Disruptive digital technologies are, true to their name, massive drivers of change in business, but many organizations are not set up for digital success.
Despite ambitious digitization efforts, many leaders are disappointed to find that their IT function isn’t prepared to leverage the emerging technologies that drive digital disruption and economic change. As a result, their companies are struggling to reinvent products and services, meet changing customer demands, and keep pace with digital competitors.
IT functions must be transformed into world-class technology functions. To do this, digital must go beyond IT. Companies need to build up digital capabilities and increase efficiency and simplification, across the board. By embarking on this journey, leaders don’t just envision the company of the future—they create it. Crucially, the technology function is treated as a strategic partner and a digital business enabler, not a service provider.
To establish a world-class tech function, business and technology must work together to define a joint vision of the six drivers of tech function excellence:
The Operating Model
Companies should drive explicit alignment between business and technology towards a joint vision through a new operating model and value-based roadmap. To ensure value delivery, companies need to apply consistent governance across business processes, applications, data, and sourcing. The operating model design must address performance measurement as well as how deeply to embed green initiatives.
Many organizations have compelling use cases but find it difficult to scale them globally. Overcoming that difficulty requires high-quality data, a skilled workforce, and cloud adoption. Companies must also establish an enterprise data model and strategy that defines how data is stored. Ongoing governance is critical to maintaining quality and consistency.
Companies should apply API-centric design as they build a modern technology landscape. This design usually includes a data layer that decouples legacy IT systems from the smart business layer, which allows companies to insert new functionalities or make quick and efficient changes. Companies also need to decide how aggressively to migrate to the cloud (be it a public or private cloud) and how to build a more modular infrastructure.
Organizations must build tech capabilities strategically. The tech function is core to the business, making the need to hire and retain tech talent critical. Companies need to rethink their employee value proposition and build critical and differentiating skills in-house.
Excellence in Sourcing
It’s imperative to efficiently manage external expertise and optimize the vendor landscape to align the sourcing model. Digital platforms and ecosystems offer innovative and compelling ways to collaborate externally, but benefit can be achieved using other approaches: consolidating vendors and services, better aligning vendors, and working to reduce unused licenses.
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Our work with clients can be defined in three phases:
Working with BCG’s tech function consulting team, clients have achieved a rise in customer satisfaction and return on digital investment, delivery times (including faster time to market and shorter cycle time) that are two to four times faster than was previously possibly, a 15% to 25% reduction in software development costs, and a 15% to 20% shift from indirect technology activities (such as overhead) to direct technology activities that add immediate value.
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