Technology Skills
Source: Dubie, Denise, IT Skills Crucial to Any Career, Students Say, Network World, 12 March 2009.
Excerpts from Functional and Business Unit Competency Models

Marketer (Chemical Company) Examines data and applies tools to see trends and implications for costs and benefits Even in the past two years I have seen a change in the sales force. They used to resist technology, but now they are lobbying for it.
Head of Sale Operations U.S. B2B Services Company
Sales Rep (Industrial Company) Uses technology to analyze and manage the business effectively Stays current with new technologies that help to create a competitive selling advantage
AVP, Finance (Investment Bank) Has command of business information and provides valueadded analysis and insight into business decisions Keeps current with IT systems applicable to own working group Understands the interrelationships between systems
Identifies trends in technology and draws conclusions and makes recommendations Works in collaboration with Tech Services to solve problems
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
83
84
Infrastructure and applications are becoming available as virtualized, configurable, and scalable services in the cloud, or will adopt licensing structures to mimic a service.
Software-as-a-service is predicted to reach mainstream adoption in 2010, with infrastructureas-a-service following after 2012. However, IT leaders predict that IaaS will not account for the majority of infrastructure until at least 2015. SaaS and IaaS will make it easier for business units to provision and use technology unaided, and vendors will take this opportunity to sell to them directly.
TREND 3: TECHNOLOGY AS A SERVICE

Software-as-a-Service Adoption Timeline Infrastructure-as-a-Service Adoption Timeline
9% Deployed by 2009 25% No Opinion 47% Deployed by 2009 12% 2011 Onward 16% Planned 2010 38% No Opinion
25% Planned 2010
28% 2011 Onward
Key Characteristics of Cloud

ElasticCapacity scales up and down automatically based on need. MultitenantCustomers share the same underlying resources, forcing commonality and generating greater scale. On DemandServices are Internet-based and can be consumed as and when needed. Usage-Based MeteringBilling is based on usage or a subscription (without long-term contracts or licenses). Self ServiceServices are simple to use and can be directly consumed from the user interface on an application programming interface, thus reducing ITs role in implementation.
As we offer services in the cloud, our sales strategy will shift to selling directly to business leaders. The CIO will become only one of five or six buying centers.
CIO Global Software Company
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
A convergence of technologies is triggering a transformation of the desktop that will enable device-agnostic service delivery.
The transformation is enabled by the growing maturity of virtualization, SaaS, and unified communications combined with the imminent move to Windows 7 at many organizations.
TREND 4: DESKTOP TRANSFORMATION

Desktop Virtualization Adoption Timeline
10% No Opinion 10% 2011 Onward 40% Deployed by 2009 40% Planned 2010 50% Mainstream Adoption Threshold 50% Mainstream Adoption Threshold
Unified Communication Adoption Timeline
12% No Opinion
15% Deployed by 2009
18% 2011 Onward 55% Planned 2010
Windows 7 Adoption Timeline

16% No Opinion 8% Deployed by 2009
24% 2011 Onward
52% Planned 2010

SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
85
86
Changes in sourcing models, technology usability and business competence reduce the value of the skill and scale advantages traditionally enjoyed by corporate IT.
The fact that cloud services cannot be extensively customized levels the playing field; business users cannot customize a cloud service, but neither can the IT function.
IMPLICATION: ERODING ITS ADVANTAGE IN SCALE AND EXPERTISE
High
Business units can obtain scale via the cloud similar to that available to IT. Access to Scale
IT
Business leaders and end users become more technology-savvy.
Business Units and End Users

Cloud and consumer technologies become less customizable. Low Low Access to Expertise High
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
A majority of IT leaders predict that the key value delivery roles of project management and business analysis will become embedded in business units, not central IT.
Sixty-four percent of IT leaders believe that this is a low risk move, but only 39% believe it will be valuable.
IMPLICATION: MOVING THE DIVIDING LINE

Project Management and Business Analyst Roles Will Move into Business Units IT Leader Perspective Risk-Return of Project Management and Business Analysis Moving to Business Units IT Leader Perspective
High
31%
5%
Risk
29%
n = 125.
35%
Note: Charts may not equal 100% due to rounding.
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
87
88
User preferences, differentiation, and external service availability will all determine the division of labor between centrally located IT resources and business units.
A NEW DIVISION OF LABOR

Factors Influencing Central and Local Roles
Q. User PreferenceDo the benefits of a common solution outweigh individual user preferences about the interface, process, or functionality? Central Roles Business Unit Roles
NO, end users provision externally. YES Q. Value of DifferentiationDo the benefits of local differentiation outweigh the benefits of a common solution?
No Role
No Role
NO, need met with a business service. YES
Deliver a Business Service
No Role
Q. External Service AvailabilityIs the functionality available in the cloud?
NO, the center is the provider.
Things have changed and perhaps I should let people get on with IT, but then what is the role of IT?
CIO European Airline
Design Procure Applications Integrate Test Secure Maintain Run Integrate Test Secure
Prioritize Set Requirements Manage Project Manage Change
YES, the center is the integrator.
Prioritize Set Requirements Procure Applications Manage Project Manage Change
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
Greater business leader responsibility does not entail a swing of the pendulum back to local or rogue IT. It is a shift in responsibility from IT to business, not a shift in resource from central to local.
BREAKING THE PENDULUM: A SHIFT IN RESPONSIBILITY, NOT RESOURCE

What Greater Business Responsibility Entails + Business-Led Opportunity IdentificationBusiness leaders are responsible for identifying technology enablement opportunities and defining needs. + Business Responsibility for Processes, Programs, and ChangeBusiness process design, project management, and change management become business roles. + Selective Business-Owned Technology SourcingBusiness leaders can obtain IT capabilities directly from the cloud when the value of differentiation outweighs standardization. What Greater Business Responsibility Does Not Entail Rogue Local IT StaffNo local rogue IT groups of dedicated IT headcount Servers Under the DeskNo business unitowned, on-premise application or technology portfolios Unintegrated DataNo relaxation of central information and integration standards when the value of integration outweighs differentiation Security RiskNo relaxation of central security policy where business unit actions create organization-wide risk
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
89
90
IT leaders predict a gradual rise in the provision of collaboration tools and knowledge sharing tools by end users
Business and IT leaders disagree about the benefits and risks of this trend. Sixty percent of business leaders believe that end-user autonomy in this area will be valuable, while only 29% of IT leaders agree. Sixty-three percent of business leaders believe the trend is low risk, while only 37% of IT leaders agree. A majority of IT leaders also predict that end users will provision their own endpoint devices. Thirty-eight percent believe this will happen within three years and a further 25% in more than three years.
IMPLICATION: THE RISE OF THE END USER

End Users Acquire Collaboration and Knowledge Sharing Technologies Themselves IT Leader Perspective Risk-Return of End Users Acquiring KnowledgeSharing Technologies for Themselves IT Leader Perspective
High
53%
11%
Risk
19%
14% More Than Three Years Low Low Returns
18%
High

High
14%
47% Not Likely to Happen 34% Within Three Years
23%
Risk
26%
n = 125 IT leaders and 58 business leaders.
37%
Note: Numbers may not equal 100% due to rounding.
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
End-user provision of devices and applications offers a third alternative to internal provision and outsourcing.
Market changes such as the transformation of the desktop and the emergence of consumer alternatives create the opportunity for end-user provision in a growing number of areas. Organizations can take advantage of these opportunities in situations where user flexibility is more important than integration, where users routinely combine internal and external information sources, and where security concerns are manageable.
A THIRD PLAYER IN IT
Analysis of Decision Criteria for End-User Provisioned Technology
Decision Criteria Affected by transformation of the desktop Viable consumer alternatives Greater value in user flexibility than in integration and harmonization Users combine internal and external information Moderate to low security risks Cost savings from reduced internal provision
Process Automation
Business Intelligence
Collaboration
End-User Devices
No Provision by End Users Employees bring their external knowledge networks into their jobs. We must accept that these networks reside on external platforms.
CIO European Technology Company
Optional Provision by End Users
Mandatory Provision by End Users
No
Yes
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
91
92
Business units will have less IT responsibility in non-diverse organizations where technology is not critical to the product.
End users in all organizations will have greater freedom to provision their own devices. They will also provide their own collaboration capabilities, although this may be less important in non-diverse organizations where centrally provided enterprise collaboration tools may have sufficient scale and reach.
INDUSTRY VARIATIONS
Non-Diverse/ Intensive 1 Business Units Provision Their Own Technology 2 3 1
Program Managers and Business Analysts Move to Business Units End Users Provision Their Own End-Point Devices
End Users Provision Their Own Collaboration Tools
Definitions

SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
KEY FINDINGS
1. Pressure for a greater role for business units in obtaining and managing information technology will grow as 1) technology understanding and confidence among business unit leaders and end users increases and 2) technology becomes ever more critical in differentiated business processes such as customer service, marketing and sales, and innovation. 2. The increased availability of software and infrastructure delivered as a service via the cloud reduces the difficulty for business units and end users of planning and provisioning their own information technology. 3. For capabilities that are differentiated, business units will increasingly own their own technology strategy, requirements definition, and change management. This will be particularly likely in IT intensive organizations. Centrally located IT resources will continue to provide strategic guidance, procure traditional on-premise solutions, and act as an integrator and tester when externally provided services are chosen. 4. End users will provision capabilities where there is little benefits from a common solution and where they have strong individual preferences for specific interfaces, functionality or networks. Examples include end-user devices and collaboration and knowledge sharing tools.
SHIFT 4: OVERVIEW
TRENDS
IMPLICATIONS
INDUSTRY VARIATIONS
KEY FINDINGS
93
94
Shift 5: Diminished Standalone IT Role

IT roles will embed in business services, evolve into business roles, or be externalized. Remaining IT roles will be housed in a business shared service group. The CIO position will expand to lead this group or shrink to manage IT procurement and integration.
95
96
Many IT roles will relocate, as those requiring business knowledge become embedded in business units or business shared services, and those benefiting from scale are externalized.
OVERVIEW: THE STORY SO FAR
Requires Business Knowledge
Business Units/End Users
Greater Business Partner ResponsibilityBusiness unit leaders and end users will play a greater role in obtaining and managing technology for themselves where differentiation has more value than standardization. Business Shared Services Group IT Embedded in Business ServicesCentrally provided applications and infrastructure will be embedded in business services and delivered by a business shared services organization.
Skill
IT
External Providers
Requires Technology Knowledge Business Unit Specific Scale
Externalized Service DeliveryDelivery will be predominantly externalized as vendors expand service provision and internal resources become brokers not providers.
IndustryWide
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
97
98
The traditional set of IT roles (EA, PMO, Applications, Infrastructure, Information Risk) will be redistributed.
Identifying opportunities and managing change will become business unit roles. Roles that can be shared such as project management and data analytics will become business services. IT strategy and architecture will become part of broader service strategy and architecture teams. The provision and operation of technology will mostly be externalized. A residual central IT function will remain to design, procure, test, and integrate applications and infrastructure.
WHAT GOES WHERE?

Current Location of Role
Central IT Office of CIO

Future Location of Role

End Users
Set IT strategy. Liaise with business units. Identify opportunities. Prioritize the portfolio. Recover costs. Develop roadmap (process, data, apps.). Manage project/program. Set requirements. Design business process. Design application. Procure/build/applications. Integrate. Test. Manage data. Maintain. Retire. Design technology. Procure/build technology. Run. Support users. Set security policy. Manage compliance.
Procure technology (user devices only).
Procure applications (BI and collaboration only).
Business Knowledge
Business Units

EA
Identify opportunities. Manage project/program. Set requirements. Design business process.
Procure applications. Manage change. Procure technology (cloud only).
PMO
Applications Development

The relative scope of business unit and shared service roles depends on business diversity. Business units focus on applications only they need, the business shared service center has the same roles for services used by all. Business Shared Services Group

Identify opportunities. Manage project/program. Set requirements. Set IT strategy. Liaise with business units. Prioritize the portfolio. Roadmap. Design/procure application. Design/procure technology. Integrate. Build/provision applications. Build/provision technology. Maintain.
Design business process. Manage change. Recover costs. Manage data. Support users. Set security policy. Manage compliance. Manage external run and maintain. Test. Retire.
Indispensible IT

Infrastructure

External Providers

Information Risk
Enhance. Run. Support users.
IndustryWide Scale
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
Headcount in standalone IT roles will likely shrink to 25% or less of current totals by 2015 in organizations where the five shifts have taken full effect.
In many cases, the number of staff in standalone IT roles will be less than those with responsibilities related to technology in the business shared services group. See the appendix on page 116 for full details of the analysis.
NOT MUCH LEFT

Estimated Reallocation of IT Headcount at Progressive Organizations by 2015
As a Percentage of Total Central IT Headcount in 2010
4575% 20% External
25% 80% Internal 1325%
1025%
Central IT Function in 2010
Externalized
Business Units
Business Shared Services Groups
Indispensible IT
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
99
100
With diminished scale and scope, the remaining standalone IT function is unlikely to warrant a separate reporting line and will become a sub-group within a business shared service organization.
A FUTURE HOME FOR IT?

Reporting Lines for Standalone IT Reporting Lines for IT in a Business Shared Services Group
CEO
CEO
Head of IT
Head of Business Shared Service
Head of Business Shared Service
Indispensible IT
Head of IT Indispensible IT + IT integrated with its largest user + Synergies from shared admin, support, and liaison roles + Diminished IT scope and scale unlikely to warrant separate CEO reporting line + Expanded career paths for IT leadership IT positioned as part of the back office
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
The business shared services group subsumes many IT activities within services or in overarching service strategy, service architecture, and corporate risk groups. A smaller, more operational IT function remains within the business services group.
Account management and help desk are shared across all business services, not just IT. IT development and operations is externalized to outsourcers or the cloud.
POTENTIAL BUSINESS SHARED SERVICES MODEL
1. IT strategy, architecture, and risk move to groups under head of business services.
Business Service Strategy and Portfolio Management Service Architecture (Business, Information, and Integration) Risk Management and Security Group IT Design/procure applications Design/procure technology Integrate Test Manage external run and maintain Retire Sourcing and Contracting Service PMO and Change Mgmt. Service Account Managers Supply Chain HR Finance 5. Account managers and help desk are shared by all business services. Business Units Help Desk
Business Services
2. Services requiring business knowledge to realize value are managed outside IT.
3. Technology services are managed by functionally aligned IT resources. Integration Layer and Standards 4. External providers deliver commoditized business processes and technologies.
Connectivity and Hosting Service
External Service Providers (IT/Business Process Outsourcers and Cloud)
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
101
102
Successfully embedding the IT function into a business shared services organization and delivering technology within business services will require five critical new roles.
Each role requires hybrid capabilities that combine technology and business knowledge and skills. In each case, there are risks related to the role during the transition from the current to future organizational model. These risks relate to skills scarcity or the need to cope with user or vendor to immaturity.
THE FIVE KEY NEW ROLES
Role 1. Business Service Manager
Hybrid Capabilities Understand business outcomes of service and underlying technology. Integrate business, information, and technology architecture. Understand business context of data, user needs, and underlying data architecture.
Likely Source

Transition Risk Inability to find/afford sufficient individuals to fill the role Inability to find individuals with combined skill sets
ITbusiness liaisons External
2. Business Service Architect
Enterprise or business architects
3. Information Analyst
Finance or market research External
Has heavy user support role until maturity of business partner information usage improves Influence of dedicated IT leadership declines before strategists develop sufficient technology understanding Until cloud vendors mature, must have deep enough technology knowledge to understand vendor maturity
4. Strategist
Understand how technology integrates with other capabilities to shape corporate strategy.
Senior IT leaders Corporate strategists External
5. Vendor Manager
Understand vendor management and technology.
Infrastructure managers Applications managers External
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
As existing IT roles are moved, reconfigured, or externalized, one critical new role in service management will emerge.
Service managers are already appearing in progressive IT functions as the end-to-end owners of delivery for a specific service. The role is accountable for designing and building the service as well as delivery and cost recovery. As such, the role requires business knowledge, and skills in sales and communications, program management, and financial management.
BUSINESS SERVICE MANAGERS

Potential Model for a Business Shared Service Group
Illustrative
Group IT Supply Chain HR Finance
Business Service Manager Profile
Key Responsibilities
Business Services
Determine what customers want or need related to the service line. Run service delivery strategic planning process for service line and update technology plan. Help business understand how to adjust to anticipated technology/product changes. Set price for services and help business in determining budget needs.
PMO and Change Mgmt. Service
Business Analytics Service Sourcing and Contracting Service Communication/Collaboration Service Connectivity and Hosting Service
Competencies Required for Selection
Experience in service delivery, direct business engagement, and multiple technology domains Has participated in design or implementation of major IT projects Technology sales and marketing experience Ability to develop complex financial plans Ability to communicate and build relationships outside IT
Each service is managed end-to-end by a business service manager.
A service manager should own the bible for a service offering the scope of whats offered, SLAs, metrics, and cost.
Manager, Service Management U.S. High-Tech Company
Source: Infrastructure Executive Board.
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
103
104
Differentiated services are launched and enhanced through short, iterative Agile releases that maximize speed to value capture and ensure resources mobility.
The operating model includes build resources remaining in IT as well as the PMO, service managers and architects from the business services group, and external providers. Commodity services are obtained directly from external providers.
AN AGILE OPERATING MODEL FOR SERVICE DELIVERY
Business Service Managers Service Roadmap Business Service Catalog Run (Primarily Cloud) KEY FINDINGS Commodity Services via SaaS
Business Needs Expressed as Capabilities
Service Roadmap
Differentiated Services
Service Roadmap Resource Mobility Service Roadmap
Business service managers maintain roadmaps for each service.
Roadmaps for differentiated services are executed in rapid releases using Agile methodology to expedite value capture and resource mobility. Involves IT build team, business services PMO and service architects, and external resources Service orientation expedites integration and reuse.
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
Test and Integrate
Remaining internal applications and infrastructure activities are reallocated to build and run teams.
The build and run teams support the needs of the business service managers within the business shared service center.
REORIENT ON BUILD AND RUN

Traditional IT Functional Model IT Build and Run Model
Applications

Infrastructure

Build
Run
Set requirements. Design business process. Design application. Procure/build applications. Integrate. Test. Manage change. Manage data. Maintain. Enhance. Retire.
Design technology. Procure/build technology. Run. Support users.
Design/procure application. Design/procure technology. Integrate. Test.
Manage external run and maintain. Retire.
Moved to Business Services, Business Units, or Externalized

Set requirements. Design business process. Build application. Build technology. Manage change.
Manage data. Run. Maintain. Enhance. Support users.
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
105
106
Roles currently in the Office of the CIO will be subsumed by similar, but more business-centric, roles within the Business Shared Services Group.
This migration will ensure technology becomes more firmly embedded in business architecture and business strategy.
ROLE MIGRATIONOFFICE OF THE CIO

Potential Migration by 2015
Role
Location Subsumed in business service architecture group reporting to Head of Business Shared Service Split and subsumed in Office of Head of Business Shared Services and Corporate Strategy group
Responsibilities Coordination of the business, technology, and information architecture for each business service IT strategy becomes embedded in the strategies of the business shared service group and the company as a whole
Required Skills and Knowledge

Enterprise Architect
Business architecture Information architecture Technology architecture Deep knowledge of drivers of competitive advantage and operational risk Insight into competitor use of technology Understanding on corporate strategic planning processes Senior-level relationships across the organization Financial accounting and controller skills
IT Strategist
IT Controller
Subsumed in Office of Head of Business Shared Services
Financial management and cost recovery of business shared services, including underlying technology Liaison between business units and Business Shared Services groups for opportunity identification
ITBusiness Liaison
Subsumed in liaison layer of Business Shared Service Group
Deep knowledge of business units Negotiation and consensus building Challenger profile
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
The traditional businessfacing applications roles of business analyst and project manager migrate or embed into the business shared service group or business units.
Most application development is externalized, leaving solutions architects to oversee integration and applications managers to oversee external partners and testing. Data and analytics are managed as a business service.
ROLE MIGRATIONAPPLICATIONS AND PMO

Role Business Analyst
Location Dedicated BAs located in Business Shared Service group and business units while basic requirements definition skills also become embedded in business roles Split between business shared service group where project management is offered as a service, and business units where project skills are embedded in business roles The build group in the remaining IT function
Responsibilities Understanding technology needs, gathering requirements, identifying vendors Managing all organizational change projects (not just change related to technology projects) Designing and enhancing remaining customized applications, and integrating applications from the cloud Enforcing consistent data architecture (as defined by business services architects) and providing support for business analytics Legacy maintenance and enhancement, testing, and short-turnaround development of customized applications that confer competitive advantage
Understanding of business processes and business needs Business requirements definition skills Stakeholder management Managing delivery from external providers Project management processes and reporting Applications and infrastructure architecture
Project Manager
Solutions Architect
DBA/ Master Data Manager/ Data Warehousing Application Developer
Moves to a data and business analytics service in the business shared services group
Data administration Information architecture Business context of data
Mostly externalized, a few remain in the build group in the remaining IT function in ITintensive organizations
Applications development Managing external development partners Testing and QA Integration
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
107
108
Infrastructure roles refocus on external provider management and on service provision within the run group in the remaining IT function.
The security role changes less, but it shifts from securing devices to securing information and user behavior.
ROLE MIGRATIONINFRASTRUCTURE AND SECURITY

Role
Location The run group in the remaining IT function
Responsibilities Manage external infrastructure providers (traditional outsourcers and providers in the cloud). Integrate external technology providers; identify and evaluate new technologies. Provide user support for business services including underlying technology. Define risk policy, oversee vendor risks, influence user behavior.

Infrastructure Manager
External provider management Infrastructure market trends
Infrastructure Architect
The run group in the remaining IT function
Infrastructure architecture
Help Desk
Moves to Business Shared Services Group and/or externalized Merges with other corporate risk roles, either within business shared services group or as a standalone office
Knowledge of workflow and business process Technology knowledge External partner management Risk management
Information Security Officer
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
The evolution of the IT function amplifies contradictions in a traditional CIO role, which are resolved by segregating the responsibilities of a business service provider, head of technology, and technology-savvy business unit leader.
The CIO role can expand to become head of a business shared services organization and oversee business service strategy and architecture. Managing technology procurement and integration still requires leadership, but is likely to be led by a report of the head of business services, and with a stronger focus on technology and operations. CIOs may also transition to a leadership role in a business unit that derives competitive advantage from technology, or to a senior role at an external service provider.
CIO ROLEWHAT NEXT?

Future Roles for CIOs
External Service Provider Executive
Head of Business Shared Services
Develops new service offerings Manages development, operations
Advisor to business units on exploiting technology Responsible for business service development and provision
Scale of Role
Oversees shared technology operations Manages vendors and integration
Leads business unit in exploiting technology for competitive advantage
Technology Leader (Reporting to head of business shared services)
Business Unit Manager
Business Impact
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
109
110
Non-intensive users of IT will see a more complete change in ITs roles than organizations that use IT intensively.
ITintensive organizations that retain some on-premise applications will have greater roles for applications and infrastructure teams. See page 15 for definitions of Diverse/Non-Diverse and Intensive/Non-Intensive.
INDUSTRY VARIATIONS
Non-Diverse/ Intensive 1 CIO Role Expands or Shrinks 2 3 1
The Infrastructure Group Focuses on Vendor Management PMO Becomes a Business Service Information Security Integrates with Corporate Risk The Applications Group Focuses on Design, Integrate, and Test Remaining IT Resources Organize as Build and Run Service Manager Role Rises in Importance
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
KEY FINDINGS
1. Central IT will disperse as roles requiring business knowledge become embedded in business units or business shared services, and roles benefiting from scale are externalized. Remaining headcount in the IT function may be cut to 25% or less of current totals. 2. The most likely organizational home for this much diminished IT function is a Business Shared Services Group, as the IT functions lack of scale or impact will not warrant a direct reporting relationship to the CEO. 3. Traditional office of the CIO roles such as strategy, architecture, and IT controlling will be subsumed by similar but more business-centric roles in the business shared services group. 4. The applications and PMO roles change substantially as the IT function merges with other shared services, and business units, end users, and external providers play a greater role. PMO becomes a role for the shared service group and selectively, for business units. Applications shrinks to focus on design, procure, integrate, and test, and infrastructure increasingly manages external providers rather than manage technology itself. 5. A critical new role in service management will emerge with accountability for end-to-end delivery for a specific business service. The role includes designing and building the service as well as delivery and cost recovery. 6. A new operating model emerges to launch and enhance differentiated services through short, iterative agile releases that maximize speed to value capture and ensure resources mobility. 7. Contradictions in a traditional CIO role are resolved by segregating responsibilities. CIOs may move into the business critical role of designing, deploying and leading a business services organization. A technology leader reporting to the head of business services can then oversee shared IT operations.
SHIFT 5: OVERVIEW
IT STRUCTURE
NEW ROLES
ROLE MIGRATION
CIO ROLE
INDUSTRY VARIATIONS
KEY FINDINGS
111
112
Appendix
113
114
The research used an outside-in approach that starts by determining business, social, and technology trends that will affect how organizations use and manage information technology, before developing hypotheses on how the IT function itself might change.
The research also relied on input from IT and business leaders, both through oneon-one interviews and online surveys.
APPENDIXA BUSINESS-DRIVEN METHODOLOGY

The Future of Corporate IT Research Process 2009/2010
1. Identify Business, Social, and Technology Trends
2. Hypothesize Implications for Corporate IT
3. Test and Validate Conduct online survey to test hypotheses with 127 IT leaders and 58 business leaders globally. Convene small group of leading CIOs for direct discussion feedback.
Review academic and general business literature and data on business, economic, and social trends with a three- to fiveyear horizon. Review Corporate Executive Board research into future of Finance, Shared Services, Sales, Marketing, etc. Interview 20 business unit general managers and heads of Sales, Finance, Procurement, and HR.
Review analyst, consultant, and trade press analysis of the future of the IT function and technology. Interview 40 CIOs and other IT leaders on changes in ITs value drivers, ownership, and role.
Output: List of Ten External Trends That Will Change Corporate IT
Output: Hypotheses on changes in IT value drivers, ownership, and role over three to five years
Output: The Future of Corporate IT study
Appendix
115
116
Analysis of IT headcount reallocation as depicted on page 25 and 99.
APPENDIXESTIMATED REALLOCATION OF IT HEADCOUNT

Estimated Reallocation of IT Headcount by 2015
As a Percentage of Total Central IT Headcount in 2010 Current Central IT Application Development and Maintenance Infrastructure (Server support, network, telecom, security ops) End-User Computing and Help Desk Vendor Management1 Test and QA PMO Business Liaison DBA IT Finance Enterprise Architecture IT Strategy Other Already Externalized (May include any of the roles above) Total
1 2
Future Externalized Business Unit2 Business Shared Service Center2 23% IT
33% 13% 9% 1% 3% 4% 3% 3% 1% 2% 1% 10% 20% 100%
1628% 711% 18%
12%
410% 26%
05% 1% 13% 23% 3% 12% 1% 2% 1%
02% 34% 12%
12% 12% 02%
01%
04% 20% 4575% 35%
02%
1325%
1025%
Assumes 6x increase due to greater externalization. Business unit and business shared services roles may be blended with other responsibilities, not new dedicated headcount.


CIO The Future of Corporate IT Volumes 1 To 5

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INFORMATION TECHNOLOGY PRACTICE

The Future of Corporate IT

INFORMATION TECHNOLOGY PRACTICE

Director Tim Kelso Consultants Shalini Das Leda Nelson

CONTENT PUBLISHING SOLUTIONS

2010 The Corporate Executive Board Company. All Rights Reserved.CIO6012110SYN

2010 The Corporate Executive Board Company. All Rights Reserved.CIO6012110SYN

EXECUTIVE SUMMARY (CONTINUED)

THE FUTURE OF CORPORATE IT

Risk High Low High

1. Information Over Process

2. IT Embedded in Business Services

Information Technology Is Delivered as a Service

The Central IT Function Becomes Part of Business Shared Services

3. Externalized Service Delivery

4. Greater Business Partner Responsibility

The Infrastructure Group Focuses on Contract and Vendor Management

5. Diminished Standalone IT Role

DOES THE IT FUNCTION MATTER?

Potential Strategic Impact of the IT Function

Criticality of Technology to Business Success

Introduction: The Future of Corporate IT

The Future of Corporate IT

WHICH WAY FORWARD?

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT

The Future of Corporate IT

THE CIOS REPORT CARD IN 2015?

Department: Group IT Leader: Chief Information Officer Date: December 2015

nds 10 l Tre Extern erna al 4 Int Trends

Current SOP Corporate IT

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT

Corporate Strategy Business Process Design Information Management and Analytics

Program Management Change Management Business Shared Services Procurement

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT

The Future of Corporate IT

NARROWER SOURCES OF COMPETITIVE ADVANTAGE

Buy Vanilla (20062010)

Buy Cloud (2010 Onward)

Sources of Differentiation Accessible to Competitors

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT

STRUGGLING TO KEEP THE TEAM ON BOARD

Second Half 2007

First Half 2008

Second Half 2008

First Half 2009

Second Half 2009

WHICH WAY FORWARD?

FOUR INTERNAL TRENDS

TEN EXTERNAL TRENDS

THE FUTURE OF CORPORATE IT