4. The Changing Face of IT
Digitalization is transforming business operations with new technologies and models, requiring companies to constantly adapt to remain relevant.
In the past decade, digitalization has become the primary process for many companies. Without IT, nothing is sold, nothing is produced, and no service is provided. In this regard, the Netherlands is ahead of its neighboring countries. Self-checkout counters, digital ordering and payment, tracking packages while they are on the way, checking in with a smartphone, and getting help from voice assistants to plan a journey from A to B. Enterprises have become digital enterprises that must compete in a digital economy.
The Secret of Young Companies
Real winners in the digital economy are often companies that are only a few years old. Think of Bol.com and CoolBlue. They have hardly any ‘legacy’ to deal with, quickly embrace the latest technology, and attract ‘high potentials’ fresh out of school as a modern company.
The laggards, including many traditionally very successful and large companies, are faced with a flood of change requests from their management or from The Hague. These are often companies with little in-house IT knowledge and extensive ‘legacy’. They struggle to find the right people. And if something goes wrong at these companies, it makes headlines.
IT Professionals as Outsiders
In the past decade, IT has moved to the core of many organizations. Therefore, it must also be managed as a primary business process. It is inevitable that the existing and the new must be unified. The current IT landscape must ensure continuity while further digitalization of business processes must be implemented as quickly as possible. IT organizations will no longer be able to stand at a great distance from the primary processes in the company. This requires new management models and that is a huge challenge. Why? For the answer, we need to look back at how IT departments have been positioned, organized, and developed within organizations.
From the 1980s, IT departments were set up as a supporting process. They were placed like marketing, facilities, and finance and were often housed within one of the latter two. From the 1990s, IT was taken more seriously and the IT director was replaced by a CIO who could attend executive meetings for the first time. At least, that was the idea. But in practice, the CIO was still an outsider who did not have a place in the real top as a strategist who could co-decide. Even today, the CIO is not seen by most organizations as on an equal playing field.
Outsourcing IT
From that philosophy, it is no wonder that entire IT departments have been outsourced in recent years. IT functions such as network, infrastructure, and application management have been outsourced to one or more external parties, over which the IT department of the control organization then took charge. In outsourcing these IT functions, the choice was made for a long time to place as many so-called technology parcels with one party as possible. Such parcels are IT services that are marketed in small chunks. Examples include functional management, application management, and application development.
If as many parcels as possible are placed with one party, there are as few suppliers to manage as possible. In the contracts with these suppliers, what is outsourced is laid down in various standardized service levels. The parcels have been highly optimized over time by the arrival of standards and methodologies such as ITIL, BISL, Prince 2, and Agile.
In the management, we have gone from a simple four-box model, via a nine-box model, to a complex twelve-box model. IT organizations have increasingly tried to better understand and translate the requests of the user organization into IT solutions.
Unfortunately, none of these models have brought better connections between the user organization and IT. Not surprisingly, because the problem remains that IT is placed ‘at a distance’. Worse still, an organization stands between the user organization and the IT suppliers. Such a distant IT department is too little involved with the user organization and insufficiently flexible to respond directly to what is requested. The only way out of this is a fundamentally different design of the IT organization.
Henry Ford and the Faster Horse
The change that is needed starts with what we call the ‘business side’ of the organization, the users of IT. Traditionally, we tend to ask what their needs or requirements are. The answer you get is often, as Henry Ford once said, the need for a faster horse. Many needs described in this way can be summarized as: better functioning of the analog world of 20 years ago instead of the future world. This limited thinking is not only the domain of business representatives but also forms the basis of much legislation and regulation. To break through that, it is necessary to stop thinking in terms of needs, requirements, and business translated into solutions by IT. The people with insight into developments in the digital world must be put at the helm of the organization.
This is a radical change for many organizations. Banks and insurers have largely taken this step, but they still generally have a CEO with limited knowledge of the digital world. This also applies to the CFO, CCO, and CMO. Today’s winners, on the other hand, have people in all layers who know how to optimally use the digital domain in their primary process. Among them are people who feed colleagues in the rest of the organization with new ideas, challenge them, and – if they are not careful – pass them by and become the future boss.
This does not mean that there should be no attention and knowledge for work processes, employees, customers, and suppliers. Digitalization requires more attention for this than ever. Work processes must be efficient but also challenging and provide sufficient room for employee development. New is the attention to compliance, ethics, accessibility, and adaptability: issues that require knowledge of people and where IT and technology can play a supporting role.
Automation: Complaints and Whistleblowers
Companies that are only focused on efficiency and see employees as the necessary function that cannot be automated will have an increasingly difficult time. Employees file complaints, become whistleblowers, or choose another employer. Amazon is a good example, still a winner, but people are massively rebelling against the almost slavery-like employment. They try to form unions, devise ways to file anonymous complaints, and leak videos showing how little time and space they have for personal development by showing how many packages they have to collect. A case like Amazon shows that being truly successful requires more than just smart automation.
Successful digitalization requires precisely an eye for the human dimension. In many traditional companies, this is difficult because how do you involve people in something they have no knowledge of? Banks have cleverly responded to this. They massively laid off people in IT management functions and rehired them by return post on the user side, in new roles and functions. With this knowledge boost, banks have elevated many employees from classical functions to a higher level. By now, almost sixty percent of the workforce at many banks consists of people we previously considered IT professionals.
Software as a Service
Over the past ten years, we have started working differently: the pace of innovation has increased and more and more software solutions have emerged where there is little left to choose from. Think of systems for education or healthcare. The disadvantage of such Software as a Service is that the software dictates and external parties are subject to it. Think of software updates or changes over which you have little say as a customer. As a user of such software, you must therefore have more knowledge of these systems in-house, and system administrators must have a lot of knowledge ready to understand the impact of the software used on their organization. The frequency of software updates is also increasing, making it necessary to be extra aware of the impact on your organization or company.
That transformation is not finished, in fact, it will never be finished. The continuous stream of changes and innovations coming at us requires people who continuously question the status quo. That’s where the balance lies: companies must shift their focus from short-term profit to long-term value. They must find a balance between social and shareholder returns. In practice, this often proves difficult.
Trends – Ten Years Ago
From Planned to Agile Working
Over the past ten years, most organizations have transitioned to Agile working. SAFE, Lean, Obeya rooms, who doesn’t know them? Successful companies have shifted work towards chains. User organizations and IT have started working according to the same pattern – AGILE – and IT has been organized differently. IT professionals are organized into so-called ‘tribes’ (a thousand people) and ‘packs’ (a few hundred people), have no hierarchical boss who decides what they do, but work based on priorities set in portfolios in small teams (five to seven people) together with the user side on the changes to be implemented. This strengthens connections between team members and bridges the gap between IT and other business functions, resulting in a more integrated and cohesive organization.
The SaaS-ification of the Landscape
In the past decade, the IT landscape has rapidly moved towards Software as a Service (SaaS). The idea is that the differences between how companies organize their processes are very small in practice. Many companies and organizations still think that administration, marketing, HR, and logistics systems need to be specifically tailored for them. That is a misconception. Instead of customized systems, generic SaaS systems are available that are not only cheaper but also more effective. Therefore, software providers deliver templates on which companies can quickly tailor the SaaS environment for their own assignments. This means that organizations must adapt to the working methods within these systems, rather than the other way around. This facilitates not only seamless integration of different systems and processes but also enhances the connection between companies and their customers by providing personalized experiences. At the same time, it raises questions about the level of human connection as interactions are increasingly mediated by technology.
More Compliance Than Ever
In 2012, we got the cookie law, in 2014 the Payment Services Directive 2 (PSD2), in 2015 the rules for net neutrality, in 2016 legislation for copyright protection, and in 2018 the
General Data Protection Regulation (GDPR), to name a few examples. Companies have had to invest massively in monitoring the digital information they increasingly collect and record. It emphasizes the need for connections based on trust and shared responsibility.
Security and Leaks
In the past decade, companies have faced a wide range of data security issues and data leaks: large-scale breaches with millions of affected records, ransomware attacks that held systems hostage for ransom, and cloud security issues such as misconfigurations and unauthorized access. Insider threats, both intentional and unintentional, by employees, contractors, or partners, have also been a concern. New data privacy laws, such as the GDPR, force companies to better secure their sensitive information and comply with stricter regulations. The increase in IoT devices (Internet of Things) has also introduced new vulnerabilities, such as poor authentication and encryption. These challenges underscore the need for companies to implement robust security measures, proactively identify and address risks, and continually adapt to an evolving threat landscape to ensure the integrity, confidentiality, and availability of their data.
Data as the New Gold
Over the past ten years, companies have increasingly recognized the value of data, with a growing emphasis on collecting, analyzing, and utilizing it to gain insights, support decisions, and achieve a competitive advantage. However, just as gold must be carefully mined, refined, and guarded, data also requires careful handling to maximize its value and minimize risks. Companies have faced challenges such as data privacy, cybersecurity threats, and compliance issues in an increasingly complex regulatory landscape. Data has the potential to transform and grow companies. This growth also brings responsibilities. Data governance and ethical use are now central due to the rise of artificial intelligence as a major consumer of information that must be thoroughly quality-checked. Transparency, integrity, and accountability are key words for success. But data is only valuable if an organization can effectively collect, analyze, and interpret it, requiring collaboration between different disciplines. At the same time, it raises questions about the ownership and ethics of data, and how technology affects the connection between individuals and control over their own data.
Trends – Ten Years Ahead
Continuous Digital Transformation
Digital transformation is a continuous process that requires companies to constantly innovate and adapt to rapidly changing technological landscapes. This includes embracing data-driven decision-making and integrating technology into all aspects of business operations. Companies must respond to growing consumer expectations for sustainability, transparency, and personalized services, while maintaining strong connections with their existing customers and communities.
Changes in the Labor Market
The labor market will undergo significant changes in the coming decade, with a rapid evolution of required skills and a shift in employee expectations towards their employers. Younger generations place more value than older employees on a healthy work-life balance, sustainability initiatives within the organization, and meaningful work over financial compensation. Companies must commit to creating an environment that supports these values to attract and retain talent and foster a culture of connectedness and engagement.
Navigating Regulation
With an increasingly complex regulatory landscape, especially in data usage, privacy, and the ethical implications of technology, companies must be proactive in their compliance efforts. This requires strong collaboration between legal, technological, and operational teams to ensure transparency, responsible data use, and protection of individual privacy, laying the foundation for trust and long-term relationships.
Managing Supply Chain Risks
Geopolitical uncertainties, pandemics, and climate change expose supply chains to new risks. Companies must develop resilient and sustainable models that are not only efficient but also ethically responsible. This requires close collaboration with suppliers and partners and a commitment to shared values and goals to create a strong and connected network that can withstand external shocks.
Cybersecurity
In an era where the threat of cyberattacks is increasing, it is essential for companies to strengthen their cybersecurity strategies. A significant development that many companies need to pay attention to is the advent of quantum computers. These computers are capable of cracking many of the security algorithms used today. This makes all digitalization vulnerable. In the coming years, companies will need to better map their security. This goes beyond technological solutions; it requires a culture of awareness and responsibility among all employees. Companies must also collaborate with governments, industries, and other stakeholders to share best practices and jointly keep their digital processes secure.
These challenges underscore the need for companies to forge deep, meaningful connections – not only internally within organizations but also externally with customers, partners, and the broader society. Through this connectedness, companies can achieve sustainable growth and make positive contributions to the world.