Today’s IT operating models are not sufficient to meet the demands of tomorrow’s business. That’s the bottom line of a recent survey by A.T. Kearney, which took the pulse of some 200 global business leaders.
IT organizations must start measuring their success in terms of the contribution
they make to core business operations, as well as the initiatives that support business strategy, according to the report. For IT executives, that means moving beyond fixing the past and becoming more active in planning their companies’ futures, says Christian Hagen, a principal in the technology transformation practice at A.T. Kearney in Chicago.
“”We’ve seen a paradigm shift of moving from innovative business models, and the bursting of the dot-com bubble to more just the blocking-and-tackling and cost reduction,”” he says. “”As a result of that bubble bursting, companies have been focussed on delivering the goods and driving costs out.””
But the focus on maintaining the IT infrastructure has come at the cost of innovation, says Hagen.
“”Innovation and the focus on innovation from an IT standpoint has left.””
Hagen says IT shops are caught in a rut of solving operational problems and fighting fires, rather than addressing strategic business issues.
In fact, the research demonstrates that since 2002, business and IT alignment has moved in the wrong direction. In the current study, only one-quarter of respondents said they considered IT planning “”fully integrated and developed simultaneously”” with the business. In 2002, one-third of participants said they had a “”fully integrated”” IT planning process. Hagen says IT’s focus on the
bottom line is putting companies at risk for growth opportunities.
“”With the emphasis on cost reduction over the past several years, the IT department has slipped into a cocoon and worked more on the actual delivery of (projects) in a cost-effective way, and not paying as much attention to how (they are) bringing these innovative solutions forward,”” he says.
By not having IT and business strategies aligned, companies are essentially wasting money and resources, say Hagen.
“”Continuing to run your IT shop internally without aligning the business creates complex environments that . . . chew up more resources, cause more fires to be fought, and we’re into this never-ending cycle,”” he says.
While more than two-thirds of business executives said they view IT innovation as important or critical to their companies’ success, the study found only 20 per cent of companies’ IT investment is allocated to IT innovation — a 30 per cent decrease from a similar study conducted in 2002.Thinking outside IT
According to the survey, nearly three-quarters of executives say the best technology ideas in their companies originate outside of the IT department in areas such as corporate strategy, sales, marketing and operations.
As a result of this, IT organizations are perceived by many as unresponsive and not very agile, the study says. Only 41 per cent of business executives believe their IT organizations react well to business change. And, more than 30 per cent of executives believe one-fifth or more of their company’s IT budget is wasted each year.
Hagen says to turn this around, companies have to shift their thinking from a governance and organization standpoint, making sure IT is appropriately positioned all the way up to the board level.