Strategy

Digital transformation – empowering the CIO

By Chris Pick, CMO at Apptio
Strategy
Published: 5 September 2017

According to Gartner’s latest report, global IT spend is forecast to increase by 2.4% reaching over $3.5 trillion in 2017, an increase of 0.3% from 2016. This growth in IT investment is not surprising considering the digital innovation sweeping the market, challenging the way businesses operate and the changing consumer expectations about the products and services they use and how they are communicated, delivered and supported.

This shift has put a greater emphasis on the return from innovation and IT spend and as a result today’s CIO is accountable for more than just the IT department. At some level, all businesses are becoming technology businesses, making the CIO arguably the most important C-level executive within an organisation.

The IT department has become the beating heart and service provider to the whole business, and the role of the CIO must evolve if it is to properly facilitate the digitalisation that is required to maintain an optimal service, improve agility and create a competitive advantage. Not only is the CIO responsible for the vast everyday IT operations in a business, but they also have the constant demands for digitalisation from other heads of the business.

There are multiple hurdles the CIO will encounter during the digitalisation process and this article will address those hurdles and help CIOs prepare for transformation.

Digital transformation is shaping the future
The expansion of innovative services and cloud technologies being released by companies such as Google, Microsoft and Amazon are raising expectations. The CIO has the delicate task of balancing a finite IT budget with the demand for rapid and intuitive digital transformation – both from an internal IT perspective and in the products and services the business offers its customers.

In a recent Gartner survey, only 42% of CEOs said their business had already started its digital transformation and further research shows that the average CIO is spending 18% of their budget on digital transformation. However, that figure is predicted to rise to 28% in 2018 highlighting the necessity for all CIOs to turn their attention towards digitalisation.

Organisations and CEOs recognise the value and reward for initiating digital transformation, but there are still several barriers that the CIO must overcome to enable this transformation:

1. The cost hurdle
IT spend on digitalisation is forecast to exceed the 2.2% increase that CIOs believe their budgets will receive in 2018 and this adds another weight for CIOs to bear. This juggling act can prove even more of a challenge for CIOs as business unit leaders, CMOs, or even CEOs, are eager to lead this digitalisation process in various areas, putting the CIO in a difficult position. Today CIOs are faced with tighter IT budgets, but are simultaneously expected to support the business’s ambitious digital transformation objectives.

Customer experience is the main influencer over digitalisation according to research from Altimeter, and as a result CMOs are the leaders in 34% of cases, as opposed to the CIO/CTO who is only leading 19% of digital transformations.

To improve services and boost efficiency, businesses are keen to adopt cloud solutions, as the quick onboarding process offers a fast track to adopting digital services. However, it’s not as simple as turning off a data centre and letting AWS do the heavy lifting. And unfortunately, those companies that don’t turn off their legacy systems ultimately end up spending more, CIOs need to create a comprehensive roadmap using intuitive tools to identify when and where digitalisation is most needed.

2. Managing cloud costs
The initial tracking of cloud IT costs can be difficult which can make the CIO’s job harder, but the cloud brings a new business model for IT that enables rapid innovations. Many businesses do not have a system in place that gives them full visibility of their master service agreements with cloud storage and computing providers. The price of cloud services can fluctuate daily and full visibility of how much the organisation is spending is necessary to maximise innovation.

Many organisations have SaaS applications such as Salesforce.com and Office365 running through the entire business making it hard to pinpoint where unused licenses are not needed and many IT leaders are burdened with unnecessary costs.

The cloud has the potential to dramatically transform the way IT funds and delivers projects and services, but to do this IT leaders must know where cloud can help reduce fixed resources, prioritise and manage cloud migration and quantify the impact of cloud investments on the business.

3. A single source of the truth
For IT leaders to make an impact on the business and promote innovation through digitalisation requires implementing agile cloud technology. Most organisations looking to fund new technologies begin by looking at the existing corporate IT budget. As a result, CIOs need to refer to a single source of truth to be able to provide business units with a transparent, holistic view of their IT spend.

The speed of digitalisation means that IT needs to be able to provide these valuable insights in a short time-frame. Sifting through endless spreadsheets from different departments and managing version control can result in such enquiries taking weeks to carry out, delaying the process of digital transformation and costing the business money.

An all-inclusive view of IT spend will help to highlight obsolete areas of IT and identify programmes that aren’t being utilised to their full capacity, enabling the CIO office to have an open conversation about whether the use of that service makes financial sense – strengthening their position as a strategic partner to the business.
App rationalisation is a common example of this in practice, where it is only with a transparent view of all IT spend that the IT department can make an informed decision over which versions are necessary, and if the cost of consolidating is justified.

Fact-based decision making
Today the CIO is at the helm of digitalisation, and even though IT spending is expected to hit $3.5 trillion this year, CIOs are increasingly finding themselves in a position where they must innovate from within. Only with a holistic, transparent view of their IT spend can a CIO use fact-based costs to make investment decisions and champion the right business growth strategy.