This article originally appeared in a shorter form in the Economist Intelligence Unit’s ‘Impact of Cloud‘ report in 2014
The legacy of company structure
If you and I were to list the departments which form our businesses we would probably find much in common. Sales, Marketing, Finance, HR and IT would almost certainly be on our lists. In older and bigger organisations, greater diversity will start to appear — Manufacturing, Design, Customer Service, Legal or even, like the enormous Volkswagen AG, your own sausage department.
These rigid structures are often formed in the earliest stages of a company’s growth and are left, unchanging, as the company grows within them. The creation of new departments and merging of existing ones requires inertia to be overcome, meaning that change becomes harder as the company grows. Structural change eventually only occur in seismic strategic shifts as the company is forced to adapt and evolve in painful paroxysms.
The legacy of our company structures fundamentally impacts our capacity for innovation and agility, and can even determine our culture, strategy and ultimately, our commercial success.
The evolution of IT
If you were to look at a small business today, you would naturally see a very different structure than you would find in a large, established organisation. Founders and early stage employees necessarily have a much greater responsibility to cover a multitude of roles where specialists have yet to be hired. With fewer people communication is easier, commitment is more obvious and the days are much, much longer.
As companies grow and new skillsets evolve, tradition and established best practice dictate that departments are created and specialists are hired to staff them. In the 1960s, it was a new type of technology — the computer — which required mathematical and analytical expertise that had rarely been required in business before, birthing not only the IT Department but also an entire, dominant industry and a legacy of innovation and creativity.
When the term “Information Technology” was coined back in 1958, the reference was broad and reverential towards the new technology it encapsulated. Harold Leavitt and Thomas Whisler, writing a landmark article for the Harvard Business Review, commented that “the new technology does not yet have a single established name. We shall call it information technology (IT)”. In that one moment, an entire industry was categorised and given identity.
IT in the age of Leavitt and Whisler would be unrecognisable to an IT department of today. Their definition of the field emphasised the strong mathematical basis of computing at the time with three distinct themes: “techniques for processing”, the “application of statistical and mathematical methods to decision-making” and the “simulation of higher-order thinking through computer programs”. Whilst these themes may form the foundations of a modern IT department, the reality of the tasks it takes on are very different.
The modern role of IT
In more recent times, the Information Technology Association of America (now TechAmerica) has defined information technology as “the study, design, development, application, implementation, support or management of computer-based information systems”. Even this staccato definition feels dated and falls short of the reality faced by most IT teams.
If you’re not involved in IT directly, the range of roles and skills with non-overlapping skillsets that may report to the CIO today may surprise you in its scope. This is one of the greatest challenges that the modern IT department has inherited.
Consider the tasks that may fall to a modern IT team; helpdesk staff support increasingly savvy and demanding users in the workplace and on a riot of mobile devices, while compliance professionals merge technical and legal expertise, ensuring that companies observe complex international and local law. Procurement teams negotiate the deals and contracts to buy the hardware, software and services that the rest of the company consume.
Architects now design the physical, virtual and cloud infrastructure which support the business while security specialists and network engineers secure them. Business Analysts write specs and maintain the documentation for the applications to be designed by Software Engineers, while designers and UX researchers consider how best to deliver the experience to the end user.
The growth of Cloud services, as demonstrated by the total number of objects stored in Amazon’s S3 from 4th quarter 2006 to 2nd quarter 2013 (in billions)
Database Administrators focus on one or more database technologies, with traditional relational databases now sharing the spotlight with NoSQL, Graph and OO databases. As data grows, it moves from databases to data warehouses, while search and data visualisation become skillsets in themselves.
All the while, the furious proliferation of both Open Source and commercial platforms and products requires the experts in each discipline to learn and challenge themselves continually.
The scope is even greater in reality than can be represented in these examples. If the number and variation of these examples surprises you, imagine the not inconsiderable task of bringing so many disparate disciplines together. In the IT Department of today there is no longer a career for life, and no one specialism is a strong enough mast to lash your skills to while riding out the storm. Change is at the very core of IT’s discipline.
The evolution of business
An increasing demand for data is everywhere, from Marketing teams working on SEO and attribution, to HR departments demanding performance dashboards from their increasingly powerful HR (or HRIS/HCM) systems. The expectation of analysis and visualisation is driven in part by the proliferation of amazingly flexible and powerful data visualisation tools, and a new movement within businesses to embrace experimentation, data and analysis to succeed.
There has been a further shift in the role of IT over the last few years, driven by two parallel developments. Technology is no longer solely the domain of IT professionals, with smart mobile devices — computers like any other — pervading our lives and driving ever greater adoption of consumer technology in the workplace. Meanwhile, the ubiquity of services delivered from the Internet — cloud, or Software as a Service — has meant that the requirement for IT departments to host their own, bespoke systems is diminishing.
For an end-user joining a company, this now means that there is an expectation that the services provided by their organization will at least match the quality that they expect from their own personal devices. If I, as a Gmail or iCloud user, can expect my phone to alert me to emails and chats, store all of my photos and be aware of my availability and location why should I not expect that from my work device? If I can use Facebook, Snapchat or Twitter without a training session, why should I need an induction to explain how my HR system works?
The change isn’t just in user expectations though. Compare the administration of Sharepoint on an on-premise server with the experience of a Jive, Huddle or Google Apps administrator. The barrier for entry, and the training and knowledge required is vastly decreased because of the reduced opacity and complexity of the administration experience itself.
As Internet based services become prevalent, there will be a greater similarity between the technology footprint of large and small companies. Google Apps is already used by 58% of the Fortune 500, while Office 365 is pushing Microsoft out of the datacentre and into the hands of people who previously couldn’t, or wouldn’t, have administered an Exchange server.
This evolution takes the already significant scope of the IT department and blurs the lines between business and technology roles even further. Deciding which department takes responsibility for which tasks will become increasingly difficult, potentially stifling agility and innovation with bureaucracy.
Networks, not departments
Whilst the IT department is central to the changes that we are experiencing in business, the repercussions of this tectonic shift will affect entire industries and the conventional wisdom of how companies are structured.
In 2009 Ron Tolido, the CTO of Capgemini Europe, described the phenomena of unrecognized “business prevention” departments within companies. IT security, legal and procurement teams were highlighted as departments whose main responsibility was to keep business from being conducted.
The unwieldy remit of the IT Department as ‘the people who deal with technology’ must change, just as the nature of any team which doesn’t facilitate business must change. The solution to both of these issues lies in challenging the legacy of those well-defined hierarchical departments.
Many modern management theorists have started to suggest that a network or cluster model is more appropriate to meeting our requirements for business agility, but it also neatly addresses how to more effectively assign domain expertise and implicitly supports the outsourcing of specialist functions where appropriate and beneficial.
The concept of the network model will be recognisable in graphical form to anyone familiar with a social graph. Rather than a typical organogram with department heads and lines of hierarchy, the network structure requires groups, or squads, of specialists and experts who are defined as much by their own skillsets as the relationships and contracts they have with other groups in the business.
The network model allows the business to grow and adapt to challenges more easily, by bringing cross-disciplinary teams together with specific shared objectives. Where previously the IT Department may have inherited responsibility for the delivery of a Finance or ERP system, within the network model a team would be pulled together to address the business objective, with no concern for disciplinary boundaries and a single-minded focus on the outcome and the satisfaction of their ‘customers’.
Squads, grouped by domain expertise, would no longer be bound by departmental responsibility. Tossing projects over the wall — “IT have let me down on this project again” — would no longer be possible, with teams committing to their own objectives and selecting their resources as needed. The network system is more organic, fluid and dynamic, with a greater sense of the value of individual contribution and a diminished reliance on seniority and rank.
What’s perhaps most notable is that in the best companies, these lines are already blurred, with cross-team collaboration being common. The network model just makes this behaviour explicit and encouraged.
The greatest challenge with a network system will be at the strategic level. While squads will be able to deliver business value more immediately, the definition of the strategic direction of the company, and the communication of the strategy to the teams will be critical. At this level, perhaps the greatest change is how a Board can assign responsibility, with traditional hierarchical responsibility no longer supporting the structure of the organization beneath.
Not only will the role of the CIO or CTO no longer be appropriate, but also the roles of Chief Finance Officer, Chief Marketing Officer, and any other vertically assigned executive role will be challenged. The accountability of executives to define the company strategy and take ownership of delivery will be undiminished, but the assignment of responsibility will be, perhaps rightly, more dynamic and demanding.
Is IT dead?
Many articles have asked the question “Is IT dead”, or whether the role of the CIO should become the Chief Digital Officer, or Chief Innovation Officer. Renaming the CIO is just replacing one ill-fitting outfit with another. The question is not whether the title of the CIO should change, but how every modern business must evolve to suit our new ecosystem.
Technology and information are the currency of business, and pervade every decision, in every department in every business. CIOs have been making strategic business decisions for years, just as their CFO, CMO, CCO and CEO colleagues have, however the definition of the term ‘IT’ and the responsibilities of the modern role are now only barely related.
The skills, talent, creativity and importance of staff within an existing IT function remain critical to business, but the monolithic and overstretched classification is out of date. This is no simple rebranding exercise, nor an opportunity to change the taxonomy of IT, but a fundamental realisation that Information Technology is a concept which has served its time and needs to be replaced.
It is essential that we address this issue. Some of the best, most creative and inspiring companies are considered ‘tech’ companies, yet still we see a shortage of IT skills and a woeful gender imbalance when attracting young talent. It is a real concern that many young people entering the workforce will be turned away from amazing careers by tired preconceptions and miscategorization.
Information Technology is responsible for some of the most significant advances in human history and we must be grateful for its legacy and impact, but at 56 years old, it’s time for it to take early retirement.
Originally published at www.ridley.co on July 15, 2014.