As big tech reaps stunning rewards from AI, CIOs must adapt fiercely, evolving digital operating models for competitiveness, intelligent efficiency, and measurable enterprise impact.

This last week was a tale of two news stories. Amazon, Apple, Google, Microsoft, and Meta all announced killer revenue growth spurred by AI. According to the WSJ, big tech is spending on AI, but it’s still not enough.

But the story CIOs and all Digital Trailblazers should pay more attention to is a headline earlier in the week. The WSJ reported that tens of thousands of white collar jobs are disappearing as AI starts to bite, highlighting job cuts at Amazon, UPS, and Target.

The last time Amazon made a major organizational announcement was back in September 2024, when it ended remote work. Boards and CEOs took the cue, and many companies followed suit, ending their remote and hybrid work policies.

CIOs read the tea leaves

Please don’t say I didn’t warn you. Months ago, I wrote about how CIOs must avoid AI’s productivity trap. Now, expect boards through CFOs to ask CIOs to show them the ROI from their AI investments.

And one place they will expect savings is in the IT department. AI will spell the end of IT as we know it, and many CIOs will have no choice but to reorganize IT for the AI era.

The question is, will CIOs follow the big-6 playbook by reducing contractors, laying off employees, and ending learning and development programs? That’s the typical approach when CIOs have to slash the IT budget, leaving demoralized IT departments floundering for months afterward.

CIOs leading world-class IT departments will take a more transformational approach to reorganizing IT for the AI era.

It’s time to rewrite IT’s digital operating model

Let’s look at several inflection points that impacted IT’s operating model over the last 25 years.

• Flash back to pre-2000, when 80%+ of IT projects failed. The Agile Manifesto sparked two decades of IT transformation, as many organizations adopted agile methodologies and abandoned waterfall project management.
• Cloud infrastructure and DevOps triggered the next wave, enabling dev and IT ops to collaborate on faster, more resilient deployments while improving IT service management.
• Low-code, citizen data science, and employee self-service technologies enabled forward-looking CIOs to expand technical capabilities outside of the IT department.
• Web, mobile, and other customer experience opportunities have required almost all companies to embark on digital transformation, creating greater demand for IT capabilities.

AI is driving the next wave, especially in IT. DevOps teams can use genAI tools to write agile requirements, develop software, automate testing, maintain documentation, and drive efficiencies across many other IT areas.

Principles to drive IT’s AI transformation

I’ll be leading a program on IT’s digital operating model. Sign up for the Driving Digital Newsletter with this link to get notified when it’s released.

Until then, here are some principles to consider for an AI-driven, digital operating model.

• Product management, or product-based IT, must guide the development of vision statements and value prioritization without the complexities of value stream management.
• Agile needs to be leaner by unwinding safe/rigid frameworks and expanding scope to continuous planning and change management.
• Governance needs to be driven by one-pagers. As I wrote in Digital Trailblazer, “One‐pagers to describe reference architectures, data models, customer personas, roadmaps, service level objectives, security fundamentals, user experience standards, and style guides—each with a context, scope, and authorities to evolve them over time.”
• AI capabilities, especially in IT, need to go from experiments to workflow rituals. Development must go beyond APIs and mobile-first principles to an architecture that enables AI agents.
• Data science, data engineering, dataops, and data governance can no longer be siloed functions.

CIOs can’t afford status quo thinking and behavior when deploying technology and AI capabilities to departments and employees. It’s time to turn inward and review how AI will enable IT’s transformation.