Coping with the downsizing of IT departments

Organisations are downsizing their IT departments, creating headaches for those leading the teams.

The IT department is shrinking, as a result of a wider move from senior management to squeeze value from every dollar the organisation spends.

That’s according to the latest C-Suite Survey from analyst firm IDC. The survey canvasses the opinions of C-level executives, asking them about their goals and challenges in the coming year. This year it included more than 300 people in Australia and 1400 across the Asia Pacific (excluding Japan).

Hugh Ujhazy, a director at IDC Australia, explained the results regarding executives’ priorities in 2015: “The highest of the CEO goals in 2015 was operational efficiency (19.5%), followed by a desire to increase the share of customer wallet (16.1%) and the ability to deliver company-wide cost savings and increase the level of customer engagement.

“This trend follows from what we have seen in the past as companies seek to do more with less and leverage their relationship with existing customers and channels to build market share and revenue without necessarily increasing spend,” Ujhazy said.

Interestingly, the concerns and goals of executives responding to the survey “remained pretty well aligned across company size and industry vertical”, Ujhazy said. In other words, this desire to squeeze value from every dollar was observed across the board.

The shrinking of the IT department - as well as the “outsourcing of IT functions to the line of business” - follows on from that executive desire for value, according to Ujhazy. This handing off of IT responsibilities from the IT department to the rest of the business is evident in the spending figures for different departments.

“In Australia, we are seeing that 40% of IT spending is driven by the line of business and that CIOs are increasingly partnering with COOs, CMOs and CFOs in driving the technology solutions they implement,” Ujhazy explained.

These spending figures also signal a change in the broader function of the IT department within the organisation.

“Combined with a trend to move non-core functions to either managed solutions (Office365 for office and email functions, WebEx and similar solutions for audio and video, collaboration solutions by Microsoft Lync and Cisco UCS) or completely to the cloud, [this means] that IT is less about technology delivery and more about enabling of business function,” Ujhazy said.

According to IDC’s analysis, the majority of the overall IT budget is still being allocated to governance and IT operations. But, Ujhazy said, “IT departments are universally recognising their need to act more as an innovator than as an accountant in supporting the business.”

This brings us back to the shrinking IT department.

“The net effect of all this is that IT departments are tending to be smaller across the board,” though this is most prevalent in companies with between 100 and 500 employees, Ujhazy said.

Those companies with larger IT departments are pushing their people into the market and looking towards managed services and the cloud as a way to offset the skills shortages that are still in effect in Australia and New Zealand, Ujhazy said.

“We expect this trend to continue as demands from the business for a technology partnership with IT increase and managed cloud solutions enable the move from a CAPEX model for technology services to a much more OPEX focused one,” he said.

Those IT departments that have shrunk are experiencing several ramifications. IDC is seeing fewer people (especially in the mid-market) focused on maintaining network, compute and storage infrastructure, as their companies move towards the cloud and off-premise for things like email, office function and collaboration. “As a result, IT people are accelerating the move toward business outcomes as their guiding metrics,” though Ujhazy notes that this is a move that started some years ago.

“That being said, IT is not in danger of becoming a collective of management consultants anytime soon and the transition is taking time. We see it accelerating in 2015 but by no means done.”

He added that the nice thing for the IT teams is “they have a wider range of solutions to choose from, which means that their only response is no longer a CAPEX justification - they can now examine key technologies and make a determination of how business needs are best met (in source, on premise, off premise, cloud, SaaS and so forth)”.

One size fits all

Keeping an IT department going after a downsizing can be tough. How’s an IT department meant to keep the lights on - and hitting all the performance metrics handed down from on high - when senior management keeps showing staff the door?

To answer that question, forget downsizing for a moment, and think more generally about the differences between large IT departments and small IT departments. At face value, it may seem that the two are very different beasts, with different expectations from the business and different problems to solve.

But that’s not really the case, at least according to analyst firm Gartner. In a recent research paper, Gartner analyst Colleen M Young argued that small IT teams actually have to do most of the same things as large IT teams, but without the resources the larger teams have access to.

Young said that there are six “pillars of capability” that every IT organisation must have in order to succeed, regardless of its size, industry or geography. There are three primary pillars (enterprise architecture, IT service management, governance) and three secondary pillars (project management, program management, investment portfolio management).

In organisations with plenty of resources to throw around, there would be a team or structure dedicated to and responsible for each of these six areas, according to Young. Each team would have specialised expertise and pursue best practices and continuous improvement within its own area.

But smaller organisations “don’t have the luxury of dedicated teams, functionally aligned resources or top-heavy ‘best practices’”, Young wrote.

“They must pursue the core, required capabilities more organically, and their people must be literate in multiple areas simultaneously. Workers must be both extremely capable and extremely versatile. They must also be comfortable collaborating in multidisciplinary teams, rather than functional or technical silos,” she wrote.

Even in that ideal scenario, with such talented and capable workers, small IT departments “will never have the bandwidth to pursue all six disciplines as extensively as more generously endowed organisations”. As such, these smaller departments must understand what constitutes a “good enough” standard in each of the six areas and be “comfortable leaving well enough alone” once that standard is reached, Young said.

How to cope

It’s not all doom and gloom, however. If your department has been downsized, but you’re still expected to meet the same needs as you did before, the analysts reckon it’s possible - but you’ll need to make some changes to how you run things.

The following is a collection of advice from two analysts - IBRS analyst Alan Hansell and Gartner’s Colleen M Young - on running a small IT team while trying to address the same problems that big teams deal with. Note that the advice isn’t necessarily geared at downsized IT teams, just small ones - so it may also be useful to those who haven’t been downsized, but are simply in charge of a smaller team that’s being asked to do big things.

First up, Hansell provides 10 tips to help small businesses and agencies better manage their use of IT. He recommends that smaller IT departments:

1. Minimise the number of vendors and service providers for business systems, operating systems and services.
2. If evaluating an ERP, choose a vendor that provides ERP as a service to avoid supporting the technical environment, including release upgrades.
3. Ensure the CIO or equivalent is a member of the SLT (senior leadership team) so they can shape the leadership’s thinking about how IT can help gain a competitive edge.
4. Make no changes for functional enhancements to business systems, in order to maintain software version currency and facilitate fast resolution of operational failures.
5. Attend vendor briefings and user groups to identify how to best use the technology and business system and maximise the expected benefits.
6. Use external providers for specialist services such as network architecture, development of tenders and to acquire disaster recovery capability.
7. Give staff an incentive to develop multiple skills so there is support coverage in an emergency or major systems outage.
8. Use cloud for delivery of commodity services such as email and workplace collaboration solutions to avoid deploying scarce, but skilled, staff.
9. Adopt a zero-based budgeting approach for workforce planning, to justify why the work days that are expected are needed, and to stop marginal value projects.
10. Make IT initiatives as transparent as possible so all stakeholders are kept informed of developments - for example, when a project’s priority is changed by the SLT.

Gartner’s Young also has some advice for the smaller IT department. She recommends that small or resource-constrained teams:

Define clear performance goals. According to Young, running a small IT team is all about optimising what you can get out of your available resources, and that optimisation requires a clear understanding of purpose and outcomes. There must be a very clear definition of what needs to be done, the priority of each of these needs and how the success of these tasks will be measured.

For change programs and projects, success should be quantified in terms of specific goals or outcome measures. The success of services that IT offers to the business, on the other hand, should be judged in terms of measurable service-level agreements (SLAs).

“Together, the project metrics and SLAs constitute the performance management context against which IT orchestrates its resources and capabilities. Without these, resource optimisation is literally impossible,” Young wrote.

‘Projectise’ work. Young advises that the best way for small IT teams to make full use of every resource is to “projectise as much work as possible”, and the best way to do that is to adopt a “professional services or repertoire IT model”.

A model of this nature involves “acquiring a portfolio of skills or competencies, understanding the depth and breadth of people’s individual and collective capabilities, and developing work intake processes that ensure enough is understood about the nature of demand so that the right resources with the right skills can be assigned in the right quantities to the right work streams,” Young wrote.

This approach helps ensure that available resources are optimally allocated to the established priorities.

Avoid process reference models. According to Young, small IT teams can’t afford process improvement for the sake of process improvement, “which is what reference models like ITIL, COBIT and Capability Maturity Model Integrated (CMMI) tend to devolve into”.

These models “lack performance context”, Young said. They assume that the specific set of processes they address are the most important and that any improvement in those processes is worthwhile.

“They implicitly advocate a management orientation of continuous process improvement. As a result, none of them are comprehensive, covering the full range of IT processes, and none of them will tell you whether you are working on the right processes, when they are ‘good enough’, or when to stop,” Young wrote.

She advises that small IT teams should not invest further in processes that support goals IT is already achieving. “If you are achieving your goals, then those processes are already good enough. If they aren’t broken, then don’t try to fix them.”

That said, if IT is not meeting its defined goals, then “understanding the processes that drive your outcomes, and which ones are broken, is crucial”. If you find that a broken process is indeed addressed in a reference model like ITIL, then Young suggests you leverage that reference model.

But until you know what’s broken, Young advises you avoid those models, “or you will almost certainly make process improvement your goal rather than a means to a defined performance outcome”.