Hitachi Data Systems Federal Blog

IT Industry: Coping with MegaChange

Posted by Harry Zimmer on Mar 16, 2016 10:07:14 AM


Change is a constant in the information technology industry. Companies rise and fall as the rapidly evolving business environment erodes their initial success. A new wave of change is sweeping the industry and all the markets that rely on it, such as the federal government. Driven by cloud computing and related technologies and services, these changes are upending old IT business models and setting the stage for new operating models. Canny public and private sector CIOs will need to be aware of what’s in store, and what is needed to survive in this new environment.

There are currently two existing modes of IT (which I will refer to as bimodal), each designed to develop and deliver information—and technology-intensive services in its own way. Mode 1 is traditional, emphasizing stability, accuracy and predictability. It’s based on privately owned and managed physical infrastructure and hardware.

Mode 2 is exploratory, emphasizing speed and agility. It resides on a completely new infrastructure, a “third platform”—to borrow a term coined by market intelligence firm IDC. This new platform is characterized by mobility, big data analytics, social applications and cloud computing.

Bimodal IT represents two distinct, yet equally essential approaches. Mode 1 is a marathon runner, with its consistency, stability and longer cycle times. Mode 2 is a sprinter using its agility to operate on shorter timeframes.

Third platform technologies are setting new standards and norms driving IT to move from Mode 1 to Mode 2. Vendors need to be prepared to adjust their business models, how they manage human capital, and other best practices. In the future, CIOs will need two IT departments, one devoted to legacy practices and technologies, and one designed to support Mode 2 operations. Mode 2-based departments will be especially challenging to staff because they will require specialized skills, such as big data analytics, that are still rare in today’s talent pool.

The “New Normal”

The IT landscape is changing dramatically as customers redirect their priorities towards agility, speed and data-driven intelligence. This evolution is already leading to major restructuring among technology vendors as they modernize how they approach the market.

Restructuring has led to a dramatic decline in tech vendor employment. The domino effect of mergers and acquisitions in the IT industry has resulted in a massive number of job cuts across the globe across the entire tech business spectrum. The ongoing industry restructuring raises many questions about how IT will keep changing. Will ITaaS (IT as a service) emerge? How will it impact storage? Will CIOs still need to hire database administrators? What will CIOs need from vendors going forward? In the future, what role will cloud and managed services play in business and government?

CIO priorities also continue to evolve with the industry’s changing needs. In the late 1990s, the typical CIO acquisitions focused on ERP, Y2K preparations, and adapting to the (then) new world of ecommerce. Today, the priorities are cloud virtualization, converged systems, and big data analytics. But that’s the present. CIOs with an eye on the near-future horizon are looking at IT environments that are mobile, hyper-converged, software-defined, and driven by the Internet of Things (IoT).

Historically, IT was seen as a strategic solution—a capital investment to improve efficiency, enhance the customer experience, and differentiate a CIO’s organization from the competition. IT is now regarded as utility rather than a capital investment. The growing ubiquity of cloud computing, white label technology and open-source software makes it possible to eliminate most IT infrastructure—allowing organizations to convert IT costs to operating expenses.

IT governance has traditionally been seen as slow, complicated, esoteric and prohibitive because its processes were cumbersome and costly. Cloud-based IT culture promises to counter these negative perceptions by prioritizing responsiveness, ease-of-use, value, speed and efficiency.

The Talent Barrier

Bimodal IT presents several human capital challenges for CIOs. As firms let go of their traditional IT personnel, there is a growing demand for staff with a different set of specialized skills. CIOs are under pressure to do more with smaller, leaner teams, but they must also attract and more importantly retain talent with the right skill sets.

Because the IT business environment is changing so rapidly, current technical skill sets are becoming obsolete. CIOs are on the lookout for people with the skills that match their organization’s needs five years in the future. These operational requirements call for more infrastructure and cloud architects, chief data officers, applications architects, data scientists, and vendor liaisons.

These new roles and skills will be vital for what IDC calls the “digital transformation” (DX)—the use of third platform technologies to create value and competitive advantage through new offerings, business models and relationships. By 2018, IDC predicts that third platform technologies and solutions will account for half of all enterprise IT expenditures, and exceeding 60 percent by 2020.

Considerations for Federal CIOs

One area where DX will have an impact is in digital government, especially with initiatives focused on improving agencies’ agility and speed. To be effective, government must be able to operate in a way that matches how its constituents live their lives.

Switching to Mode 2 will help agencies meet the expectations of a digitally reliant public by allowing government to deploy services faster, transform itself faster, and improve services. To succeed, public sector organizations need to focus on five areas aligned with Mode 2: analytics, cloud computing, mobile services, social media, and the IoT.

The role of the CIO is evolving. As the IT environment shifts from Mode 1 to Mode 2, new metrics for success and failure will emerge. They will emphasize speed, agility, time-to-business value, efficiency, and total cost to operate. Successful CIOs in the public and private sectors will adopt forward thinking, outcome-based best practices.

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