As the economy recovers in Central and Eastern Europe (CEE), returning IT investment has changed CIO roles from supporting the business to driving business growth.
According to IDC whitepaper The next step for CIOs in Central and Eastern Europe, board members in CEE enterprises expect CIOs to assist in developing business to a greater extent than before. IDC conducted 200 interviews with both CIOs and CEOs from large CEE companies.
“The present state of technology development provides CIOs in CEE unique capabilities,” said Michel Clement, head of Oracle in CEE region.
“Cloud, mobile technologies, big data and modern database technology can radically increase efficiency of business.”
A more forward-looking approach to IT tools is emerging among CEE enterprises. CIOs have found more business activities with less IT hardware and software can be achieved in a company through restructuring the whole IT ecosystem.
CIOs are moving toward a more comprehensive, enterprise-wide transformation of their IT resources. And this change should enable them to keep pace with the constantly changing business needs of their organisations.
Cost reduction bordering on the obsessive
Regardless of the IT development needs of a company, reducing or at least controlling costs remains the central priority of many senior IT managers. Following the attitude of the board, the CIO must adopt a cost-cutting approach; 60% of CIOs who participated in the IDC survey considered cutting costs a high priority. Many highlighted their principle task as negotiating lower prices from IT suppliers.
“For several years, our company has followed strategic principles that assumed IT spending reduction, aggressively negotiating lower prices, reducing levels of service and lengthening upgrade cycle,” said Tibor Kovacs, IT manager at K&H Bank.
With many similar statements, IDC argues that, in recent years, IT services contracts in CEE have generally become shorter and more focused, addressing single business IT issues or challenges. The focus on savings may improve a company’s finances – but it also sometimes weakens the strength of IT support.
“This is short-sighted and has started to reduce IT agility, with IT environments being pieced together through discounted purchases. Moreover, it fails to proactively focus on areas that can generate revenue,” said Mark Yates, CEE research manager at IDC. “Additionally, we noted a number of symptoms indicating that such approach becomes outdated."
CIOs in other parts of the world are already breaking free from the cost-reduction mentality and looking for ways to drive business. IDC research in Western Europe suggests that shift toward value creation is catching on. In 2014 it surveyed nearly 800 IT buyers and reported that around 46% of IT services spending is directed toward projects and technologies that drive revenue, increase customer satisfaction and help companies meet their business goals.
The CIO as intermediary and visionary
According to IDC survey, around 45% of IT projects in CEE companies are paid for and driven by particular lines of business. Business managers recognise IT is crucial for competitive advantage.
“It explains why today more than 50% of CIOs say IT is a key driver of revenue generation. Now business managers are insisting on solution deployments that would once have taken years to be completed – but now should be ready in months or even weeks,” said Yates.
CIOs work under rising pressure from colleagues. CFOs and auditors demand tangible results from IT investments. Task completion speeds must be improved. New interfaces and office management software must be perceived as more user-friendly. CIO must work as intermediary and visionary with other managers working in their respective departments.
“It is often up to CIOs to create business agility by connecting systems that collect data about income-generating activities with accountancy, tax and finance applications. And these systems must be connected to databases that hold information about customer behaviour and HR efficiency,” said Yates.
The CIO as an agent of needed change
CEOs and CIOs in CEE do not quite see eye to eye on statements collected by IDC. Both sides present different points of view for several questions. Some 66% of CIOs are convinced IT can help to improve business processes, but only 43% of CEOs agree with this. It is meaningful that this tendency is reversed when such a question is put: Can IT help to reduce costs? Some 52% of CEOs believe it is possible, but only 46% of CIOs share this conviction.
What do IT spending plans for 2015 include? Nearly 50% of respondents declared expenses for implementing or upgrading enterprise application, 47% said PC refresh, 40% infrastructure consolidation, 38% business intelligence or analytics (including big data), 34% server virtualisation, 33% mobility integration and management, 30% advanced security systems, 26% network related issues and only 19% outsourcing IT services.
Implementation and upgrading enterprise resource planning (ERP), customer relationship management (CRM), human resources management (HRM), supply chain management (SCM) and other management applications are ranked as top IT priorities. They are essential for improving business processes and – indirectly – boost cost reduction. Now they are both top business rules. Furthermore, more than one third of big enterprises in CEE invest in business intelligence and analytics, including big data, to better identify business opportunities.
“Rapid growth of data is a challenge, but not for storage systems. These are two to three years ahead of most companies needs. Proper data analysis is decisive for achieving competitive advantage, but today this is more of a business obstacle than purely technical," said Ales Bartunek, general manager, IBM Poland & Baltics. “However companies expect CIOs will just play the role of change agent that is needed.”
The main challenges CIOs face
In CEE, enterprises are already facing a surge of structured and unstructured data, especially from remote locations. Consequently, storage costs alone run to as much as 10% of all IT expenditure. Simplification has become a top priority to managing the rising volume and variety of data.
“IT infrastructure and lots of legacy systems are causing high maintenance costs that exert a pressure on IT and business processes. As a result here and there appears bottleneck we have to face,” said Łukasz Krause, CIO of the Polish energy organisation, Tauron Group.
How do CIOs cope with such challenges? IDC noted the following remedies: reducing the number of systems, establishing service-oriented architecture (SOA) environments through application programming interfaces (APIs) and middleware, creating enterprise-wide dashboards and automating routines from hardware to application level, but consolidating IT resources is assumed to be the best response to IT sprawl. Some 86% of enterprise surveyed have already consolidated their datacentres to a single location.
“Consolidation improves capacity utilisation, eliminates redundancies and duplication of systems and decreases energy consumption. Virtualisation of server and storage assets is a core element of consolidation as it helps streamline system administration and allow for dashboards, monitoring, metering and chargeback. This all lays a foundation for the deployment of IT assets to cloud,” said Leszek Hołda, CEO at Integrated Solutions, Orange subsidiary.
While many CIOs surveyed seemed to be reluctant to use cloud, a significant number suggest they are moving toward adopting cloud technology. More than 32% already use a private or hybrid cloud environment. Some 16% use public cloud infrastructure and applications. IDC predicts that software as a service will be a new paradigm for the next few years.