Rethink IT strategy

RETHINK
ITFive Actionable Strategies to
Drive Business Value from IT

Contents
1 Summary
2 ReThink IT: Five Actionable Strategies to Drive Business
Value from IT in this New World
2 Introduction
3 The Shift in Responsibility for IT
4 The Convergence of ITO and BPO
4 The Rise of Social, Big Data,Analytics and Mobility
5 The Commoditization of IT
6 The Consumerization of IT
7 It’s a New World for IT
9 Five Actionable Strategies to Drive Value from IT
9 #1 New IT Supply Chain
10 #2 Governance and Vendor Management:Two
Separate Yet Important Disciplines
11 #3 New IT Roles, Responsibilities and Skills
14 #4 New Way to Manage IT Services and Project Portfolio
15 #5 New Definition of IT Business Value
16 Conclusion
Copyright © WGroup 2013 All Rights Reserved

WGroup 1
Five disruptive trends are
changing the role of the
CIO and the IT function—
a shift in responsibility for
IT to business units; the
convergence of IT and
business process outsourcing;
the onset of big data,
analytics, social and mobility;
the commoditization of IT;
and the consumerization of IT.
The answers for who should
deliver services, where should
services be delivered from,
and how IT drives value in
the business are undergoing
radical transformation.
This new world of IT presents
an opportunity for executives
to enhance the value of
IT across the enterprise.
The choice is to embrace
change and adapt, or resist
and risk marginalization.
High performing IT leaders
understand these trends
and their implications. They
are implementing strategies
to seize transformation
opportunities and better
utilize IT as a competitive
advantage. They are
expanding or repositioning
their roles as strategic
advisors for the organization.
They deliver value from IT
by not only decreasing cost
but from increasing revenue
and enabling new business
models. Leading CIOs
encourage direct alignment
of IT to the business,
and lead innovation.
In this paper, we examine
these disruptive trends and
recommend how companies
must react to them. In
fact, we believe the trends
require nothing less than
a total rethink of IT. We
present five actionable
strategies that companies
can take to be successful in
this new world, including:
■■ A new approach to the IT
supply chain and service
integration into one
comprehensive model
that addresses 1) how
IT services are procured
(insourced, outsourced),
2) how IT services are
managed (shared services,
multisourcing) and how
IT services are delivered
(cloud, XaaS / Offshore,
Onshore, Captive.)
■■ A new enterprise-wide
governance discipline
that provides greater
accountability for decision-
making around the use of IT
and a vendor management
office to manage not only
outsourced vendors, but
all the sources of services
across the IT supply chain.
■■ New roles, responsibilities
and skills for the CIO and
all IT managers and staff.
Above all the CIO must be
an advisor to the business.
■■ A new way to manage IT
services and the project
portfolio, one that will
bring high levels of service
satisfaction and better
allocate limited resources
to support a company’s
strategic needs.
■■ A new way to think about
how the IT function can
provide value to the
business—a broader role
that calls for IT to help
the company exploit
critical new technologies
and drive technology-
enabled innovation.
Summary
“CIOs that do not address this new world of IT
will be marginalized and lose out on significant
opportunities these changes are creating for
their company.”
Harry Wallaesa
CEO and President, WGroup

2 ReThink IT
Introduction
CIOs, their IT organizations,
and the business units to
which they supply services
are facing five disruptive
trends that are forcing them
to do far more with IT while
owning or directly managing
far less of the people and
technology delivering
service to their customers:
■■ The responsibility for IT
is moving to individual
business units. Across
all industries, easy to
procure and run software,
business platforms and the
consumerization of IT have
changed the value the IT
organization can provide
to the business unit.
■■ The commoditization of IT.
Cloud, as-a-service, remote
management and offshore
development are just a
few ways IT is becoming
cheaper and more efficient.
■■ The convergence of
business process and IT
outsourcing. New utility or
platform-based models are
emerging where companies
can outsource and bundle
the process, technology,
and people that deliver a
set of business services into
one contract and price.
■■ The huge volumes and
variety of digitized data that
reside inside or within reach
of just about every large
company’s systems, and the
need to turn this so-called
“Big Data” into insights.
■■ Social media, digital
marketing and content
marketing are constantly
changing and growing,
and are now a major
influence on sales, and
both employee and
customer satisfaction.
New social networks are
constantly being created,
requiring a new form of
collaboration between
IT and the business.
■■ Mobility is changing the
way employees work
and customers buy.
It is requiring IT to
keep pace with
new technologies
across a number of
mobile applications
and platforms.
■■ The Consumerization of
IT offers more powerful
devices and 24x7 access
to information that change
purchasing behavior and
elevate expectations. As
employees, these same
consumers demand
similar access to business
information and decision-
making insights, often
on the same devices.
A review of these trends
illustrates how they are
beginning to impact and
change the traditional
corporate IT organization as
well as the role of technology
across the entire enterprise.
ReThink ITFive Actionable Strategies to Drive
Business Value from IT in this New World

WGroup 3
The Shift in Responsibility
for IT
In an effort to improve the
return on IT investments,
further integrate IT with
the business, increase
business accountability for IT
projects, and support large-
scale IT enabled business
transformation, many
business executives (e.g.,
Supply Chain executives,
CFOs, etc.) are more open
to taking direct control of IT.
This is a two way shift as many
CIOs are managing business
functions (e.g., business
shared services centers) and
owning business processes
in addition to their IT role.
But there is also a more subtle
yet equally important shift in
responsibilities and concept of
a monolithic IT organization.
With the increasing
availability of software-as-
a-service and cloud based
delivery models, some
core IT decisions are being
made within the business
domain, often without the
participation of the CIO. The
trend may have started with
Salesforce.com, but now
major ERP vendors are full
participants in this process.
Companies’ business
functions have adopted
these cloud applications
so quickly that technology
research firm Gartner recently
predicted spending on IT
from outside of the IT
organization will grow from
20% of total IT spending in
2000 to 90% by 2020.1
Historically, CIOs would
have regarded this as a
massive end-run around
the IT function, and one
they would actively resisted
even to the point of waging
a massive power struggle.
Contemporary CIOs, however,
only need to look at the
rapid adoption of third-
party, cloud-based marketing
applications to see that such
a battle may not be prudent.
A 2011 IBM survey of 1,734
chief marketing officers in 19
industries and 64 countries
found that about one-quarter
extensively used external
providers of IT services.
1 Gartner statement from a October 22, 2012
press release—http://www.gartner.com/it/
page.jsp?id=2208015
What’s more, nearly two-
thirds (61%) said they would
rely on such IT providers in
the next five years.2
High-
tech company marketers
are already there. Gartner
says only one-third of the
2013 marketing technology
budget for 383 vendors
of hardware, software, IT
professional services, and
electronic components will
go to capitalized software
and infrastructure. By
contrast, two-thirds will
go to services provided
by external marketing
technology vendors.3
2 IBM’s 2011 survey, “From Stretched to
Strengthened,” polled 1,734 chief marketing
officers.
3 From a Gartner blog post by Richard Fouts
on Sept. 10, 2012: http://blogs.gartner.com/
richard-fouts/2012/09/10/2013-marketing-
budgets-rising-again-for-high-tech-
providers/
Responsibility for IT is Moving to the Business
Convergence of ITO and BPO
Social, Big Data, Mobility and Analytics
Commoditization of IT and Global Delivery
Consumerization of IT
EXHIBIT 1: FIVE DRIVERS OF IT TRANSFORMATION
Source: WGroup

4 ReThink IT
So this shift in responsibilities
is real and it has implications
for how IT organizations
engage with the business,
plan for and integrate
software-as-a-service, and
cloud-based solutions
within their architecture and
operating models.
The Convergence of ITO
and BPO
The emergence of business
platforms offered on a
subscription basis will be
irresistible to many functional
managers: lower technology
costs, no maintenance
headaches, and the ability
to change service delivery
providers more easily, and
modify business process with
minimal investment and start-
up costs. That’s a far cry from
the days of installing a high-
priced business application
such as CRM, ERP or supply
chain management software,
with its onerous follow-on
costs and multi-year lock-in.
Companies are under
pressure to retool their
value chains. Subscribing to
business process platforms
enables them to tap easily
into the labor and processing
advantages of outsourcing
and offshoring. While some
companies are setting up
captive offshore organizations,
many are wary of incurring
the risk and costs of such
operations. They are more
likely to acquire these services
from the same firms that
run their applications and
infrastructure. The trend
that started with accounts
receivable, payable and call
centers is being extended
to purchasing, strategic
sourcing and other closer-
to-the-core functions.
However, these moves
increase complexity and raise
security issues that the CIO
needs to manage. IT today
will spend as much time in
integration and control efforts
as they have historically in
support and enhancement
capabilities. In the future, the
CIO and his or her business
function counterparts will
operate as more of an
“integrator of services”—
an orchestra conductor
rather than a musician or
section leader in the band.
The convergence of ITO and
BPO will change how services
are priced. For example,
outcomes-based pricing is
where the service provider
charges the buyer not on
labor or FTE cost but for the
business outcome the work
generates. Standardization,
automation, technology
platforms and tools made
more available through the
convergence of business
process and IT are enabling
service providers to bear the
additional risk of outcome-
based pricing. While a true
understanding of cost of
service is required to make
outcome-based pricing
work effectively, it has
tremendous potential to
help organizations align work
to strategic outcomes and
generate business value.
The Rise of Social, Big Data,
Analytics and Mobility
Social involves the way we
connect and collaborate
within the workplace with
employees, and outside the
workplace with customers
and partners. The technology,
process and tools supporting
social—social media,
collaboration and knowledge
management—can directly
Similar trends are occurring in almost every business
function. Without an overhaul in outlook and strategy,
IT organizations will resemble department stores,
where each department is cannibalized by specialty
stores in the mall or e-tailers online.

It is not just about
outsourcing, but about
a service delivery model
that leverages all forms
of sourcing based
on what will provide
the best value to the
business (insourcing,
outsourcing, shared
services). IT leaders
must master the
capability to manage
and govern multiple IT
service providers, cloud-
based and other delivery
models into a coherent
operating model
supporting a company’s
business functions.
WGroup 5
impact sales, recruiting,
customer satisfaction,
employee satisfaction and
work productivity. Combined,
social, big data, analytics and
mobility are creating unique
challenges and opportunities
for every industry.
For example, in large
consumer product and retail
companies today, marketing
executives must quickly
identify profitable customers
and send targeted promotions
to their smart phones while
they are out shopping. Supply
chain executives must rapidly
track flaws in manufacturing
and distribution processes.
These and hundreds of other
high-stakes decisions require
processing and analyzing
enormous amounts of
digital data. As companies
become more data-driven,
mobility is making everything
immediately actionable.
The mobile phone provides
immediate decision-making
capability through access to
intelligence and real-time data
collection from the field.
IT leaders must proactively
engage with the business
to ensure that social, big
data, analytics and mobility
strategies, projects and
governance processes
are aligned to overall
business strategy.
The Commoditization of IT
A new model of IT delivery
across applications,
infrastructure and IT
management has brought
significant economic
advantages. For example,
until recently, it was always
in the best interest of large
companies to build and own
the IT infrastructure that
supported the business. The
choice was limited: Either
run it in their facility or run it
at an outsourcer’s premises.
No matter which strategy
they chose, large companies
almost always owned or
leased the hardware and bore
the full cost of those assets.
Companies no longer need to
have any computer operations
on their premises, as they can
tap into Internet resources,
such as Cloud services. Today,
Infrastructure-as-a-service and
Platform-as-a-service products
allow companies to pay for
just what they use and acquire
needed capacity just-in-time.
No longer must they have
specialized capacity planning.
No longer do they need to
acquire technology in big,
capital-draining chunks and
burden their return on asset
calculations with long-term
depreciable assets. In some
cases, rather than continuing
to run their own data centers,
companies are outsourcing
their IT infrastructure to
reduce cost, increase flexibility
and gain service advantages.
But this doesn’t mean the CIO
can retire. In fact, companies
need CIOs more than ever—
yet in a much different role.
A robust IT service delivery
strategy and common

6 ReThink IT
framework is essential
to address governance,
security, integration,
processes, policies,
and architecture across
applications, infrastructure
and IT management.
However, it is not just about
outsourcing, but about
a service delivery model
that leverages all forms of
sourcing based on what will
provide the best value to
the business (insourcing,
outsourcing, shared services).
IT leaders must integrate,
manage and govern internal
groups, multiple IT service
providers, cloud-based and
other delivery models into
a coherent, streamlined and
efficient IT operating model.
Even more importantly,
IT leadership must make
decisions to provide flexibility
for the future and enable
them to interchange sourcing
providers (insourced or
outsourced) and delivery
models (cloud, XaaS) as
the business strategy and
requirements change. For
flexibility in cloud delivery
across private, public or hybrid
models, consideration must
be given to the ownership,
form and governance
of data to manage and
transport data across
discrete cloud resources.
The Consumerization of IT
Some employees come
to work every day with a
myriad of devices—their
own smartphones, tablet
devices and laptops—
which can reduce some
of the financial burdens
companies have assumed for
decades. The trend towards
“bring your own device”
(BYOD) allows companies
to reduce their investment
in employees’ technology
by taking advantage of
investments that employees
have already made.
However, at the same time, it
increases the level of security,
integration and control
needed to provide access
to a far less standardized set
of devices and to maintain
control over the most fungible
asset a company has: its
intellectual property and
data assets. An employee
can easily have thousands
of customer names, credit
card numbers and other
sensitive information sitting
on a laptop computer—there
for the taking. Customer data
that used to be locked in the
data center now travels easily
on mobile devices through
airports, bars and hotels.
Until recently, the focus on
the Consumerization of IT
has been only on devices.
Employees and consumers in
general are more technology-
savvy than ever before. Not
only do they bring their own
equipment, they bring their
own applications and tools.
While this trend signifies that
IT organizations have the
opportunity to get out of the
computer and mobile device
supply business, IT leaders
must be prepared to manage
the security and governance
challenges this trend will
continue to produce.
Until recently the focus of Consumerization of IT has
been only on devices. Employees and consumers in
general are more technology-savvy than ever before.
Not only do they bring their own equipment, they
bring their own applications and tools.

WGroup 7
It’s a New World
for IT
These five fundamental
drivers of IT transformation
are here now. They affect
every organization. And the
pace of change isn’t abating; if
anything, it is quickening and
becoming more acute.
One key driver is that the
economics of procuring IT
and IT-intensive business
process services from the
outside are now irresistible
and the risks are becoming
more manageable. Procuring
these IT and business process
services externally means IT
no longer has to be a huge
fixed cost. Turning IT into a
variable cost is immensely
attractive to companies that
make major IT investments
(e.g., banks) or in highly
cyclical businesses. As an
example, after the 2008
financial meltdown, a regional
financial services company
outsourced its entire IT
infrastructure to third parties.
IT services are now an entirely
variable cost; tens of millions
of dollars in hardware and
software assets are off its
books, materially raising its
return on assets (ROA). In
industries such as banking,
where IT can be 30% of
operating costs,4
this can be a
major boost to profitability.
4 McKinsey article: http://www.
mckinseyquarterly.com/Smart_IT_spending_
Insights_from_European_banks_1698
Cloud services
are also maturing
rapidly. They are
going beyond
the initial
niche software
applications such
as Salesforce.
com to cloud-
based versions of
ERP from Oracle
and SAP. The mega
million-dollar on-premise
installations of enterprise
software packages are
becoming a relic of the past.
Web 2.0, virtual computing
technology and cloud delivery
continues to be another
key driver of change. Cloud
computing allows managers
and workers to use their
company’s information
systems as if they’re in a
data center down the hall.
Orchestration layers allow
deployment of new servers
and capabilities within
minutes—not the weeks or
months it took in traditional
forms of delivery. Remote
management, virtualization
and numerous IT management
software and tools are
making IT operations and
management more efficient.
Outsourcing and IT service
providers continue to drive
change and shape the
landscape. To compete
for your business, they
continue to improve the cost
and service of their global
distributed delivery center
model (e.g., India, China,
Brazil, Poland) and offer
new service offerings. There
are many more outsourcing
companies to choose from
than ever before. Before
outsourcing, companies must
have a clear strategy that
identifies what are core and
non-core capabilities, and
then from that develop the
right sourcing strategy for
their business. Even when
this is done, picking the right
provider can be complex
and daunting. Consider the
number of IT and business
process outsourcing
companies coming from India
alone. Over the last 15 years a
$75 billion annual industry has
sprung up in this country, with
more than 1,300 companies
taking on the computing and
business process chores of
firms in the rest of the world.5
5 This data is from Nasscom, an association
of Indian ITO and BPO companies,
from an article in India Economic Times:
http://articles.economictimes.indiatimes.
com/2012-11-13/news/35068747_1_
nasscom-chairman-software-services-n-
chandrasekaran

Senior executives
need a different kind
of IT organization—a
very different kind.
CIOs must break the
model with which
they’ve run their
department for years.
8 ReThink IT
The supply of outsourcing
vendors will expand further
as companies continue
global expansion and seek
services in parts of the world
that are not only offer lower
labor costs but are strategic
locations for them such as
Latin America and Asia. With
these five inescapable forces
unleashed and ongoing
drivers of change senior
executives might conclude
that companies will no
longer need an internal IT
organization. This is absolutely
not the case. They just need
a different IT organization—a
very different kind—as we
will explain. CIOs must break
the model with which they’ve
run their departments for
years. In many cases, they will
need to own and operate far
less technology—or rather,
technology that’s in their data
centers and on their books—
because it’s now possible
to do so.

WGroup 9
Business and IT executives
and their staffs face a far
different world than their
predecessors did even ten
years ago. Companies that
are early adopters of the
disruptive trends we’ve
described are managing
five issues very differently.
#1 New IT Supply Chain
The supply chain of IT is
radically different. Disruptive
technologies such as cloud
computing
and the “as-a-
service” model
for software,
infrastructure
and platforms
have led to fundamental
changes in how IT services
are organized, managed and
delivered—whether they are
outsourced, insourced or a
combination. The reality that
IT services can be delivered
to anywhere on the globe via
the “Cloud” has accelerated
the commoditization of
infrastructure. Ubiquitous
access to IT services has
lessened business units’
dependency on internal IT and
shifted the IT organization’s
prime role from process
excellence to technology
and service innovation.
Outsourcing continues to
be a key component in the
supply chain however the
next generation calls for a
different approach. Strategic
outsourcing partnerships
should be developed and
maintained to not only realize
cost-savings but to exploit
global trends and support
business innovation. Multi-
sourcing strategies leveraging
best-in-class providers
matched to strengths are now
the norm. With these multi-
sourced environments, the
interaction among vendors
emerges as a new source of
management focus driving the
development of operating-
level agreements to govern
interaction. Relationships have
greater built-in flexibility to
address changes in platforms,
architecture, services and
performance requirements.
Companies need to
restructure their IT operations
from being a provider of
IT services to a broker,
orchestrator and manager of
IT services purchased from
providers around the globe.
Outsourcing relationships are
smaller, more focused and
of shorter duration allowing
the business to capitalize
on more discrete vendor
Five Actionable Strategies
to Drive Value from IT
EXHIBIT 2: The New IT Supply Chain and Outsourcing
Source: WGroup

10 ReThink IT
strengths while providing
more flexibility in starting
and ending relationships.
More importantly, as line
of business heads have
assumed responsibility for
outsourcing relationships,
IT must serve as the center
of excellence in outsourcing
relationship development
and management. This
means IT acts as a “broker”
in advising the business,
developing relationships and
managing relationships. All
performed consistent with a
predefined (and periodically
updated) sourcing strategy.
Finally, IT leadership must
become more proactive and
focused on requiring business
value from service providers
and no longer satisfied with
just meeting service levels
and operational metrics.
#2 Governance and
Vendor Management:
Two Separate Yet
Important Disciplines
Companies should establish
both a governance strategy
and discipline, and a vendor
management
organization
(VMO) to direct
and integrate
the efforts of
this complex
supply chain to ensure the
organization is receiving value
from IT. This applies to all
delivery models; outsourced,
in-sourced or multi-sourced.
Companies should develop
the people, process and
controls to effectively manage
this new model of IT service
delivery or run the risk of
misalignment or operational
failure if one or more IT
providers fails to execute.
Outsourcing is not
always the right answer
but IT organizations that
move too slowly where
outsourcing makes sense
will tie their companies
down with escalating
costs of maintaining their
company’s IT infrastructure
and applications. That will
put a damper on investing
in technology innovation
in such critical areas as
big data, analytics and
mobile computing.
Recent surveys of senior
business and IT executives
tell an interesting story.
For example, the majority
of 536 C-suite executives
around the world polled
in 2012 by the Economist
Intelligence Unit see their IT
organizations changing greatly
by 2015. Some 43% say their
company will increasingly
buy IT only when they need
it as a commodity service.6
6 The study, conducted by the Economist
Intelligence Unit, is titled “The C-suite
Challenges IT: New Expectations for
Business Value.” It was funded by Dell Inc.
and published by the EIU in July 2012.
Some 36% of the respondents were CEOs,
and 20% were CIOs. The study report can
be found here: http://www.slideshare.
net/Management-Thinking/the-csuite-
challenges-it-new-expectations-for-business-
value
A number of senior IT
executives see a similar
future. As a former FedEx
SVP of IT put it, IT functions
of the future will be “small,
more externally focused,
higher-expertise IT
organizations, with most of the
infrastructure and operational
expertise outsourced.”7
Many computing tasks and
business processes that
depend on technology can be
done by third parties for
far less cost and with far fewer
headaches. In particular, the
focus on core competencies
and competitive pressures
on cost and innovation will
drive companies to outsource
those business processes and
IT services that don’t yield a
competitive advantage. HR,
finance, procurement and
other backroom processes
and their supporting IT
services are especially
ripe for outsourcing.
However, a common mistake
organizations make is
establishing approaches
for governance and vendor
management in parts vs.
taking a holistic view.
7 This comment was from former FedEx
senior vice president of IT, Larry Tieman,
as quoted here in a column he published
in June 2012 in InformationWeek. Tieman
had been with FedEx for 10 years (until
2010), and previously was CIO or CTO
at GE Capital Logistics, GeoLogistics,
Schneider National and A.C. Nielsen. http://
www.informationweek.com/global-cio/
interviews/why-the-cio-position-is-in-
jeopardy/240001607

WGroup 11
Examples include establishing
a governance program for
an outsourcing contract
that is stand alone and does
not fit within a broader IT
governance program will not
suffice. In addition, vendor
management must be seen
not as a small component of
a companies procurement
function, but as a core
competency of the IT function.
#3 New IT Roles,
Responsibilities
and Skills
Shifting to this new IT
operating model will require
the IT organization to adopt
new roles and
responsibilities,
as well as
to master
new skills.
New roles and responsibilities
in the IT function: IT
organizations will move
from having hundreds or
even thousands of full-
time employees to a much
smaller headcount: dozens or
hundreds (because most of
the IT services are delivered
by external providers). These
roles will be more strategic—
i.e., helping divisional and
functional managers identify
opportunities with the
greatest promise for using
technology to sell, market,
manufacture, distribute
and conduct other key
processes more effectively
and efficiently. The roles will
also be more architectural:
how to seamlessly integrate IT
and business process services
from disparate providers.
New skills for IT professionals,
from the top down:
Leadership skills of the IT
organization must shift from
capabilities in planning and
managing hardware, software
and network infrastructure to
highly tuned capabilities in
sourcing strategy, managing
outsourcing firms, and
transforming the business
through technology. There
will be vendor management
roles specializing in contract
management, maintaining
service levels, program
management and financial
analysis to assure that service
providers deliver on the
cost, quality, responsiveness
and other potential
advantages of outsourcing.
To fulfill their new, more
strategic role in the
organization, IT executives
including the CIO will need to
raise their game in business
strategy and process thinking.
In fact, these will become the
CIO’s most important skills.
For 20 years, IT has been
foundational to operational
success across industries,
and it has only grown more
so. Numerous companies
have been Amazon’d (book
and electronics retailing),
Google’d (newspapers and
map makers) and Apple’d
(music and mobile devices)
out of existence (or placed
on the death list).
Yet as profound as those
seismic industry shifts have
been to date, more change
is ahead. In every sector
and every day, bricks and
mortar companies are being
attacked by clicks and bits.
The technologies of this
decade—especially social
media, mobile devices, and
big data—will have an even
more profound impact on
such sectors as consumer
products (transformed by a
whole new world of social
media marketing), retailing
and media, to name a few.
Business unit and functional
managers need to understand
which of the multiple
decisions they make every
day can be transformed with
big data and analytics tools.
Reinventing service delivery
models, supply chain models
and corporate operating
models are critical for the
competitive landscape of the
future. The answers are not
straightforward. Companies
need executives at the
top who aren’t blinded by
the business practices of
the past. Farsighted CIOs
and IT leaders can fill this
role—if they can master
the still-nascent arts of
business model invention
and process reengineering.
In addition, strong skills in IT
architecture will become far
more important, particularly
service-oriented architecture
strategy and planning. With

12 ReThink IT
business and IT services
purchased from outside
vendors, it is up to the IT
organization to connect and
integrate them. For example,
the customer database
that the sales force uses to
prospect for customers must
be able to tap marketing’s
customer database. In turn,
those databases need to feed
the call center’s database so
that customer service reps
have a total view of the caller’s
relationship with the company.
The CIO’s organization must
make sure that business
and IT processes are well-
codified, data definition
standards are well-defined,
and the processes bringing
these things together are
well-documented. If they
are not, it will be difficult
for outsourcing vendors to
implement them without a
lot of guesswork. Having
multiple outsourcing vendors
working on different pieces
of the IT infrastructure—and
often in different parts of the
world (often not in the old
data center anymore)—the IT
organization must have clear
instructions for all parties. IT
must act as the hub for key
decision-making and control.
New relationship management
skills—Many IT organizations
today have “business
relationship managers”
whose role is essentially to
meet with functional heads
and take orders for IT and
business process services.
Others continue to play the
role of “rationers of service.”
This will no longer fly. IT
needs to become a strategic
advisor and the “facilitator
of fulfillment” to add value.
Functional heads easily go
around IT and buy business
processes and IT services
by the drink without setting
off the budget alarms.
Functional managers need
internal process and IT
consultants who can help
them understand their
unstated (and unknown)
needs. This takes exceptional
skills in building relationships.
It also requires deep
knowledge of the company’s
industry (its competitive
set, customers, etc.).
CIOs and other senior IT
managers will need to
develop such relationship
skills to deal with numerous
outsourcing vendors. By
doing so, the CIO can
become the orchestrator
of external suppliers for
internal customers. Many
CIOs who moved up the
ranks in computer science
and programming will need
to build deep, late-career
skills in working with and
managing people—especially
those outside the company
at outsourcing vendors. They
must know the skills and
personalities of vendor team
members, as much as they
know their own team. Helping
the company determine
where to focus limited IT
investments requires strategic
and financial acumen. This
is a crucial governance skill.
To provide assurance to
the CEO and CFO that the
company’s IT investments
are being made wisely, CIOs
and their teams must be
able to run ROI analyses
on such things as business
unit requests for Big Data
technologies and expertise.
IT organization must also
help business unit managers
identify high-quality
outsourcing vendors and
strike effective contracts.
Based on the current
outsourcing environment
and the demand for new
or improved capabilities,
the CIO needs to lead the
organization in scanning the
market for opportunities and
strategic partners. The CIO
must have the skills to run
effective RFP and contracting
processes; the project
management office (PMO)
skills to oversee effective
transition; and the relationship
management skills to extract
the best performance,
lowest costs and most
innovative thinking from the
company’s supplier partners.
To be sure, these skills sets
will not be easy for many CIOs
and IT organizations to gain.
However, we see big rewards
for companies and CIOs
who can acquire them, and
quickly. Perhaps the biggest
personal benefit for CIOs is
that they’ll occupy a much
more strategic job in the

WGroup 13
organization: the executive
responsible for making the
company’s key technology-
intensive business processes,
and its entire business model
for that matter, click.
This is a much bigger role
than many CIOs and their
IT organizations play today.
Those who can master it will
have an order-of-magnitude
greater impact on the success
of their company, even with
a much smaller internal IT
department to manage.
A world where most
companies’ IT services are
outsourced rather than
insourced forces a major
change in the CIO’s role. The
role of the past—effectively
and efficiently managing
an IT organization—is
inappropriate for the future.
CIOs must not only manage
their IT professionals; they
must manage the services
delivered by a diverse group
of external service providers.
After helping business units
select the best outsourcing
vendors, the IT organization
needs to orchestrate all of
the internal stakeholders into
a full lifecycle governance
organization for all the
suppliers. This governance
organization must actively
manage outsourcing vendors,
assuring performance, cost
effectiveness and continuous
improvement of service.
Competition doesn’t
stand still; companies
must continually improve
the performance of their
service providers to keep
pace. Business heads, IT
leadership, procurement
and legal must work in
concert and speak with one
voice. They must represent
the company’s interests,
not parochial interests.
CIOs need to increase both
their strategic and operational
value. (See Exhibit 3 below)
In a world in which companies
bring more IT services in
from external providers
than they deliver internally,
the roles of managing
data centers, recruiting IT
professionals (especially
those in IT infrastructure
jobs), and managing big
systems projects become
far less important.
Managing outsourcing
vendors (lower right quadrant)
and identifying strategic
outsourcing vendors (upper
left) are two of the high value
roles. What will diminish in
value are roles in managing
data center and other IT
infrastructure (e.g., tech
support and maintenance),
IT recruitment and internal
systems development
projects. Yet these managerial
chores occupy much of the
work of many CIOs today.
CIOs who can generate
significant strategic and
operational value will find
themselves in continual
discussions with the CEO
and the board about the
most important issues of the
company: How might we
need to reinvent the entire
business model? How do we
use technology to reengineer
the way we acquire customers
or serve them after the
purchase? What emerging
technologies could have
a profound impact on our
entire business model or
a key business process?
Strategic
Value
HIGH
• IT and business services
architecture planning
• Outsourcing vendor
identification
• Key technology vendor
identification
• Business model
reinvention
• Business process
innovation
• Key technology
watching/identification
LOW
• Data center management
• IT infrastructure management
• Recruitment and retention for IT
infrastructure jobs
• Management of internally
developed information systems
governance
management
LOW HIGHOperational Value
EXHIBIT 3: THE CHANGING ROLES OF THE CIO
Source: WGroup

14 ReThink IT
#4 New Way to
Manage IT Services
and Project Portfolio
Leading companies are
transforming to the best
practices of Information
Technology
Service
Management
(ITSM) to
achieve
discipline,
standardization, service
excellence and process
efficiency of IT across
the enterprise. The ITSM
model provides guidance
and structure to assist IT
in the transformation from
a support organization to
running IT as a business.
The CIO and IT leadership
will need to champion ITSM
and be the bridge between
technology and the business.
As we mentioned earlier, the
new world for IT organizations
is one of shedding much
of their IT operations. But
which operations, and
where should they go? This
should be the outcome of a
rigorous portfolio analysis: an
evaluation that determines
which business processes
and IT services should
remain in-house and which
should be outsourced.
Such portfolio analyses can
reveal substantial cost savings.
The first step is determining
which components of IT may
not have value anymore and
thus should be eliminated.
For example, we find many
companies with systems
that once were essential
but have lost their value,
and yet still linger. After
identifying what could be
eliminated, the analysis should
focus on benchmarking
and cost comparison. As
an example, a large U.S.
health insurer commissioned
an extensive analysis of
the cost and performance
of its IT organization. The
company was compared
to other companies, both
in and outside the health
insurance sector. It found
that outsourcing many
IT services (including
application development and
maintenance, data center
operations, technical support
and network management)
would reduce annual IT costs
by 11%. It struck a seven-year
contract with an outsourcing
vendor, which has delivered
the savings expected.
Companies should conduct
such services portfolio
analysis jointly with the heads
of the business functions—i.e.,
the internal customers of IT.
Changes should address both
the opportunity to outsource
IT support and move to BPO
as well. Together, functional
and IT leaders need to
assess the current state of
service and what functional
managers need in the future.
They must work together to
reduce costs and improve
operational performance.
This portfolio analysis is
a crucial part of creating
an outsourcing vendor
management capability (VMO
as referred to earlier). Business
units and functions need to
make a service and financial
case for determining whether
and how to outsource—similar
to the ones that CFOs force
divisional and functional
managers to make in justifying
any major purchase. The
portfolio analysis approach
should apply to all aspects of
IT, including operations and
maintenance and projects.
CIOs who can generate high strategic and
operational value will find themselves in continual
discussions with the CEO and the board about the
most important issues of the company.

WGroup 15
The role of the CIO is no longer an operator but an
integrator. It is about how well they partner with the
business. CIO’s must lead company-wide innovation
and understand how technology can increase revenue
for their business. CIOs must behave more like a
venture capitalist to embrace pace of change and align
technology investment with business strategy.
#5 New Definition of
IT Business Value
A big shift is underway in how
IT performance is measured.
How should
a company
measure IT’s
value in this
new world?
When IT ran the data center,
built or implemented most of
the applications, maintained
those applications and
provided tech support, its
key performance measures
were necessarily about cost
and efficiency: How well is
IT delivering cost-effective
services to the company?
Those were measures of IT
operational performance.
Going forward, those won’t
be the most important
measures of IT. After
getting huge amounts of
the IT infrastructure out
of its data centers and off
the company’s books, IT’s
performance will require a
whole different set of metrics.
In short, IT’s value must
shift to delivering business
impact to the organization.
Success of IT and business
services will be based on
“business outcomes” and
not only operational (e.g.,
effectiveness, responsiveness,
performance) and
financial metrics (e.g., cost
reduction). For example:
■■ How did the IT function
enable exploratory
investment in IT that
resulted in new products
or competitive advantage
for the business?
■■ How quickly did IT enable
the company to revamp
its business processes to
react to ever-changing
market conditions and
execute its strategy?
■■ How quickly did IT
enable the company to
transform its business
model (if necessary)?
■■ How well did IT help the
company capitalize on
the billowing amounts of
digital data that courses
through its information
systems, i.e., how well
did it help knowledge
workers make better
decisions using big data?
In short, the IT function
must embark on its own
transformation. IT must
redefine the business value
it delivers to the company—
from one of cost savings
and operational efficiency
to one of strategic value
and revenue growth.

16 ReThink IT
The new world for IT
organizations is here and
rapidly evolving. The new
model of IT needs to contend
with a world that has evolved
from one in which the IT
department was the sole
provider of IT services to one
in which they compete with or
need to manage a wide array
of external global providers.
Consequently, the job of the
CIO (and the role of the IT
department) has evolved into
a role that requires the CIO to:
■■ Not only manage the
service delivery capabilities
of the internal IT group,
but integrate the services
delivered by a diverse
group of service providers,
■■ Manage the transition
of responsibility for IT
decisions to the business
and manage the effective
use of IT resources to
support the business, and
■■ Champion an effective
governance framework
and vendor management
capability.
Above all, the CIO must be an
advisor to the business. They
must bring insight on new and
evolving technology and stay
current on the offerings and
capabilities available to them.
With the increased use of
outsourcing, there is a danger
for CIOs to become over
reliant on service providers
and vendors to identify
and execute innovation.
Innovation strategy needs
to come from leading edge
CIOs that will understand
the services and products
available to them in the
market and how to integrate
them based on their specific
business needs. This will
enable the business to move
faster than the competition.
While IT strategic planning
has always been critical,
it takes on an even more
important role in this new
world of IT. Leadership must
drive a shared view of the
current business, and the
IT landscape, which is often
referred to as Enterprise
Architecture (EA). The right
EA strategy aligns IT systems,
processes, and organizations
to to business unit strategy
and goals in response to to
these disruptive trends. EA
delivers value by allowing
business and IT leaders to
have a recipe for adjusting
policies and projects to
achieve business outcomes
in response to disruptions,
challenges and opportunities.
Now is the time for IT
executives to dissect and
anticipate the impact of
the disruptive industry
trends we identified in this
perspective paper. Those
who can transform IT’s
operations, roles, skills and
governance accordingly
and move from a pure cost
reduction to a top line
growth orientation will have a
much greater impact on the
success of their companies.
Key Skills Required of Today’s CIO
■■ Strategic Planning
■■ Relationship Building
■■ Business Leadership
■■ Business Systems and Process Thinking
■■ Architecture Planning
■■ Governance and Vendor Management
■■ Industry Knowledge
Conclusion

WGroup 17
About WGroup
Founded in 1995, WGroup is a boutique management consulting firm
that provides Strategy, Management and Execution Services to
optimize business performance, minimize cost and create value. Our
consultants have years of experience, both as industry executives and
trusted advisors, to help clients think through complicated and pressing
challenges to drive their business forward.
For more information on WGroup, visit http://thinkwgroup.com
Contact Us
WGroup
301 Lindenwood Drive, Suite 301
Malvern, PA 19355
610-854-2700
013_ReThinkIT_080213

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