Optimize Your Application Organizational Structure

There isn’t a one-size-fits-all approach to designing an application organization, but rather a set of trade-offs and choices that must be evaluated before charging forward.

The advent of digital business has added significant complexity to organizational design. In the application industry, one of the most common questions for leaders is how to choose the “right” structure to achieve optimal business results and delivery for their organizations.

A large number of organizational redesigns are unnecessary — and often harmful

Matthew Hotle, vice president and distinguished analyst at Gartner, says there is no “right” way to do it. “Add in size, agile, platforms, products, bimodal, pace layers and cloud, and organizational design becomes even more challenging. It is now almost a given that any organization will have to live with a hybrid structure.”

A large number of organizational redesigns are unnecessary — and often harmful. This is because they address the structure, but not the operating model itself. Hotle says this is why application leaders must have forethought and planning. It starts with analyzing the information and technology (I&T) operating model.

Application organizations are not stand-alone entities

The I&T operating model of any organization describes “how things get done.” Because the organizational structure component is only one part of an operating model, it is imperative that the structure relates to other components, such as an organization’s tools, performance, financials and talent. A change in the org structure might result in an unintended change to a different component.

The moral of the story is that the organizational design matters within the context of the operating model, not separately

“Any change to an organizational design causes disruptions in delivery for a period of time, typically 6 – 12 months,” Bill Swanton, vice president and distinguished analyst at Gartner, says. “The moral of the story is that the organizational design matters within the context of the operating model, not separately.”

Two basic models for organizing application teams

There are two basic models for organizing an application team: the silo and the system integrator. In the silo model, a senior application manager is responsible for a group of work based on various areas — geography, business function or process, technology stack or product. The system integrator model, also referred to as a pooled style, groups similarly skilled individuals together into resource pools or centers of excellence. These pools are based on roles and become the primary mechanism for assigning work.

“Deciding which model works more effectively in your organization requires a fundamental understanding of how IT is perceived in your organization,” Hotle explains. “Organizations where IT is a cost center typically choose a silo model. Organizations where the distribution of the IT budget may shift often choose a system integration construct due to its flexibility.”

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Hybrid organizational structures are the norm

“As organizations move toward the cloud and digital delivery, it’s nearly impossible for an organization to use only one of the constructs successfully,” Hotle says. Given the dynamism of new products, applications, tools and platforms, a hybrid structure is an appropriate approach for application leaders to move toward. A cloud hybrid, for instance, is a popular structure used to move a portion of an organization’s application portfolio to the cloud while keeping the remaining portion on-premises or elsewhere.

It is important for application leaders to realize that there is no one-size-fits-all solution for designing their application organizations, but rather a set of trade-offs and choices that must be evaluated before charging forward.

Product-centric delivery organization structure is emerging

In Maverick research in 2011, Gartner predicted a coming shift in delivery styles from projects to products. This new delivery model has become more prevalent with our clients. Although there’s no best practice for organizing the product-centric organization, there are emerging practices for doing so. While the organizational structure is typically a version of a product-based silo, there are major changes in the operating model that drive differences both in structure and how things get done.

Gartner clients can read more in the report Designing the Application Organization: An Overview by Matthew Hotle and Bill Swanton.

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