I was talking with Dave Castellani, who as senior vice president and business information officer, runs IT for $25 billion New York Life Insurance Company, and we got onto the discussion of shadow IT. When Dave posited that CIOs would be better off “unleashing shadow IT” rather than attempting to contain it, I asked him to tell me more. Our conversation quickly became a discussion about the wholesale overhaul of the IT operating model.
What is shadow IT?
These days, shadow IT is any activity that happens outside of the IT organization that involves coding, the purchase of a tool or equipment, or the establishment of core infrastructure. If these activities have an impact on scalability, repeatability and availability across the enterprise, they are shadow IT. This form of shadow IT needs to be controlled and contained.
What should CIOs do about shadow IT?
CIOs need to unleash all other forms of shadow IT, that is, allow business functions to own more technology resources and be accountable for the technology that they own. Most people in the business say, “I need to get things done faster to meet market demands. I can’t wait for IT.” The reporting relationships that govern technology professionals should change in this new business climate; technology resources should be anchored in the business, rather than in a centralized IT organization. This change will allow everyone to move more quickly.
It is critical to understand, though, the need for strong architecture disciplines and standards. If you are ceding control to the business, you must established standards and strong goverance. Scalablity, interoperability and repeatability are non-negotiable.
Think about it. How many people are happy with the level of service provided by the technology organization? The majority of them are not because technology resources are too far removed from where the needs for technology are located. We need to do a better job of tying process improvement experts to technology, and that means breaking up the unity of the technology organization for the advancement of business.
Are you talking about bi-modal IT?
I am. With bi-modal, you have core infrastructure — servers in the data centers, telecom, networks, architecture and security — as a core set of functions. The job of the group managing these functions is to make technology as cheap as possible with the highest availability. The cost of compute is coming down every year. This group needs to capitalize on those cost reductions. Thinks of this as the core technology services overlaid with strong security.
All of the business technology resources live in the business, including design, requirements and standards. This is agile development at scale. You have a group of people who design a new process or product, and this group is aided by technology people who work in a series of sprints that never end. IT people, product people and business process owners come in and out of the scrum, always meeting the demands of the business in an endless cycle.
Most organizations talk a good game about agile, but they aren’t organized or disciplined enough to execute agile at scale. When you have agile at scale, there are no project managers or due dates — just constant iteration of more services to the business at a faster and faster pace. Release cycles are a matter of days and [are] unending. But legacy organizations are not organized properly to operate this way. Facebook does agile at scale. No wonder they can bring new products to market so quickly.
Why is it so hard for legacy companies to move into this new structure?
People get stuck in their legacy org charts and operating models. They care too much about how much budget they control and how many people they manage. “Dave has a $1 billion budget and an organization of 1,000 people, so Dave must have a big job.” But $300 million of that budget is for core compute, and the rest of it is for business technology. Should I own that budget and those people, or should I start to think differently about how to manage those assets?
When the business comes to me with a technology solution request, I ask them, “How much money do you have for these projects? It’s your money. You tell me how you are going to fund this request. In IT, we will resource the heck out of it. We will be efficient, but you need to decide how much you want to invest in your business and at what pace.”
What we are really talking about is a workforce transformation. One organization will have core compute, architecture, and security, and everything will be distributed within the business. If I have 2,000 people working for me in 2017, I might have 300 directly working for me by 2020.
Open source is a major catalyst allowing us to embed technology resources in the business, since applications work together much more easily now than in the past. Remember the Intel/Microsoft duopoly? When those two companies controlled everything from the operating system to the desktop, no one understood how anything worked. But SaaS companies such as Salesforce are using open source to create a whole new partner ecosystem. We now have a more flexible environment and can allow business functions to control their own technology.
If the business controls their own technology resources, what does “traditional IT” focus on?
IT focuses on core compute, security and architectural standards. For example, the IT organization has an obligation to the company to kill code. IT should be reducing applications as often as possible because extra applications are sludge; they slow things down, cost more, and reduce interoperability. If you are not reducing your code at a rate of 10 percent a year, you will be in trouble. If you and I started a company today, we’d have no legacy. Since that is not the case, we need to do constant pruning to create agility and speed.
About Dave Castellani
Dave Castellani is senior vice president, business information officer with New York Life. He joined the firm in September 2013. Previously, he was senior vice president at Prudential Financial. Castellani is currently also chairman of the board for Qv21 Technologies. He received a BA in history from College of the Holy Cross.