Chief Information Officers (CIOs) expect IT budgets to increase by 2.5 percent in 2005, and believe their focus will be on supporting business growth and results, according to a survey by Gartner Executive Programs
(EXP), a unit of Gartner Inc. In the past few years, CIOs have had to focus on internal efficiency and cost control, while preparing their organization for an economic upswing. CIOs also voiced concerns about their relationship with the CEO and whether they have the right people to meet current and future business needs.
Gartner EXP surveyed more than 1,300 CIOs representing more than $57 billion in IT spending, covering more than 30 countries. Industry sectors include manufacturing 21 percent, financial services 19 percent, public sector 18 percent, consumer products and services 9 percent, professional services 7 percent, high tech and communications 5 percent, utilities and chemicals 7 percent, healthcare and pharmaceuticals 4 percent, education 4 percent and other 4 percent.
"Business expectations are now forcing CIOs to transform the IS organization and 2005 is the year where CIOs must deliver more value and become a contributor rather than a commodity," said Mark McDonald, group vice president for Gartner EXP. "They must do this without large up-front investments and CIOs are turning to business processes and business intelligence to meet this challenge."
Gartner said contributing to business growth starts by providing secure, high quality and cost effective IT services. This is mandatory and a baseline for IT's credibility. It is reflected in the top technology priorities for 2005, where security features at the top of the list.
Table 1 - Top 10 Business and Technologies Priorities in 2005
|Top 10 Business Priorities||Overall Ranking||Top 10 Technology Priorities||Overall Ranking|
|Business Process Improvement||1||Security enhancement tools||1|
|Security breaches and disruptions||2||Business Intelligence applications||2|
|Enterprisewide operating costs||3||Mobile workforce enablement||3|
|Supporting competitive advantage||4||Workflow management deployment and integration||4|
|Data protection and privacy||5||Enterprise resource planning (ERP) upgrades||5|
|The need for revenue growth||6||Storage Management||6|
|Using intelligence in products and services||7||Voice and data integration over IP||7|
|Focus on internal controls||8||Customer relationship management (CRM)||8|
|Shortage of business skills||9||Business process integration tools||9|
|Faster innovation and cycle
Source: Gartner EXP (January 2005)
CIOs believe that business process improvement and strategic use of business intelligence will be most significant in delivering IT's contribution to business growth in 2005 through 2008. Pressure for greater profitability, faster innovation and growth requires enterprises to be more agile. That means doing things better, not just cheaper and faster. These pressures force a move towards business process improvement and integration. The focus on business intelligence reflects the need to identify and find new sources of business growth.
"Business process improvement has been a focus for IS organization for 20 years, however, it is no longer about making individual processes within a business unit or geography faster," said Marcus Blosch, vice president Gartner EXP. "The latest wave of business process change, business process fusion, provides the opportunity to re-engineer processes end-to-end from the customer perspective and integrate previously autonomous business processes, information and application software across business units and geographies."
"Building on these 'fused' processes, business process innovation can link process execution with business intelligence to exploit opportunities for growth, efficiency and customer service," Mr. McDonald added. "Enterprises with strong integrated business processes are already gaining results from a focus on innovation. Extending the CIO and IS role into business process innovation will contribute business value without large up front investments."
CIO Challenges 2005
CIOs reported that they face three critical challenges for 2005:
- CIO/CEO relationship -- Two thirds of CIOs see themselves as 'at risk' based on the CEO's view of IT and its performance. To address this, CIOs need to raise and stabilize the quality of IT services and provide measures that clearly demonstrate the contribution of those services and their ability to deliver growth. This needs to be articulated in business terms understood by the CEO.
- People and skills -- Only 39 percent of CIOs believe they have the right people to meet current and future business needs. Additionally, only 20 percent of CIOs who put business process improvement in the top 5 priorities for 2005, believe the IS oganisation has the necessary skills to implement this. This skills gap must be addressed before enterprises can leverage this opportunity. 51 percent of CIOs also reported concerns around an aging workforce as a result of difficulty in attracting new people with the right skills to meet the new requirements.
- The changing role of IT -- The move towards greater involvement with business process and business intelligence will transform IT's role in new ways. This will force changes in IT governance, business relationships and accountabilities, and the overall shape of the IT organization.
The transformation to business contributor requires CIOs to excel in three distinct, but related roles:
- Senior technology executive responsible for leading the IS organisation.
- Technology leader responsible for applying technology to enterprise challenges.
- Member of the executive team, who needs to develop business, technology, leadership and personal skills.
"Being a 'new CIO leader' requires finding the right balance across these roles," Mr. Blosch concluded.
Additional information is available in the Gartner EXP report: Delivering IT's Contribution: The 2005 CIO Agenda.