IT Org Chart

“Peak IT”: Or how most new startups may NEVER have an “IT department” in their future

Yesterday I had the chance to talk to 2 startups. One has been around for 2 years and has raised $2 Million in seed funding and is in the B2B SaaS (Marketing) space. The other is older, has raised a series B and has over 47 people in their company.

Neither of them have a single person in “IT”. They both have over 40+ applications they use and everyone of their employees is using notebooks, phones, etc., but they dont have a central IT team.

I asked the CEO’s at what point do they see themselves getting an IT team and the answer from both of them was “Why do we need an IT team”?

That reminded me of Nichoas Carr’s piece, 12 years ago, in which he claims IT does not matter. He was subjected to a lot of ridicule many year’s ago, but he’s proving to be right.

I started to read about what all IT does actually in any company. You can break it down into 5 main priorities.

IT Org Chart
IT Org Chart
  1. Support the business with computing – notebooks, devices, etc. Turns out most new startups, (which will grow into larger ones later), have mostly a BYOD policy or let their employees choose their own machines, which focuses on the support, maintenance and upgrade of the machines to the employee. So, that’s mostly not needed.
  2. Provide the business teams with internal applications (Build, Buy or Outsource)- Email, Collaboration, HR systems, ERP, etc. Most new companies are buying SaaS products and are letting the business teams (HR, Sales, Engineering, etc.) make their own decisions on which applications to buy.
  3. Build, buy or outsource external customer / partner facing applications – These are also being moved from IT to the business teams. They directly engage with partners, agencies or buy off the shelf SaaS applications, bypassing IT to directly buy to their requirements. In fact over the last 10 years, according to Gartner, 50% of IT spend on applications is being managed directly by the business teams, bypassing IT. That’s in the large companies. In the small companies, it is 100%.
  4. Supporting, managing and assisting internal users via a help desk on problems they have with IT systems. Most users are bringing their own devices and building their own applications, so the help desk is largely eliminated.
  5. Operationally support the applications built with DBA’s, system administrators, operations managers, etc. With the rise of DevOps and the cloud, all of these external facing, customer applications, which are developed internally are being deployed, managed and supported by the developers who built the applications in the first place.

The only remaining portions are vendor management (if there are many suppliers to IT) or outsource partner management, which is starting to get managed by the business teams.

While, many of these startups are saying they dont have an IT team, what’s really going on is that many of the functional elements that IT did before are being given back to the business teams.

The two entrepreneurs who I spoke with foresee a day when they might need a person to help them with integrating their different “apps” which the teams bought, but that’s much later, and a highly specialized role.

Maybe in 20 years only 10% of large companies will have an IT org, and that’s when they have multiple locations, need to make sure all the offices have connectivity to their VPN and need an intranet (which can also #SaaS), but that’s going to be rare.

2 thoughts on ““Peak IT”: Or how most new startups may NEVER have an “IT department” in their future”

  1. The other pernicious effect…really good IT will tend to be stagnant for periods of time as they obviate themselves (current, secure, maintainable environment). Then, they’re buying office furniture and helping user get their audio working on Youtube videos…

  2. Very relevant and insightful blog. Now, I think, that makes IT matter more not less! But that said, ‘IT Department’ , is losing its relevance, for sure. But, if each business function chooses its ‘technology enablers’, on its own, would you not need someone, who provides an oversight across the organization, and makes sure, there’s some kind of ‘directional sanity’ in making IT help the organization become more competitive in the market place?

    So, it looks like organizations now need a ‘CIO’, more than they need an ‘IT Department’. And for small organizations, this person could well be an outsider, a ‘consultant’. And soon, these CIOs on hire, could themselves be available on a ‘cloud’, and you can pay for them using a credit card like you do when you buy a VM 🙂

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