Implement the Next-Generation IT Operating Model

The operating model for organizations embracing Exponential IT and transforming into technology-first enterprises.

Analyst Perspective

Be the organization that can thrive in an exponential IT world.

Carlene McCubbin Research Practice Lead CIO Organizational Transformation Practice Info-Tech Research Group	Brittany Lutes Research Director, CIO Organization Transformation Practice Info-Tech Research Group

IT leaders are increasingly expected to be responsible for understanding and delivering high-value customer experiences. This evolution depends on the distribution and oversight of IT capabilities that are embedded throughout the organizational structure.

Defining digital strategic objectives, establishing governance frameworks for an autonomous culture, and enabling the organization to act on insightful data are all impossible without a new way of operating that involves the oversight and accountability of advancing IT roles. Through exponential change, functional groups can lose clarity regarding their responsibilities, creating a sense of ambiguity and disorder.

But adopting a new way of working that supports an exponential IT organization does not have to be difficult. Leveraging Info-Tech Research Group's next-generation operating model, you can clearly demonstrate how the organization will collaborate to deliver on the various digital and IT services. This is no longer just an IT operating model, but a technology-first enterprise model.

Included in this blueprint:

Exponential IT Model

Defines how the Exponential IT model operates and delivers value to the organization.
This is done by exploring:

• Exponential IT cultural norms and behaviors
• Opportunities and risks of the Exponential IT model
• A breakdown of the embedded, integrated, and centralized aspects of the model
• Operating model value stream stages
• An assessment on whether the Exponential IT operating model is right for your organization

Changing Role of IT Leader

Defines how chief information officers (CIOs) can operate or elevate their role in this changing operating model.

• Identifies why the C-suite is changing – again
• How IT leaders should consider where they will add value in the new operating model
• Outlines examples of future organization-wide structures and where IT roles are positioned
• Supports IT leaders in developing themselves to operate in this structure

Executive Summary

Your Challenge

IT is challenged to change how it operates to better support evolving organizations. IT must:

• Consider the needs of customers, end users, and organization stakeholders simultaneously.
• Leverage resources strategically to support the various IT and digital services being offered.
• Create a digital services enablement office to design, monitor, and enhance services continuously.

While many organizations have projects that support a digital strategy, few have an operating model that supports this digital services strategy.

Common Obstacles

Organizations struggle to support the definition and ongoing maintenance of services because:

• The organization's Digital and IT services offerings are not clear.
• The functional team accountable to deliver on each IT or Digital service is ambiguous.
• There are insufficient resources to support all the IT and Digital services being offered.
• C-suite leaders required to support the services are missing or in the wrong role to effectively lead.
• Technology has not been standardized to ensure consistency and effectiveness.

Info-Tech's Approach

Embrace the IT operating model that focuses on the enablement and delivery of Digital and IT services by:

• Having technology stakeholders actively collaborate to decide on priorities and deliver on objectives.
• Leveraging data more effectively across the organization to understand and meet user needs.
• Ensuring technology architecture and security standards are well-established and followed by all throughout the organization.
• Allocating dedicated and skilled resources to ensure services can be continuously delivered.

Info-Tech Insight

The first IT operating model where customer engagement with IT and Digital Services is at the forefront.

What is an operating model?

An IT operating model is a visual representation of the way your IT organization will function using a clear and coherent blueprint. This visualization demonstrates how capabilities are organized and aligned to deliver on the business mission and strategic and technological objectives.

The should visualize the optimization and alignment of the IT organization to deliver the capabilities required to achieve business goals. Additionally, it should demonstrate the workflow so key stakeholders can understand where inputs flow in and outputs flow out of the IT organization. Investing time in the front-end to get the operating model right is critical. This will give you a framework to rationalize future organizational changes, allowing you to be more iterative and your model to change as the business changes.

From computerization to digitization to the new frontier in autonomization, IT has progressively matured, enabling it to actively lead this next stage of business transformation.

EXPONENTIAL RISK
Autonomous processes will integrate with human-led processes, creating risks to business continuity, information security, and quality of delivery. Supplier power will exacerbate business risks.

EXPONENTIAL REWARD
The efficiency gains and new value chains created through artificial intelligence (AI), robotics, and additive manufacturing will be very significant. Most of this value will be realized through the augmentation of human labor.

EXPONENTIAL DEMAND
Autonomous solutions for productivity and back-office applications will eventually become commoditized and provided by a handful of large vendors. There will, however, be a proliferation of in-house algorithms and workflows to autonomize the middle and front office, offered by a busy landscape of industry-centric capability vendors.

EXPONENTIAL IT

Exponential IT involves IT leading the cognitive re-engineering of the organization with evolved practices for:

• IT governance
• Asset management
• Vendor management
• Data management
• Business continuity management
• Information security management

To learn more about IT's journey into autonomization, check out Info-Tech Research Group's Adopt an Exponential IT Mindset blueprint.

The IT operating model must evolve to respond to exponential change

• Ensuring customers are not an afterthought to IT leaders. Customers inform how and where IT leaders invest resources to realize organizational objectives.
• Adopting a formalized approach to service definition and delivery to eliminate silos.
• Leveraging data throughout the organization to better inform and enable the various digital services in meeting customer demands.
• Responding to employee demands for development and training opportunities by applying skills in new settings.
• Having cross-collaboration mechanisms built into the ways of operating to reduce silos across the organization.
• Enabling services through a strong set of governance and risk mandates and practices.
• Eliminating the need for IT capabilities to only be within an IT department.

IT can no longer be just a service provider:

78% of IT leaders with established digital strategies and 45% of IT leaders with emerging digital strategies are driven by customer experiences.
Source: Foundry "Digital Business Study,"2023

40% - The number of CIOs that are responsible for creating new products or services to support revenue generation.
Source: Foundry, "The State of the CIO," 2023

This change requires a breakdown of traditional IT-business divisions

CIOs must recognize that separating IT from the business is restrictive

• Many organizations have recently completed or are in the process of completing a digital transformation focused on enhanced employee and customer experiences.
• Post-transformation organizations must change how they operate to continue to deliver on those enhanced experiences, especially for the customer.
• There must no longer be a wall between IT and the business, but a unified organization offering digital services that include IT components. Already, 81% of work is being performed across the functional boundaries created in an organization (Deloitte, 2023).
• Effectively designing, delivering, and maintaining these services depends on a Digital Services functional layer, expanding IT's involvement into how the business delivers worthwhile experiences to customers.
• This Digital Services functional layer will consider whether the new services are better owned by the IT group or another area of the organization.
• CIOs need to be prepared to adopt a new way of operating or be left to manage a smaller subset of IT functions.

"I think we've done the IT industry a disservice by constantly referring to IT and the business, artificially creating this wedge."
– David Vidoni, VP of IT at Pegasystems
Source: Dan Roberts, CIO, 2023

Four trends driving an Exponential IT organization include:

Emerging Technologies

• 67% of respondents to KPMG's 2022 Global Tech Survey indicated they intend to embrace emerging platforms by the end of 2024.(1)
• The technology landscape is constantly shifting with artificial intelligence (AI), quantum computing, 5G cellular networks, and next-generation robotics. Each of these technologies requires new capabilities and a new way in which those capabilities are organized.

Enhanced Customer Experiences

• 24% of CIOs have been tasked by their CEO to increase the customer experience.(3)
• Organizations realize that to gain and retain customers, it has become necessary to consistently evaluate service offerings and identify opportunities for enhancement or new services.

Digital Trust

• 1/3 of CISOs plan to increase their GRC focus during the next year and 36% have already begun to implement Zero Trust components.(2)
• Risk and security capabilities mature focusing on defined enterprise accountability, consideration of ethics and inclusivity and proactive security controls.

Embedded Technology & Skills

• Spending on embedded software is expected to increase to $21.5 billion by 2027.(4)
• The technology strategy no longer resides solely within IT. The organization must take ownership of this strategy while they define their digital strategies. Technology services are also embedded.

(1) "Global Tech Survey," KPMG, 2022
(2) "Global Digital Trust Insights Report," PwC, 2023
(3) "State of IT Report," Foundry, 2023
(4) "Global surge in embedded software demand; here is why," DAC Digital, 2023

Application of the Four Key Trends on your Exponential IT operating model:

Adopting an Exponential IT operating model is typically influenced by resonating with the following drivers:

Section 1: The Next-Generation Operating Model

The Technology Value Trinity

All three elements of the Technology Value Trinity work together to deliver business value and achieve strategic needs. As one changes, the others must change as well.
How do these three elements relate?

• I&T Operating Model aligns resources, processes, measures, stakeholders, value streams, and decision rights to enable the delivery of your strategy and priorities. This is done by strategically structuring IT capabilities in a way that enables the organization's vision and considers the context in which the model will operate.
• Digital and IT Strategy tells you what you must achieve to be successful. For an Exponential IT organization, customer demands and digital service offerings would drive strategic decisions.
• I&T Governance is the confirmation of IT's goals and strategy, which ensures the alignment of IT and business strategy. This is the mechanism by which you continuously prioritize work so that what is delivered aligns with the strategy.

Strategy, operating models, and governance are too often considered separate practices – strategies are defined without clarity on how to support. A significant change to your strategy necessitates a change to your operating model, which in turn necessitates a change to your governance and organizational structure.

The Exponential IT operating model delivers value across seven components

Organizations adopting the Exponential IT Model will experience new norms and behaviors

Customer-Centric
Dedicated to the customer experience and making sure that the end customer is considered first and foremost.

"Yes" Approach
The organization can say yes to emerging technology and customer desires because it has organized itself to be agile in its digital service offerings.

Digital Service Ownership
Digital service offerings are owned and managed across the organization ensuring the continuous delivery of value to customers.

Employee Development
Resources are organized into pods based on specific skills or functions increasing the likelihood of adopting new skills.

Autonomization
Centralized and accessible data provides service owners autonomy when making informed decisions that support enhanced customer experiences.

Exponential IT is an embedded model approach

Info-Tech has identified seven common IT operating model archetypes. Each model represents a different approach to who delivers technology services and how. Each model is designed to drive different outcomes, as the way your organization is structured will dictate the way it behaves. The Exponential IT model is an emerging archetype which capitalizes on embedded delivery.

Centralized	Shifted	Embedded
Owned and operated by leadership within IT. IT takes full responsibility of the functional areas and maintains control over the outcomes.	Can be owned/operated by a variety of leadership roles throughout the organization. This can shift from IT ownership to other organizational leadership. Decisions about ownership are often made to enable quick response or mitigate risks.	Owned/operated by leadership outside of traditional IT. Another area of the organization has taken authoritative power over the outcome of this functional area for a quicker response.

Even as an embedded IT operating model, shifted and centralized IT functions as support

1. Embedded functions required for scaled autonomation
   Definition and oversight of the organization's strategic direction demonstrated through a customer-first culture, data insights, and a well-defined risk appetite.
2. Integrated design and optimization of the digital service offering
   Actively considers the customer experience and designs the appropriate services to be delivered. Considers all aspects in the design and delivery of services by exploring opportunities to integrate components to enhance customer experiences or architecting new service offerings to eliminate gaps.
3. Centralized standards for IT technology, security & resources
   Technology functions continue to deliver exceptional services to the enterprise including clear standards for technology and solution architecture, application of security requirements, and resources to enable various service offerings.

Opportunities and risks of the Exponential IT model

The Exponential IT operating model blends embedded, shifted and centralized delivery to balance agility & risk

The Exponential IT model commands a new placement and significance of IT capabilities

Using capabilities for the operating model

• Capabilities are focused on the entire system that would be in place to satisfy a particular need. This not only includes the people who are able to complete a specific task, but the technology, processes, and resources required to deliver.
• Focusing on capabilities rather than the individuals in organizational redesign enables a more objective and holistic view of what your organization is striving toward.
• Capabilities deliver on specific need(s) and how they are organized changes the way those needs are delivered.

1. Embedded functions required for autonomization

Overview of the function:

• Focuses on a single strategy and roadmap for the organization that actively includes technology.
• Governance, risk, compliance, and general oversight are defined and embedded throughout the organization.
• Ensures that quality data is being generated to help inform the defined digital service offering.
• Readies the organization to adopt emerging technology quickly and with minimal disruption to other digital service offerings.
• A team of technical experts that decides what information should exist for operational efficiency or service innovation.

2. Integrated design and optimization of the digital service offering

Overview of the function:

• Analyzes and responds to insights about the customer experience.
• Maintains the portfolio of the organization's digital service offerings.
• Considers what is necessary to operate efficiently as an organization while simultaneously exploring emerging technology to optimize new or existing digital services.
• Requires the expertise and involvement of both business-minded and technology-skilled resources.
• The differentiating factor from other IT operating models is how it holistically considers all the components throughout the organization and how they are connected.

3. Centralized standards for IT technology, security & resources

Overview of the function:

• Compared with other IT operating model archetypes, the Exponential IT model has fewer capabilities that are centralized within the technology function of an organization.
• Architecture and standards are the foundation of successful embedded delivery, ensuring reuse, improved integration, and a unified experience. This includes technology, risk, data, AI and security architecture, models, and standards.
• Employee resources are also organized in pods to be leveraged based on greatest need and skills availability.
• This lets the organization be more agile when innovating and implementing new digital service offerings.

Exponential IT explores new value stream stages

Customer Perspective		The organization is continually anticipating their wants and needs and establishing mechanisms to vocalize those needs.	Customer receives the right IT and digital services to respond to their needs.	The service is easy to use and continuously responds to wants and needs.	The service is meeting expectations or exceeding them.	There is a dedicated service owner who can hear demands and feedback, then action desirable outcomes.
Value Stream Stages
Organizational Perspective	Expected Outcome	Customers' wants and needs are understood and at times anticipated before the customer requests them.	Assess needs to determine if service is already offered or needs to be created. Design services that will enhance the customer experience.	Look for opportunities to integrate processes and resources to increase the performance of IT and Digital Services.	Ensure that the right employees with the right skills are working to develop or enhance service offering.	The service owner manages the ongoing lifecycle of the service and establishes a roadmap on how value will continue to be delivered.
	Critical Processes	Customer experience Research and innovation Stakeholder management	Research and innovation Service design & portfolio management	Performance management Continuous improvement Integration planning	Service management Resource planning and allocation	Service strategy & roadmap Service governance Service performance management
	Metrics	Customer satisfaction score Service-to-need alignment	Gaps in service portfolio Speed to design services	Service performance Service adoption	Time to resolve customer demand Frequency by which service requires enhancements	Service satisfaction Alignment of service strategy to organization strategy

1.1 Assess if the Exponential IT operating model is right for your organization

1 hour

1. Begin by downloading the Exponential IT Operating Model Assessment.
2. Review the questions within each of the operating model components. For each question, use the drop-down menu to determine your level of agreement.
3. The more your organization agrees with the statements, the more likely your organization is prepared to implement an Exponential IT operating model.
4. The less your organization agrees with the statements, the more likely you should adopt a different IT operating model.
5. For support implementing the Exponential IT or another IT operating model, explore the Visualize Your IT Operating Model blueprint (coming soon).

Input

• Desire to change the organization's IT & Digital operating model

Output

• Desire to implement the IT & Digital Service Enablement operating model

Materials

• Exponential IT Operating Model Assessment

Participants

• Executive IT leadership
• Business leadership

Explore other Info-Tech research to support your organization transformation initiatives

Visualize the IT Operating Model blueprint (coming soon)

Redesign Your IT Organizational Structure

Section 2: Elevating the CIO Role

The next generation of IT C-suite roles are here

As the operating model changes and becomes increasingly embedded into the organization's delivery of IT and Digital Services, new C-suite roles are being defined

• One of the most critical roles being defined in this change is the Chief Digital Services Officer (CDSO) who focuses on all components of the digital experience from the lens of the customer.
• There are two directions from which the CDSO role is typically approached as it gains popularity:
• CIOs evolve beyond just information and technology—focusing on how IT & Digital Services enhance the customer experience
• Business leaders who have technical know-how increase their involvement and responsibility over IT related functions
• IT leaders need to consider where they would rather sit: focused only on technology and remaining a service provider to the organization, or embedding technology into the services, products, and organization in general?

Info-Tech Insight

This is not about making the CIO report to someone else but allowing the CIO to elevate their role into that of a CDSO.

Increasing IT leadership's span of control throughout the organization

As maturity increases so does span of control, ownership & executive influence

Organizations hoping to fully adopt the Exponential IT operating model require a shift in leadership expectations. Notably, these leaders will have oversight and accountability for functions beyond the traditional IT group.

As the organization matures its governance, security, and data management practices, increasing how it delivers high-impact experiences to customers, it would have one leader who owns all the components to ensure clear alignment with goals and business strategy.

Emerging Exponential IT organizations will have distributed authority

• Organizations beginning their transition toward an exponential model often continue to have distributed leaders providing oversight of distinct functional areas.
• Their spans of control are smaller, but very clearly defined, eliminating confusion through a transparent accountability framework.
• Each leader strives toward optimization and efficiency regarding IT capabilities, for which they are responsible.

1. Distributed Leadership
   Embedded functions required for scaled autonomation
   Distributed leaders identify the ways technology will enable them to advance enterprise objectives while maintaining autonomy over their own functions. They may oversee technology.
2. Experience Officer
   Integrated design and optimization of the digital service offering
   An Experience Officer will help consider the insights gained from enterprise data and make informed decisions around enterprise service offerings. They actively explore new ways to deliver high-value experiences.
3. Chief Technology Officer (CTO)
   Centralized standards for IT technology, security & resources
   A CTO will continue to oversee the core technology, including infrastructure and service management functions.

Established organizations will be driven by a digital transformation journey

• Organizations that have begun to deliver on their transformation journey will typically see two distinct C-suite leaders emerge—the CIO and the CDO.
• The Chief Digital Officer (CDO) often explores ways to optimize the integration and management of data to enable insightful decision making from the organization.
• The Chief Information Officer (CIO), however, considers mechanisms to standardize how new technologies can be integrated with the architecture.
• While both leaders have distinct responsibilities, their roles intersect at the customer experience.

Advanced organizations will be managed by a single emerging role

• A single leader will oversee all the functional areas where value is delivered and enabled by IT capabilities.
• Through a large span of control, this leader can holistically consider opportunities to optimize the customer experience and ensure recommendations are actioned to deliver on that enhanced experience.
• This leader's span of control will require a strong understanding of both strategic and operational functions to authoritatively oversee all aspects for which they are responsible.

CDSO – Chief Digital Service Officer

1. Embedded functions required for scaled autonomation
   The CDSO will set, oversee, and manage the delivery of an enterprise's digital strategy, ensuring accountability through good governance and data practices.
2. Integrated design and optimization of the digital service offering
   They ensure that the enterprise holistically considers the various services that could be offered to exceed customer expectations through high-impact experiences.
3. Centralized standards for IT technology, security & resources
   They also ensure stable and secure architecture standards to enable consistency across the organization and a seamless ability to integrate new technology to support service offerings.

Evolution of the IT C-suite now includes the CDSO

Examples of what the emerging organizational structure can look like

This is more than a new title for IT leaders

It's about establishing a business first perspective

• IT leaders exploring this new way of operating are not just adopting the new title of CDSO or CDIO.
• These leaders must change how information, technology, and digital experiences are consumed across the various stakeholders – especially the end customer.
• IT leaders who pursue this new IT operating model choose to be more than order takers for an organization.
• They are:
• Partners in defining the organization's digital service offerings
• Recognizing the benefits of distributing decision-making authority for IT-related aspects to others throughout the organization
• Prioritizing capabilities like portfolio management, architecture, vendor management, relationship management, cloud and user experience

"'For me, the IT portfolio for the next few years and the IT architecture have taken the place that IT strategy used to have,' he adds. This view doesn't position IT outside of the organization, but rather gives it central importance in the company."
– Bernd Rattey, Group CIO and CDO of Deutsche Bahn (DB), qtd. by Jens Dose, CIO, 2023

1.2 Plan your career move to CDSO

1-3 hours

• Create a roadmap on how to move from your current role to CDSO by identifying current strengths and opportunities to improve.
• Download the Career Vision Roadmap Tool from the website. An example of this is on the next slide.
• Document the tagline. This is your overarching career focus and goal – what is your passion? Think beyond titles to what you want to be doing, the atmosphere you want to be in, and what you want to add value to.
• Document the current role: what are the strengths, achievements and opportunities?
• Consider the CDSO role: how will you build stronger relationships and competencies to elevate your profile within the organization? What is an example of what someone would display in this role?
• Define specific roles or stakeholders that you should develop a stronger relationship with.

Download the Career Vision Roadmap Tool

Input

• Desire to implement the IT & Digital Service Enablement Operating Model

Output

• Roadmap to elevate from a CIO to a CDSO

Materials

• Career Vision Roadmap
• IT & Digital Services Enablement operating model archetype
• CDSO job profile

Participants

• CIO (or any other role aspiring to eventually become a CDSO)
• Individual activity

Career Vision Roadmap:
Executive Leader
Akbar K.

Sample

To provide customers with an exceptional experience by ensuring all IT and Digital Services consider and anticipate their needs or wants. Enable IT and Digital Services to be successful through clear leadership, strong collaboration, and continuous improvement or innovation.

CIO

1. Establish technology standards that enable the organization to consistently and securely integrate platforms or solutions.
2. Lead the project team that defined and standardized the organization's reference architecture.
3. Need to work on listening to a variety of stakeholder demands rather than only specific roles/titles.

Transition

• Strengths: Technology acumen, budget planning, allocating resources
• Enhance: Stakeholder relationship management.
• Work with current CDO to define and implement more digital transformation initiatives.

CDSO

• Being responsive to customer expectations and communicating clear and realistic timelines.
• Establish trust among the organization that services will deliver expected value.
• Empowering service owners to manage and oversee the delivery of their services.

Network Opportunities

• Connect with board members and understand each of their key areas of priority.
• Begin to interact with end customers and define ways that will enhance their customer experience.
• Chief Digital Officer

Actions now in line with aspiration

Appendix: Capabilities & Capability Model

IT and digital capabilities

Using capabilities for the operating model:

• Capabilities are focused on the entire system that would be in place to satisfy a particular need. This not only includes people who have skills to complete a specific task, but also the technology, processes, and resources required to deliver.
• Focusing on capabilities rather than the individuals in organizational redesign enables a more objective and holistic view of what your organization is striving toward.
• Capabilities deliver on specific need(s) and how they are organized changes the way those need(s) are delivered.

Research Contributors and Experts

Donna Bales
Principal Research Director
Info-Tech Research Group

Scott Bickley
Practice Lead – Vendor Management Practice
Info-Tech Research Group

Christine Coz
Executive Counselor – Executive Services
Info-Tech Research Group

Valence Howden
Principal Research Director
Info-Tech Research Group

Duraid Ibrahim
Executive Counselor – Executive Services
Info-Tech Research Group

Chris Goodhue
Managing Partner– Executive Services
Info-Tech Research Group

Carlene McCubbin
Practice Lead – CIO Practice
Info-Tech Research Group

Mike Tweedie
Practice Lead – CIO Practice
Info-Tech Research Group

Vicki van Alphen
Executive Counselor – Executive Services
Info-Tech Research Group

*Plus an additional 5 industry experts who anonymously contributed to this research piece.

Related Info-Tech Research

Adopt an Exponential IT Mindset

• To succeed in the coming business transformation, IT will have to adopt different priorities in its mission, governance, capabilities, and partnerships.
• CIOs will have to provide exceptionally mature services while owning business targets.

Become a Transformational CIO

• Business transformations are happening, but CIOs are often involved only when it comes time to implement change. This makes it difficult for the CIO to be perceived as an organizational leader.
• Elevate your stature as a business leader.
• Create a high-powered IT organization that is focused on driving lasting change, improving client experiences, and encouraging collaboration across the entire enterprise.

Define Your Digital Business Strategy

• Design a strategy that applies innovation to your business model, streamline and transform processes, and make use of technologies to enhance interactions with customers and employees.
• Pre-pandemic digital strategies have been primarily focused on automation. However, your post-pandemic digital strategy must focus on driving resilience for growth opportunities.

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