An era of transformation

The UK government is setting out to deliver a number of transformational agendas on the back of its determined drive to cut public spending: agendas designed, in the coalition’s view, to better deliver the why and the how of things being done, raising public sector efficiency and lowering costs. The early initiative in the NHS of moving decision-making from the Primary Care Trusts to local General Practices illustrates this.

In several of my columns in 2010 I made the point that to deliver real reductions in public spending on IT will require transformation not only of how Whitehall sources technology but also in how it exploits it. So I am starting 2011 with a focus on some wider aspects of transformations in technology sourcing.

A decade ago offshoring was the transformational driver of the moment as emergent Indian ventures copied existing IT services business models, but with an edge in much lower human resource costs. Virtualisation was starting to impact at the same time, but the initial transformational sourcing developments were in totally new business models: online search (Google) and e-commerce (Amazon) in the consumer services space, and a young Salesforce.com launching into the enterprise market with an equally innovative sourced services model.

Now look to the recently published shortlist of companies identified by the FT ArcelorMittal Boldness in Business Awards. In the Drivers of Change category, four of the six on the shortlist are identifiably offspring of the impact of that virtualisation revolution of a decade back: Apple, Amazon, VMware and Facebook.

– Apple is now exploiting its potent blend of design-driven and integrated hardware, services, apps and content to set the standard for how we better interface with and exploit the virtual. – Amazon is exploiting the substantial service manufacturing experience built in its e-commerce engine room to redefine the business of infrastructural services. – VMware is providing the enabling tools for economic transformation through virtualisation of flabby, low-asset productivity and decidedly un-green portfolios of server farms and datacentres. – Facebook, as the leader in social networking, is now moving ambitiously to rework, redraw and re-enable the human processes that lie at the heart of how much contemporary business is done.

So here is the essence of my 2011 New Year Epistle to a Contemporary CIO.

The real starting point in this new era of the transformation must be to boldly address the why and the how of your business. Many of the systems restraints imposed by older technologies are now evaporating, so it is time to revisit and challenge old assumption and certainties. Why is your business done the way it is? Is how it is done now open to competitive challenge?

This is not a transformational journey that starts in technology. It is one that starts in a deep understanding of what your business is about – why its best clients value it, what defines the real dynamics of your market, what underwrites your competitive edge – and in your ability to deliver sustained margins with which to continue to reward staff and shareholders.

It is only through intimacy with the core nature of your business that you can address what transformation may be required as the constraints imposed by old ways of doing things evaporate and opportunities presented by new ways of doing things take shape.

A minor but informative example: the Financial Reporting Council, the UK’s accounting watchdog, is proposing that companies should no longer be required to issue printed hard copies of their annual reports – online versions would suffice. Tough on printers – good news for forests.

The proposed move is proving controversial, with even a leading partner in Deloitte arguing for the need to maintain the paper version despite the obvious cost and environmental implications of blocking such a move. But the development of the markup language XBRL, designed specifically for tagging financial information, is argued to be a potential enabler to speed the change.

The new challenge and opportunity of offshoring a decade back was arguably much simpler to tackle. Today, the transformational challenge and opportunity the contemporary CIO faces is multi-dimensional. And nowhere is this more obvious than in sourcing.

Consider how each of the four firms I listed above has been at the forefront of transformation. Transformation in how the people-processes at the core of a business operate so that a younger generation is already infiltrating the use of sourcing (Facebook). Transformation of on-premise datacentres into high-productivity in-house service factories (VMware) or their replacement with externally sourced infrastructural services (Amazon). A bonfire of desktops and implosion of office space as the new norm is mobility and the smartphone operating wirelessly into the cloud (Apple).

Time for some serious thinking…

Richard Sykes was vice president of IT at ICI in the 1990s and is now a consultant