IT and business alignment: Putting the federated hybrid model on steroids

Knowing your organizational DNA can help maximize enterprise value via the right IT and business alignment.

business strategy

Much has been said about the IT organization structure. A rightly structured IT department that aligns well with business can really create a competitive advantage. Put simply, alignment is a dynamic state in which an organization is able to use IT effectively to further business goals. Every enterprise intends to be IT savvy. IT savviness is a measure of the enterprise's ability to gain above-industry-average business value from IT investments.

During the last decade, the federated hybrid model emerged as a model of choice for medium-to-large shops. The federated structure brought a significant advantage and mindset change over centralized monolithic IT departments. The federated model attempted to address the main frustrations that line-of-business owners and CXOs had with the perceptions of IT organizations as being out of touch with the business.

This was frequently a result of the organizational disconnects between the IT and the business. Quite often, for the sake of aggressive cost control and production efficiency, all IT resources were pulled into a shared services group. This resulted in lost connectivity to the business.

One of the analogies from Gartner is a dinner fork model. This is a hybrid model that places business-facing resources at the BU level with centralized IT services and offers a potential solution. This hybrid model resembles a dinner fork, with business unit IT as the tines of the fork and centralized IT services as its base and handle.

Over the last couple of years, the pendulum has swing in the other direction. The federated model like a dinner fork brings the problems of over alignment and lost control. It has resulted in a number of departmental, functional or geographical shadow IT organizations that run like it is the Wild West, with limited governance.

The fork model needs to further evolve to address some practical difficulties and value bleed. This is where the metaphor of a "spork" comes handy. A spork is a hybrid between a spoon and a fork and is a perfect metaphor for IT and business alignment. (See image below). It functions as both spoon and fork — representing the right balance between centralization, decentralization and gray area of overlap with abundant governance.

The paper also describes what roles PMO, governance and innovation play in the Spork model and the shape of the Spork (large tines for entrepreneur mindset enterprises) that are applicable depending on maturity and type of the industry. The paper describes various aspects of the Spork metaphor and paves a roadmap for successful IT organization with the right mix of alignment and centralization.

The stem of the Spork is the backbone of IT. It represents the core infrastructure services that everybody agrees need to be centralized. They include infrastructure, networks, databases, collaboration tools and help desk systems. This layer has undergone a fundamental change during the last few years with the advent of unified communications, virtualization, mobility and grid computing.

The strength of the stem depends on the investment and commitment to game changing technology and paradigm shifts such as cloud computing and virtualization. Investment in these technologies is like adding a titanium coating to the stem to strengthen the structure. In real life, titanium coatings help remove the metallic smell or taste and leaves no rust. In the IT world, it makes the IT invisible and robust. The focus in this area should be on vulnerabilities — any disruption in networks, breaches in security or outrages in communication systems can be devastating to the business.

The middle section of the Spork that acts as the spoon is where IT and business are working collaboratively hand in hand. This is the area for IT systems that cut across many functional areas such as order to cash, procure to pay and concept to release. Successful organizations need to ensure that enterprise architecture, prioritization frameworks and strong PMOs are in place to ensure governance. The spoon section promotes functional convergence. This involves taking like processes and like technologies across lines of businesses and placing those in centralized service factories.

This area represents the largest chunk of the IT budget and has the grayest area between centralization and decentralization. The IT dollars can be correlated to the volume of the spoon. The depth of the spoon should be proportional to spend on governance, enterprise architecture and PMO activities. If the radius is very large, the spoon becomes unusable and the stem cannot support it, and it tends to bend.

What it implies is there is excessive focus on governance, PMO and enterprise architecture that results in higher bureaucracy, organizational politics and ends up in slowing down project work and thereby delivery of business value. On the other hand, if the spend is too little on these critical activities, the spoon cannot hold much substance and is analogous to underutilized IT value.

The tines of the Spork are where true decentralization needs to occur. This is the area that brings strong competitive advantages to the enterprise. The tines are the engine of the IT-led innovation, and the sharper the tines are, the more agile IT in responding to fast changing business needs.This is the area where business has unique needs that cannot be met by an out-of-the-box ERP functionality, and subject matter expertise is not available within IT.

The length and number of tines are dependent on the maturity of the industry segment. For startups, and growing industries such as bio engineering, the tines will be long. It aids in independence and promotes IT led innovations. For mature industries, that are moving into cost cutting, the spoon section will be bigger compared to tines.

This is an area of the IT budget where you ignore Moore's Law. You do not wait for technology and solution to mature; you choose your risky bets wisely in an entrepreneurial, venture capitalist mindset. The rate of failure is highest in this segment but rewards keep you ahead of the competition. The real competitive advantage is when you figure out that a new technology solution based on big data, mobility and IoT allows you to conduct business differently, and you get it deployed as quickly and as risk free as possible. Some of the functional examples would be patient and drug safety, crash testing, grid-outage management, and automated metering infrastructure.

So next time when you are on a hiking trip or an IT reorganization retreat — don’t forget to pack your Spork!

Copyright © 2015 IDG Communications, Inc.

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