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CIOs ill-prepared for IT changes to enable digital business transformation

Lack of skills, an inability to make the most of advanced analytics internally and slow software development are hampering digitisation efforts

Almost three-quarters of business leaders expect digital transformation to disrupt their industry, according to the latest CIO agenda: Driving value from transformation report from the Hackett Group.

But the study, based on a survey of 160 executives in the US and abroad, in companies with annual revenue of $1bn or more, found that most IT leaders (60%) lack confidence in the resources and competencies of their businesses to execute their transformation strategy.

The Hackett Group reported that 64% of respondents lack confidence in their IT organisation’s capability to support transformation execution. This is all the more worrying given Hackett’s analysis, which predicted that in 2018, IT’s workload will increase by more than the number of full-time employees in IT.

The Hackett Group suggested this would mean that IT needs a 2% productivity boost, on average, just to keep pace. However, it said the largest percentage increases in workload (5%) and IT staff (4.2%) are happening outside corporate IT. Instead, business groups appear to be investing in their own IT capabilities.

Hackett’s benchmark study said: “Digital transformation goals are at least partial motivators for this, in that IT needs to help business units transform and differentiate customer experiences, locating IT resources closer to the end-customer’s facilities.”

Scott Holland, principal and global IT executive advisory practice leader at the Hackett Group, said: “The impact of digital transformation on talent is a critical factor. IT roles are being transformed by digital – more than one in four IT roles are already affected. Current staff are ageing out and millennials show little interest in employers that have not fully embraced digital, and in working for companies located outside of technology innovation centres such as the US West Coast.

“Data savviness, agility/ability to change, and creativity are increasingly critical skillsets that are lacking in most IT organisations. Companies that don’t address staffing challenges more aggressively will suffer, as they fall behind competitors in leveraging new tools, processes and business models.”

Advanced analytics adoption

Hackett’s research found that harnessing disruptive technologies is a major driver of IT’s increasing workload. It predicted that broad adoption of advanced analytics tools is expected to grow by more than eleven-fold in the next few years – the biggest increase of any technology category measured.

Although 56% of businesses that took part in Hackett’s study said they were using advanced analytics in a limited way, over a two to three-year time period, 67% said they expected to be using advanced analytics broadly. The study also found that while only 13% of businesses said they have broad adoption of data visualisation tools in their companies, this figure quadruples to 60% when companies were asked about their two to three-year plans.

The Hackett Group reported that enabling analytics was a top five capability among IT professionals, but only 28% of IT respondents said they will be working on analytics in the coming year. Richard Pastore, senior research adviser, IT executive advisory programme at the Hackett Group, said: “Not enough is being done to use analytics within IT itself.” Analytics could be applied in demand management to help IT run more efficiently, he added.

Another area where IT seems to be falling behind is in the speed of software development. Pastore said: “The speed of development is not where it needs to be; upgrades are taking a lot of time.” While rapid application development methodologies are being applied to new projects, Pastore felt IT is missing out by not applying such techniques to the more routine and time-consuming maintenance areas of software development.

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The Hackett Group identified machine learning and artificial intelligence as hot technologies set to grow within the enterprise. A quarter of the IT leaders who took part in the study said they are using machine learning in a limited way for forecasting and prediction, but 80% expect some level of adoption in two to three years.

Machine learning for discovery and diagnosis will be adopted by 73% of respondents over the same period, and 63% expect to apply the technology for security purposes such as behaviour-pattern and biometric analysis, as well as identity verification.

The Hackett Group recommended that given the inherent complexity of digital tools such as advanced analytics and machine learning, leading organisations will establish IT centres of expertise (CoE) within companies, specialising in providing services wherever they are needed in the enterprise.

Pastore said: “We have seen fairly large companies create centres of expertise.” These comprise a travelling group of experts in a particular technology, who can roam across the enterprise. The CoE teams can be more agile and responsive to the needs of the business, he said.

Although Hackett’s research found that IT leaders consider protecting the enterprise against cyber crime and hacking as their top priority, the main takeaway for CIOs and IT leaders is that there is a shift in budget to support digital initiatives. Overall, the research predicted a significant shift in IT spending allocation, away from operational or “run” processes such as application and infrastructure maintenance, and towards processes associated with planning and building systems.

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