ORLANDO — If you want to be a top performing CIO get ready to increase the number of partnerships at your organization, juggle making innovation a priority while also cost-cutting, and reconsider that ERP investment, advises Gartner Inc.
The good news coming out of the firm’s 2017 CIO Agenda research is that IT budgets are going up. In 2017, there will be a 2.2 per cent rise globally and a 1.8 per cent rise in North America. (The developing regions in Asia-Pacific region are increasing at a faster rate). That’s on par with last year’s increase, and looks good compared to previous years of global flat lines or slight reductions.
The survey, presented here at the annual Gartner Symposium by research director Andy Rowswell-Jones, was conducted with 2,598 CIOs across 93 countries, with companies that are planning a $292 billion total IT spend. But of course, not all IT departments are created equal. Reflecting that, Gartner’s segmented its data into three distinct groups: top performers, typical performers, and trailing performers.
Whether you fall into the leaders or the laggard or somewhere in between depends a large part in where you’re spending that IT budget, Rowswell-Jones says. “If you want to be a digital leader then you have to start thinking about how you allocate resources in your IT budget.”
Overall, IT departments spend 75 per cent of their budget on a formal IT budget – keeping the lights on, deploying technology and maintaining licences. Another 18 per cent is going to specific business unit IT spending, likely towards cloud software deployments. Another seven per cent is marked as “shadow IT” expense for when end-users elect to go outside of the IT department to solve a problem they’re having with a third-party service.
One key trend that set top performers apart from the pack was spending on digitalization projects. Top performers were spending 33 per cent of their budget on digitalization currently and plan to move up to 43 per cent by 2018. Compare that to the typical segment at 18 per cent now and 28 per cent by 2018. For the trailing segment, the numbers are seven per cent now and 16 per cent by 2018.
Gartner defines “digitalization” as the process of moving to a digital business that will lead to new revenue opportunities and change a business model. In his opening keynote, Peter Sondergaard, senior vice president and global head of research at Gartner, described the digital platform as the new infrastructure of society.
“It will change the way people engage socially, digitally, and physically,” he says. “We’ve done this before. We are builders again.”
Despite their focus on modernization, don’t think those in the top performing group of IT leaders didn’t have to penny pinch. Gartner’s survey shows that 55 per cent of top performers have a cost reduction target to hit, more than typical or tailing groups. Though those top performers did enjoy a larger budget increase on average of 4.6 per cent.
“If I’ve proven myself able to manage the budget, able to manage the numbers, then I’m trusted with more money to spend on the right things.”
Building a digital ecosystem
Almost eight out of 10 top performers are active members of a digital ecosystem, another characteristic that set them apart from the rest of the field. Though the number of partners is projected to increase across all businesses between now and 2018.
Top performers were much more likely to say they were running their digital ecosystem than the other two groups. They also used their ecosystems to buy and sell products and services.
Sondergaard offered this advice on connecting to a digital ecosystem with your business: build an API. This serves as a digital touchpoint for developers to help scale your business.
“An active developer community can create more products in a week than you can in a year,” he says. “APIs implement business policies in the digital world.”
One more difference that sets Gartner’s top performers apart that is quite specific – they aren’t investing in ERP.
“Many ERP projects are being invested in, well, because we’ve always invested in them,” Rowswell-Jones says. “Maybe it’s time we had a hard look at those projects.”
Instead, top performers look to be prioritizing investing in business intelligence and analytics technology.