Technology investment returns to the CEO agenda

Analysis

Technology investment returns to the CEO agenda

Cliff Saran

For the first time in nearly a decade, CEOs believe technology can make a difference. But is the CIO best placed to drive the technology business agenda?

Despite industry hype, IT has largely followed the arguments set out in Nicholas Carr’s 2003 Harvard Business Review article, 'IT doesn’t matter'.

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Carr noted that, rather than using IT to gain an advantage, most companies should spend less on technology.

"Between 2003 and 2007, the ideas of Nicholas Carr were almost believed," said Gartner fellow Mark Raskino. "Business IT was about standardisation and outsourcing, and IT was seen as a commodity function. CEOs hired CIOs to make IT more efficient."

Gartner’s latest CEO and senior business executive survey shows business heads have changed their view about technology spending. Raskino said: "CEOs are really interested in technology as a factor in the business, which is something we haven’t seen since 2001."

Gartner asked CEOs to list their top five business priorities for 2014-15. After the obvious ones of growth, cost and profit, the survey revealed technology as the fourth highest priority for CEOs.

Raskino said this shows CEOs now want to take advantage of the digital era, with mobile, social, cloud, big data and online strategies.

"Technology is pivotal," he said. "It is not about internal efficiency any more."

Most of the technologies mentioned explicitly in the survey were those associated with front office/revenue-winning capabilities. The responses made it clear that CEOs' minds were set on applying technology for growth, rather than internal cost and efficiency, said Gartner.

"CEOs want to use technology to help win customers and help staff," said Raskino. "They are looking for growth in home markets because emerging markets are slowing down and they want to make the most of digital marketing."

Being digital means taking a different approach to products and services. Google, for instance, has set the agenda for the car industry by developing an autonomous car.

Gartner also asked respondents about their most important technology-enabled capability investments over the next five years. This year, the top of the list is dominated by "front-office" technology-related capabilities that are used to help in sales and marketing. Gartner also noted strong interest in basing business operations in the cloud and in using data-driven decision-making via business analytics, big data and data science.

CEOs are on a journey to define their business strategy in the digital era. Gartner’s study found that some CEOs do not differentiate between the old-fashioned approach to IT and this new era. Raskino said many are still on the e-commerce page in terms of their strategy, dating from 2003. According to Gartner, only a quarter really understand where digital is heading, such as the use of mobile commerce and the internet of things. "Few CEOs would consider an app [could be used] to start your car," said Raskino.

The IT challenge

While CEOs struggle to get to grips with this emerging digital era, CIOs are stuck in a pre-recession time warp, where cost control was regarded as a top priority.

A survey of more than 100 C-level executives conducted by Wakefield Research for Avanade reported that 37% of budgets allocated for technology in 2014 is now controlled by business departments outside IT. This means that more than one-third of a company’s total technology purchase is made by business people who do not report to the CIO.

Digital leaders need to set the agenda, and no existing business head is providing this creativity

Mark Raskino, Gartner

Raskino added: "If you look at CIO strategy documents and strip off the logos, they could be from any company. CIO business orientation covers SLAs, and the function of IT departments, rather than the business. Digital leaders need to set the agenda, and no existing business head is providing this creativity."

From a CIO strategy perspective, the digital era cannot be bought off-the-shelf, said Raskino. "It is not a package of competencies, unlike ERP, CRM or supply chain management. There are no frameworks, organisational structures or people who can be hired from a consulting firm to tell you how to change your business."

The digital era is more about a way of operating, such as considering how social or mobile technologies change the bottom line. The return on investment is less clearly defined compared to a traditional packaged IT solution.

Raskino warned that the CIO's role was type-cast. "CIOs have lived under cost control and don’t look like agenda-setters," he said. "This will cause a lot of CIO churn.

"CIOs used to order the next package from the IT industry. Now business has to be creative, and IT is not set up for creativity and agenda-setting, which is why CEOs are hiring digital leaders."

CEOs need CIOs who are agenda-setters, said Raskino. It is all about leadership and CEOs need confidence in the ability of people to set the digital agenda.

CEOs will find it hard to hire the right people to fill the role of digital leader, said Raskino. "There are some digital leaders in retail and media who have been doing 'digital' for 10 years, and there will occasionally be people from marketing and consulting firm backgrounds. But true talent is in short supply and home-grown talent takes time."

For example, last October, McDonald's hired Atif Rafiq as its first chief digital officer (CDO). Rafiq was previously general manager of Kindle Direct at Amazon and was taken on to lead McDonald's global digital strategy, focusing on future growth in e-commerce, modernising the restaurant experience, and engaging with consumers across the digital landscape.

While the CDO role evolves, IT is largely regarded as a service function to the business. In fact, 35% of companies’ IT departments now act primarily as services brokers, Avanade’s research found. And this is set to expand to 58% over the next 12 months, which is probably not good news for a CIO planning to be at the forefront of the digital era.


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