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The latest research from The Hackett Group highlighted the savings well-run “world-class IT departments” can make, but showed IT needs to use more robotic process automation (RPA) to keep pace with digital business transformation.
For a typical company with $10bn in revenue, attaining world-class performance can bring as much as $41m in potential savings annually – relative to the peer group – which could be reallocated to fund digital transformation and innovation initiatives.
The Hackett Group’s research found that the top IT departments are further along in cloud deployment than the peer group. Their portion of technology cost that is cloud-based – software as a service, infrastructure as a service and platform as a service – is 15% greater.
For new software and systems deployment, the mantra for IT needs to be “cloud-first”, in the same way platform development has become “mobile-first”, according to The Hackett Group.
Well-run IT departments tend to have lower operational costs. Looking at the cost of running IT, The Hackett Group reported that world-class IT organisations spend 51% less on infrastructure management, 43% less on user support and 25% less on application maintenance, based on the cost of providing IT for users. RPA can lead to further efficiency gains.
However, the Envisioning world-class digital IT report by The Hackett Group found that IT has been slow to apply robotic process automation.
IT departments in a unique situation
Rick Pastore, senior director and IT research advisor at The Hackett Group, said IT departments were in a unique situation.
“IT staff are expected to help the enterprise transform into a digital business, but IT also needs to transform itself to remain relevant in the future and provide the services required in a digital business,” he said. “Compared to finance, IT has been slow to apply RPA. But there has always been a level of automation in IT processes.”
With the exception of agile, IT departments have been far better at enabling enterprise digital transformation, while their own capabilities have lagged. But this is changing, and research from The Hackett Group found 30% of all IT projects are inwardly focused processes for IT.
One of the key metrics that can be measured to rate the effectiveness of an IT department is its ability to reduce iterative software development cycle time from 12 months to below three months to build a minimum viable product. “Most IT organisations feel they are not where they need to be,” warned Pastore.
The Hackett Group report noted that IT departments were evaluating the use of RPA to automate routine function processes and tasks. For instance, The Hackett Group reported 53% of IT departments expected to have limited adoption or RPA within two to three years.
Over the same time period, 67% said they would have limited adoption of virtual assistants and artificial intelligence (AI) technologies, encompassing machine learning, natural language processing, speech recognition, expert systems and augmented reality.
IT functions where RPA can be applied include server provisioning and de-provisioning; file and folder handling; network and operating system configuration and patching; plus the use of automation for application testing and management.
Read more about AI in IT
Pastore said RPA enabled IT to use more sophisticated automation, especially when augmented with advanced analytics and artificial intelligence.
“If you look at some of the more augmented techniques like AI and analytics, you can have front-end analytics or AI look at patterns such as bug rates and then direct the RPA to take certain actions. This is about using intelligence to augment RPA,” he said.
According to Pastore, RPA could be used to free up valuable staff, who can then be used to work on tasks that add more value to the business. “There is a shortage of skills in IT,” he said. “With RPA in IT, people could be redeployed rather than trying to make do with contractors. They will probably get salary increases.”
The Hackett Group’s research showed the deployment of RPA across the enterprise was increasing beyond market forecasts. Correctly implementing digital transformation in IT should free up capital, but these savings needs to be reinvested to improve underlying systems, said Pastore.
Equally, when RPA is deployed by IT service providers to improve the efficiency of labour-intensive processes, the customer should be able to see the benefits too.
Tony Adams, head of IT outsourcing advisory at The Hackett Group, said that if a service is outsourced to a supplier which uses RPA, you need to ensure the supplier is being creative and more price competitive. You should see more proactive rather than reactive IT services.