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Author: Rohit Nand |05/30/19

The Next Frontier for Enterprises – Moving to a Product IT Operating Model

In the world of information technology, there are few things as dramatic and impactful as enterprise IT’s spectacular ascent - from ‘an enabler’ to a ‘strategic business driver’. Tasked with powering next-gen digital business models, IT teams today are fast realizing a harsh truth. They must make a pervasive strategic shift from traditional project-based operating model to a product-centric one to accelerate organization-wide digital transformation and consolidate its competitive standing. The days of plan/build/run are numbered as digitization forces IT leaders to act fast, think outside the norm, and embrace the blurring boundaries between digital and physical worlds. Horizontal technology teams that were created solely for the purpose of optimizing costs are giving way to robust product-oriented teams focused on driving responsiveness and agility.

What’s driving the shift to product IT operating model

As digitization takes hold and becomes all pervasive, CIOs are realizing that intertwining IT and business objectives is the only way forward, if they are to respond to market changes at the speed of business and remain competitive. Since the start of 2018, volatility has returned to global equity markets in a big way, even as global GDP growth is expected to peak this year and then decline. Moreover, deepening economic crises, coupled with rapid globalization and unprecedented disruption from technology is impacting the average life span of companies, which is down from 60 years to 20 years. Overall, the changing business environment makes few things abundantly clear. That agility, an appetite for new markets, new products, bias for action, and a fail-fast approach will be the new mandates for IT leaders going forward. To this end, most CIOs are replacing portfolios of discrete projects with product lines, with each product line enabling a specific business capability. The key factors driving the shift towards a product IT operating model include:

  • Need for holistic transformation: Silo-ed functions have no place in the digital business world that thrives on integration of data and information across structure, culture, processes and technologies. To enable holistic transformation, organizations must draw a balance between organizational guidelines versus autonomy of teams for process, architecture, technology, tools, etc.

  • Lack of alignment in traditional IT operating model: Lack of alignment across large teams and multiple organizational groups (such as IT, finance, business) prevents organizations from executing their digital strategies. Shifting to a product IT operating model can help steer organizational units towards a common goal. It can facilitate greater collaboration between different DevOps teams supporting different products and domains. Recognizing the failure of existing IT governance and the pressing need for a shared digital transformation vision, by 2020, 40% of CIOs will adopt new digital governance models*.

  • Need for speed: Most companies say inflexible or slow processes followed as part of the traditional IT operating model hinder their digitization efforts. Adopting a product line management approach to IT can help organizations define and agree on a pace of change congruent with their readiness and appetite. According to IDC, by 2018, 70% of CIOs will adopt a product IT model using Design Thinking and DevOps, in order to take agility to the next level.

  • Lack of integration between old and new technologies: Lack of integration between new and existing technologies is a key factor that keeps organizations from realizing the full potential of digitization. Modern companies need to balance innovation, experimentation, adoption of new technologies and tools with the enterprise’s need for business results, co-operation, risk management and compliance.

Embracing a next-gen operating model

Traditional companies that are serious about growth are leaving no stone unturned to follow the footsteps of newer, nimbler companies such as Facebook, Uber, Spotify and others who have tasted success with the product IT operating model. More than 80% of CIOs across the globe are channeling the shift towards productization of IT**. From being providers of reliable IT services, CIOs have emerged as strategic partners in driving business transformation. Modern day CIOs are driving business innovation and identifying opportunities for competitive differentiation, not delivering silo-ed IT services. As Cloud-first and AI-first become the new mandates for organizations, re-engineering the IT operating model is fast becoming central to creating value, competitive advantage and growth.

*IDC FutureScape: Worldwide CIO Agenda 2018 Predictions

** CIO.com

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