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Enterprise IT Swings Back to Insourcing

Insourcing is becoming more common as businesses try to leverage newer technologies and tools to create business opportunities.

Everything is cyclical. That is especially true in the information technology profession. For instance, companies are constantly shifting between centralizing and decentralizing technology, so it can be more responsive to the business.

The same can be said about outsourcing. Only a few years ago, the general thinking was that technology was a commodity, and that companies could outsource most, if not all, IT functions. But is that still true today?

David Wright, CIO, McGraw-Hill Education

According to David Wright, a former technology senior vice president at Capital One and the current CIO of McGraw-Hill Education, the shift to insource is stronger than ever. "Today, technology is seen as being so central to the business," he told us. "There is now a move to centralize technology and insource it. Just a few years ago, IT was defined as a commodity, and there was a massive move to outsourcing."

Although there are many things that companies need to do themselves, they still don't need to run all technology, Wright said. "Most small and medium-sized companies don't need to run their own data center," including McGraw-Hill Education. "But there are certain things that we do need to control," such as creating digital learning products, which are the future for traditional textbook publishers.

[Do you aspire to the C-suite or some other spot in upper IT management? Bulk up your credentials around today's most pressing IT movement, digital business, at the InformationWeek IT Leadership Summit.]

In his role as CIO at McGraw-Hill, his financial services experience will be helpful. "The banking industry is so technology dependent, and it has been that way forever." Technology has only recently begun to play a central role in the education space, whose legacy is one of print textbook publishing. "Technology is now the foundation of McGraw-Hill and digital learning tools."

That experience in the ultra-secure and highly regulated financial services industry will come in handy as McGraw-Hill becomes a digital learning provider. "As McGraw-Hill Education makes this transition, these technology-enabled platforms make you vulnerable to the many different things that happen on the Internet." Until a few years ago, McGraw-Hill Education and the rest of the education textbook industry had only limited Internet exposure.

Wright, who will speak at the InformationWeek IT Leadership Summit at Interop New York, said the move to bring IT back in-house also means CIOs must adapt their skill sets to manage the transition to a digital business.

"As companies go through the digital transformation, they are structuring IT as an internal software company," he said. "They will have a chief digital officer to oversee technology development for products that they may sell" or other customer-facing technologies. "And they will have a CIO who oversees the internal technology."

The role is splitting because CIOs are often viewed as order takers. Either group is vitally important to the business, but Wright said many current technologists who could fill a digital business leader role. "There are a lot of people who are excited to do that. Many technologists would like to be part of the group that moves the needle for the business."

Constant upheaval
The need to adapt is becoming more important as technology continues to disrupt many different traditional businesses, such as financial services, retail, and publishing.

"A lot of businesses used to have some pretty good barriers to entry, but those are coming down," Wright said, citing nontraditional financial services players such as Paypal and new digital learning players looking to disrupt the businesses of McGraw-Hill and Houghton Mifflin-Harcourt.

McGraw-Hill Education has "historically sold education textbooks," he said. "Our industry is being disrupted by digital learning. That is a huge force. There is a traditional set of players, and now there are a lot of new entrants to the market."

Though there are many similarities between banking and publishing, Wright sees a few differences. "One big difference is you don't bump into people on the street who hate you because you work for a bank. There is a lot of negativity focused at the banking industry, while there is near universal support for education."

To hear David Wright talk about the future role of the CIO, register for the InformationWeek IT Leadership Summit and hear his presentation, "A CIO's View on IT's Future."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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KBurger
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KBurger,
User Rank: Author
8/26/2014 | 2:17:35 PM
Order takers - really?
Is it still really that common for CIOs to be viewed as "order takers," as David Wright suggests? I'm not saying that CIOs don't need to constantly update their skills and validate their value/roles within the organization. But after all this time, don't a growing number of FIs expect more from their IT organizations than just "run the business"?
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
8/26/2014 | 2:23:38 PM
Re: Order takers - really?
Yes, unfortunately. That is why we are seeing some companies designate Chief Digital Officers (which is a very new title), as well as Chief Marketing Officers who are taking control of more of the technology $$.

He's not saying that all CIOs are like that (after all, he is a CIO), nor is he saying that being a "run the business" CIO is a bad thing (they are vitally important too).

But, yes, many CIOs are still viewed as order takers.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
8/26/2014 | 4:37:58 PM
Re: Order takers - really?
In conversations that I've had around cloud I've foudn that business organizations do still regard IT as order-takers. Moving infrastructure to the cloud changes that model obviously as it's often no longer IT that is doing the maintenance. Organizations then need to get IT refocused on other tasks like innovation, and that can be difficult when some IT departments are spending so much of their time and resources on maintaining systems and fixing users' problems.
Becca L
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Becca L,
User Rank: Author
8/28/2014 | 3:43:14 PM
Re: Order takers - really?
Why not both. The reason we see these new roles is because the old roles of order takers is still not obsolete. Even with Infrastructure moving to the cloud, As you said IT still needs to maintain some systems and fix user problems. By all means hire the innovator, but you still need the fix-it guys.
IvySchmerken
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IvySchmerken,
User Rank: Author
8/28/2014 | 5:41:16 PM
Re: Order takers - really?
It sounds like the two roles are being separated and that the CIO will be focused on infrastructure and running the technology internally while the Chief Digital Officer will get to focus on business innovation. This can reinforce the notion of CIO as "order taker' or "Fix It" person. Most CIOs I know talk about aligning technology with the business needs and goals. They are very much in tune with the business. Are CIOs becoming overshadowed by the Chief Digital Officers?
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
8/29/2014 | 9:54:01 AM
Re: Order takers - really?
Often with moving infrastructure to the cloud, the cloud provider becomes the fix-it guys, freeing up IT to do other things like innovation and launching new products. The problem though is that you could have an IT workforce that has been focuse on maintaining systems for decades, and now that maintenance is the role of the cloud provider, and the people in your workforce are asked to do something different from what they've been doing for years. That can often mean retraining or workforce turnover. And it also means that IT can sometimes resist adopting the cloud because they see it as a threat to the jobs that they've been doing or so long.
Kelly22
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Kelly22,
User Rank: Author
8/29/2014 | 10:59:41 AM
Re: Order takers - really?
Sounds like that's a primary issue throughout financial services - IT departments are important to innovation but are often bogged down with system maintenance and problem solving. When so many people are having tech issues, there isn't much time left over to innovate. 
IvySchmerken
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IvySchmerken,
User Rank: Author
8/29/2014 | 1:17:22 PM
Re: Order takers - really?
With so much on the traditional CIO's plate, the job is more about infrastructure, cloud, data centers, virtualization, application development, and maintenance. It seems that innovation with social media and mobility is going to be the domain of the Chief Digital Officer.   It will be interesting to see what other roles evolve and if there are overlaps say between the Chief Marketing Officer and the Chief Digital Officer.
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