Is It Time For An IT Reorg?

Decisions about the structure of the IT organization, governance and delivery models are often taken with a siloed mindset, but today's realities should force CIOs to adopt a more collaborative and holistic approach.

Corporate CIOs, especially in the fast moving financial services space, are faced with the perennial question whether their IT ‘model’ is conducive enough to support the realities faced by their internal line of business users. This is even more so in today’s technology landscape that is rapidly evolving, with changing dynamics across computing, storage, business application services and presentation layers.

On the IT organization side, most firms have seen cyclical patterns over the past few decades, moving from completely decentralized LOB-focused IT groups working independently to centralized monolithic IT organizations supporting multiple lines of business, and vice versa. There have been variants of the same, with some firms adopting models which are centralized, but where IT is carved in to groups supporting specific portions of the IT value delivery chain.

Each change brings with it some level of disruption of service delivery, additional costs and the burden of driving significant organizational change management. Preference for models are often dictated by the stakeholder group one belongs to, with business and operations groups preferring IT models which are LOB-aligned (more nimble), while IT leaders are often pushed to centralized models, driven by ever-increasing cost pressure and the need to have uniform technology architecture and strategy.

[For more info on decision making and IT leadership in financial services, read: Datacenters: The Future Is Not What It Used To Be.]

But, how frequently should one look at revamping the IT organization, governance and delivery models, and how should one go about deciding the same? In addition, what are the key factors when deciding on the best approach for your IT shop? 

Cross-Functional Executive Oversight

The answers to the first and third questions are inter-linked, and we will get to this in a bit. The second question (How should executives go about deciding how to revamp the IT shop?) should logically have an easy answer, but that is usually where many organizations falter. The most commonly used approach is for IT leaders to seek help from external consultants to lay out a roadmap for transformation.

Decisions on the right IT organization and governance model should involve more considerations than just IT service delivery efficiencies and cost structure.

It is healthy to seek a neutral view and try to imbibe industry best practices, but unless the strategy is driven by realities facing your particular organization, a cookie-cutter approach could back-fire. To safeguard against this, the best approach is to have an enterprise-level executive team involving the right stakeholders from the business, operations and IT. This group should brainstorm to drive the overall direction, with an external consulting entities providing a perspective on industry trends, and helping to drive the creation of an implementation blue print. There are many factors including nature of market/customers, industry dynamics, geographic distribution of end customers, technology trends and other factors which should ideally play some role in the final decision. 

Top-Down Perspective

Given the fact that technology is core to most business these days, more so in the financial services world, decisions involving the IT organization’s structure and service delivery of technology should definitely not be driven purely by IT stakeholders alone. What fits a commercial lender might not necessarily fit a trading and brokerage shop. One needs to start at the top, understand overall business strategy/direction and analyze the business operating model to determine how to align IT assets, and hence how to get to a blue print for a flexible IT organization and governance framework.

This should also come into play for the definition of service delivery models for application services. For example, let’s say a firm faced with a rapidly changing market so it needed nimbleness in product strategy. The firm could adopt an agile execution model, though only in cases where there is true business value from such a model (given costs involved).

Eye On Emerging Technology

New technology directions should be considered when one makes the decision for a reorganization. Rapid uptake of cloud-based solutions could dictate a different model for IT infrastructure services. The importance of big data and analytics to a particular business could possibly dictate creation of an analytics center of excellence staffed by IT and business stake holders, as some firms have already done. This could have an effect on related areas -- for example, the decision to create an analytics center of excellence could dictate a totally different approach to data management across the enterprise.

The Big Picture View

One needs to clearly define 'core' and 'non-core' when deciding on in sourcing and outsourcing strategies. Executives also need to have the right risk-reward frameworks built in place with external IT partners to help drive goal alignment. Again, sourcing decisions should not necessarily be limited to deciding in house vs. outsource from a labor perspective and deciding the right vendor partners. One needs to consider several other factors while arriving at a decision. For example, a technology direction could dictate some of these decisions. Emergence of industry-wide computing and application service 'utilities' could drive a different perspective to addressing this area.

The intent here is not to list out all the factors that one needs to consider in IT organizational and governance decisions, but give a perspective on the complexities associated with such a decision. It is clear that decisions on the right IT organization and governance model should involve more considerations than just IT service delivery efficiencies and cost structure, and the timing and direction of changes need to be carefully thought of given trends in both business and technology landscapes. 

The views expressed in this article are my own, and do not necessarily reflect the views of Oracle.

About The Author: Promod Radhakrishnan is Head of Sales (Consulting Services) for Americas with Oracle's Financial Services Global Business Unit. As part of the sales leadership team for this specialized group focused on financial services clients, Promod manages and directs the development and implementation of go-to-market strategies and sales plans for banking and capital markets information technology solutions across all of the Americas. Prior to Oracle, Promod was with Cognizant's Banking & Financial Services Practice, leading sales and client relationship for a few strategic clients in South East US.