McKinsey’s Business Technology Office published it’s latest global survey on IT trends today. It is an interesting read and I suggest checking it out if you have a few minutes to spare. The summary of the results are as follows:

• Firms are recognizing the importance of strategic value that IT brings to making the overall organization more efficient.
• Most organizations do not feel that their IT current staff is capable of capturing that value. This thought is driven primarily by the IT executives in the organization, followed by the business leaders.
• Organizations envision shifting their IT spending away from infrastructure and more toward analytics and innovation.

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I found these points contradictory. Although I believe there is a sentiment that there is a strategic purpose in IT, IT departments are still looked at as a cost center, and rampant cost cutting in IT departments continues on a yearly basis. This cost cutting isn’t necessarily due to the movement to the cloud as the survey suggests – in fact it’s quite the opposite. Moving data into the cloud still requires heavy infrastructure. As a firm consolidates their hardware, they are just buying more complex and thus more expensive hardware to support it. Furthermore, the data explosion that continues to happen as firms keep most of their data electronic, coupled with the compliance laws such as Sarbanes-Oxley which require data to be kept for a certain number of years is only increasing infrastructure costs.

Yet, businesses still aim to cut IT as much as possible. Most of the large financial institutions are cutting their annual IT spending budget anywhere between 10%-15%. Unfortunately, when these firm’s can’t cut out the infrastructure, they instead cut their personnel. It is quite easy to cut IT personnel. There hasn’t been a major disruption in IT since the introduction of virtualization technology, and instead, the technologies that are used heavily have become mature to the point where they are very simplistic to implement. Couple that with the proliferation of knowledge on the internet, where one can just Google for any issue they are trying to solve, and it has made supporting IT infrastructure very easy. It’s essentially commoditized IT.

This commoditization of IT has naturally led to downward pressure on salary. Companies are also not investing in their IT personnel by giving them training, even though the survey alludes to the fact that organizations believe they should. Even if the company does invest in them, they only send those employees to courses/seminars which teach administrative tasks. As these employees gain seniority, their salaries increase, but their skill sets didn’t match the salary. That’s when the companies realize their IT budgets are too large and look to outsource. This is especially true in the operational roles within the IT department (e.g. server admins, database admins, helpdesk, etc.). These roles are then being increasingly outsourced to India where firms like Wipro and Genpact have been the main beneficiaries. The downside to the outsourcing is that roles will never bring added value to the organization – they are there to perform the operational tasks and that is it.

So in short, firms see the value of IT, yet are not investing in it, are outsourcing their staff, and then complaining that IT is not brining strategic value to the enterprise.

This actually leaves the IT personnel in today’s global businesses in dire straits. With those employees now out of a job, they are stuck in a very difficult position – they don’t have the skill set that current IT firms are looking for, and they are too expensive. This, unfortunately is the ugly side of “growing up” within IT – at some point, you become too old and too expensive and don’t have a specialized trait. There will always be someone younger, and willing to work much harder for a cheaper salary. Companies know this, even if they don’t publicly speak about it.

How do we solve this problem? Well, we already know that operational roles will no longer be necessary in the future. Either technology will evolve to automate those tasks, or they will just be outsourced to the lowest bidder. Instead, what can’t be outsourced is the design of these infrastructures, along with the architecting of solutions. McKinsey’s survey alludes to this also, as demonstrated in the following chart:

 

*Exhibit 6 from McKinsey’s Global IT survey

 All of the roles mentioned in the chart above point to the same thing – creating solutions that help the business become more profitable. Of particular interest is the the “Joint business and IT expertise” category. Companies will need IT executives with MBA’s or other strong business experience. Sending IT personnel to business oriented classes, instead of the pure technical classes is one way to address this. If the firm won’t do it, then I suggest that IT employees take the initiative to start learning basic business principles and applying them to their work.

You can easily move away from being a “cost” to a business to becoming a valued asset, once you can show the business how you can help it improve, and thus make more money.

Key Takeaways:

• Companies are beginning to understand the strategic value of IT, but have not found a way to capture this strategic value.
• Even so, IT is still looked at as a cost center. Firms are not cutting cost on infrastructure and instead cutting cost on personnel.
• The IT employee has become commoditized; operational roles will continue to diminish to the point of obsolescence.
• IT personnel must begin understanding business principles and applying it to their jobs to become an asset instead of a liability.