CIO great says “Get rid of IT”
On 24 June 2011 at the Global Access Partners (GAP) Workshop on Cloud Computing, a joint initiative with the Department of Broadband Communications and the Digital Economy, I had the chance to hear the keynote address from Prof Paul A Strassmann.
Prof Strassmann has truly earned his place in the CIO hall of fame; joking that he is not really a Professor, in the sense that his interest in IT is by no means merely academic. He has authored many articles and books and holds a number of trademarks. He seems to have been even busier since retirement.
In the afternoon I was lucky enough to grab a few minutes with Prof. Strassmann and given his expertise in the field cloud computing I wanted to know what advice he had for First 5000 members.
First, Prof Strassmann needed some background on who the First 5000 were. I described First 5000 as a network, launched by GAP in 2010, for senior executives from the engine-room of Australia’s economy. With member companies that have between 20-199 employees and turnover in excess of $10 million per annum. In Australia medium-sized enterprises make up 4% of all Australian actively trading businesses and contribute 25.3% to the Australian industry revenue.
Prof Strassmann remarked that there is a similar picture in most economies with regard to the role of medium-sized companies on national economies.
I only had time for one question so the big one was what would be the one piece of advice you’d give First 5000 members about how to manage the risks and opportunities of cloud computing in their business?
Coming from someone who has headed up IT for the US Department of Defence, NASA , Kraft and Xerox his response shocked me, “Get rid of IT”.
Excuse me?
“Buy it all in as a service”, he explained as if it was obvious.
He said it is no longer practical for medium size companies to maintain the best of every different type of IT system required. They are all highly specialised and changing all the time. By outsourcing to good providers medium-sized businesses can satisfy their IT requirements more reliably and affordably.
“Get rid of the in-house IT department and buy everything as a service. Of course you’ll have to get your services from more than one source. You’ll probably need a range of different providers, for accounting, HR and another for logistics”.
As we were leaving I snuck in one last question. Hoping for a clue as to what technology stocks we should all be investing in, I wanted to know what Strassmann was excited about as the next big development in cloud technology that he’d be pursuing within his business. Characteristically he just laughed and said, “Who knows? I’ve been doing the same job for 64 years; it just keeps getting bigger and more complicated”.
If you’d like to read more from Paul in his own words he blogs regularly at Strassmann’s Blog (http://pstrassmann.blogspot.com/) and has a new book available soon via Strassmann Inc (http://www.strassmann.com/) .
Nancy Getsi
July 3, 2011 at 8:22 am
Nadeem, you said it
Nadeem, you said it brilliantly, I couldn’t agree more. Purchase the commodities, but don’t throw everything away. Companies still need IT strategic planning that is in the best interest of the company, not planning with a focus on what’s best for a vendor or a set of vendors. And as you mentioned you simply cannot replace the IT perspective in conversations regarding company direction, with an outsourced representative.
Nadeem Moghal
July 2, 2011 at 3:58 am
Friends: Notwithstanding
Friends: Notwithstanding Professor Strassmann’s otherwise brilliant commentary, I find myself in the “other camp” on this topic.
The notion of outsourcing IT is only relevant based on how IT is positioned within an organization. If they are just the people who connect machines and bring email to your desktop – in other words, if they are “commodity providers” – then an argument could be made that we outsource this function and find the cheapest service provider who could take over these responsibilities based on a pre-signed SLA.
But that is what used to happen many years back, when IT would simply carry out the instructions meted out by business/operations. IT is now increasingly finding a place at the table, where their executive management are making strategic contribution to a company. They understand the business, know where the competitive advantage lies, and can work with business/operations to implement solutions that improve the bottom line.
Study closely all major initiatives launched by corporations (M&A, globalization, manufacturing efficiency, business process management, ERP migration, distance learning, just to name a few), find the successful ones from this mix and you would see the IT imprint all over.
You just cannot replace this spot on the table with a vendor, who obviously has a vested interest.
That said, I completely agree with the notion that a business should focus on their core competency and outsource everything that is not central to its operations. With certain tweaks, this could be the mantra for all companies. But let’s not consider eliminating IT from the core group: it would be for our own peril.
Dave Clark
July 2, 2011 at 2:35 am
I’ve worked both in some very
I’ve worked both in some very large companies and also some mid-sized ones. Based on that experience, I’d say that there’s a lot to Prof. Strassmann’s views. Mid-sized companies have many of the same problems and challenges as very large companies, but nowhere near the resources to deal with them. It makes sense to outsource IT as a service so that another large company with access to lots of resources can manage the complexity.
That said, the one thing you can’t outsource is leadership. I still think there’s room for a CIO, CTO, or equivalent to help make the right decisions about technology direction, vendor selection, and strategic alignment. GM tried to outsource all of that to EDS at a point and ended up bringing the leadership component back in-house, which was the right move in my view.
Jeff Gill
July 2, 2011 at 2:30 am
Strassmann is brilliant. I’ve
Strassmann is brilliant. I’ve read his views on IT before and I love his innovative thinking in the role of IT for the business. This article is a great short synopsis on buying everything IT offers the business as a pay as you go service from service providers outside of the organization. Except where it is absolutely essential to the success of the business, the resources spent on IT should be spent on R&D, Marketing, New Product Development, Customer Service and anything else that is a core competency for the business. Spend resources on technology only when it is absolutely unavoidable.
Won Byon
July 2, 2011 at 2:30 am
Easy to say if you don’t
Easy to say if you don’t envision a competitive advantage from IT in your business model.
Laurence Strano
July 2, 2011 at 1:36 am
Very valid points.Similarly
Very valid points.Similarly marketing electronically requires up to date
strategic online marketing techniques which again are most suited to be outsourced to get up to date access.The difficulty is keeping abreast on who is most competent in each area.We have got to the stage where we need evaluation of competencies.