I was with a client recently as their CIO was leading one of their regular “town hall” meetings (live meeting for those in HQ, videoconference for those elsewhere).  He was talking (eloquently!) about Next Generation Enterprises, Web 2.0 technologies and the implications for their company and for their IT / shared services organization.

A question from the floor asked if ITIL (Information Technology Infrastructure Library)was incompatible with the move towards becoming a Next Generation Enterprise (NGE).  It’s an interesting question.  It is easy to perceive NGE’s as chaotic, emergent, free-for-alls – characteristics that seem to be at odds with the rigor and process discipline inherent in approaches such as ITIL, CMMI, 6 Sigma, and so on.  There can seem to be all sorts of inconsistencies and ambiguities in the idea that, on the one hand, we are implementing all this process discipline, while on the other, we are moving to a world of rapid experiments, open networking, emergent teams, and all sorts of loose collaborations, both within the enterprise, and with customers, suppliers and the outside world.

As is often the case, I find the Business-IT Maturity lens helpful in sorting out this apparent dichotomy.  In this case, I want to add another model that I find helpful in thinking through these issues, and then combine the models.  First, as a reminder, below is a version of the basic Business-IT Maturity Model that has been central to many posts on this blog.

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Business-IT Maturity Model

Next, I want to consider an IT portfolio model.  The model below comes from Professor Peter Weill at the MIT Sloan School.  It is a very useful portfolio view that classifies IT spend (or investment) into infrastructure (common and shared IT capability), transactional, informational and strategic.

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IT Portfolio Model

This model divides IT spend (or investment, depending upon how it is being used) into 4 classifications.  To a degree, Level 1 Business-IT Maturity is all about getting the right IT infrastructure capability.  Level 2 is about getting the right transaction processing capabilities in place.  And Level 3 is about the strategic and informational IT capabilities.  Again, I realize this is a crude approximation, but it helps us to realize what types of IT investments we should expect to focus on as we move through business-IT maturity, and how the shape of the IT portfolio might change with that maturity journey.  Putting the portfolio model on top of the maturity model creates the following picture.

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IT Portfolio Mapped Against Business-IT Maturity

So, the IT portfolio can be something of a proxy for business-IT maturity.  Compared against ‘average’ infrastructure spend, a Level 1 organization will be higher than average.  Compared against ‘average’ transactional spend, a Level 2 organization will be higher.  And compared against ‘average’ informational and strategic spend, a Level 3 organization will be higher.  Now there are many issues that can distort this simple view.  If your transaction processing systems are a mess of dozens of different instances of disparate systems, you are probably at Level 1, but will have inordinately high transactional spend because of all the complexity in your transactional systems.  So, higher than average transaction spend may be more a symptom of lack of Level 2 attention, than a byproduct of Level 2 investment.

Finally, back to the opening question – are ITIL and NGE approaches incompatible?  No, not all all – they are focused on very different capabilities.  ITIL will help improve Level 1 and Level 2 IT capabilities, but do little to nothing for Level 3.  If you are moving into Level 3, you need strong Level 1 and Level 2 capabilities, which leverages techniques such as ITIL and CMMI.  But these same techniques will not get you to Level 3.