by Byron Connolly

State of the CIO 2017

Jul 14, 2017
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So what are technology and digital chiefs spending their time on these days?

It’s perhaps unsurprising that innovating and aligning IT initiatives with their businesses’ goals are two of the top priorities for technology bosses now and in the foreseeable future.

Australia may be regarded as an ‘innovation nation’ despite several high profile technology-led disasters in recent times with most tech chiefs regarding business innovation as a big priority.

Spending more time on driving business innovation over the next three to five years was a priority for 72 per cent of respondents to CIO Australia’s 2017 State of the CIO survey. It’s a significant jump from the 43 per cent who are focusing on business innovation in their organisations right now. In the 2015 survey, only 25 per cent of respondents were being asked to lead a product innovation effort.

More than half of the respondents this year (52 per cent) will also focus on identifying opportunities for competitive differentiation in the coming years, developing and redefining business strategy (47 per cent), and developing go-to-market strategies and technologies (42 per cent).

A survey respondent and senior tech executive at a government department said that innovation is a ‘tool’ but IT for a long time has ‘been the tail wagging business.’

“Business has to get engaged in this innovation conversation,” he said. “A book written by Rowan Gibson talks about innovation being a core competency where everybody gets involved – it’s not just the ‘skunkworks’ that comes up with these innovative ideas.

“The business has to be involved and lead it. Technology can facilitate it but we don’t necessarily have the business innovation ideas,” he adds.

“That’s the issue I find a lot of the time with technology and the IT [group] is that they don’t understand their business. They believe they have the solution and they can ‘shoehorn’ the business problems into it when you have to actually understand the problem before you can come up with a solution.”

The Intrepid Group is moving beyond digital transformation to “embedding a digital mindset into all our strategies using technology to be better at everything we do,” says CIO Michelle Beveridge.

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“That means our technology people are essential contributors and in some cases, leaders of innovation from small improvements to new business streams – working hand in glove with their sales, product development, operations and marketing colleagues,” Beveridge says.

But IT and digital chiefs are finding that innovating inside their businesses can be hard with 29 per cent indicating that they ‘strongly agree’ with the statement that it’s challenging to find the right balance between business innovation and operational excellence.

In his role, a senior government department tech exec says he has a ‘partnership’ with other c-level executives who acknowledge that technology can facilitate the business’ goals.

“I’ve shown an interest in their business needs rather than trying to push a technology. Having that recognition and acceptance means that we [the IT group], have enabled a lot of operational innovation that the business has embraced,” he says.

Finding the right balance means moving in pace with the business but also adjusting to that pace as needs change, says Intrepid Group’s Beveridge.

“It’s an ongoing challenge in a fast-growing entrepreneurial business but I see it as part of the CIO role to identify and anticipate the moving pieces of the puzzle and structure my team and the IT roadmap accordingly,” she says.

Rick Coenen, CIO at retailer Sussan Group, says as IT matures in organisations, it is becoming integrated inside businesses that are now less focused on ‘keeping the lights on’ and more focused on innovation.

“This is certainly the case inside our business and I feel like we are becoming more mature with technology due to the digital age,” Coenen says. “I feel like this is also happening all over the place [in other organisations],” he says.

How you’re viewed by your organisation

Thankfully, 42 per cent of survey respondents believe their IT groups are viewed by the rest of the organisation as business partners with 13 per cent indicating their teams were even viewed as business leaders. Unfortunately, the reputation of the IT group still needs to be dramatically improved with 35 per cent of respondents still viewed as service providers and nine per cent as cost centres.

“We are shifting in the cloud now with an ‘opex model’ and we can’t just say, ‘this investment is going to give us a return,’” says one CIO.

“We have to talk in business terms – we’ve now in a fibre network and moved people to Office 365. We’ve increased productivity but we’ve looked into the business to see when productivity gains have been obtained.

“So when the finance people come and say, ‘well you’ve cost this amount of money’, we can say, ‘well actually that investment has given this return and here are the business metrics,” he says.

“IT [group] struggle with that because it is not looking at the return to the business. They are looking at the technology and the technology return.”

Sussan Group’s Coenen agrees that IT groups generally have got some way to go before they are viewed as true business leaders.

“It’s something that internally I say to people I think as an organisation we’ve come along in leaps and bounds in terms of where we sit in that IT maturity curve. We are becoming less and less an IT supplier and solution provider and more of a strategic partner and real innovators,” he says.

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“But it’s different across parts of our business – it’s a cultural thing that needs to be chipped away at over a long period of time. It’s not something that you can achieve by running a few sessions at the boardroom level and click your fingers and it’s done.”

A more challenging role

The role of the IT chief is also getting more challenging, according to 45 per cent of respondents. Still, 33 per cent ‘agree strongly’ with the statement that the role is more rewarding with 46 per cent ‘agreeing somewhat’ and 14 per cent ‘disagreeing somewhat.’

The CIO role has become more broad and central to overall business success, aligned with the growing importance of technology generally, says Intrepid’s Beveridge.

“The pace of change in the role has quickened recently with the emergence of digital disruption, cloud platforms, and the merging of technical tasks into business roles such as digital marketing,” she says.

“It is more challenging from the perspective that you need to be across more aspects of the enterprise, keep up with a rapidly changing technology industry and the need to deliver faster than ever. But the role is also more fun because things like cloud and the empowerment of agile [ways of working] means spending less time on the plumbing of IT and more time on innovation, strategy. This is particularly the case at Intrepid Group in contributing to business growth and purpose beyond profit.”

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But it’s not all positive news for others in c-level technology teams. Almost one-fifth (21 per cent) of respondents ‘agree somewhat’ with the statement that the CIO is being sidelined in the business. A further eight per cent ‘strongly agreed’ with the statement.

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“I’ve been with Sussan for five years and we’ve been putting in a solid effort and made real inroads into pulling IT out of the back office and becoming a part of the business,” says Coenen.

“I don’t want IT to be thought of as a separate team of people but part of the business so when initiatives come up we are there at the table for the initial discussions not brought along later on to ‘mop up’ and provide a solution after the fact.”

Reporting lines and ambitions

The majority of CIOs are now part of their organisation’s leadership team. This was something that came through strongly in CIO Australia’s 2016 top 50 CIO list. Sixty per cent of technology chiefs in the list reported to the chief executive officer in their organisations, which shows that technology is now well and truly a core part of business strategy for many businesses.

More than two-thirds of CIOs (41 per cent) responding to the State of the CIO research are now reporting to their organisation’s CEO with 18 per cent still reporting to the CFO. Around 14 per cent report to the COO.

Meanwhile, CIOs also seem happy in their roles with 45 per cent indicating they have no ambition to move up the c-suite within the next three to five years and want to remain as tech chiefs. A further eight per cent said that they wanted to be CEOs and 12 per cent want to move into a customer-facing digital role such as chief digital officer, or a role with a more operational focus such as a COO or running shared services (eight per cent).

“Personally, I love the CIO role,” says Intrepid’s Beveridge. “It has changed so much over the years, moving a long way from being a technology service provider to being that plus a business strategist and digital evangelist,” she says.

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“Our leadership team and board see digital innovation as a key to future growth and purpose beyond profit, and as a CIO that means I can be a key contributor to business success. I also love working with technology professionals; from my experience the majority are smart, passionate people who care about the success of the organisation they work for and the people they work with.”

Next page:Finding the right skills and where technology is being invested

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Finding the right skills

Finding people with the right tech skills is becoming increasingly difficult for enterprises that are being forced to look offshore for talent. Research respondents anticipate that they will continue to have difficulty finding staff in the areas of big data/business intelligence and analytics (50 per cent of respondents), followed by security/risk management (35 per cent), and application development/programming/DevOps (33 per cent).

Nicholas Fourie, VP, ICT at Fisher and Paykel in New Zealand, stopped short of saying there’s a skills crisis but says the tech sector is having some challenges with recruitment, particularly in areas such as data analytics.

“I wouldn’t say we have a skills crisis but we do have some challenges with recruitment. I think in the more traditional IT roles there’s definitely enough [talent] in the market to pull from,” he says.

“The other recruitment challenge we have in New Zealand is finding local talent. We get a lot of foreigners who are highly skilled, highly capable but you are not really supporting the local economy by hiring foreigners all the time.

“So while we don’t have any preference, there is a case to ask, ‘Where is the local talent and why aren’t they being pipelined into the industry?’” he says.

Who is investing in IT and where?

This year’s study indicates that there is a fairly even spread in the percentage of total dollars invested in technology products and services that are directed controlled by IT. Almost half of respondents (46 per cent) controlled between 71 per cent and 99 per cent of total tech spend.

Over the past few years, marketing has invested more and more in technology solutions and this year is no different as organisations realise the high importance of user experience and internal and external customer engagement.

Tech chiefs are expecting their operations (55 per cent) and marketing (51 per cent) divisions to have the budgets specifically earmarked for investments in technology products now and within three years. Marketing’s investment in technology initiatives is only slightly down compared to the 2015 study where 55 per cent indicated money had been put aside for initiatives.

In 2017, 34 per cent of respondents said technology investments would also be made in sales, followed by engineering at 26 per cent.

Meanwhile, more than two thirds (69 per cent) say they consult with the marketing team to determine the requirements for technology-led marketing programs. A further 66 per cent say they meet with the marketing team to evaluate potential vendors, and 64 per cent oversee the implementation of marketing technologies.

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It’s not surprising that marketing is earning a larger share of the technology spend, says one CIO. The rise of chief digital officers (CDOs) inside organisations is forcing the CIO into more operational tasks rather than strategic ones, he says.

“Where you have that situation, the CDO and the chief marketing officer does get the lion’s share [of the spend] because they are coming up with the innovative business ideas that require technology. That’s where the CIO has to embrace his or her role as a strategic player and engage with the business to manage, operate and push technology.”

Technology will be used to improve business initiatives around customer experience (60 per cent of respondents) and to improve operational efficiency for 57 per cent of respondents over the next 12 months. Transforming existing business processes is also high on the list (44 per cent of respondents) as is increasing cybersecurity protections (30 per cent), and improving organisational agility (31 per cent).

Cloud computing technology initiatives will remain a priority over the next 12 months for 47 per cent of IT chiefs, followed by big data/business analytics (39 per cent) and security and risk management (29 per cent).

As expected, the testing and deployment of so called emerging and disruptive technologies is on many CIO’s radars over the next 12 months. Forty seven per cent will be piloting or deploying artificial intelligence and machine learning technologies over the next 12 months, followed by virtual and augmented reality (23 per cent).

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“Artificial intelligence is coming in under the covers. There’s a lot of market buzz about it but there’s no practical examples. However, blockchain is where the pedal is hitting the metal,” says one CIO. “Some of the stuff the NSW government is doing around blockchain is starting to get really interesting,” he says.

Sussan Group’s Coenen, says a range of technologies come across his desk every day and “we have to look carefully at what we jump into and what we don’t.”

“But I proceed very cautiously with [some technologies] because you can easily jump on the wrong bandwagon and implement things that become irrelevant very quickly,” he says.