New World Order
This lack of management control over business IT consumption has a tremendous cost. It is partly responsible for loss of the competitive advantage that IT can and does deliver, and is directly responsible for many lost opportunities, increased costs, and service outages.
Over time the erosion of perceived IT quality usually leads to outsourcing, which is increasingly seen as an incomplete solution at best, and a disaster at worst.
In order to recover and expand upon the advantages promised by commodity IT, senior executives have to change their concepts of an IT department, the role of centralized control, and how knowledge workers should contribute. The issue is fundamentally one of management philosophy.
The Nordstrom way promotes a customer/worker management philosophy where management’s first commitment is to the customer. The customer is always right in the Nordstrom way. This accurately reflects is the hands-off position taken by many senior executive leaders with regard to out-of-control Shadow IT practices and bad business behavior.
A better management philosophy for commoditized IT is the ‘Southwest’ way. In the Southwest way, the worker comes first. The customer is not always right, and Southwest has been know to ask misbehaving customers to fly another airline.
Management’s first concern is the worker, because they know that workers following sound processes hold the keys to customer satisfaction, and in turn, competitive advantage.
Making the Southwest model work for 21st century IT requires a more comprehensive view of what constitutes an IT organization, a view that extends well past the borders of what most leaders consider IT.
Shifting Demographics
The rising sophistication and expectations of knowledge workers results in divergence in perceived operational goals between IT and the business—an indicator of task-uncertainty and a key contingency within structural contingency theory.
These changing demographics give new urgency to the need for coordination of knowledge-workers and IT, yet management is trying to centralize IT spend and control via the CIO role.
Instead of embracing Shadow IT, CIOs are trying to shut it down. Consider instant messaging (IM), an application many knowledge worker consider critical. IT’s approach to IM is reminiscent of the early days of the Internet.
Instead of realizing the job of IT is to support the needs of knowledge-workers, most IT organizations are trying to stamp out IM—just as they tried to restrict and eliminate Internet access. How will traditional IT respond to Wikis and blogs as corporate IT tools in the future?
The Corporate Executive Board projects that the percentage of IT spend under central control to grow from 50% in 2002, to 95% in 2006, but this does not take into account the knowledge-workers of Shadow IT.
A study by Booze Allen Hamilton found that shadow IT personnel equal as much as 80% of the official IT staff. Clearly, despite the best efforts of senior leaders and IT, the business stubbornly refuses to succumb to centralized IT control.
The problem with the current direction of the CIO role is that is typically has responsibility to support the business without authority to control the business; a classic management mistake leading to the aforementioned dilemmas.
The lure of commodity IT is great. Since shadow IT is a direct result of commoditized IT and resource dependency, it also demonstrates that both corporate IT, and IT utilities, are not delivering the services required by knowledge workers.
However, most IT leaders do not understand the strategic contingencies within the commoditized IT micro-economy. They don’t know their marketplace, and they don’t know who their customer is. In effect, IT is manufacturing the wrong products for the wrong market. IT doesn’t get it either.