Taming the digital dragon

Digitisation - the restructuring and reworking of business processes for the digital age - is gathering pace across multiple sectors.

But company IT leaders feel overwhelmed by the prospect of building digital leadership while renovating the core of IT their infrastructure to support a digital future, reveals a global survey of more than 2,300 Chief Information Officers conducted by Gartner.

To help understand the factors lying behind this apparent lack of confidence and the challenges posed by corporate digitisation, I asked Dave Aron, vice-president and Gartner Fellow, about the conclusions he draws from the survey. The following is an edited version of his answers.

The CIO Agenda 2014 survey reveals some rather alarming findings about company IT leaders' preparedness for a digital future. What's going on?

The fact is that company IT leaders are facing all the challenges they have had for many years, plus a torrent of digital opportunities and threats. Digitalisation raises questions about strategy, leadership, structure, talent, financing and almost everything else. Many IT leaders feel ill-prepared to face these challenges while also ensuring that the core of enterprise IT is fit for purpose.

The 2014 CIO Agenda survey found that, as we head towards the third era of IT in the enterprise, 51 per cent of company IT leaders are concerned that the digital torrent is coming faster than they can cope and that 42 per cent don't feel that they have the talent needed to face this future.

What is so different about this so-called 'third era' of enterprise IT?

During the first era of enterprise IT, the focus was on how IT could help do new and seemingly 'magical' things such as automating operations to create massive improvements in speed and scale, and providing business leaders with management information they never had before. The downside was that the IT organisation was often a little unreliable and a poor communicator.

All this came to a sudden end with the Y2K problem and the dotcom boom and bust. There was less tolerance for an unreliable 'black box' IT organisation in the business. We entered the second era of enterprise IT, an era of industrialisation of enterprise IT, making it more reliable, predictable, open and transparent. However, while, this second era has been necessary and powerful, tight budgets and little appetite for risk left scant room for innovation.

Now we are entering a third era of enterprise IT. Technological and societal trends such as the Nexus of Forces and the Internet of Things are not only improving what businesses do with technology to make themselves faster, cheaper and more scalable, but fundamentally changing businesses with information and technology, changing the basis of competition and the portfolio of businesses people are in, and in some cases, creating new industries.

Why is this shift such a big deal, surely IT has always been about change?

It is certainly true that in the IT industry, we have become inured and immune to new buzzwords and messages about how everything is changing. But this time it really is. This is both a company chief information officer's dream come true and a career-changing leadership challenge.

Against the backdrop of this gradual shift to growth and company specialisation in the use of IT, there is a much bigger tectonic shift happening. Every industry and every geography is being radically reshaped by digital opportunities and threats. Current enterprise IT is simply not set up to easily deliver on these digital dreams. This is why talk of the 'digital dragon' - potentially very powerful, but also potentially destructive if not tamed.

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If company IT leaders feel they do not have the talent needed to address an increasingly digital world, what specifically are they missing?

There are five talent areas that most companies don't possess, at least in sufficient numbers: digital design, data science, digital anthropology, start-up/ small business partnership/ vendor management and agile development. These are all particularly challenging because not only are most companies short of them, there isn't a big enough talent pool to draw from globally. Companies need to get creative, recruiting people based on aptitude and underlying capabilities rather than proven experience, working with universities to develop skills, job rotations etc.

So, what can company IT leaders do to tame this 'Digital Dragon'?

It's tempting to think that the chief information officers and the IT organisation just need to absorb some of the new technology and societal trends into what they are doing already - to do it just a bit faster, cheaper and smarter. But if we dig deeper, we see something more fundamental going on.

This year will be a year of dual goals: responding to continuing needs for efficiency and growth, but also shifting to exploit a fundamentally different, digital paradigm. Ignoring either of these is not an option.

The top CIO technology priorities for 2014 reveal two complementary goals: renovating the core of IT and exploiting new technologies and trends.

The core of enterprise IT - infrastructure, applications such as ERP, information and sourcing - was built for the IT past and needs to be renovated for the digital future. The talent needed to execute on renovation includes different skills, such as digital design, data science, 'digital anthropology', start-up skills and agile development.

Most businesses have established IT leadership, strategy and governance but have a vacuum in digital leadership. To exploit new digital opportunities and ensure that the core of IT services is ready, there must be clear digital leadership, strategy and governance. But individual digital leaders are not enough - all business leaders must become digital leaders.

Will we see a rise in CIOs' budgets in 2014 to accommodate this challenge?

In terms of business leaders' focus, we are seeing a gradual but undeniable shift toward growth. However, despite the need to grow, there is pressure on IT budgets. The global weighted average expected change in CIOs' IT budgets is an increase of 0.2 per cent. This is especially challenging since there is the need to both renovate the core of IT systems and services, and exploit new technology options.

More than ever, the size and shape of IT budgets are unique to each enterprise and that, coupled with a shift to digitalised business models, means there can be no more vanilla IT. The more that information and technology get intertwined in the customer experience, and the more IT serves the most strategic and tactically nuanced parts of the business, the less appropriate it is to have the same IT as everybody else - even in the same industry.

Company IT leaders also report that a quarter of IT spending will happen outside the IT budget in 2014. This is a direct result of the new digital opportunities that are more entwined with customer and colleague experiences, and that may, in some cases, reflect concerns that the IT organisation is not fast enough or otherwise ready for more digital opportunities.

How will company IT leaders address this imbalance?

There is an inherent tension between doing IT right and doing IT fast, doing IT safely and doing IT innovatively, working the plan and adapting. The second era of enterprise IT has been all about planning IT right, doing IT right, being predictable and creating value while maximising control and minimising risk. However, to capture digital opportunities created by the third era, chief information officers need to deal with speed, innovation and uncertainty. This requires operating two modes of enterprise IT: conventional - that is to say 'safe and steady' and non-conventional or 'non-linear', which could be described as 'fast and agile'.

Achieving this bimodal capability is an absolute necessity as the era of digitalisation poses many 'non-linear' challenges such as the need to absorb disruptive new business models enabled by new digital technologies; the need to scale up and down in Internet time and the need to explore and evolve solutions that are surrounded by uncertainty.

This is not a quantitative improvement; it's a fundamental change in the way information and technology show up in the enterprise - a rethinking of the role of the company IT leader and the IT organisation, and the rest of the business's expectations. If this transition succeeds and tames the digital dragon, massive new value for businesses can be created, and with it, a renewed role and greater credibility for the chief information officer and the IT organisation. If, however, the dragon isn't tamed, businesses might fail and the relevance of the IT organisation will almost certainly disappear.

The worldwide Gartner CIO Agenda Survey was conducted in the fourth quarter of 2013 and included 2,339 CIOs, representing more than $300bn in CIO IT budgets in 77 countries.

Dave Aron is a vice-president and Gartner Fellow in Gartner's CIO research group, focusing on IT leadership issues.

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