Andrei Merkulov -

Big companies face extinction unless they use IT better

Better use of IT could add £100bn to the British economy, says a CBI report into UK big business

A CBI report, sponsored by Oracle, has found that UK big business could boost the economy by over £100bn if they did a better job of digital transformation.

Companies with more than 250 employees generate 48% of UK revenue and employ 40% of the British workforce, according to the big business federation’s report, Bigger, faster, stronger.

But businesses are hamstrung by legacy IT, burdened by bureaucratic business processes and are falling down on cyber security, the report said. 

The press statement released with the report said: “Conventional wisdom has it that large companies always have the resources and ‘knowhow’ to compete. Yet in an age of disruption, many larger businesses are struggling to digitally transform at pace.”

The report contains the stark warning, drawn from CBI member analysis, that 40% of FTSE 100 companies from a decade ago no longer exist in the form they then had.

The £100bn Gross Value Added (GVA) figure cited in the report has its source in an earlier CBI report, From ostrich to magpie, published in 2017.

“Greater adoption of technology could unlock productivity and wage growth,” the statement continued. “The research shows that more adoption, coupled with better management practices, could add £100bn to the UK economy and cut income inequality by 5%. However, only 54% of UK companies believe disruptive technologies play an important role in their organisation – much lower than in countries such as France, Germany, India and Russia.”

In an interview with Computer Weekly, John Abel, Oracle vice-president, cloud and innovation for the UK, Ireland and Israel, said he was surprised by the lack of attention big companies are paying to information security, as is made evident in the report.

“Only 46% of the FT 350 have a dedicated budget for cyber security,” said Abel. “That was quite a surprise to me. And yet the biggest business worth of these companies lies in their data. Data being in silos is a big problem for large companies. We, as large companies, need to realise that in our heritage lies our biggest defence against being disrupted, and no sector is immune from this. Culture is always the biggest issue.”

The report itself, based on research conducted among CBI members, states: “Legacy systems and ageing operating models are continually cited as a major factor preventing companies from undertaking digital transformation projects. Due to their size and longevity, this can be particularly crippling for many large businesses.

“Working across multiple platforms, regions and countries means that large companies will often have years of complex legacy systems entrenched within their daily operations. Changing these systems often presents a significant challenge, especially within older and bigger firms.”

And yet the paradox is that there is value buried in that legacy, says the report. “Legacy systems have value. The insights that can be drawn from the data already held by large firms is often necessary for the continued operation of a firm.”

The CBI report is based on a literature review of UK and overseas case studies, interviews with 23 senior decision-makers within large companies conducted between November 2018 and February 2019, and a roundtable discussion between business leaders, government and trade associations.

Read more about IT and the UK macro economy

Felicity Burch, CBI director of digital and innovation, said: “No business can rest on its laurels when it comes to technology. Big firms must be doing all they can to stay ahead of international competitors and adopt new technologies that will boost productivity and efficiency.

“Many will assume that, with the resources at their disposal, it is easy for large firms to adopt new technology. But a host of challenges, from ageing legacy systems, cyber security threats and agile new challenger firms can make successful innovation feel like hitting a moving target.

“If larger businesses don’t want to become dinosaurs, they need a long-term plan for adoption of new technologies.”

Neil Sholay, vice-president of digital innovation at Oracle, added: “In any digital transformation project, culture is crucial and knowledge is power. Both the latest technologies and connected thinking are needed to ensure the benefits of innovation are felt at all levels of the organisation. Digital innovation is everyone’s job, and everyone should be willing to learn from exemplars in other companies and sectors.

“One of our customers, West Midlands Police, wasn’t unique in the challenges it faced, but is a great example of utilising technology to its fullest. By adopting a shared services model in its back office based on a standardised Oracle software-as-a-service module, West Midlands was able to create £36m in savings and streamline processes for officers. This not only cut resolution time to 24 hours for 80% of operations, it also doubled reported satisfaction.”

One critical so-called “fuel of innovation” recommended by the report is to “bring digital transformation to the boardroom”, adding: “Digital transformation is not an IT project; it requires company-wide change. Leaders need to take a strategic view of their business. The whole board must share the company’s digital vision, commit to addressing the risks, share learnings across departments and be strong advocates for change across the company.”

From his position working with Oracle clients, Abel said this point is often under-appreciated, verging on a cliché. “It’s like canoeing down a river,” he said. “It’s fine until you miss a gate and have to go back up river, and are fighting like crazy to go back upstream. You need an exec pushing you on.”

Businesses and individual business professionals need to “get creative”, said Abel. “Anything repetitive should be industrialised and automated. It’s like artisan work in the medieval period – the skill is what you will be famous for. Don’t be repetitive. The only advantage as a human is to be creative.”

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