Essential Innovation: Essennovation

It’s likely not lost on many of us that large chunks of the internal information technology (IT) department at businesses are being outsourced. Rather than a new phenomenon, strategic sourcing–a term that covers the myriad ways resources and services can be alternatively provided by vendors– is picking up pace. We’re seeing more and more organizations choosing to move many of their technology functions to an external provider.  Among many factors, increasing commoditization of technologies and services make them easier to offload to someone else. When we say commoditization in this context, we mean, for example: standard hardware and software, and services that can be relatively easily documented, then duplicated and repeated.  Think about common technology needs such as data storage or software testing.  By outsourcing, organizations can take advantage of, for example:  lower labor costs; larger pools of scare talent; and the ability to easily increase or decrease needs, and subsequent cost, based on demand. In fact, strategic sourcing has been a boon for these types of business objectives. Only in the long term will we be certain of the wisdom of this strategy, but there is no doubt that short-term value is being recognized. At some point, one could certainly conclude that IT is simply becoming a utility and from a strategic perspective, ‘IT may not matter.’ But this conclusion, in my view, would be wrong.

It’s become clear that most business functions now depend on technology in some form or another. If there is any doubt, just look at what happens when email is unavailable for 30 minutes.  Indeed, in the absence of technology, strategic imperatives such as reengineering efforts and the introduction of new products and services become almost impossible. In this equation, it is possible to separate the use of commodity technology and resources from the technology and resources needed to innovate. Nobody is asking for IT to be eliminated as an internal function in its entirety; moreover, most business leaders are recognizing that IT is essential for success and are willing to pay a premium for it; we just have to spend the right amounts on the right things. IT is being tasked with flipping the cost model from a typical maintenance-value ratio of 60/40 to 40/60 or better. Not a simple task, but a reasonable objective assuming you have the right strategy and leadership in place.

And herein we identify the opportunity for technologists everywhere. If we recognize that the IT needs of organizations going forward will be increasingly focused on innovation, creativity and  other right-brained activities, we soon realize—assuming, if necessary, we invest in personal retooling—that the future is indeed much brighter.  Organizations will retain and promote those that are best suited for this type of new IT work.  Where there are gaps they will need to recruit a different type of IT individual. In addition to a basic computer science foundation, this person will be increasingly skilled and educated in some creative field, and for added bonus, will have an acumen or experience in the business side of the house. The traditional technology professional such as those in system administration, software development, and call support, will still have opportunities and those needs will continue to be sought by organizations. But that workforce will be considerably smaller and will live with some ongoing vulnerability.

It’s my view that the future of IT is solidly rooted in innovation. The quicker both the IT professional and the organization realize this, the better the long-term outcome will be. For both parties, significant investment will be required.  Future organizational success will be more dependent on IT innovation than many have yet to make a bet on.  While some may argue the validity of innovation in certain scenarios; in my opinion, IT innovation is not an option. It is essential innovation and that’s something I call Essennovation.

Let me know what you think. Respond to this blog or send me a direct message at twitter.com/reichental.

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11 Responses to Essential Innovation: Essennovation

  1. Matt Hart says:

    IT Innovation is absolutely NOT an oxymoron… but it often takes new thinking on the part of IT managers. I’m sometimes asked about how IT can better enable engineers, and I always start the conversation with, “Have you talked to them, learned how they work, observed them?” The answer is always something like, “No, but we should, huh?”

    I’ve been told that at least my message is consistent. 🙂

    IT needs to identify their customers and stakeholders, then talk to them, observe them, and brainstorm creative ways to solve for them. Create paper prototypes, show them the stakeholders, take the feedback and iterate.

    IT should be no different than anyone else that designs products for their customers.

    – Matt H
    – Innovation Architect
    – Intuit, Inc.

  2. chris says:

    I think you are half right Jonathan… it is innovation and relationship/hub role/emotional intelligence skills that will drive technology value… assuming solid and credible technical skills, for the next decade.

    -cd

  3. IT innovation is like teenage sex – everybody’s excited about it but nobody quite knows what it is or how to go about doing it. That’s where the problem is, not in deciding whether it is important or not — it is about understanding the scope and rationale, about fulfilling real business needs and about setting and meeting customer expectations.

  4. Kimon Paxinos says:

    I like Jim Collins’s view on this from Good to Great: Do not innovate in support IT. Use tried and tested stuff. Figure out what the core competence of the organisation is or ought to be and develop technology that accelerates that competence. No other IT innovation really matters?! To me this would be “essenovation”.

  5. Jonathan Reichental says:

    I read every comment that is written. Some excellent points here. Please do keep the comments coming.

  6. Thanks for writing this article! I can’t more than agree with your view. IT innovation is certainly the way forward and this isn’t option. But as Hemant mentions in his comments the challenge is to conceptualize this vision and convert that into implementable steps – linking business needs to IT innovation investments. Jim Collins’s view in Good to Great as shared by Kimon in his comments to you article is quiet interesting. I agree that it may not make sense in trying to innovate in Support IT internally but one should certainly expect and insist on a certain level of process improvement from their outsourcing vendors to ensure there is Y-O-Y reduction in costs and continous increase in value derived. Internal IT resources will need to move up the value chain by looking at how IT investments can create business impact. This also helps from a job security perspective but will require a transformation in the way internal IT teams think and operate.

  7. Valbona Bushi says:

    I think that all employees of PwC should get more IT training, not just with the software systems that we use but overall to increase our general knowledge.

  8. Jason Price says:

    Yes, innovation is crucial to every business but the future “IT” individual will NEED to have experience on the business side of the house, not just as an added bonus. I would find it rather difficult to innovate if I didn’t know what the customer wants.

  9. Pingback: Essennovation, Part 2 « gabriel catalano | in-perfección

  10. Pingback: Essential innovation: Essennovation Part 2 | Reichental

  11. Pingback: Essennovation, Part 2 « PwC Innovation Blog

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