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What Transitioning to the Cloud Means for IT Organizational Structures

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What Transitioning to the Cloud Means for IT Organizational Structures

(And why you should pay attention)

While many companies are still in the process of transitioning products to the cloud, early adopters face a new challenge—what does a best-in-class, cloud-enabled IT organization look like? 
 
Companies with fully-deployed Office 365 after several years are starting to recognize organizational disruptions brought on by transitioning to the cloud—including an unrealized expectation of organizational downsizing. With cloud-enablement, IT organizations are dramatically shifting their visions towards becoming more agile and business-oriented rather than on-prem technical experts. 
 
Recently, Microsoft conducted research with hundreds of IT employees across different business sizes and roles to find out how small businesses and enterprises were dealing with these new organizational challenges. While a dominant best practice for restructuring has yet to emerge, three common organizational themes appeared: decentralization, customer-centric and the strategic steering arm.  
 
1.       Decentralized
A decentralized organization connects IT employees directly with end-users to increase accountability to the overall business results. By distributing IT across business units, IT organizations can work directly with internal customers to better understand their needs, their requests, and then communicate these requirements back to the Enterprise IT organization. 
 
What might that look like?

  • An IT Field Engineer reports to Business Unit Manager, with indirect ties back to a Regional IT Manager
  • IT relationship managers are assigned to different business units and are responsible for representing their needs and interests
  • IT Field reps are assigned to visit store locations and proactively think about how to improve technology used by retail reps.


2.       Customer-Centric
Like the decentralized structure, the customer-centric model is end-user focused. In this structure, IT employees act like service brokers between outsourced IT/cloud vendors and internal customers. Rather than prioritizing technical skills, these service roles require people skills, as day-to-day tasks require end-user problem-solving. 
 
Customer-centric structures aim to be more inclusive of broader, less-technical audiences—emphasizing that business should drive IT and IT should enable business rather than dictate. 
 
3.       The Strategic Steering Arm
Unlike the previous two organizational structures, the Strategic Steering Arm takes on a high-impact decision-making role within a company, combining both IT and business decisions. This strategic team sits more closely to the CIO and evaluates strategic priorities and investments. 
 
“We have a Director of Technology Strategy in our group.  It’s a fairly new role. He plays an important role in proactively thinking about how technology can better serve people in the organization and makes sure the IT support team has direction on where to go next.” 
- IT Manager, 1,000 employees, US
 
Additionally, these organizations may choose to outsource lower ITI delivery roles. 
 
Looking Ahead
The transition to the cloud has shifted the IT landscape significantly. As companies continue to deploy cloud products, forward-thinking organizations are looking at how to optimize their cloud investments and solve business challenges with their new infrastructure capabilities. While no single blueprint is identified as a best org structure, there’s a general shift towards bringing IT closer to business units and end-users. This also translates into an individual skill set change for employees, who shift from needing deep technical expertise to developing higher-level strategies, improving business acumen, and becoming more customer-centric in providing IT services. In this shift, IT (at all levels) can be more strategic in approaching business decisions and enabling business units to reach goals. 
 
Share your thoughts with us:

  • Is your IT organization experiencing transformational change? 
  • Has your team gone through a reorganization, or is one pending? 
  • What have you experienced? 
  • How will you choose to structure your team? 
  • Has your organization experienced one of these three trends?
15 Replies

Re: What Transitioning to the Cloud Means for IT Organizational Structures

There is one other relevant change that I have seen in a number of my clients and is related to the need to respond to the new opportunities for customer focus, agility, and speed in cloud services. A number of IT organizations have now reorganized to have distinct teams for Design, Build (or Buy), and Run.  This approach has broken up traditionally asset-, stack- or capability- centric teams, enabled greater agility to be addressed from the beginning of the asset lifecycle and enabled scaled operational management processes to apply consistently across the Run environments, particularly for cloud services or large scale systems.  Given cloud and the demands of digital businesses, developing the distinct capabilities required to design, build and run as centers of excellence can offer benefits, particularly if underlying technologies are changing or new choices are available.

Re: What Transitioning to the Cloud Means for IT Organizational Structures

My other observation on IT reorganization is that it largely seems to be perpetual now. If IT is not leading the charge to transform itself to deliver greater business effectiveness, then the business is restructuring IT to cut costs or outsource functions.  The challenge this presents for IT pros is that all of the models above (& the threat of business-driven restructuring) demands that IT Pros have a greater understanding of the business, greater strategic sophistication and a new level of agility and responsiveness. That brings the people side of IT to the fore and means IT leaders must focus on new skills in business awareness, consulting, collaboration and leadership. Once upon a time as an asset-centric organization, IT could restrict its supply, exploit its unique expertise and leverage its monopoly power in organizations. The business had nowhere to go if IT were not leveraging the potential of their people. IT staff, users, business leaders, service providers, and outside partners now have alternative ways to get the job done, if the IT organization is not leading, responsive or effective enough.  IT Pros whatever their asset or functional expertise have an opportunity to lead business transformation, not just IT transformation. After all, almost every organization is heavily technology-driven to execute business outcomes.

Re: What Transitioning to the Cloud Means for IT Organizational Structures


Simon Terry wrote:

"A number of IT organizations have now reorganized to have distinct teams for Design, Build (or Buy), and Run.  This approach has broken up traditionally asset-, stack- or capability- centric teams, enabled greater agility to be addressed from the beginning of the asset lifecycle and enabled scaled operational management processes to apply consistently across the Run environments, particularly for cloud services or large scale systems.  Given cloud and the demands of digital businesses, developing the distinct capabilities required to design, build and run as centers of excellence can offer benefits, particularly if underlying technologies are changing or new choices are available."


@Simon Terry have you noticed any similarities between organizations who have reorganized in this structure? 

Re: What Transitioning to the Cloud Means for IT Organizational Structures


Simon Terry wrote:

"My other observation on IT reorganization is that it largely seems to be perpetual now. If IT is not leading the charge to transform itself to deliver greater business effectiveness, then the business is restructuring IT to cut costs or outsource functions.  The challenge this presents for IT pros is that all of the models above (& the threat of business-driven restructuring) demands that IT Pros have a greater understanding of the business, greater strategic sophistication and a new level of agility and responsiveness. That brings the people side of IT to the fore and means IT leaders must focus on new skills in business awareness, consulting, collaboration and leadership. Once upon a time as an asset-centric organization, IT could restrict its supply, exploit its unique expertise and leverage its monopoly power in organizations. The business had nowhere to go if IT were not leveraging the potential of their people. IT staff, users, business leaders, service providers, and outside partners now have alternative ways to get the job done, if the IT organization is not leading, responsive or effective enough.  IT Pros whatever their asset or functional expertise have an opportunity to lead business transformation, not just IT transformation. After all, almost every organization is heavily technology-driven to execute business outcomes."


Could not have said it better @Simon Terry.  Have you got any advice on specific resources IT leaders to help them prepare to be on the forefront of change?  Any good starting points?

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Anna, my clients tend to be services organisations where the pressure of digital agility is extreme so that may account for a greater focus on realising the scale benefits and introducing new practices across the lifecycle. That said I have one utility client and they have chosen the same model because it better enables them to understand, respond and manage technology to the customer value chain.

Re: What Transitioning to the Cloud Means for IT Organizational Structures

I will start a separate thread on that topic.

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Here's the related thread to start a discussion on what capabilities are needed to lead IT Transformation ongoing: https://techcommunity.microsoft.com/t5/Thought-Leadership/What-are-the-Capabilities-to-Lead-Ongoing-...

Re: What Transitioning to the Cloud Means for IT Organizational Structures

It was fascinating to watch Microsoft's own IT organization go through essentially all three of these shifts at the same time, so they're by no means mutually exclusive. The decentralization is happening in a less explicit way than in previous swings of that pendulum, but as one who's seen this swing before, I'm interested to see if the presence of the cloud makes this phase more durable than the shift that was driven by strong server-led architectures last time. As the hardware becomes more centralized than ever, does that free up IT Pros to become increasingly customer-centric, business-focused, and higher up in the value chain?

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Re: What Transitioning to the Cloud Means for IT Organizational Structures


Chris Slemp wrote:

It was fascinating to watch Microsoft's own IT organization go through essentially all three of these shifts at the same time, so they're by no means mutually exclusive. The decentralization is happening in a less explicit way than in previous swings of that pendulum, but as one who's seen this swing before, I'm interested to see if the presence of the cloud makes this phase more durable than the shift that was driven by strong server-led architectures last time. As the hardware becomes more centralized than ever, does that free up IT Pros to become increasingly customer-centric, business-focused, and higher up in the value chain?


Would love to know what you think of this @Naomi Moneypenny!

Re: What Transitioning to the Cloud Means for IT Organizational Structures

I've finally had the chance to collect my thoughts. I agree with the themes of decentralisation, customer centricity and the need for a strategic steering arm described in the original post. I've crafted a response based on the overall experience and my observations.

 

https://buildbod.com/2017/02/22/what-transitioning-to-the-cloud-means-for-it-organisational-structur...

 

 

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Always love your outside-in perspectives @Simon Denton! 'From a civil engineering perspective, it is like building a skyscraper but you only need to worry about the planning and transportation to it.'

 

Great stuff! 

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Thanks Anna!

Re: What Transitioning to the Cloud Means for IT Organizational Structures

I know that some people might be thinking about pro's and con's associated with the themes in the original post. My thoughts are:

 

Decentralized

 

This is a model most will either already have or be striving towards. It's about global knowledge, locally delivered. It plays into the needs that we have when looking for help - we'll ask our immediate peers, then those around and then Google. If the IT team is local then there is a higher probability of them being asked first.

 

So the Pro is it aligns more with how communities / teams work / what we need as individuals
It's also easier to show empathy when you are side by side

A con is that you need to work harder to ensure your distributed network has current and relevant knowledge and a common approach to triage (of problems), design, build etc.


Customer centric

 

Arguably this model is more rewarding for your staff and so it is easier to retain staff as they are being satisfied by their Pride motivator. However, if, as an organization, you do not react to customer needs, improve services etc. you will demotivate staff as they cannot keep saying "that's the way it is" etc. Pro's become con's


Strategic steering arm

 

This is definitely not scale dependent. The IT person in a 5-person shop can also be the guiding light in terms of strategy. The key is to have some one consider it and for them to take a holistic view.

The con is that taking a holistic view can be challenging for some. It's very easy to have a blinked view. It's also too easy for strategists to disappear down the hole like Alice in Wonderland.

 

 

Each theme is relevant to any organization, big, small, global, local

 

Re: What Transitioning to the Cloud Means for IT Organizational Structures

Great point @Chris Slemp that there can be a lot going on in these changes. Often organisations end up iterating their way through a number of models and using different models in different parts of their IT organisation depending on customer needs and the underlying business challenges.  There is also the fact that some times the change and the scale of the IT organisation creates complexity and a little experimentation might be required to find a path through the complexity. The obvious answers from theory are often ineffective when rapid change is underway.

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