CIOs Must Respond to Expectations that IT Makes the Company More Competitive
Egham, UK, 23 January 2006 – Chief Information Officers (CIOs) will come under increased pressure in 2006 to perform whilst they transform their IT organisation to become more externally focussed, according to a worldwide survey of 1,400 CIOs by Gartner Executive Programmes (EXP), a unit of Gartner Inc. Gartner said executives now expect IT to play a significant role in business growth and competitiveness, a shift that will accelerate in 2006.
The survey found that worldwide IT budgets are expected to increase by an average of 2.7 percent in 2006. This compares to an increase of 2.5 percent in 2005 and represents a modest budget increase for the third consecutive year. Growth is on the CIO agenda as IT budgets at companies planning to grow faster than the market are increasing by an average of 4.8 percent.
Gartner EXP surveyed 1,400 CIOs in more than 30 countries, representing more than U.S. $90 billion in IT spending*. The findings are presented in the report “Growing IT’s Contribution: The 2006 CIO Agenda”.
“The survey results make it very clear that business expectations of IT have changed dramatically and executives are expecting their CIOs to move beyond concerns about cost, security and quality to help grow the business,” said Marcus Blosch, vice president and research director at Gartner EXP. “Last year saw the beginning of a transformation that is intensifying in 2006.”
As a result, the survey found that business process improvement – making a company easier to do business with – is the top business priority for CIOs for the second consecutive year (see Table 1). In addition, 2006 will see CIOs become more externally focused; helping the business to grow customer relationships, improve competitiveness and increase overall efficiency.
|Top 10 Business Priorities||Ranking||Top 10 Technology Priorities||Ranking|
|Business process improvement||1||Business Intelligence applications||1|
|Controlling enterprise operating costs||2||Security technologies||2|
|Attracting and growing customer relationships||3||Mobile workforce enablement||3|
|Improving competitive advantage||4||Collaboration technologies||4|
|Improving competitiveness||5||Customer sales and service||5|
|Using intelligence in products and services||6||Service Oriented Architectures (SOA)||6|
|Security breaches and disruptions||7||Workflow management||7|
|Revenue growth||8||Networking, voice and data communications||8|
|Faster innovation and cycle times||10||Legacy application modernization||10|
Source: Gartner EXP (January 2006)
Whilst CIOs are playing an increasingly business-focused role, the responsibility for running effective technology operations remains. Commenting on the fact that business concerns over security breaches and disruptions fell from the second to the seventh ranked priority, Dr Blosch said, “This does not mean that security is no longer an issue. Rather, it indicates that in 2006 the business expects IT to be secure and is looking to the CIO to keep it that way.” Overall, the survey found that IT spending on security related tools remains healthy at a projected average increase of 4.5 percent in 2006.
“Business leaders expect CIOs to run an effective technology operation,” said Mark McDonald, group vice president and head of research for Gartner EXP. “With that in place, executives are looking for ways in which IT can make the company more prominent in a competitive market. CIOs are looking to help the business stand out with strategic and innovative use of information, business processes, and intelligence in products and services. They are looking to use technology tools, rather than buying package solutions, to support competitive difference.”
CIO Challenges in 2006
In response to these priorities and changing work patterns, the survey revealed that CIOs see themselves facing three critical challenges in 2006:
Strengthening the ‘information value chain’ – Two thirds of CIOs believe that their competitors make better use of information, creating opportunity for the business and IT. In order to strengthen the information value chain, CIOs and the business are making their communication and collaboration more dynamic based on ongoing business needs rather than according to annual planning cycles.
Building IT business skills – The skills of IT professionals will become the differentiating factor as technologies continue to commoditise. The gap in skills is considerable with seven out of 10 survey respondents recognising the need to build new business skills in IT to deliver business results. Building business skills in the organisation will be a big priority in 2006 with an increased demand for management disciplines such as relationship and sourcing, process design and information design.
Getting closer to customers – Two out of three CIOs still see the business as the barrier to IT increasing its business contribution. Effective CIOs and IT organisations work within the business to get results. Companies looking to grow market share are investing in IT to use information better, to make themselves distinct, and to attract and retain customers. The CIO’s goal in growing IT’s contribution in 2006 must be to change the conversation between IT and the business from one based on “what IT can do for me” to “how we will solve the problem together.”
“CIOs who are doing this effectively today enjoy a deeper business relationship, report to the CEO, and play a greater role in strategy formulation and major decisions,” Mr McDonald said. “The distinctions between companies using technology effectively and those that do not are becoming clearer for the CIO and for the business.”
“This is not a transformation that is going to happen over night,” said Mr McDonald. “We tend to forget that until last year, business process improvement was far from a key priority for CIOs, and ranked only eighteenth priority in our 2004 survey.” Mr McDonald maintained that good progress has been made by many CIOs in 2005 and concluded by highlighting Gartner’s top-level recommendations for CIOs in 2006.
Make time for customers and the “front office” capabilities. Generating growth from the core of your business is the greatest challenge facing executives. Get involved earlier in product development and launch processes. Increasing your direct experience with customers will help CIOs and IT leaders understand the customer context and how information and business tools can address more customer needs.
Build business awareness and skills across the IS organization. CIOs must raise the business relevance of IT services and solutions and this requires increasing business knowledge within IT.
Identify opportunities to use information more effectively. Understanding and applying what you know is a prime source of competitive difference and advantage. As the Chief Information Officer, CIOs should look to enhance the value and quality of information flowing through systems and processes. Improving the use of information to assess and understand customer needs is a particular area of focus as that drives growth and higher enterprise effectiveness.
Remain vigilant on enterprise security and risk management. Security and risk are now assumed to be part of the CIO’s and IT’s responsibility. Continue to invest in processes, people and tools to protect the brand and the business. Executives build confidence and CIOs credibility when they know what to do and practice how to respond.
“Information technology has changed the world and now the world is changing IT as concerns about growth, customers and market needs top the business agenda. In a world of increasing competition and customer choice, IT is rising to the challenge of making a tangible difference in the business,” said Mr McDonald.
About Gartner EXP
Gartner Executive Programs (EXP) is a membership-based organization of 3,000 CIOs worldwide. Members benefit from the convenience of a single source of knowledge, one-to-one counsel, personalized service, the shared knowledge of the world’s largest community of CIOs and the assurance of Gartner objectivity and insight. Additional information about Gartner EXP can be found on the Gartner Web site here.
Gartner, Inc. (NYSE: IT) is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 9,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company’s businesses consist of Research and Events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customized engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has more than 3,900 associates, including more than 1,200 research analysts and consultants, in more than 75 countries worldwide. For more information, visit http://www.gartner.com.