Managing major business change is always going to be one of the toughest challenges for senior decision-makers across all industries. But will new IT models such as cloud computing and software-as-a-service make businesses much more capable of dealing with such transformational upheaval?

That was the critical question under scrutiny at the latest Fujitsu Executive Discussion Evening in London from two leading experts in business change — Neville Roberts, the former CIO of Best Buy International and Roger Flynn, who has led transformational agendas at the BBC, Prudential, Virgin and British Airways.

For Roberts, the CIO is becoming a more — not less — strategic player in major transformation. He dismissed the notion that IT has become a means to an end for business — treated like company cars or stationary — that needs to be low-cost and commoditized as much as possible.

“There are very few industries were IT is not pivotal,” said Roberts who left Best Buy in January 2011 to run enterprise portfolio management software and services company Planixs. “The trend is for more CIOs to get closer to the board, if not move onto the board.”

In trying to create greater business agility, the dilemma they face lies in identifying the elements of the IT portfolio that create differentiation and competitive edge, and the ones that are commodities and can therefore be moved to cloud-based or other outsourced services.

“Trying to get to the point where 80% of your IT is commodity and 20% gives advantage over the competition [as some observers have suggested as an optimal balance] is very hard to do,” said Roberts. The problem is that every part of the organization — from HR and finance to sales and marketing — thinks its supporting IT qualifies for the 20%. “They all think it provides the ‘secret sauce’,” says Roberts.

“Every department believes their issues are special; so trying to get that mindset to change is almost impossible.”

Nonetheless, he observes the move to cloud services is already underway. By the time he left Best Buy, he estimates the company had moved about 5% of its IT to the cloud, even though the target was closer to 50%. “Getting to 50% is a big ask for any company,” he said.

The change to cloud so far has largely been through the adoption of software-as-a-service (SaaS) offerings such as Salesforce.com. But Neville warns other organizations that they should not be blind to the challenges of switching to commodity services.

“If you are implementing SaaS, you still have to do the design, the configuration, the end-to-end testing, the performance optimization. SaaS can have the habit of not working out unless you appreciate it needs to be treated in the same way you would treat any project.”

One of the reasons companies will find it challenging to move more of their IT resources to commodity services will be the complexity of their existing architectures, he said. In illustration, Roberts pointed out that Best Buy, with a global annual IT outlay of around $1 billion and an IT team of around 4,500, spends almost a quarter of its budget on systems integration.

However, among CIOs the desire to overcome such barriers is there. While still at Best Buy, Roberts surveyed his peers within a closed CIO network. The results underline that dilemma: over 70% thought the move to cloud is inevitable. “They want to move away from waterfall IT to a more modular, agile approach to how IT projects contribute business benefits,” said Roberts.

At the same time, CIOs want evolution not revolution. “They want to optimize the IT environment they have now while progressing towards that cloud world — at the lowest possible cost,” he said. At this stage many are experimenting with the move of non-core processes to SaaS, he observed, with many seeing the move of business-critical systems as risky.

Risk and reward

That challenge of balancing risk with the advantages of pursuing business-enhancing strategy was a theme taken by Roger Flynn, now chief executive of private investment vehicle Springboard Group.

He explained how, in a previous role as head of retail at UK insurance company Prudential, he undertook the transformation of a CRM project that had run up £200 million in costs with nothing in terms of business deliverables to show for the investment. He instigated a radical shift to try to speed the benefits, cutting the whole project up into a series of £25 million chunks, each with its own set of deliverables.

The opportunity to be more modular is something that will be evident with increased cloud adoption, Flynn argued. “SaaS gives you this [capability] in droves,” he said.

But any transformational change cannot be successful unless it becomes part of the DNA of the organisation. A transformational agenda is all about alignment, said Flynn. “If you are going in a new direction, every aspect of the organization has to be aligned in that direction.” The danger is that senior management formulate a transformational strategy but don’t extend that to all the other dimensions of company. So alignment, according to Flynn, has to extend from strategy to objectives and tasks; from infrastructure to policy and processes; from culture to values and behaviors.

“That forces you to think systemically [about transformation],” said Flynn.

The pursuit of any such agenda also needs to weigh risk carefully. Flynn learned that at Virgin working alongside founder Richard Branson, where a period of strategizing about a business opportunity would always be matched by an equal period of risk analysis. Only when those two had been smashed together and a lower risk strategy formulated would Virgin pursue the opportunity. “Organizations simply don’t typically work risk hard enough,” he said.

For example, as Branson was purchasing his first two aircraft for Virgin Atlantic, he sprung a late contract change on Boeing, requiring the aviation giant to take back the planes and lease them back to Virgin if its business went badly wrong. But the fact that the business prospered did not detract from Virgin’s canny move to limit its exposure to any downside, said Flynn.

Videos from the event will appear here later this week.