Midsize Enterprise IT Organizational Design: 3

Models to Meet Discrete Enterprise Needs

Published: 10 April 2020 ID: G00465930

Analyst(s): Tomas Nielsen, Debra Curtis, Monika Sinha, Joseph Provenza, Roger Caleya

Smaller teams and fewer resources (in terms of absolute numbers) make
designing an IT organization challenging for midsize enterprises. MSE CIOs
should identify enterprise demand and organize IT operations around one of
three models: responsive, engaging or driving IT organizations.

Key Challenges
■ Midsize enterprise (MSE) CIOs rarely benefit from the same economies of scale as their large-
enterprise counterparts.
■ IT departments in most MSEs do not have the absolute number of resources required to create
a large, functionally aligned resource pool.
■ Although MSEs tend to be less bureaucratic, the informal nature of a smaller enterprise does
not negate the need for a robust and clear organizational structure for the IT organization.

Recommendations
Midmarket CIOs responsible for strategizing, governance and planning the design of bimodal and
other IT operating and organizational models should:

■ Begin organizational design by identifying the principal enterprise demands that the IT
organization must meet.
■ Use enterprise demands to select one of three organizational models:
■ A responsive model that enables IT to respond to the enterprise’s demands for information
and technology services.
■ An engaging model in which IT provides information and technology (I&T) services and
proactively engages with business units to shape IT demand from a business perspective.
■ A driving model in which IT drives enterprise demand for I&T services.
■ Adjust the organizational model to ensure that it meets overall enterprise demands and matches
the specific nature of the enterprise.

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 Table of Contents

Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 3
Context, Enterprise Demand and Organizational Models.................................................................. 3
Context...................................................................................................................................... 3
MSE Demands and Organizational Model Choices..................................................................... 3
Sample Organizations and the Rationale Behind Them..................................................................... 5
Functions and Roles................................................................................................................... 5
The Responsive MSE IT Organization......................................................................................... 6
The Engaging MSE IT Organization.............................................................................................9
The Driving MSE IT Organization...............................................................................................12
Levers of Growth: Closing the Gap Between Enterprise Demand and IT Ambition, While Escaping
the Resource-Demand “Catch-22”................................................................................................. 15
Conclusion: Finalizing the IT Organization and Next Steps — I&T Operating Model.........................16
Gartner Recommended Reading.......................................................................................................... 18

List of Tables

Table 1. Organizational Models for MSE IT Organizations........................................................................4

List of Figures

Figure 1. Project Management (PM) Versus Business Relationship Management (BRM) Roles................ 6
Figure 2. The Responsive MSE IT Organization.......................................................................................7
Figure 3. The Engaging MSE IT Organization........................................................................................ 10
Figure 4. The Driving MSE IT Organization............................................................................................ 13
Figure 5. I&T Operating Model Components......................................................................................... 17

Introduction
IT organizations in MSEs require many of the same skill sets found in their large-enterprise
counterparts, but at a lesser scale. However, with a smaller organization, the IT organization must
be designed to make trade-offs, while striving to meet the essential, business-differentiating
enterprise demands.

This research presents three organizational models corresponding to three different types of
enterprise demand.

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 Analysis
Context, Enterprise Demand and Organizational Models

Context
Gartner defines MSEs as “organizations with between $50 million and $1 billion in annual revenue
and fewer than 1,000 employees” (see “Midsize Enterprise IT Leadership Primer for 2020”). This
definition means that MSEs comprise a multitude of enterprise profiles or personas, including
family-owned businesses, venture-capital-backed startups, nonprofits and publicly held
organizations.

IT functions in MSEs face a key challenge: They need most, if not all, of the I&T capabilities of larger
enterprises, just on a smaller scale. On the other hand, MSE IT organizations benefit from easier
access to business leaders, shorter lines of communication and flatter hierarchies across the
organization. These simplify governance and decision making (see “Three Dynamics That Drive
Midsize Enterprises”).

When designing an MSE IT organization, CIOs should consider logically grouping adjacent domains
of expertise into a few broader roles — so-called “versatilist” roles (see “How to Foster Workforce
Versatility” and “Career Lattices for Workforce Versatility (Intel)”).

MSE Demands and Organizational Model Choices

The key to success for an MSE IT organization is to align the IT organization with enterprise
demands. Although MSEs may take many forms (such as family-owned, nonprofit and startup), IT
organizations have historically faced two types of persistent enterprise demand overall:

■ Providing or sourcing the core I&T infrastructure and operations (I&O) capabilities for the entire
organization. This typically includes computing services, data and voice communications, data
security, disaster recovery, help desk, and end-user support.
■ Supporting the organization’s core business transactions and connected information
management needs — the so-called “back office” — through a number of applications. These
may or may not be integrated into a single ERP system or supported by a small number of
additional core applications.

In addition to these two historic demands, the ambition to transform to digital businesses is taking
hold in all segments, including MSEs. Consequently, a third enterprise demand, which is also likely
to be long-term and persistent, has emerged:

■ To drive MSEs’ digital business transformation, including developing and transforming the
enterprise’s customer, citizen and/or business-partner-centric interactions — the so-called
“front office” of the enterprise.

From these needs, three distinct organizational models have emerged for MSE IT functions (see
Table 1).

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 Table 1. Organizational Models for MSE IT Organizations

Midmarket IT
Organizational
Model Business Context IT Services Provided Purpose

The Responsive The enterprise needs IT to I&O is supplied, in To deliver consistent IT

Midsize IT provide technology support for a addition to maintaining solutions on-demand,
Organization business-defined operating back-office business responding to explicit
model. support (IT services). enterprise needs.

The Engaging The enterprise expects IT to go
Midsize IT beyond being an order taker and,
Organization instead, to become an active
participant in the technology life
cycle.
In addition to providing IT
services, it also supplies
business services.
Work together with the
enterprise to define,
develop, deliver and
operate IT solutions to
shape enterprise demand.

The Driving Midsize As the enterprise is or is
IT Organization becoming a digital enterprise, I&T
solutions are core to the success
of the enterprise and, as such,
I&T is expected to proactively
inspire the rest of the enterprise.
This supplies IT services,
business services and
business transformation.
Proactively drive the
organization and external
stakeholders, directly
transforming the enterprise
— that is, driving enterprise
demand.

Source: Gartner (April 2020)

IT organizational design for MSEs means deciding which of these models best meets the demands
of the enterprise in terms of requirements and IT role expectations. Then it’s time to adjust the
model to the specifics of the enterprise, such as the business unit, geographic locations or
company structure in terms of subsidiaries and joint ventures (JVs).

A key question then arises for MSE CIOs. Given the choice, does the enterprise primarily expect the
IT organization to respond to the specific demands of the enterprise and engage the business units
of the enterprise to define and design IT solutions for the business? Or does it drive how the
enterprise can use IT to transform beyond its current business?

In responding to these questions, the MSE must be aware of the differences between the role the
enterprise expects of IT and the CIO’s preferred role for IT. Although both dimensions are important,
any imbalance between the two can be a source of frustration and may ultimately pose a job risk for
the CIO.

Hence, MSE CIOs should first and foremost design their IT organizations to meet enterprise
demand, rather than personal aspirations. Once this design is in place, MSE CIOs should consider
the suggestions in the Levers of Growth: Closing the Gap Between Enterprise Demand and IT
Ambition, While Escaping the Resource-Demand Catch-22 section of this research to start this
journey.

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 Sample Organizations and the Rationale Behind Them
This section illustrates how an MSE IT organization could look in midmarket enterprises. The
models are composite structures based on inquiries and client interactions with MSEs conducted
by Gartner analysts regarding IT organizational design.

Each of the three examples corresponds to one of the three organizational models. Although the
examples illustrate different-size IT organizations, the primary driver for the size of an IT organization
is changing enterprise demand and the additional roles needed to fulfill higher-level demands of
engaging and driving organizations.

Functions and Roles

A frequent challenge for MSEs is that the number of necessary roles exceeds the number of
available resources with the appropriate skills. The number of IT full-time equivalents (FTEs) as a
percentage of total employees across industries is 7.4% for MSEs. This usually equates to IT
departments of 10 to 35 people (see “IT Key Metrics Data 2020: Industry Measures — Insights for
Midsize Enterprises”). To illustrate this, the following nomenclature will be used in the organizational
structures in this research:

■ Function: A dedicated unit typically found in MSE organizations, consisting of one or more job
profiles and corresponding positions in the organigram. A function composed of a single job
profile is also called a “job.”
■ Role: A position that should be filled to execute a prescribed set of tasks, where the exact
location of the role within the other functions in the IT organization will depend on the resources
and skills available. In certain cases, roles may also be fulfilled by business resources, thus
allowing the MSE CIO to cover demand without adding IT headcount.
■ Function or role: Depending on the enterprise, this represents a role that, for most
organizations, is handled as such; however, certain enterprises may find that the role demands
an effort that justifies making this a stand-alone function. An example could be enterprise
architecture (EA), which may initially be a role if an enterprise relies on a single ERP system. In a
complex landscape with a postmodern ERP system, as well as extensive use of cloud
components, the EA role may become a dedicated function.

From an organizational design perspective, MSE CIOs should consider that, in particular, for the rest
of the enterprise, clarifying the roles of their staff, rather than the positions, can make the
organizational design more understandable to outsiders. (For an example, consider Figure 1.)

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 Figure 1. Project Management (PM) Versus Business Relationship Management (BRM) Roles

In this case, the organization has a function (enterprise PMO), in which there are project managers
and senior project managers. Although project managers (job) have the role of project manager,
senior project managers have an additional role of BRM for one or more business units. On the right
side of Figure 1, the X1* person with the “BRM-Sales” role under Business Engagement is the same
X1 person with the senior PM position under Enterprise PMO Lead. The X2* person with the “BRM-
Finance” role is the same X2 person with the senior PM position.

In illustrating this in an organization chart, the MSE CIO can make a point by including the roles,
thus making it clear from the organization chart where BRM responsibility lies, even without
dedicating headcount for it.

The Responsive MSE IT Organization

Organizational Design Principles

The fundamental design principle for a responsive IT organization is that it delivers services in a
reliable, efficient manner, responding to explicit demands from the enterprise. Consequently, the
responsive IT organization is likely to need a staff with mainly a technical, rather than a business,
focus.

This is the traditional role of IT as a utility services provider. However, in the best of cases, it has
adopted disciplined processes and performance management. As a result, it can deliver
predictable, repeatable outcomes for fundamental, core processes, as well as an adaptive IT
infrastructure that can adjust to changing enterprise requirements. A sample organization chart for a
responsive IT organization is shown in Figure 2.

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 Figure 2. The Responsive MSE IT Organization

The IT organization is designed to match the enterprise’s demands for a responsive organization, in
particular:

■ There are two direct reports to the CIO, each with a clear focus, either on I&O or on applications
— with a total of four teams, enabling each team to provide adequate continuous coverage
during shortages (such as vacations or illness).
■ The structure is simple, yet with enough latitude that tasks that may not have been explicitly
considered can be logically allocated. The structure also allows teams to specialize in their
respective technology-defined areas, such as infrastructure, ERP or custom development.
■ The help desk function exhibits the beginnings of service management, but is focused
exclusively on defining repeatable IT management processes. In the responsive organization,
they are not yet involved with business-facing strategic service management.
■ Project managers are assigned roles given to more senior technical people, or if a dedicated
function is created, then they’re typically embedded in the application teams to ensure close
alignment with the teams. This allows project managers to develop solid knowledge bases in

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 their respective areas and to respond quickly to business unit demands with deeper technical
understanding, once the business units approach IT with requests.
■ Business analyst roles are generally assigned to senior developers or project managers;
however, they rarely become full-time positions in the responsive organization.
■ Less focus is given to aligning with business units, because the primary purpose of the
responsive organization is to respond to business needs.
■ The architect and security roles are not defined as full-time, but are fulfilled by other resources,
in addition to their core positions. Given the importance of security in today’s economic,
technological and legal landscape, the security role is not optional. However, its location may
vary (for alternatives, see “Midsize Enterprise Playlist: Security Actions That Scale” and
“Midmarket Context: ‘Can You, and Should You, Bring in a Virtual CISO?’”).

In terms of team size and resources, the exact team size and split between the teams will depend
on the enterprise, and the degree and nature of external sourcing. However, most organizations
tend to need a nearly even split between the efforts of two major teams of infrastructure and
applications. Consequently, a responsive IT organization (without external sourcing) with a total of
20 FTEs would typically lead to each of the four teams being four or five people (smaller IT would be
proportionally smaller on both sides).

Modifications and Alternatives

Depending on the specifics of the enterprise, the responsive model may be modified in a number of
ways, for example:

■ Aligning the application teams to business units, rather than applications, if the business units
are very different and have more-specialized applications. An example of this could be an MSE
with a single ERP system supporting both manufacturing and sales, where the different
requirements of manufacturing/supply chain versus sales/marketing would drive a need for two
distinct technology teams.
■ Outsourcing functions typically means replacing one or more team(s) shown in Figure 2 with a
smaller retained organization (one or two FTEs) in more of a vendor management role. This
applies particularly to MSEs involved in I&O and help desk teams, as well as for application
development, where MSEs may struggle to achieve critical volume in the development pool.
■ Simplifying the structure to two teams — that is, splitting up between an infrastructure and end-
user computing team and an application team. This may be especially relevant for significantly
smaller organizations (10 to 12 FTEs).
■ Aligning project resources with applications and infrastructure.
■ Allowing minimal staffing (perhaps one FTE in each role) to report directly to the CIO. This
depends on the culture and risk profile of the enterprise, and some level of funding might be
allocated to functions such as security or architecture.

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 The Engaging MSE IT Organization

Organizational Design Principles

For the engaging MSE IT organization, enterprise demand remains for the fundamental I&O
services, as well as application services. However, the center of gravity of the IT organization is
changing to be more directed toward the business units. Consequently, the design principle for the
engaging IT organization is to extend its operational and application core with additional resources
that can engage business units and help shape demand by their combined IT and business insights.

In an MSE context, MSE CIOs often face significant resource constraints. However, in justifying
additional resources, MSE CIOs should keep in mind that CEO surveys show CEOs are willing to
invest in IT to scale the enterprise. For example, the “2018 CEO Survey: Midsize Enterprise
Spotlight” highlights that 57% of MSE CEOs intend to build up in-house IT and digital capabilities
during the next two years.

For an engaging MSE IT organization, the key driver is shaping demand. Contrast that with the
responsive IT organization that strives to meet the enterprise’s IT demand as it is presented, even if
it’s given in an unprioritized or nonselective way. The engaging IT organization captures, qualifies
and delivers the core IT services, and it prioritizes them to leverage technology for strategic
business performance outcomes.

Hence, the design of an engaging IT organization must be a balanced organization, which, in

addition to the fundamental operations and technical skills, has a higher level of business acumen
than the responsive IT organization. Although the engaging MSE IT organization may still have a
staff that is, overall, more familiar with technology than with business, the engaging organization
requires IT to wrap business, stakeholder and relationship management competencies around a
core delivery capability. This will develop a so-called “front office of IT.”

Therefore, IT must retain the delivery technical capability to stand behind its delivery and
performance commitments. At the same time, it should develop the BRM capability to ensure that
it’s offering the right solutions and services at the cost and quality levels agreed on with internal
stakeholders.

In addition, in the engaging organization, it is usual to see the emergence of multidisciplinary teams
that combine IT and business resources to address a business issue. These are also called “fusion
teams,” and happen more or less informally, with a mission-driven nature. They may naturally evolve
into more-established product teams — permanent, longer-lived, ideate-build-run teams to support
a business capability (see “Drive Digital Transformation Applying Product Management in a Midsize
Enterprise” and “Fusion Teams: A New Model for Digital Delivery”).

Figure 3 shows a sample organization chart for the engaging IT organization.

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 Figure 3. The Engaging MSE IT Organization

Compared with the responsive IT organization, the engaging organization differs in the following
ways:

■ Project manager and business analyst roles are critical and are now part of a service
management and strategy function designed to create an increased business unit focus. It is
common in MSE to see these two roles performed by the same function. Often, they are aligned
with the different business units to facilitate a more-consistent interaction.
■ The BRM and service owner roles have been added to the new service management and
strategy function to fulfill the front-office competencies of stakeholder engagement (see
“Leveraging the BRM Role Is All About Business Value”) and help ensure that IT is offering the
right services at the right price and quality levels (see“Understanding the Role of Process
Owners and Service Owners”). Typically, this role is fulfilled by (senior) project managers or
business analysts.
■ A service delivery position may be added to lead the overall service delivery (that is, I&O and
application groups) to create the bandwidth for the CIO to focus on the rest of the enterprise.

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 ■ An OCIO has been added. This role should include the overall management and leadership
support (for a broader description of OCIO, see “Scoping the Office of the CIO”). Depending on
the organization, these may be roles assigned within the functions of the IT organization. Stand-
alone functions may be embedded in the OCIO.
■ In the operations area, there continues to be a need for an architecture capability. However,
compared with the responsive IT organization, the engaging IT organization is likely to find a
need for two architecture roles. One would be focused on current solutions (here labeled
“solution architect”). The other would be directed more toward the evolution and design of new
offerings (here labeled “EA”). The EA role will typically start out under the service management
and strategy function.
■ Likewise, there is a need for operational and tactical/strategic security roles (here labeled
“security operations” and “CISO,” respectively). As for the responsive organization, alternatives
to this might be a virtual CISO (see “Midsize Enterprise Playlist: Security Actions That Scale”
and “Midmarket Context: ‘Can You, and Should You, Bring in a Virtual CISO?’”).
■ As enterprise demand matures, the need for a dedicated business intelligence (BI) role that can
provide business insights — not operational reporting, but business analytics — is growing.
Thus, for the engaging organization, there is often a need to add this as a dedicated function/
single position to service management and strategy.

The engaging organization may be adjusted to the specifics of the given organization, such as the
specifics of the enterprise, including the business unit, geographic locations and company
structure, in terms of subsidiaries and JVs. For example, an MSE that operates in two different
geographic locations may elect to have two service management and strategy teams split along
those lines, supported by one common organization.

In terms of size, the engaging IT organization provides an additional layer of engagement with the
rest of the organization. Therefore, an engaging organization is generally expected to need
additional resources, compared with the responsive organization. However, in terms of overall
staffing, the service management and OCIO roles, as shown, would normally amount to less than
25% of the overall IT organization.

In relative terms, for example, an engaging IT organization corresponding to the responsive IT

organizational model shown in the previous example (with 20 FTEs) would typically have
approximately 25 to 28 FTEs.

For MSE CIOs for whom added headcount is not feasible, this will be a more gradual change. A
typical starting point would be to reallocate one or two FTEs from the application teams into the
service management functions. Although the reallocation of resources may (temporarily) enable the
MSE IT organization to take on the additional functionality without additional headcount, this will not
fundamentally change the nature of the work. Instead, these initial resource allocations should focus
on illustrating the extra value that IT can provide in such a scenario. Thus, it can serve as a proof of
concept (POC) for adding additional resources (refer to the section below on the Levers of Growth:
Closing the Gap Between Enterprise Demand and IT Ambition, While Escaping the Resource-
Demand “Catch-22”).

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 Modifications and Alternatives

Depending on the context, some organizations find that keeping project management, BI and
business analyst resources in the application teams — or, alternatively, allowing some of these
functions to remain in the business organization — works better. Regardless of the adjustments, the
key element of the engaging organization — that the organization has a structure and resources that
are clearly aligned with engaging the rest of the enterprise — must remain.

Furthermore, in terms of engaging the rest of the enterprise, CIOs that want a more-engaging
organization often find that creating a small, dedicated bimodal Mode 2 team can act as a catalyst.
This can be done in the form of a fusion/product team, combining non-IT personnel. This can foster
a closer and more-iterative interaction with the rest of the enterprise (see “Beginning Bimodal:
Lighting the Mode 2 Candle in a Mode 1 World”).

Finally, another element of enabling the IT organization to become more engaging, in particular with
headcount limitations, is the use of outsourcing. This is particularly relevant for commodity services
or services in which the IT organization cannot reach the same economies of scale as larger
enterprises. This often results from the enterprise’s size or geographic reach. Depending on the
nature of the enterprise, this may be the case for I&O or the help desk. In such cases, the retained
organization would typically focus on vendor performance management instead.

The Driving MSE IT Organization

Organizational Design Principles

The driving midsize IT organization goes beyond engaging to drive digital transformation. A driving
IT organization still provides core I&T services, while having the bandwidth, resources and structure
to enable it to identify and proactively propose new solutions to business units.

In terms of demand, the driving IT organization must have the resources and skills to drive the
technology agenda in the wider enterprise. In comparison with the responsive organization
(“responding to demand”) and the engaging organization (“shaping demand”), the driving
organization should be able to go further by “creating demand.” Therefore, the driving organization
is characterized by a strong business focus.

This choice optimizes the value the enterprise receives from its I&T investments. It is generally
focused on delivering some sort of high-level, sticky competitive advantage through I&T. IT
organizations with this option are fully fused into the core of the enterprise. The driving IT
organization leans toward the business side of the enterprise, and it will have the greatest variety of
the three types, because it needs to be designed to closely interact with the entire organization.

A sample organization chart is shown in Figure 4.

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 Figure 4. The Driving MSE IT Organization

The driving organization now has an even stronger focus toward business units and, potentially,
external parties. This is characterized by the following features:

■ Business analytics typically increase in number and become a dedicated team, because the
need for business insight (and information in general) increases. Examples range from predictive
analytics and better product/sales support to incorporating information as a part of the value
proposition of products (such as through usage data).
■ Since driving IT organizations must support digital initiatives that are key to the business
success, they typically will have a few established product teams in high-value areas (see “Drive
Digital Transformation Applying Product Management in a Midsize Enterprise”).
■ Additionally, the product teams have the resources and bandwidth to explore new digital
business opportunities, a dedicated digital business and an innovation fusion team may be
created. This is likely to include:

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 ■ A combination of IT and business personnel working closely with business units and
external parties to explore new opportunities.
■ A business analytics member that reports directly to the innovation team to meet the
demand for extra business insights and explorative analytics, as business models become
increasingly digital. Tactical and operational reporting will typically remain with the
application teams.
■ The leader of the digital and innovation team, who is sometimes referred to as the chief
digital officer (CDO). In other instances, the CIO takes on a joint CIO/CDO title and uses this
as the digital team.
■ In the driving organization, EA will also normally report to the service management and strategy
group to provide a longer-term technology view for the wider enterprise. Also, they will provide
ongoing support, guidance and expertise to the existing product teams.
■ In an MSE IT driving organization, the project management role will combine managing the
majority of projects that fall outside of product teams with increasing support for the product
lines. The more the company develops toward a product-centric model, the more the traditional
role of the PMO will evolve to help product managers (see “How to Ensure the PMO Supports
Product Managers”).
■ The CISO role often becomes a dedicated position.

However, even in the driving midsize IT organization, core IT services should continue to be
provided. As a result, service delivery remains a core element of the IT organization.

A driving organization is generally the most resource-heavy of the three IT organization models
described. The exact staffing ratios depend on the organization; however, for the driving
organization, a 40% to 60% staff split between the service delivery group and the rest of the
organization, including the OCIO and CISO, would be typical.

The driving IT organization corresponding to the responsive and engaging organizations shown in
the previous examples (with 20 FTEs and 25 to 28 FTEs, respectively) may have approximately 32 to
40 FTEs. Staffing of the driving IT organization will be more varied than that of responsive and
engaging organizations, because driving IT organizations are more closely engaged with the
business and are more directly influenced by the characteristics of the wider enterprise.

Modifications and Alternatives

As with the previous models, the driving organization should be adjusted to the specifics of the
organization.

For example, the company might continue to evolve into a product-centric model. In that case, as
its product teams grow in number, its central applications, PMO and business analysts reduce their
staff in favor of the former.

Regardless, CIOs should consider strategic enterprise demand before making any changes. The key
principle for the driving organization should continue to be a strong focus on transformational

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 activities that continuously improve existing capabilities, as well as develop new solutions and the
requirement to drive these solutions to business units and external customers.

This is not to say that CIOs won’t face cost pressures. However, when finding themselves with these
kinds of demands, CIOs should be mindful of what’s realistic, and ensure that any adjustment is still
enabling the organization to be a driving organization. In fact, CIOs facing strong opposition from
senior executives against a proposed driving organization should consider whether the enterprise
truly expects IT to be driving, or if enterprise demands might be better met by an engaging or
responding IT organization.

Furthermore, of the three models, the driving organization is — due to its close alignment with the
enterprise — the most susceptive to changes, inside and outside the enterprise. Consequently,
especially for the business-facing parts of the driving organization, changing according to the
strategic needs of the enterprise is infinitely more important than relying on a single structure or
model. Therefore, driving organizations are likely to require smaller ongoing modifications.

Structurally, the need for a bimodal approach and outsourcing (as mentioned for the engaging
organization) is amplified by two factors in the driving organization:

■ In terms of sourcing, as the IT organization matures and succeeds in becoming a driving IT

organization, it may need to add a sourcing and vendor management capability in place of, or
as a supplement to, its own capabilities. As the IT organization takes a driving role in the
definition of demands and adoption of new technologies, the diversity of technologies and
solutions may grow beyond what is practically feasible for a midsize IT organizational context.
This will create a need to address these issues with outside resources.
■ In terms of a bimodal approach, when the IT organization takes on a driving role in terms of
creating and shaping demand, it may encounter complex or even chaotic situations, resulting
from the dynamics of internal and market forces. In such situations, a traditional IT development
approach is likely to be challenging, creating a practically irrefutable need to adopt a bimodal
approach.

Although a driving organization may start out without an explicit application of bimodal and
outsourcing, once the driving organization succeeds, it is likely to find a need to incorporate support
for both going forward.

Levers of Growth: Closing the Gap Between Enterprise Demand and IT Ambition,
While Escaping the Resource-Demand “Catch-22”
A common challenge is that enterprise demands do not match the CIO’s ambition — for example,
the enterprise demands a responsive IT organization, while the CIO believes that IT should take an
engaging or driving role. This challenge is often amplified by the fact that delivering at a higher level
requires additional resources. Therefore, MSE CIOs often find themselves in a resource-demand
Catch-22. They believe they could provide bigger value to the enterprise; however, doing so will
require additional resources, which will be approved only when the IT organization delivers bigger
value.

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 Furthermore, there is an additional challenge that, barring glaring inefficiencies, it’s unlikely that the
MSE IT organization can take on the extra responsibilities associated with the next level without
additional resources.

Although there’s no universal solution for addressing this, MSE CIOs should meet this challenge by
considering a pragmatic, incremental and focused approach in which they:

■ Design the IT organization to deliver on current enterprise demands.

■ Look to the next-level organization (responsive to engaging or engaging to driving) and identify
one or two positions as “levers of growth” to move the IT organization’s capabilities toward the
next level. (For advice on how to use services to increase IT maturity, see “Maturing the IT
Service Portfolio for Strategic Business Impact.”)
■ Ensure that positions added not (only) for current demand, but to elevate the capabilities of the
entire organization, are used to evolve the organization. This includes protecting the resources
as far as possible for the day-to-day operations, and for capturing and communicating the
impact of these resources.
■ Target willing business partners in various departments and functions, such as marketing or
sales, who are ready and willing to engage in a new, iterative, exploratory model and commit
business resources to these efforts. Do this with an explicit focus on ensuring business unit
support, as well as backing for extra allocation of IT resources. Gradually use the successes
with these willing business partners to incrementally evolve the organization.

Conclusion: Finalizing the IT Organization and Next Steps — I&T Operating Model
The models outlined in this research are intended to serve as starting points for an MSE IT
organizational design. Because every enterprise is unique, each IT organization is unique. Before
implementing the new organization, CIOs should adjust their designs to the specifics of their
enterprises:

■ An enterprise with a strong customer focus may require the IT organization to be closely aligned
with the customer-facing business units, rather than application areas.
■ Depending on the application and technology landscape, the exact number and size of the
individual teams may need to be adjusted. For global benchmarks, MSE CIOs can refer to “IT
Key Metrics Data 2020: Industry Measures — Insights for Midsize Enterprises,” then consider
how their own numbers compare and whether the deviation is desirable. For example, being
above average in terms of IT FTEs for a given company may be justified. An enterprise may be
above average (for the industry) focusing on digital business, while being above average and
conservative in terms of technology usage. This would typically indicate that further
consideration should be given to the staffing numbers.

However, regardless of the adjustments, the core of the IT organization, with a focus on responding,
engaging or driving, should remain consistent and in line with enterprise demands.

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 Finally, although the IT organization may be the most visible artifact of the I&T operating model, the
remaining eight elements of the I&T operating model (see Figure 5) must be aligned with the
organizational design.

Figure 5. I&T Operating Model Components

Before finalizing the IT organization, CIOs should review the wider I&T operating model and make
the necessary adjustments, as outlined, for example, in:

■ “Redesign the IT Operating Model to Accelerate Digital Business”

■ “What Is an I&T Operating Model, and How Do You Accelerate Its Design Process?”
■ “Why Traditional I&T Operating Models Are Under Stress, and How to Plan a Response”

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 Gartner Recommended Reading
Some documents may not be available as part of your current Gartner subscription.

“Midsize Enterprise IT Leadership Primer for 2020”

“Drive Digital Transformation Applying Product Management in a Midsize Enterprise”

“Midmarket Context: ‘Get the Right Seat at the Table’”

“Midsize Enterprise Approach to Talent and Skilling”

“Beginning Bimodal: Lighting the Mode 2 Candle in a Mode 1 World”

“IT Key Metrics Data 2020: Industry Measures — Insights for Midsize Enterprises”

“Scoping the Office of the CIO”

“Three Dynamics That Drive Midsize Enterprises”

“Midsize Enterprise CIOs Must Emulate Chief Digital Officers to Create Digital Workplaces”

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