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Rise in business-led IT spend increases risks and opportunities

Digitally leading businesses benefit from faster time to market, better employee experience and improved finances, but lack of partnership between CIOs and business units can jeopardise progress, says Harvey Nash / KPMG survey

As more organisations move towards decentralising IT management, new threats and opportunities are arising that directly affect IT leaders, a new study has found.

The role of CIOs in decisions related to technology within organisations is a key theme highlighted in the 2019 Harvey Nash and KPMG CIO survey, which polled 3,645 senior IT leaders across 108 countries and found that 63% of firms are happy for IT to be managed outside the IT department.

At the same time, the survey suggests that budgets under the CIO’s control are the highest for 15 years, with 55% of those surveyed reporting increases, compared with 49% last year.

With resources being ploughed into IT across the whole organisation, partnerships between business departments and IT are more important than ever.

The survey suggests that businesses whose CIO is formally involved in technology decisions are seeing benefits such as a significant improvement in time to market – cited by 52% of respondents.

Companies that are very, or extremely, effective in their use of digital technology – labelled as “digital leaders” in the study – are also more likely to introduce major new changes to products (cited by 55% of respondents) and to focus on making money with tech projects (cited by 76% of chief executives in digital leader organisations).

Such companies also claimed to perform better than their peers in terms of customer experience, cited by 65% of respondents, as well as revenue growth (55%), profitability (50%) and employee experience (38%).

In a scenario where shadow IT is becoming even more prevalent, governance becomes critical, said Steve Bates, global leader for KPMG International’s CIO Advisory Centre of Excellence.

“The key is to create a more streamlined and cross-functional governance function that manages technology through products and portfolios directly linked to business measures, not simply a list of projects,” said Bates.

“As organisations shift to become more agile, connected enterprises, full-stack teams comprised of business, functional and technology professionals will be responsible for the continuous delivery and improvement of their respective products and services.”

“CIOs continue to exert a strong degree of influence and are being joined by a new generation of technology-savvy executives”

Steve Bates, KPMG

Bates predicted that portfolio and product managers will replace traditional project managers in overseeing the delivery of initiatives.

Achieving digital leadership is an aim for many organisations, which is reflected in recruitment demands for senior leaders, according to Albert Ellis, chief executive at Harvey Nash Group.

“The main concern [of organisations] is around digital and disruption, as they try to cope with the rise of competition from places they didn’t expect, such as online platforms,” said Ellis.

“The concept of this traditional IT leader is really now history. They have to be totally business-immersed and understand how their businesses are being disrupted and how to respond to that, which includes supporting marketing, enabling productivity of staff and driving automation.

“Beyond the technology elements, a CIO is also required to have a complete understanding of the overall issues and the complexity surrounding their industry sector. That is seen as essential to driving the digital transformation that organisations need.”  

Issues from the IT-business disconnect

However, 43% of the CIOs polled said they are not being consulted in technology decisions led by the business. This throws up challenges, such as a limited ability to build consumer trust effectively, cited by 23% of respondents, as well as increased security risks.

But despite commanding larger budgets for technology, CIOs also seem to be losing influence, with the percentage of CIOs sitting on the board falling from 71% to 58% in two years, according to the research.

However, Bates does not think fewer CIOs sitting on the board will have a negative impact on business-led IT projects – or even IT projects in general.

“CIOs continue to exert a strong degree of influence and are being joined by a new generation of technology-savvy executives like the chief technology officer, chief digital officer and chief data officer,” he said. “As organisations mature into this new paradigm of a coalition of technology leaders, there will be more effective governance at all levels.

“We are at a moment in time where the CIO is still best positioned to advise the board and senior business leaders on technology and will increasingly have deep subject matter expertise from fellow executives to inform decision-making.”

Beyond the disconnect between business and IT, another issue highlighted by the study is the slow progress in diversity and inclusion, with 74% of IT leaders polled saying related initiatives are, at most, “moderately successful”, with only minimal growth in women on tech teams – rising to 22% this year, compared with 21% last year.

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The study shows that over the past year, there has been no change in the percentage of female technology leaders at 12%.

Lack of sufficiently skilled professionals to drive tech projects is still an ongoing issue, with the skills gap reaching its highest level since 2008, according to the survey.

The areas of expertise that are hardest to find in the marketplace are big data and analytics, cited by 44% of respondents, followed by cyber security (39%) and artificial intelligence (39%).  

According to Harvey Nash’s Ellis, there are early signs of a move towards supporting technical apprenticeships as a way to address the skills issue. Citing his company’s own initiative, he said one way to go could be to look for other character traits in candidates and then provide training for additional requirements.

“We look for characteristics of determination to succeed, ambition and ability to stick [to objectives], then train them for the technical skills that clients need,” said Ellis. “What clients need is mostly people who will stay in their jobs and be part of the future.

“So we are looking for people who are unskilled and therefore have a much longer ramp up into their careers, so clients can get anything between three to seven years out of them.”

The problem with making initiatives such as apprenticeships a way to alleviate the skills gap is the short-term mindset usually seen in companies, said Ellis, and this lack of long-term vision has been compounded in the UK by Brexit.

“We are seeing a lot of eastern Europeans go home now, even though Brexit has not even happened,” he said. “So that [Brexit-related] uncertainty is putting talented IT professionals off [coming to or staying in the UK], so there could be even greater skills shortages. Apprenticeships are a way of addressing that and thinking longer-term, as this [issue] is not going to go away.”

AI adoption and quantum interest

As regards technology trends, the survey noted that the adoption of artificial intelligence (AI) is having a significant impact on business leaders, with many being tasked to use it to improve efficiency (up 17% as a board priority).

The overall expectation of leaders surveyed is that one in five jobs will be replaced by tech within five years, but new roles will make up for job cuts caused by AI and automation (cited by 69% of those polled).

Organisations leading in the adoption of automation technologies such as AI, advanced analytics and robotic process automation (RPA) can obtain real financial benefits, but Bates said the pace of scaling is not fast enough for many organisations to see the gains they had hoped for. 

“There are going to be major jumps in capabilities as organisations mature their data management capabilities and enhance their abilities to teach machines more complicated tasks,” he said.

The rise in AI adoption is also adding more responsibilities to CIOs’ remit as they will need to understand how AI will displace jobs in their organisations, said Harvey Nash’s Ellis.

“It is likely that jobs will be displaced by systems that the CIO has presented to the company,” he said. “So the CIO has to understand elements of human resources [HR] to handle that and work with HR departments to prepare the workforce and think about preparation, transition and communication around how that is going to happen.” 

Another trend highlighted in the report is quantum computing, which, despite its early stages of development, has been adopted by 107 global organisations (4% of respondents), including large pharmaceuticals, energy and financial services firms.

While quantum technology is a potential game-changer – particularly for financial services, pharmaceuticals and biotech businesses, because they require highly complex processes with large quantities of data input and results in seconds – KPMG says organisations are still several years away from broad commercial application of the technology.

“There are significant risks when considering quantum computing,” said Bates. “There are researchers that believe that quantum could make all current cyber and encryption technologies obsolete in the next five years.”

One-fifth (22%) of organisations polled by Harvey Nash and KPMG that reported investment in quantum computing are UK-based, with 19% in the US, followed by 7% for both Australia and the Republic of Ireland.

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