Digital transformations are not just about technology, they’re also about business change. As technology increasingly permeates every aspect of the enterprise, the lines are blurring, with business unit employees frequently becoming business technologists and purchasing their own software and services.
Nearly three-quarters (74%) of technology purchases are funded, at least in part, by business units outside of IT, according to a recent Gartner survey, with 26% of tech investments funded — and presumably controlled — entirely by IT. Analytics and AI are increasingly the capabilities for which business technologists are taking the lead.
Industry observers say IT leaders are generally not opposed to business leaders taking more ownership of tech spending. “If you speak to the vast majority of CIOs, they’ll say those business transformations need to be led by the business leader with support from IT,’’ notes Len Riley, commercial advisory practice leader at UpperEdge.
This is due in part to the fact that pure SaaS vendors frequently sell directly to the business, Riley says. “Vendors definitely influenced this.”
Another factor is that CFOs want expenses associated with a tech platform to reside within a business unit’s profit and loss statement, “which inherently increases the power and control for the business,” along with accountability, he says.
But there isn’t always support or guidance from IT. When tech spending is fragmented through multiple SaaS vendors across multiple business units — and even across departments within a business unit — managing the relationship and spending to optimize value and get the most effective financing arrangements is a real challenge, Riley says.
If a company’s procurement group and IT have weak relationships with business units, “you can rest assured the business is going to go off and do their own thing,’’ he says.
What sometimes happens after a business unit purchases its own technology, is “the CIO is looked upon to … do the rear-view mirror thing,” and help figure out who is going to control or manage the relationship with whatever software vendor is involved, Riley says.
To avoid this, CIOs are getting more deeply involved earlier in the spending process.
Mapping out tensions
Steve Miller, vice president and CTO of Steelcase, which manufactures furniture, interior architecture, and tech products, makes no bones about the fact that IT needed a makeover a few years back. There was a recognition that “a lot of our behaviors and culture and practices were not compatible with a digitally transforming business,’’ he says.
For example, in the company’s online procurement process, a lot of business leaders in offices outside of the US were quickly standing up storefronts to sell products to make order flow more seamless, Miller says. But these business leaders didn’t have a technology or security background — and were circumventing IT. “They wanted to move quickly, and the concern was, ‘If I involve IT they’ll hold me up.’”
Miller calls that a “fair characterization,” and says that instead of IT continuing to take a one-size-fits-all approach to ecommerce, his team needed to recognize that different countries have different needs. “We had to help identify tiers of capabilities.”
IT “mapped out the tensions we were feeling,” Miller says, and started thinking about where they needed to pivot to be successful. One clear area was in the relationship with the line-of-business (LOB) leaders. Not involving IT in tech spending decisions translates to “a relationship management challenge to understand what that area of the business is trying to accomplish, what’s behind the behaviors they’re exhibiting, and how can we change the way we work to better steer the company as a whole in the right direction,” Miller says.
When offices in other countries were purchasing their own software, Miller says there was duplicate spending — a common issue when IT is not involved in LOB tech spending.
“They were recreating elements of their solution that were [already developed by IT] and it was wasteful and slowed them down,” as opposed to using some of the interfaces and templates IT built, which would have helped them move faster, he says.
Miller estimates that Steelcase has saved nearly 20% by getting their offices in other countries to use the templates.
Now IT approaches the relationship with more of a laser focus on what each area of the business is trying to accomplish, and that has led to quarterly discussions on how to make good tech investment choices and where IT can help, he says.
“It wasn’t about trying to stand in the way of lines of business on tech spending but making better decisions together,’’ Miller says. “It’s about understanding our role in the discussions and facilitating the discussions across business groups.” Both sides now “come away not feeling it’s us against them.”
Fostering a culture that encourages tight partnerships
At TIAA Bank, IT is becoming increasingly involved in driving the research and selection of software platforms. CIO John Elton says it’s part of a culture change promoting a more collaborative working relationship and tight partnership between IT and the bank’s business units.
If business unit leadership has confidence that IT will work in their best interest, both groups will not just collaborate but also get to show their strengths, Elton says.
“It’s always been my philosophy … that your best results come when IT and the business partner together,’’ he says. “What I try to instill in everybody is if technology is laser-focused on meeting the business needs, that partnership will naturally grow, the trust will grow, delivery will improve.”
A change in culture at Fidelity Investments has also fostered a more natural partnership between IT and the business, says Brooke Forbes, CIO and head of technology for personal investing. “We made a really significant shift in our operating model to move to agile full-stack,’’ Forbes says. “We wanted integrated digital partnerships between business, IT, and operations, and [go] the final mile and have fully mashed-up teams of business and technology people.”
Prior to the operating model shift, there were “pockets of shadow IT” due to a unit needing to make a tech purchase rapidly, she says.
“Pre-agile and operating model, you could see some of these [buying] decisions made’’ outside of IT, Forbes says. But leadership began to see more positive outcomes when business units learned about technology — so much so that Fidelity now devotes 20% of every week to cross-training all employees through a global program called “Learning Tuesdays.”
Non-IT employees can learn about topics such as data as a service, AI, personalization, web and mobile technologies, and blockchain, she says.
To ensure that business groups use the appropriate tools and that IT isn’t circumvented in the purchasing process, Forbes says she has engineers sit in on meetings with various internal teams.
“I think one of the best things we’ve done is [implement] the notion of IT not being separate,’’ Forbes says. “IT is part of all business teams, and this shows up at the leadership table. … That’s how baked it is.”
From identifying vendors to requests for proposals, interviews, and setting requirements process — everything is done jointly, Forbes says.
The fact that there is now joint decision-making and all associates are plugged into agile operations teams “is the underpinning for us of our culture of co-creation, collaboration, and communication on everything we’re doing,’’ she says.
IT as a catalyst for business value
If IT wants to better collaborate with business units on tech spending, it comes down to building solid, trusting relationships. It’s not rocket science, just something both sides need to work at, leaders say.
For TIAA’s Elton, to prove its value when it comes to spending on new technologies, IT needs to adopt a less myopic view of its worth. Traditionally, IT leaders would look at technology and think solely of what it can deliver versus really being focused on the business and then seeing a tool as a catalyst to meet those business needs.
“So it’s a matter of perspective, and the leader in general, of any tech organization, usually sets that tone,’’ Elton says. Leaders on both sides of the aisle have to be very open to the strengths both bring to the table and the business has to trust that IT has its best interests at heart, he says. IT, of course, must work to build that trust by demonstrating this to the business.
“I put my business’s needs in front of my own team’s needs, in a sense,’’ Elton says. IT must recognize that the ultimate goal is to help achieve business outcomes and implement the technology that will help make that happen, “whether it’s cool or not.”
While it’s tempting to go for a product with the newest features, the caveat is that “IT is responsible for security, availability, performance, innovation, and speed to market and our own efficiencies. We can’t ignore our own needs in that regard and we can’t sacrifice them on behalf of the business,” Elton says.
How to get the business-IT relationship right
Forbes says there are several ways IT can better collaborate with lines of business on tech spending, and it starts with investing in the relationships. The second thing IT can do is be an advocate for business leaders and encourage conversations about problems they have and how technology can solve them.
She also recommends organizations consider deploying an agile model across the enterprise. “When I talk to other CIOs, they say they’re doing agile but they may be doing it in the IT division,’’ she says. Forbes also advocates for forming fully integrated teams.
Kathryn Guarini, CIO of IBM, says that IT needs to understand what individual business units need — “their strategy, opportunities, and challenges — so that we can prioritize investments in areas that will make a marked difference to their business. At the same time, we co-create with our businesses, becoming early adopters of IBM’s products and services, providing proof points, and demonstrating the value of emerging technology deployed at enterprise scale.”
Miller of Steelcase says IT must be aware of the sense of urgency that business units have. “That’s what they’re afraid of, that IT will make it take as long as it takes” to purchase technology, while IT is concerned about issues if something is done wrong.
“Balance their needs with your need to do it safely,’’ he advises. “Make sure they understand we get it.”
UpperEdge’s Riley says it can be “dangerous” for businesspeople to negotiate SaaS partnerships “without the advice of an experienced CIO. So we recommend balancing the skillsets of the CIO to manage tech partner relationships at an enterprise level while pushing accountability for project outcomes and operating effectiveness to the business units.”
He also suggests that the CIO have direct participation at the executive table to understand the business strategy. “If they don’t have a seat at the table that’s a problem unto itself,’’ he says. There needs to be annual or quarterly planning and alignment of the project portfolio to the business strategy, Riley says. CIOs also need a strong team of vice presidents to not only form strong relationships but “face-off with each of the lines of business, because the CIO can’t do it all.”
Riley says he advocates for CIOs to push the business to have accountability for the transformation they’re undertaking “with a major proviso that the CIO is also supporting them not only on the execution of the program but on the management of the vendor relationship at the enterprise level. I think there are some business leaders who are smart enough to know what they don’t know.”
For those business leaders who don’t fall into this category, Riley says they will eventually see where the gaps are in their vendor relationship management strategy if they don’t engage the CIO.
“If they let it go too far, you’ll inevitably see the chief procurement officer or CFO look at the disaggregation of spend across all these P&Ls with specific vendors, and there will be a reckoning,” he says.