We are currently seeing developments inconceivable a few years ago: Uber, the world’s largest taxi enterprise, owns no cars. Facebook, the world’s most popular supplier of media and content, does not generate any content of its own, and Airbnb, the world’s largest supplier of accommodation, owns no property. Digital transformation is changing everything. Because the opportunities and potential of digital media and the internet are shaking the foundations of every company. IT which has to be agile, flexible and efficient at the same time, is playing a special part in the process.
However, the flexibility and speed of response required are currently not in evidence in many places. Because many prestigious companies, e.g. from the banking, insurance or travel sectors, are unable to keep up with the pace of digital change in terms of their IT. They are held up by ancient IT systems that have grown with the years. “With innovation cycles of five or more years in some cases, established companies are unable to keep up with the rapid changes in the market”, explains Michael Gomolka, partner at the business and IT consultancy Q_PERIOR. “So companies will not be able to avoid creating new structures in their IT architecture.”
Division of IT into apparent opposites
The requirements are diverse, therefore, and the budget frequently limited. A complete overhaul of the IT structure is usually unaffordable. One way out of the dilemma, in many cases, is to divide the IT systems into two, i.e. into two apparently opposite modi operandi. The two modes have totally different speeds and objectives. They are used in parallel in order on the one hand to achieve the balancing act between the demand for a core system designed for reliable operational security, and on the other the need for a more customer-centered, agile IT system. Mode 1 (“rock solid IT”) is characterized by its linear design, driven by budgeting and costs and uses mature technology with a long life-cycle. Mode 2 (“lean and exploratory”), on the other hand, is agile and iterative, has comparatively short cycles of frequently only a month and pursues in some cases an unknown end result. The success of this approach depends crucially on the understanding that both modes unquestionably belong together and are mutually interdependent. For example, mode 1 forms the basis for the successful implementation of mode 2.
Bimodal – and then?
Converting the IT structure towards bimodality entails far-reaching changes in the company. Because projects of this nature not only impact a company’s IT structure but also the organization, culture and every company process. They also affect the daily interaction between IT and the different departments. “The advantages of a bimodal IT structure can only be fully exploited if an agile framework is created along with the IT changes”, Michael Gomolka explains. “For example, this includes training agile mindsets, the long-term implementation of learning and change processes as well as reviewing and adapting existing roles and responsibilities.”
Once a company has decided to introduce a bimodal IT structure, there are various options for implementing the choice. There are numerous approaches to improving a company’s bimodal performance. The options focus on different areas of the company, such as Application Development, structural and process organization or sourcing. The individual approaches differ in their speed of implementation which may be short, medium or long-term. The remarkable fact is that they exert differing degrees of leverage in mode 2. This can serve as an indication of which approach is best suited to a particular company. Which combination of measures is best, must be determined on the basis of the individual company situation and previous experience. As a general rule, it can be stated that some of the methods specified below show comparatively high leverage such as agile methods or smart sourcing.
By contrast with classical project management, agile methods allow a dynamic, flexible approach to projects, and therefore lend themselves to managing complex situations. With agile methods, the focus is on the iterative implementation of newly raised customer demands. The development cycles are correspondingly short. As a result of fast implementation, less time is spent on design and testing than for a traditional implementation scenario.
By focusing on agility, fast implementation capability and customer demands, agile methods are ideal for meeting the conditions for mode 2 in a bimodal IT structure. Agile methods make processes more flexible and leaner, but they also have to be embedded in a conventional, organizational framework. That is why it is important for agile and classical methods to complement each other depending on the requirements. Care must be taken to ensure that the agile concept also takes root in employees’ mindsets. This is a challenge that is not always easy to overcome as some employees tend to adopt a hostile attitude to agile approaches out of conviction or habit. It is important here to carry the employees with you and to introduce them to the concept of agile methods.
Sourcing, originally a term from materials management, describes the strategy for procuring a company’s goods and services. With reference to the IT field, smart sourcing denotes the decision as to which IT services are best performed within the company and which are best supplied by external service providers. This decision is crucial, especially for the implementation of a bimodal IT structure, in order to focus the right capacity on innovative subjects close to the business.
The right sourcing measures can also enlarge a company’s talent pool and shorten the time-to-market phase. Cost issues naturally play a not insignificant role as well. The prerequisite for sensible smart sourcing is to take an individual look at the particular situation of the company – from both an internal and external perspective.
The thrust of the internal measures is to analyze which employees can be best utilized in which area. This serves to strengthen a company’s core skills and ideally to increase productivity. The right internal resources can also be built up through the process of internalization insofar as this can be achieved at a reasonable expense and simultaneously high quality.
However, if services cannot be suitably performed internally, the second – external – route must be explored. What services can be better performed externally and therefore outsourced? In this way, ancillary skills can be supplied by service providers who can deliver them faster, better and more cost effectively. There are various options available here such as outsourcing, offshoring or nearshoring − a version of offshoring which denotes the movement of services to nearby countries, and one which has become increasingly important in the last few years.
Demands on companies have changed radically in the last few years with the advent of digital transformation. Increasing digitalization goes hand-in-hand not only with new infrastructure, big data and the internet of things, but also agility and speed. Flexible IT is essential in order to be able to react as quickly as possible to the demands of markets increasingly shaped by customers. The introduction of a bimodal IT structure therefore represents an ideal way of establishing the success factor of agility in the company and thereby remaining successful in the long term.