The Next Frontier for Enterprises: Moving to a Product IT Operating Model

In the world of technology, there are few things as dramatic and impactful as enterprise IT’s recent ascent from an enabler to a strategic business driver. Tasked with powering next-gen digital business models, IT teams today are fast realizing the harsh truth that they must make a pervasive strategic shift from traditional project-based operating model to a product-centric one. 

Traditional project-based operating models focus resources on a specific application or project, leading to fragmented experiences and a disconnect with the rest of the IT organization or company. For instance, in many cases, one team may be working on a back-end system, while entirely different teams work on the front-end application or updating databases. A product-based operating model takes a more holistic approach to ensure projects are integrated and teams work concurrently toward a uniform goal. 

The days of plan/build/run are numbered as digitization forces IT leaders to act fast, think outside the norm and embrace the blurring boundaries between the digital and physical worlds. A product-centric operating model, sometimes also referred to as a DevOps operating model, accelerates organization-wide digital transformation and consolidates a business’ competitive standing. Companies must transition to a product-centric model to scale-up their agile programs to support end-to-end innovation and reduce siloed operations and projects. 

The companies that have embraced a product-centric operating model are quickly realizing the benefits, but for many IT departments, they have yet to experience or fully understand why the shift is imperative.

What’s Driving the Shift to Product IT Operating Model?

As digitization takes hold and becomes more and more pervasive, CIOs are realizing that intertwining IT and business objectives is quintessential to respond to market changes quickly and remain competitive. Since 2018, volatility has returned to global equity markets in a big way. With the economy in a constant state of flux, coupled with rapid globalization and unprecedented disruption from technology, the average lifespan of a company is 20 years, compared to 60 years in the 1950s, according to Credit Suisse. Overall, the changing business environment makes few things as abundantly clear as this–agility, an appetite for new markets, new products, bias for action and a fail-fast approach will be the new mandates for IT leaders going forward. 

To this end, most CIOs are replacing portfolios of discrete, siloed projects with product lines that enable a specific business capability. The key factors driving the shift toward a product IT operating model include:

• Need for Holistic Transformation: Siloed functions have no place in the digital business world that thrives on integration of data and information across structure, culture, processes and technologies. To enable holistic transformation, organizations must draw a balance and establish cross-collaboration between organizational guidelines versus autonomy of teams for process, architecture, technology, tools, etc.

• Lack of Alignment in Traditional IT Operating Models: Lack of alignment across large teams and multiple organizational groups (such as IT, finance and business) prevents organizations from executing an end-to-end digital strategy. Shifting to a product IT operating model can help steer organizational units toward a common goal. It can facilitate greater collaboration between different DevOps teams that support different products and domains. Recognizing the failure of existing IT governance and the pressing need for a shared digital transformation vision, IDC predicts 40% of CIOs will adopt new digital governance models.

• Need for Speed: Most companies cited that their digitization efforts were hindered by inflexible or slow processes with a traditional IT operating model. Adopting a product-oriented management approach for IT can help organizations define and agree on a pace of change congruent with their readiness and appetite. According to IDC, 65% of CIOs will expand Agile/DevOps practices into the wider business to achieve the velocity necessary for innovation, execution and change by 2021.

• Lack of Integration Between Old and New Technologies: Lack of integration between new and existing technologies is a key factor that keeps organizations from realizing the full potential of digitization. Modern companies need to balance innovation, experimentation, adoption of new technologies and tools with the enterprise’s need for business results, cooperation, risk management and compliance. Because a product-centric model takes a holistic, end-to-end approach, it is ideal for integrating technologies, processes and teams at scale.

Embracing a Next-Gen Operating Model

To compete with newer, nimbler companies such as Facebook, Uber, Spotify and others, traditional companies that are serious about continued growth are leaving no stone unturned and embracing a product IT operating model. From being providers of reliable IT services, CIOs have emerged as strategic partners in driving business transformation. Modern day CIOs are driving business innovation and identifying opportunities for competitive differentiation, not delivering ad-hoc, siloed services. As cloud-first and AI-first become the new mandates for organizations, re-engineering the IT operating model is quickly becoming central to creating value, competitive advantage and growth.