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Why the rise of IT managed by the business is driving creative thinking

Organisations that encourage business units to implement and run their own IT systems have an edge over competitors that rely entirely on the IT department, research from Harvey Nash and KPMG reveals

The past five years have seen a steady rise in the proportion of businesses where more than 10% of tech spend is managed outside the IT department – from 32% of organisations in 2014 to 43% today. With the rise of software as a service (SaaS), managed services and low-code environments, this trend will only increase.

There was a time in the recent past that CIOs were solidly unified against the business acquiring, implementing and running technology outside the IT function. It was given the pejorative term shadow IT, but today’s reality is that, as long as it is well governed and controlled, progressive businesses are accepting and even encouraging it.

The latest Harvey Nash/KPMG CIO survey shows that almost two-thirds (63%) of organisations at least allow shadow IT, and one in 10 actively encourage it. Younger businesses born in the past 10 years are almost twice as likely to encourage collaboration between business and IT as the global average, and many of these companies are delivering higher returns in almost every dimension.

This enlightened approach to collaboration is one of the key differentiators of a digital leader. Good CIOs know that one of the most powerful things they can do is put technology in the hands of those people in the business who are creating value. If you give these people the right tools and guardrails to use them, the organisation will reap the performance benefits.

The supporting evidence in the survey is quite clear. Organisations that actively encourage business-managed IT are likely to be significantly better than competitors in a whole host of factors, including time to market for new products (52% more likely to be “significantly better than their competitors”) and employee experience (38% more likely to be “significantly better than their competitors”).

Of course, having parts of the business manage some technology themselves does not mean the IT team simply lets go of all control and leaves their colleagues to get on with it. Rather, it’s a scenario where the IT team acts as an advisor or broker to the business – a champion of tech – helping the business make the right decisions and source the right skills to fulfil them. It’s about acting as a team, where IT and business functions recognise that they can greatly improve customer and business outcomes if they work together.

“Today’s reality is that, as long as it is well governed and controlled, progressive businesses are accepting and even encouraging shadow IT”
Steve Bates, KPMG

Clearly, there is a need to reimagine central IT governance and control. There are risks to giving non-technologists access to systems. These range from explicit risks, such as privacy, regulatory or security, to implicit risks, such as the danger that overall costs will rise if investments are not coordinated. Digital leaders ensure there is a process in place to give them transparency across the technology estate and that there is a cross-functional leadership team involved, at least in an advisory capacity, in the decision-making for business-led investments.

Just as we see the benefits in the survey of good business-managed IT, so we see the risks of it when it is not handled well. Those organisations where the IT team is not involved in their business departments’ IT decisions are twice as likely to have multiple security areas exposed and 9% more likely to have been targeted by a major cyber attack in the past two years.

The rise in tech spend managed outside the IT department is only going to continue. It’s inevitable, given how fundamental and accessible technology has become in driving business strategy. There is no point in CIOs trying to slam the lid shut on it with centralised control. Instead, they need to be aware of it and involved with it, helping direct technology to where the value is and getting the right outcomes for the business.

This was last published in June 2019

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