Is a competition model good for IT?

Back in February, Jason Bloomberg of ZapThink posted a ZapFlash entitled “Competitive SOA.” I didn’t blog about it at the time, but this topic was brought back to the forefront of my mind by this post from Ian Thomas, with some follow-on commentary from Joe McKendrick.

While I’m not one to take one side or the other strongly, I must admit that I have significant reservations about a competition model, whether it is internal competition as suggested in the initial ZapThink article, or it is competition between IT and outside providers of services. First, let’s get the easy part of this out of the way. Part of Ian’s article is about simply running IT as a business and having good cost accounting. I’m certainly not going to argue about this. This being said, there’s a big difference between being a division or department of a company versus a supplier to a company.

I believe strongly that a customer/supplier relationship between IT and the end users of IT in the business is a bad thing, in most cases. If IT moves to exclusively to that model, the business leaders should clearly always be considering outsourcing IT completely. In doing so, it definitely sends a clear message that technology usage is not going to be a competitive advantage for this company. I believe that outsourcing can make sense for horizontal domains, where cost management is the most important concern.

The right model, in my opinion, is to have IT be part of the business, not a supplier to the business. To be part of a business, you need to be a partner, not a supplier. Brenda Michelson posted some excerpts from a Wall Street Journal interview with three CIO’s: Meg McCarthy of Aetna, Inc., Frank Modruson of Accenture Ltd., and Steve Squeri of American Express Co. Some great quotes from this:

Ms. McCarthy: At Aenta, the IT Organization is critical to enabling the implementation of our business strategy. I report to the chairman of our company and I am a member of the executive committee. In that capacity, I participate in all of the key business conversations/decisions that impact the company strategy and the technology strategy.

Mr. Squeri: I believe that over the next 10 years, the CIO will get more involved in the overall business strategy of the company and see their role expand in importance. The CIO will be increasingly called upon not only to translate business strategies into capabilities but to become even more forward-looking to determine what capabilities the business will need in the future.

The days of tech leaders as relationship managers and “order takers” will go by the wayside and they will be called upon to create and drive technology strategies that drive business capabilities.

It’s great to hear these leaders calling out how IT is becoming a partner, rather than a supplier. While our business leaders are certainly more tech-savvy than they have been in the past, there is still significant value in having people that specialize in technology adoption and utilization on your leadership team, just as you have people who specialize in sales, marketing, operations, etc.

Ian suggests letting “self interest flourish within the bounds set by the organisational context as long as it delivers cost-effective services but punish it by outsourcing where it doesn’t.” Cost reduction is just one factor in a complex decision. Holding the threat of outsourcing over IT may certainly in a more efficient operation, but applying those principles to areas where the decision shouldn’t be based on cost efficiency, but strategic impact to the business is a risky proposition. Let the business, which includes IT, decide what’s right to outsource and what isn’t. It shouldn’t be a threat or a punishment, but a decision that all parties involved agree makes good business sense.

6 Responses to “Is a competition model good for IT?”

  • Tim Toennies:

    Hmmm… Did you come by these ideas by your experiences at past companies? I ask rhetorically…

  • […] I read Todd Biske for a balanced view of enterprise architecture and a particular focus on Service Oriented Architecture (SOA).   His recent post titled Is a competition model good for IT? got me thinking.  Todd wonders if the IT department should be a supplier to the business, and compete against outsourced providers and vendors, or be a “partner, not a supplier”. […]

  • […] Biske made last month has been kind of sticking in my mind. Todd said that it’s important to regard IT as a full partner of the business, versus a “supplier”: “I believe strongly that a customer/supplier relationship between IT and the end users of IT […]

  • […] Biske also questioned the idea of IT-as-service-provider, stating that IT needs to be seen as a full partner in the management of the enterprise, versus a […]

  • […] was brought back up by Joe McKendrick of ZDNet in this blog. In it, Joe made reference to a past blog of mine in which I stated my opinion that a customer/supplier relationship between IT and their end […]

  • You can be both a “partner” and a “supplier”. In this case, “partner” refers to the sharing the same business goals and fate and “supplier” refers to the deliver method.

    One of the most powerful, but often overlooked, aspects of SaaS is that it enables a well-define contract between the provider and the consumer. The consumer agrees to specific business requirements and to a minimum platform (in most cases, a standard browser). The provider agrees to meet those requirements with a minimum SLA. How they do that is up to them.

    The relationship between “business” and “IT” has historically been a rocky one. They use different vocabulary, work on different cycles, and just generally see the world differently. Its just human nature at work.

    Having a SaaS-like provider/consumer delivery model gives you well defined roles, interactions, and metrics. It doesn’t mean that they can’t also be partners in terms of goals and rewards. In fact, I think most managers would agree that clearly defined roles along with metrics-based performance analysis to judge performance makes it easier to be partners!


Leave a Reply


This blog represents my own personal views, and not those of my employer or any third party. Any use of the material in articles, whitepapers, blogs, etc. must be attributed to me alone without any reference to my employer. Use of my employers name is NOT authorized.