IT Organization Circa 2017

I had a conversation yesterday with my colleague Tom Steinthal as part of my Reaching Level 3 research.  Tom has spent his working life at the cutting edge of financial services/capital markets – a space where business-IT maturity is very high – in fact, it is a requirement for survival!  I was trying to draw out lessons that less mature IT organizations can draw from the highly mature capital markets segment.

At the risk of stating the obvious, my conversation with Tom reminded me how much the business demand characteristics of capital markets drive high IT supply maturity.  Let’s examine those characteristics.

1. Highly leveraged – huge profit potential for relatively small IT efforts.
2. Speed is key – profit opportunities may be fleeting – there’s a big potential payoff for moving quickly.  As Tom said, “Being a half-millisecond ahead of a competitor can translate into significant profits!”
3. Innovation is important – big profit potential for coming up with a “new idea” (e.g., new derivative, new type of fund).
4. Highly competitive marketplace – big winners, big losers, winners can become losers overnight.

These demand characteristics create an IT environment where funding is available to be on the cutting edge.  They also lead to an environment where “brutal prioritization processes” are used to sort out what gets done – with an understanding that it needs to get done with excellence – no second chances – either win big, or fail!  They also create an environment where small, short-term projects are attractive, so that things get broken down into small chunks – deliver early, deliver often!

IT organizations in capital markets companies are typically organized along a hybrid centralized/decentralized model – a central IT infrastructure/operations group, and decentralized business unit groups organized around product lines (e.g., equity trading).  This is a fairly common model, and suffers the usual tensions – figuring out what should be common and leveraged in the central group (for cost effectiveness and efficiencies) versus located in a business unit/product group (for speed, innovativeness and business value).

The capital markets IT model is not, of course, nirvana.  The willingness to fund business unit/product initiatives brings with it a hesitance to fund IT infrastructure initiatives, or longer term investments.  The tensions between central and decentralized IT groups can lead to a “we’re important, you’re lesser beings” dynamic between the groups.  However, this should not detract from the fact that capital markets companies do tend to demonstrate high business-IT maturity, achieve high performance and availability, and can develop complex systems at warp speed, so I do believe they have lessons to teach less capital intensive businesses.

One lesson I see is that if you are not in a business where demand characteristics match those above (1 to 4) then it is incumbent upon IT leadership, and especially, IT business relationship managers, to be stimulating this type of demand.  I can’t think of many businesses today where highly leveraged IT opportunities don’t exist (even if they have not yet been identified); where speed (time to value) is not critical; where innovation would not have significant implications for competitiveness and profitability; and where competition isn’t a constant challenge.

The trap for those of us in lower business-IT maturity settings is we expend all our energy meeting Level 1 and Level 2 demand, and have no energy left to stimulate Level 3 demand – then grumble that our business partners don’t create level 3 demand!  I’ve said before, businesses get the IT they deserve.  The important corollary to, IT organizations get the business demand they deserve!

Filed under: Change Management, Demand Maturity, IT Management, Supply Maturity | Tagged: Capital markets IT, central IT, decentralized IT, hybrid model, IT demand maturity, IT relationship manager, IT supply maturity