Service Oriented Organizations

A few days ago I read an interesting article about how organizations need to adapt to virtualization to take full advantage of it.

If we consider that this is, in fact, the first step toward the industrialization of IT, we should consider how the organization of industry evolved over time, from the beginning to the mass-production era. In fact, I think IT will reach the mass-production stage within a few years. If we replicate this evolution in IT, it will go through these phases:

  • The craftsperson era. At the early stage of any industry, we find a solitary figure in a shop soon complemented by similarly minded associates (this is me, 43 years ago). They create valuable and innovative products, but productivity and cost per unit of production is usually through the roof. This is where IT was at the end of the 1960s and the beginning of the 1970s. The organization landscape was dominated by “gurus” who seemed to know everything and were loosely coupled within some kind of primitive structure.
  • The bureaucratic era. As IT was getting more complex, an organizational structure started to appear that tended to “rationalize” IT into a formal, hierarchical structure. In concept, it is very similar to what Max Weber described in 1910: a structure that emphasizes specialization and standardization in pursuit of a common goal. Tasks are split into small increments, mated to skills, and coordinated by a strong hierarchical protocol. The coordination within the organization is primarily achieved through bureaucratic controls. This is the “silo” concept.
  • The cooperation era. The limits of a strong hierarchical organization start to appear when the production structure is more complex. In 1938, Chester Barnard promoted organizations as “cooperative systems,” in which the members achieve productivity by participating in cooperative groups focused on a common goal. In IT, this represents the ITIL era — processes are created to promote cooperation among the previous silos of technology.

These last two organizational models, which are inspired by a rationalization of the enterprise, require technology stability to be effective — and productivity gains, once the organization is in place, can only be incremental. The paradox is that enterprises are trying to bind into these models an IT organization that also should provide flexibility, agility, and innovation in the context of an ever-growing and changing technology, and expect constant productivity gains.

How can we achieve the productivity of cloud organizations within an enterprise organization? Productivity gains are actually brought by technical improvement and economy of scale, which fits the model of the cloud providers exactly. I recently saw a TV show on automation in the car industry. It shows how an engine is actually entirely built by robots, without any human intervention. This means that instead of a number of people dedicated to machining and assembling this engine, a single person was controlling engine production by monitoring the robots. This is the organizational model to which IT would tend: Abstraction of the different tasks through automation replaces big chunks of both the original rational model and the process-oriented model. Someone’s needed to plug in and oil the machine, and someone must manage and monitor the service, but there are very few specialized skills outside those two roles. This leaves us with a service-oriented model where: 1) the breadth of understanding and responsibilities is expanded for the members of the organization, and 2) the main challenge is to provide the necessary information for decision-making as the complexity of the infrastructure is abstracted. This does not mean that technical skills are dead; it just means that the person in control of a service has a broad understanding of the goals and structures of the organization and its technical components, rather than a specialized one.

I am very interested in your comments and experiences.