by Byron Connolly

State of the CIO 2018

Sep 07, 2018

It’s perhaps no surprise that driving business innovation ranked as the top strategic imperative for technology and digital chiefs responding to this year’s State of the CIO survey.

CIO Australia spoke to 182 tech chiefs in Australia and New Zealand for the report with almost two-thirds (62 per cent) of respondents to the wide-ranging study cited driving business innovation as a strategic focus, up from 43 per cent in 2017. Innovation will also be a high priority for 64 per cent of respondents over the next three years.

Developing and refining business strategy (49 per cent) and identifying opportunities for competitive differentiation (47 per cent) were also a focus for respondents who work in market sectors including advertising and media, financial services, government and non-profits, healthcare, IT services, manufacturing, retail and wholesale distribution, and legal.

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The University of Tasmania is heading into what CIO Jeff Murray describes as a ‘technology-intensive’ period to improve access to higher education for Tasmanians.

“Innovative technology will make the working life and experience at the university a more efficient, engaged and collaborative process,” says Murray.

Murray says the University of Tasmania’s executive committee has discovered that technology is pervasive across everything that the university does – and that’s it’s no longer just an enabler.

“We [IT] are being called on digitally transform [services], enhance and broaden choice and provide greater flexibility around our pipeline and make our business a more enjoyable place to be for our customers and also our internal staff,” he says.

Anthony Molinia, chief information officer at The University of Newcastle, says as a regional university, Newcastle needs to have a relatively high appetite for innovation to give it a competitive advantage.

“There’s no singular lens,” says Molinia. “We look at innovation in terms of driving a competitive advantage through emerging technologies like augmented reality and virtual reality and blockchain [and using these] to bridge environments together.”

Dagmar Neumann, head of information technology at Toyota Financial Services, says business innovation ‘is and it isn’t’ a priority for the organisation.

“Most businesses these days have heard about disruption, changes in the market and digital transformation – and executives are getting nervous. Financial services organisations are really lumbered with a lot of legacy. And when it comes to legacy and the complexities that come with it – the slowness, the lack of agility – a priority for CIOs is to generate an environment of innovation,” she says.

This year’s research also uncovered moves by organisations to focus their technology investments on one top area over the next 12 months: improving customer experience (74 per cent of respondents). This was followed by increasing operational efficiency (73 per cent), growing the business (55 per cent), transforming existing business processes (55 per cent.)

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“It [improving customer experience] is absolutely something that we focus on. If we are not driving up the value chain and trying to deliver a heightened experience through technology, then we are a commodity service and just represent a cost centre within the organisation,” says The University of Newcastle’s Molinia.

“If we are going to have a voice at the table, then we need to be focused on the value chain like everyone else.”

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Luke van Leeuwen, associate director, technology and business services, The Fred Hollows Foundation, says creating innovative products is a priority for the IT group but less so for the wider organisation. Digital innovation is tricky in remote areas around the globe where the charity does its work, he says.

“Due to the remoteness, the availability of technology becomes quite difficult. The work that we do will be revolutionised with a 5 to 10-year timeframe – there are opportunities around data collection. There will be a time in the not too distant future where you will start seeing the ubiquitous connection of medical and consumer devices in a medical setting through smartphone apps, health monitors and so forth.”

But as it stands at the moment, capturing population and health data in places the organisation works, such as Africa and South Asia, is difficult, he says.

“That data is still emerging and at this stage, it is collected with difficultly,” he says. “At the moment, we almost have to go and conduct local point surveys and assessments of populations and make extrapolations. And obviously, that’s slow, time-consuming, expensive and not very accurate.

“There will simply be an expectation that this stuff can be stored, accessed and assessed by your big data and AI type applications,” he says.

“But right now, if we said, ‘let’s hook up a big data system to health populations statistics across South Asia and Africa, we would be scratching for things to hook up to.”

Cyber a top priority

Understandably, cyber security is also a high priority for tech execs responding to the survey with 45 per cent saying the need to increase protections will drive business investment over the coming year.

Enterprises are most certainly having the think harder about how they approach cyber security given the increasing size and complexity of global ransomware attacks, social engineering and threats from rogue nations.

Cyber security is now under the spotlight of the University of Tasmania’s executive group, says Murray.

The university was a client of PageUp, the human resources company that reported a massive data breach in June. It was reported that as many as 3,500 people’s names and emails may have been compromised after using the company’s job site.

“We were just digesting our response to the [mandatory data breach notification laws] and suddenly we had a vendor and supplier saying, ‘oh, we might have leaked your data, it may be out there, we don’t know.’ Early messaging [from PageUp] brought a lot of attention from our peak body and once we responded fairly swiftly and were upfront about reporting it as a data breach.

“Doing that was a good thing and our CEO was fairly complementary around that because we set up email channels and helplines – we got 400 ‘customer contacts’ and they were surprising in the extent of emotion, worry and concern that our customer base had suffered.

The activity really enforced that cyber security is the number one consideration, it’s a big business risk and it carries with it the responsibility of ensuring we can protect people’s privacy and their data to the highest degree that we can afford.”

Cyber security is a ‘bread and butter business’ for Toyota Financial Services ‘because if we don’t have it, we won’t have a business tomorrow,” says Neumann.

“And I think we are much better at making the connection between security and compliance. I think that is something that in the past, executives viewed as being a little bit separate. Security was the IT thing and compliance was the business and now they are completely intertwined,” says Neumann.

Toyota Financial Services’ Neumann: “We are much better at making the connection between security and compliance.”

Requirements to meet data privacy laws while exposing data and processes inside the business and external to customers is also increasing the organisation’s exposure to security threats, she adds.

“Therefore we need to get really active; when we do comprehensive credit reporting and we talk about open banking, customers start owning the data. But at the same time, we have a mandate to keep it absolutely private and secure. That is a conundrum that automatically forces a huge focus on cyber security.”

Data security and privacy is more of concern that it has been in the past, says The Fred Hollows Foundation’s Leeuwen.

“We have a large number of private donor details that we are custodians of and that’s probably our largest concern,” he says. “But we have the same sort of challenges everybody has, getting control of CVs, persuading people not to stash them wherever they feel like it. You just can’t do that sort of stuff anymore so education – we are currently running an education campaign across the organisation around privacy dos and don’ts and it really is a challenge.”

Next up: The war for talent

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The war for talent

The skills crisis continues to bite the local tech sector with senior tech leaders anticipating that they will have difficulty in finding skill sets in the areas of big data (46.97 per cent), artificial intelligence and machine learning (43.94 per cent), and application development (25.76 per cent).

Further, 38.64 per cent of respondents felt that the federal government’s Global Talent Scheme would not make it easier for their organisations to hire talent from overseas. Fifty-nine per cent were not sure and only 2.27 per cent indicated that the new rules would make it easier. Surprisingly, three quarters of respondents said they didn’t have a tech graduate program in place at their organisations.

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The University of Newcastle’s Molinia believes the government has conflicting positions on promoting bringing in talent from overseas but has put in place restrictions on visas.

He says it’s quite difficult to source global talent directly so he focuses more on capabilities rather than technologies – for example, engaging people who understand intellectual property and customer needs.

“I buy the capabilities by partnering with large organisations that have an international footprint. I think the reality is that this is where it will go – if it’s not already going that way – where there are strategic partnerships and alliances between organisations because the talent pool is so thin,” he says.

The University of Tasmania’s Murray agrees that the skills crisis is real and like Molinia, he emphasises the capabilities more so than abilities of staff.

“Therefore people are building skills on the job – that’s given us the agility to get done what we have to get done,” Murray says.

The university’s approach has been to engage external providers for its projects. Like other education providers, all of the university’s digital transformation resources are sourced externally from across the state and also mainland Australia.

“The beauty of that is that it protects my internal resources from the heavy load of this transformation, which is huge. It also enabled us to expand our resources by bringing in the skills we need.”

Meanwhile, the university’s UHack innovation hackathon competition, run by students and staff is helping foster people with the right skills. The university has built an extensive database that includes information about 90 developers, gathered from hackathons in recent years.

“We know how they code, what they’ve coded and what their ideas are. They are in the areas of AI, blockchain, machine learning and analytics. It’s a fantastic way to unearth the next-generation of skills. So running hackathons, innovation and entrepreneurial events doesn’t just help grow your economy, it helps grow your talent pool,” he says.

University of Tasmania’s Murray: “UHack innovation hackathon competition is helping foster people with the right skills.”

Toyota Financial Services’ Neumann says she has been lucky to attract tech talent due to the popularity of the company’s brand.

‘It [Toyota] is the fifth largest company worldwide and people are actually quite keen on having that on their CV,” she says. “Financial services is one of those industries that people want to get into because within IT, it is one of the more sophisticated and better paying industries so that’s a drawcard.

“I can bring in permanent and contract [staff] and consultants. I have a lot of freedom of movement in that space at the moment. We are in the midst of a whole range of transformation programs at the moment and we are moving fast but when we start more with long-term planning, I can see that this will bite me a bit.”

The Fred Hollows Foundation’s Leeuwen expects that his organisation will have trouble finding data scientists in particular as the best talent is ‘hoovered up’ by organisations with more money to spend.

“That’s a problem we face across the board as a charity – we have a certain amount of difficulty attracting talent. We don’t pay top dollar but we make up for it with people’s enthusiasm.”

CEO’s priorities, technology focus

Survey respondents were asked what their CEO’s priorities were for them in the coming year when 71 per cent were being asked the lead digital business initiatives. Not surprisingly, 44 per cent of tech bosses were being asked to upgrade IT and data security to avoid a cyber security attack. This was followed by simplifying IT (40 per cent).

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Meanwhile, almost half (47 per cent) of respondents will make investments in cloud computing over the next year, closely followed by security/risk management (46 per cent) and application modernisation (42 per cent).

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Other findings

Tech execs were also asked how long they have been in their roles. It is believed that CIO tenures in Australia are getting shorter. Almost one quarter (24 per cent) of respondents had been in their roles for less than one year; 26 per cent between one and two years, and 16 per cent between three and four years.

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What is particularly heartening is that 66 per cent of IT leaders responding to the survey felt that they were viewed as strategic advisors to their businesses. A further 24 per cent were viewed as ‘consultants’, 7 per cent as ‘risk assessors’, 2 per cent as ‘road blocks’ and sadly, 1 per cent were viewed as ‘rogue players.’

Finally, tech execs are playing a key role in their organisation’s digital transformation activities. Two-thirds (35 per cent)of respondents are helping identify which parts of the business could be digitally transformed through the use of digital technologies. One quarter of respondents are also identifying emerging technologies that could accelerate digital transformation, and 24 per cent are integrating digital innovations to the enterprise business systems.

The full State of the CIO report will be available soon.

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Follow Byron Connolly on Twitter:@ByronConnolly