The Next Generation Enterprise (NGE) is highly (totally?) dependent upon IT.  A rich and robust infrastructure, user friendly tools, on demand web services, on demand processing capacity and storage space are merely table stakes for tapping the next generation of collaborative, social networking, and marketing capabilities.  IT organizations need to partner with business units and functions in new ways.  Business and IT need to have the skills to collaborate and converge in news ways – finding opportunities for product, service and process innovation.  The massive burden and resource drain from legacy systems and technologies, which often consume 80% or more of the IT budget, must be reigned in so as to free up funds and resources for the new sources of business value that are available to NGE’s.  And yet, this is proving elusive for most businesses – especially those with a long history and the associated “legacy” environment, including infrastructures, systems, skillsets and, above all, mental models about the role of IT.  Why is this proving so challenging?

Business-IT Maturity Model

Maturity models can be very useful.  I think Richard Nolan was one of the first to propose a Stage theory for IT management back in the 60’s.  The Software Engineering Institute has contributed much to comtemporary best practice with a Capability Maturity approach, and its current manisfestion CMMI.  Maturity can be a great lens or perspective through which to understand the journey to 2017.  The highly simplified Business-IT Maturity Model above separates business demand (the business’s “appetite” for IT) and IT supply (the enterprise’s ability to satisfy that demand) and explores how they mature over time, and how they are mutually dependent.  Business demand at any point in time is a complex function of industry characteristics, market forces, business vision and leadership, and many other variables.  Capital Markets (e.g., investment banking and brokerage houses) and high technology companies tend to have high demand maturity – in the financial services case, information and IT are at the very heart of the business, while in the high tech case, rapidly evolving business models (think Dell and Google, for example) are highly dependent upon agile IT infrastructures.

Business demand is also a function of IT supply – low supply maturity will constrain business demand.  For example, an IT infrastructure that is unreliable and hard to use will tend to dampen the business appetite to leverage IT for business innovation and for collaboration with customers and partners.  Typically, if business demand gets too far ahead of IT supply, there will be a change of IT leadership.  On the other hand, if IT supply gets too far ahead of business demand, IT will be seen to be overspending, resulting in a change of IT leadership.  The most common patterns are that at Level 1, business demand leads IT supply; in Level 2, IT supply tends to ‘catch up’ with and overtake demand, and in Level 3, demand and supply are closely aligned. From the perspective of late 2007, we see the majority of companies at mid-Level 2, some at high Level 2, and a minority at either low Level 3 or high Level 1.  Why are so many at mid-level 2, and seem to be struggling to get to the next level?