By more than a two-to-one ratio, CEOs are inclined to increase IT spending this year rather than to reduce it, according to analyst Gartner.
Growth is the number one priority for the 229 CEOs Gartner surveyed in its CEO Survey 2012. CRM is the technology of choice to help businesses leaders achieve this objective, according to Gartner. The firm urged CIOs to improve IT-related competitor intelligence to help the business navigate the difficult economic climate ahead.
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Gartner analyst Mark Raskino says the 2:1 ratio reflects IT’s resilience to change. “During the boom we did not see people throwing money at IT, and during the recession, they did not shutdown datacentres, but they did close factories.”
He expects 2012 will be a slower year for growth. “Things might get better, but the gut feeling among business leaders is that Chinese and Indian growth is slowing. There is a lot more headwind, and this will impact the propensity to increase IT investment," he said.
“CIOs and CEOs should discuss with each other what new information would help them manage the business better through uncertain economic times. We know most companies have weak management formalism over information strategy and governance; however, information variety, complexity and volume are rising exponentially. Muddling through without discipline will soon start to leave major companies vulnerable to new entrant competition. CIOs should spearhead the development of an information strategy for their firms, concentrating, in particular, on new kinds of information that might lead to industry disruptions and transformations.”
The perception that there is a slowdown in growth is reflected in the latest Ernst & Young ITEM Club study. The ITEM Club forecasts that UK GDP growth will be 0.4% this year, before rising to 1.5% in 2013 and 2.6% in 2014. According to the Club’s spring forecast, it is now up to UK plc to drive the recovery forward and prevent any relapses.
The Apple and Amazon effect
Worryingly, CEOs are unable to see the major benefits of IT in their own industry and point to the big firms like Apple, Google and Amazon as innovators of IT. Apple easily eclipsed everyone as the most admired company for its use of IT, accounting for 39% of the responses to Gartner's survey. Google was second with 11% share, followed by Amazon at 5.8%.
Raskino said, ”CEOs are not coming up with names of companies that are doing well in their own industries, but they are naming companies that have a reputation of IT.”
He argued that the result for Apple may be superficial, since the CEOs Raskino spoke to appear to like Apple. But within the retail and manufacturing sectors Apple appears to exhibit the best revenue per square foot for retail shop space and has a supply chain management that means it can get a new product onto the shelves in two months, he said.
According to the Gartner report, any paranoia CEOs have about a company (such as Google or Amazon) coming after their industry one day probably has some validity. CIOs should spearhead the development of an information strategy for their firms, concentrating, in particular, on new kinds of information that might lead to industry disruptions and transformations.
While there are plenty of individual examples of smart use of IT – such as the pay-per-use financing of aircraft engines pioneered by Rolls Royce, Raskino said CEOs had very few examples of businesses that have changed through the innovative use of IT.
“There are far less case studies than in the 1990s,” he said. This was the time many traditional businesses first started using IT to improve business processes and optimise supply chains.
He said CEOs today should be worried about the demise of Kodak due to digital photography, as it shows how a business that sticks to its core values can fail to adapt to changing business conditions. Kodak not only pioneered low-cost, convenient film photography, it also invented the world’s first digital camera. He said, “It is not good enough to make one small part of your company innovative.”
Part of the problem for companies is that they lack true innovation programmes, said Raskino: "The finance director is closest to the CEO on strategy. But it is not the CIO or CFO who lead innovation programmes.”
In the Gartner survey, 30% of CEOs said they were primarily responsible for innovation programmes. Other directors, senior management and business unit heads took on some of this responsibility. However only 4% of CEOs directly mention CIOs, while CFOs were never mentioned, Raskino said.
In the survey, most CEOs said their CIOs do not report to them. The reasons given for reporting lines to the CFO and COO were things such as cutting the cost of IT or because it is not seen as strategic, Gartner stated in the report. In an age of such digital disruption to business, and when six of the world's 10 most powerful brands are technology firms, we are left wondering why the CIO role remains so under-invested, said the analyst. Perhaps, it's because many of today's CIOs are not perceived as capable of general business leadership, Gartner stated.
Raskino blames the industry for hyping IT: “In every airport in the world there are banner adverts for cloud computing.”