Gartner CIO Survey reveals the hopes and fears of UK and Ireland CIOs for 2017

CIOs in the UK and Ireland are facing stagnated budgets due to the concerns over the impact of the Brexit vote, but continue to pursue digital initiatives to drive growth and innovation despite the economic constraints.

Those are some of the findings from the 2017 Gartner CIO Survey, which canvassed 143 CIOs from the UK and Ireland in the third quarter of 2016 to examine their priorities for the year ahead.

Gartner research director and CIO UK columnist Ian Cox said that digital ecosystems and data analytics were key to developing digital success when he discussed the findings with CIO UK. [See also: 2017 CEO Priorities – and how CIOs can help CEOs on the digital journey]

Brexit uncertainty

The ongoing uncertainty caused by the vote to leave the European Union is affecting business across the country, and CIOs are no exception. UK and Ireland CIOs expect an increase in their IT budgets in 2017 of just 0.5%, compared to an average increase internationally of 2.2%, as they try to find ways to delay investment without damaging their businesses.

“We’re not seeing a lot of organisations actually doing anything about Brexit but it’s just stopping them from doing anything new in some cases,” says Cox.

“The level of caution about doing anything depends on your business, who your customers are and where you do business.”

The loss of business confidence is expected to trigger a decline in investment of up to 2.2%, while the overall economy is predicted to grow by only 1%. Vendor costs are already being impacted due to the fall in sterling causing UK prices to rise.

“If you’re a larger UK-based company, you’re seeing an impact in client cost. If you trade, or you process data in EU, there’s a working assumption that we’ve got a bit of time, but we just don’t know,” adds Cox.

Digitisation spending

Many CIOs are choosing to wait and see how their planning Brexit could impact their planning, and would rather hold back than risk making major changes. There remains a general recognition, however, that digital initiatives offer the opportunity to prepare their businesses for an unclear future.

Despite the slow budget growth, UK and Ireland CIOs expect the proportion of their IT budget that is spent on digitisation to increase from its 20% average to 30% by 2018. Digitisation spending is expected to grow at a far greater rate than the largely flat general budgets, a result of the recent priorities in the UK and Ireland.

They were above the worldwide average for prioritising investment in digitisation, digital marketing and CRM. This suggests that they have generally invested enough recently in infrastructure and core systems that they have room in their budgets to explore other technology investments.

“UK and Ireland appears to be ahead of a lot of the rest of the countries in terms of moving to the cloud and adopting newer technologies. It’s already done what the rest of the world is now doing in terms of moving away from data centre and infrastructure as being key spenders because it’s already been doing that for years,” says Cox.

“The UK and Ireland can now spend more of its budget on digital efforts because it’s already been doing a lot of that data centre, and infrastructure, and ERP, and things like that. Which starting this year, they are still quite high in terms of the priority areas for the rest of the world.

“We’ve seen a lot of opportune ideas in the last few years through our surveys about upgrading your core systems. You need to do that digital anyway, particularly for the digital ecosystem process basis.”

Digital ecosystems

Gartner identifies participating digital ecosystems as an essential strategy to secure affordable growth, but the survey suggests that they tend to be underused by CIOs in the UK and Ireland.

Some 79% of the top performers in the survey participate in ecosystems, compared with 49% for typical performers and 24% for trailing organizations. Only 46% of respondents from the UK and Ireland participate, slightly lower than the overall average of 49%.

These interdependent groups of individuals and enterprises sharing standardised platforms for mutual benefits allow CIOs to leverage both their own data and services but also those of their eco-partners.

“If you’re already engaged in an ecosystem, you need to really start driving that,” says Cox. “If you’re not, you need to start leading your organisation thinking around those things, because you can create connections at scale, you can leverage other people’s assets with IT. Also, through your partners you can bring more customers into your own data and services as well.

“UK organisations that do participate in ecosystems are far more likely to run them effectively, so they are actually building platforms. That is one approach, where an organisation will essentially build around the platform and actually enable the partners, customers, suppliers, whoever they are, to engage with each other by that platform.

“Obviously, that opens up the host organisation. We also see organisations just basically joining other ecosystems. It’s just a way of touching more customers.”

CIOs can leverage the connections and the exposure provided by the platform brand and the other members of it. They can also support innovation by drawing on the ideas and experiments of others. Cox suggests that they identify and free up the data they need to share in the ecosystem, and then establish whether they have the interoperability to connect their data and services with their partners to ensure it works efficiently. Exploring APIs is an essential aspect of this.

“There’s also a general change in mind-set,” says Cox. “It’s no longer just about your organisation. You need to think about the whole ecosystem. You need to take a wider view of things, which takes a different leadership style just to understand. You are working together to a common outcome as opposed to individual organisations having individual outcomes.”

This collaborative form of leadership can be eased into through smaller pilots that force to organisation to start thinking about ecosystems by demonstrating their value before gradually increasing their remit.

Bimodal importance

Bimodal adoption is one area that the survey suggests might need more attention. Gartner coined the term in 2014 to mixed reviews, with some hailing it as and others criticising it as little more than a buzzword. It describes the approach of separating IT into two separate modes: one for predictable and existing systems, and the other for exploring new products and technology. Of the survey’s top performers, 68% of top performers had adopted bimodal, compared to 17% of trailing performers, at least according to Gartner.

Survey respondents from the UK and Ireland reported a bimodal adoption rate of 34%, compared to the survey average of 43%. The rate has actually dropped since last year, but Cox suggests that this may be partly a result of an improved understanding of the terms full meaning.

“The appetite for bimodal is still there,” he says. “I think there must have been a realisation that we actually meant that we were doing Agile last year. The UK has started realising there’s a lot more to bimodal than just doing Agile.

“That’s one part of my advice to anybody thinking about bimodal; you need to master Agile first. If you’re not doing Agile, you’re can’t do bimodal. I think we are beginning to realise that UK and Ireland CIOs were over-reporting bimodal last year. This year we’re actually now under-reporting it because we realise it’s actually a bit more difficult than you think.

“The two key building blocks are to embed Agile as a genuine way of working and a culture, not just a series of processes, and also think about the governance that you have in place, because for mode one governance you have a predictable stable environment, but it will not work for mode two. In fact, it will suffocate mode two. You actually do need a distant approach to governance for the mode.”

Technology investments

There is a hint as to why digital ecosystems and bimodal adoption has been slower than ideal in the UK and Ireland in the top three areas for new investment cited by CIOs: Business intelligence (BI) and analytics, cloud services and solutions, and digitisation and digital marketing.

“All three of those skills are core to bimodal,” says Cox. “The challenge and adoption of bimodal is possibly all just because they don’t have resource for it. Finding the right type of developers, the right type of business analysts who could work in that mode two way, or if you’re to scale-up your own internal capability. Those three skill areas were all challenging to the UK and Ireland far and above.”

The UK and Ireland differ from the worldwide average in a greater focus on digitisation and digital marketing spending, and a lesser one on Enterprise Resource Planning (ERP). The former rises from 16% overall to 22% in the UK and Ireland, while the latter drops from 22% to 17%.

“That shows that the UK and Ireland are actually a little bit ahead of the game in terms of modifying some of their systems,” suggests Cox. “They’re no longer focusing as much on ERP and data.”

BI and analytics top the list, as the vast waves of data contemporary companies generate need to be analysed effectively to maximise value. It ranks number one for top performers (47%), overall (38%) and in the UK and Ireland (34%).

“Data analytics really does underpin the digital world,” says Cox. “Even with an ecosystem, every transaction creates data and you can extract further data out of that data by using analytics. It is one of the underpinning core capabilities. It’s the core technology and core capability behind digital.”

Skills gap

The availability of skills and resources was the top barrier to CIOs achieving their objectives in 2017, identified as a challenge by 30% of UK and Ireland CIOs, slightly higher than the overall average of 26%.

Working with startups can provide an alternative source of talent and technology, and an affordable option under current financial constraints. Such a strategy is simpler with bimodal adoption.

“You need to engage more with startups, because they may provide you with some of those tools that you need, but at the same time you may need to build up your own resource,” says Cox.

“Something the top performers do is they’re more like to build stuff in-house. If it’s critical to their organisation and what they want to do in the digital world, or they just believe it’s a differentiator, they’re more likely to build component in-house compared to our typical trailing force.

“Maybe this is the missing part for the UK and Ireland, is you have to accept increasingly you might do some in-house development if it’s critical to your digital plans or it’s a differentiator.”

[Read next: Startups and diversity driving innovation – 2017 CIO Agenda recommends new IT procurement strategy]