In 2005, a survey conducted by the CIO Executive Board, program of the Corporate Executive Board, found that less than 25 per cent of business leaders rated their organisation’s IT function effective at delivering the capabilities they needed. What is the number today? It’s the same.
If, despite five years of Herculean effort by IT leaders to improve governance, strengthen alignment, and deliver value, the results remain the same, clearly more radical change is needed. But where will this change come from? In a recent review, we shortlisted 10 business, social, and economic trends that we believe will shape the way large organisations manage IT in the next five years. By analysing these trends, and by interviewing and surveying hundreds of business and IT leaders, we have identified five emerging shifts in IT value, ownership, and role.
Shift 1: Information over process
It will be harder to gain competitive advantage using a cloud service than from technology built and run in-house. In theory, using the cloud, a start up and an industry leader will have access to the same functionality, scale, and quality. Organisations using services in the cloud will differentiate themselves by the way they manage change, integrate services, and exploit information the services generate, not from unique business processes or application functionality.
The way information technology is used also is changing. Most employees are now knowledge workers, social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, when we looked at business areas that drive growth (for example, innovation, marketing, sales, customer service), we found that up to 80 per cent of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface, rather than to process automation. To exploit these opportunities, IT must bolster its ability to capture, integrate, and deliver information, both structured and unstructured.
Shift 2: IT embedded in business services
The corporate centre is in flux. Corporate functions have overlapping capabilities, little control over business outcomes, and after many cuts, struggle to find yet more efficiencies even as they are asked to support growing operations in emerging markets.
The IT function shares these problems. Its skills in program management, business process design, and sourcing are valuable, but none relate solely to technology delivery and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value disappears into the uncertainty that this situation creates. Finally, cost pressures conflict with the need for new differentiated services in growth markets.
The need for efficiency and joint accountability, combined with parallel changes occurring in other central functions, will reshape the IT’s delivery model and organisational location. Technology will be consumed as part of business services as the IT function merges into a multi-functional business shared services group.
Shift 3: Externalised service delivery
This shift is easy to overestimate, particularly in the short term. However, externalisation of applications development, infrastructure operations, and back-office business processes will gradually erode the ‘factory’ side of the IT function. While much still cannot be externalised, this will gradually change as the cloud enables up to 80 per cent of lifetime spend on applications to move outside. As this occurs, internal roles will evolve into technology brokers.
Shift 4: Greater business partner responsibility
The IT enablement opportunities outlined in the first shift all have something in common. They require experimentation and iteration, are user-driven, and offer value from local diversity. None of this is easy for a central function to fulfil.
At the same time, technology knowledge and confidence is growing among business leaders and end users. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. While they will never have deep technical knowledge, the cloud will give them to access unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customised levels the playing field; business units cannot customise these services but nor can the IT function.
Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need for integration. This is not a return to locally controlled IT resources, rather it is a shift in responsibility for technology decision making.
Shift 5: The unbundling of IT
As IT roles migrate to business services, evolve into business roles, or are externalised, we believe that the headcount remaining in the IT function may fall by 75 per cent or more. A diminished IT function is usually synonymous with decentralisation, but looking ahead, this is not necessarily the case. Many of the roles that define IT standards and coordinate delivery will remain centralised within a larger, and potentially more influential, business services organisation. The unbundling holds both promise and peril for the CIO. The CIO role could either expand to lead this broader group or shrink to manage technology procurement and integration.
Our analysis of each shift is still ongoing, but we believe that collectively they provide a useful starting point for debate on the future direction of corporate IT, and a valuable lens for organisations evaluating their three to five year IT strategic plans.
Andrew Horne is global head of research at the CIO Executive Board, program of the Corporate Executive Board. The Corporate Executive Board drives faster, more effective decision-making among the world’s leading executives and business professionals. As the premier, network-based knowledge resource, it provides them with the authoritative and timely guidance needed to excel in their roles, take decisive action and improve company performance.