Your IT overhaul doesn’t need to be cutting-edge, expert says

Toronto, ON – With a record number of Canadian enterprises expected to upgrade their IT infrastructure next year, CIOs need to prepare a game plan that accounts for company resources and support from the C-suite, rather than forcing the latest digital breakthrough on their firms at all costs.

That was the message delivered by John-David Lovelock, research vice president with consulting firm Gartner Inc.’s technology and service provider research division during the company’s 2016 CIO & IT Executive Summit on Wednesday.

Noting that IT spending by Canadian enterprises had remained relatively stable since 2008, with a projected growth rate of 2.2 per cent next year – and that people, rather than technology, remain the average department’s number one investment – Lovelock suggested that CIOs base their IT strategy on one of three “islands”: digital optimization; digital-first; or digital to the core.

Gartner technology expert John-David Lovelock says it’s more important that IT departments have a clear strategy in place than make sure it’s cutting-edge.
Gartner technology expert John-David Lovelock says it’s more important that IT departments have a clear strategy in place than make sure it’s cutting-edge.

“Choose one, and do it well,” he said. “You can’t choose optimization and then try a little bit of digital first… Be laser-focused, recognizing that you’ve got a two- or three-year strategic plan, and say ‘this is what we’re doing.’”

By the end of next year, Lovelock said, the number of Canadian enterprises with a business or IT cost optimization initiative underway will be 400 per cent higher than normal.

The form that initiative should take will depend on an individual company’s risk profile and revenue expectations, he said.

In fact, the majority of enterprise IT departments will choose digital optimization, with the CIO and IT department implementing the best available technical solutions to reduce costs, over expanding the the company’s business – and there’s nothing wrong with that, Lovelock said.

For example, though many believe the cloud has made servers obsolete, they aren’t going away, he said, with Gartner projecting their use well into 2025. The same goes for telephone landlines, which in Canada are often retained because they’re tied to bundles.

“(Digital optimization) is safer, it’s easier, and it offers cost optimization as the first step, so it releases money towards their digital business needs,” Lovelock said. “It is incrementally better than where you are and it’s within everybody’s capacity to do it.”

If other departments are involved with a company’s IT strategy, it can attempt a digital-first approach, Lovelock said – but management cannot expect the same degree of savings at first.

“Digital first requires business and IT to collaborate in a way that they never have before,” he said. “You cannot say that once you go digital first, you’re going to save more money. You won’t.”

“But your agility and capabilities are going to go up much higher than digital optimizers,” he added.

Meanwhile, adopting a “digital to the core” approach means flat-out disrupting your industry – and possibly your own company.

“I don’t want to say that if you’re not in digital to the core you’re out of business in five years – that’s ridiculous,” Lovelock said. “Most will go with digital optimizing, strive for digital first, and only the rare will actually be digital to the core and try transforming the industry that they’re in.”

Lovelock used the hospitality industry to illustrate the difference: Days Inn, for example, only recently upgraded its software and began inviting visitors to book online, while hotel chain Marriot takes a digital-first approach, matching guest preferences to consumer profiles so that, for example, its staff are notified when a frequent traveller is likely to wake up in the morning and what they’re likely to order for breakfast.

AirBNB, meanwhile, is digital to the core: Its directors neither own nor wants property. Instead, their business serves as an aggregate for thousands of novice hotel owners.

Of course, AirBNB is also currently valued at more than $20 billion USD.

“There is lots of money and business progress to be made in digital optimization and digital first… but it’s for the few,” Lovelock said.

Since 2008, the average Canadian enterprise’s IT budget has only increased by around five per cent, with spending expected to reach $100 billion next year.

Moreover, $93 billion of that was spent on employees, in departments such as internal services and IT outsourcing.

Lovelock noted that spending on human capital is likely to remain high well into the future, since most companies are better off hiring experts to implement their newest equipment, especially at first, than training current employees in its use.

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Jim Love, Chief Content Officer, IT World Canada

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Eric Emin Wood
Eric Emin Wood
Former IT World Canada associate editor turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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