Aligning IT with the business and improving application development processes reaps rewards.
The IT department for a global multi business company was struggling to meet heightened demand for increasingly complex technology solutions. This frustrated the company's business leaders, who were relying on technology solutions to drive multiple changes in the business model.
The company realized that continuing down this path without making some adjustments in the technology delivery model jeopardized its goals for deepening its IT capabilities. This would have hindered its ability to quickly implement business strategies and to maintain a competitive edge in the market. Senior management asked McKinsey to help change the IT organizational model in a way that would more effectively support strategy.
As the McKinsey team started to work with the client, it became clear that the ineffective delivery model was rooted in a range of issues: The IT department’s resources were organized by application area and not business needs; neither the business nor the IT group practiced basic portfolio management effectively; IT demand-supply disciplines were weak; and there was a shortage of people who had expertise in high-demand subject matter such as knowledge of certain applications and advanced programming-language skills. Also, the IT department's heavy reliance on external contractors which, when combined with weak processes and disciplines, was adding some delivery capacity but not very effectively relative to the added cost and resources.
In conjunction with a sizable client team, we redesigned the IT delivery organization—structure, process, and people—to improve the effectiveness of technology delivery. Our jointly developed solution included multiple changes:
- Alignment of project definition and management resources to the major businesses
- Creation of a new demand organization capable of prioritizing project demand and simplifying project support requests
- Separation of application-development and quality-assurance resources from demand in order to force clarified project expression and improve these disciplines
- Introduction of a range of supporting processes, including demand management, release deployment, and quick-iteration maintenance and enhancement requests
- Identification of several critical people capabilities that needed to be strengthened, and improvement of the hiring and development program to deepen expertise in the high-demand skills
For this program to succeed at the scale of the IT department, we needed to work closely with business and IT leaders alike. With such a large-scale transformation, development of a clear program for change, including process rollout, implementation, communication and change-management efforts was necessary. Investing the time upfront to address not just the mechanics of change, but also the underlying culture of the IT department, was a critical piece of the new organizational model.
The relationship between business leadership and IT leadership has vastly improved, becoming a collaborative relationship rather than an arms-length, customer-to-supplier relationship. Shared accountability for projects, enabled by much greater clarity of roles and responsibilities, has become the norm. This in turn offers IT staff members a wider range of well-defined career tracks and broader development opportunities. Moreover, the realigned organization is now able to consistently and effectively implement specific foundational capabilities (e.g., end-to-end project portfolio management, project management discipline, and tailored application development methodologies).