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Apr 16 2014

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Is the IT department, as we know it, on its way out?

Although IT is essential to most businesses, a recent survey by analyst firm, McKinsey, suggest that executives are becoming less satisfied with the role and performance of IT in their organisations. Could the IT department, as we know it, be on its way out?

Joining Society by jscreationzs (FreeDigitalPhotos.net)Across virtually all organisations, regardless of size, Information Technology (IT) is critical, as it fosters productivity, communications, connectivity, and business efficiency, among other things. In larger organisations, it may be necessary to have a dedicated IT department to ensure those operations are being properly maintained and support the larger organisational goals and objectives.

However, the recently published findings of a McKinsey Global Survey on business and technology strategy indicate that although business executives might appreciate the strategic value of their firm’s IT departments, increasingly, they are having some difficulty with those departments’ role and performance. In this article, we highlight some of the key findings of the survey, along with changes that might be necessary to allow IT departments to thrive.

Changing priorities

Traditionally, the primary purpose of IT (and consequently IT departments) has been as a cost centre – it costs a firm money to operate but does not contribute directly to the firm’s profit, which was corroborated by the results of earlier McKinsey surveys. However, in the most recent exercise, respondents identified the following IT priorities in order of decreasing importance:

  • improving effectiveness of business processes
  • improving cost efficiency of businesses
  • providing managers with information to support planning and decision-making
  • reducing IT costs.

In light of those results, executives expect that in the short- to medium- term, spending on IT infrastructure will decrease. Instead, priority will be given to areas such as innovation and analytics, which have become major buzzwords globally, but also reflect the heightened environment that exists.

Have IT departments become stuck?

Although the strategic value of IT in organisations is not being disputed, respondents were less satisfied with the performance of IT departments than they had been in previous years. Having said this, there was some consensus that IT departments best facilitated organisations in matters related to (in order of decreasing importance):

  • the sharing of knowledge
  • delivering year-over-year productivity gains
  • tracking customer or segment-level profitability
  • creating new products, and
  • entering new markets (Source: McKinsey).

Interestingly, IT executives were less conciliatory about IT departments than the overall pool of executives surveyed, which again was far less favourable than the results of earlier exercises. For example, IT executives were of the view that their departments were less effective in areas such as:

  • introducing new technologies faster and/or more effectively than competitors
  • targeting areas in organisations where IT can add the most value, and
  • driving technology enablement or innovation in business processes and operations (Source: McKinsey).

What might be required to change the status quo?

Overall, the general sentiment of the latest McKinsey survey appears to be that IT departments are not effective or as aligned with corporate needs and imperatives as they should be. Both IT and non-IT respondents were of the view that the most important ways of improving IT’s performance were to:

  • improve accountability for IT-related projects
  • reallocate IT budgets to focus on critical drivers of business  value
  • improve overall level of talent and capabilities of IT staff
  • improve governance processes and oversight
  • increase IT budgets and technology spending, and
  • replace IT management with new leadership (Source: McKinsey).

Ironically, the above views and concerns are not unique. During the Analyst Keynote at Gartner Symposium/ITxpo held last October, Peter Sondergaard, Senior Vice President, Research, indicated that there was a crisis in IT leadership. Among other things, Gartner’s investigations found that around half of the Chief Executive Officers surveyed wanted better direction from IT departments; but the Chief Information Officers were generally happy with the status quo. Ultimately, the role of IT personnel and departments is changing.

Historically, and as indicated earlier, IT was seen as a support service. IT was not invited to sit at the boardroom table to help shape an organisation’s strategy, but instead, would be required to facilitate the agreed direction. Consequently, the emphasis in recruitment for IT – from the manager to the technicians – was, almost exclusively, on technical competence, but typically, with a silo approach: hardware; software; programming; etc.

It should therefore come as no surprise that although IT is now being invited to sit at the executive table, thanks to positions such as Chief Technology Officer, Chief Information Officer, and Chief Digital Officer, essentially, the skills and competencies in that department have not changed. Some of the reasons for this current and persistent situation include difficulty in finding, developing and retaining talent, especially since job descriptions must be broadened to include business experience, in addition to technical/IT competence (Source: McKinsey).  As a result, and at least over the next year, organisations will be challenged to secure talent that can address priority areas such as analytics and data science, mobile and online development, enterprise application architecture, and cloud and distributed computing (Source: McKinsey).

In summary, in order for IT departments and their staff to remain relevant to organisations, they must change to better align themselves with current needs and imperatives. Sadly, many managers and executives might realise that there is a problem, but may not fully appreciate that the entire ecosystem – including their own organisations, academia, and even the society at large – are yet to catch up with the demands of today’s business.

 

Image credit:  (FreeDigitalPhotos.net)

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About the author

Michele Marius

Michele Marius has a wealth of experience in the telecoms and ICT space, which has been gained in the Caribbean, Southeast Asia and the South Pacific, and in the public and private sectors. She is the Editor and Publisher of ICT Pulse.

Permanent link to this article: http://www.ict-pulse.com/2014/04/department-it-out/

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  1. Robert Flatters

    IT departments are constantly having to keep up with the latest developments as the demand from other departments for faster machine, slicker software and better and quicker internet access. As well as keeping the staff trained and paid industry rate of pay and at the same time working to tight budget constraints.

    1. Michele Marius

      Though I agree with you Robert, I think the bigger issue is that the business world wants the role of IT to evolve, or perhaps more specifically broaden. What you describe is inherently a technician’s role.

      IMO, what organisations are looking for is greater a contribution from IT to shape strategy, along with more a sophisticated suite of skills and competencies to make those organisations even more cutting edge and competitive.

      Hence although infrastructure and hardware is, and will continue to be important, I think more “softer skills” are being demanded, and that is where the challenges lie…

  2. Carlton Samuels

    Good, they got! But the blame must be evenly distributed.

    Yes, we have some sclerotic organisations and practices to overcome. And yes, we need to change the conversation and the terminology we use to convey ideas. It is a long hard slog; years ago I attempted to sell ATMs to a Canadian bank that shall remain nameless. So we flew to the head office and we began the conversation by me telling the fella that our plan was to help them to improve market presence and the service to the market channels. He looked at me and asked what that had to do with ATMs! He never got it that his principal business was buying and selling money – and most definitely, the information about money! – using various transactional models!.

    The problems of technology integration and useful purposes in business are largely about keen understanding of business processes…and the interventions necessary to meet set objectives. And often times technology plays the smallest but a most, if not the most, critical role.

    The C-level ICT folks are now at the executive table but most of us are still suspected of having knowledge ONLY of technology. And some of that is largely our own fault; we do not speak up at meetings, we do not insist on information and analysis of same as pre-requisites for decision-making, we do not emphasize the feedback loop of that virtuous circle and the role of analytics in driving it, we rarely challenge decisions made even when the logic – or the plain evidence of your own 2 lying eyes – demand we do,

    I always tell my colleagues to know the business you support, the market models employed for gain and the key flex points. Then learn how to read financial reports and balance sheets. And do not ever leave those discussions alone with the financiers and MBA-types; like the law and lawyers, they are far too important to cede the field to them.

    Focus on results. If you know those and you study the processes via which they are delivered, you will see ways to enable better outcomes utilizing technologies.

  3. Kamutula

    Carlton:

    Couldn’t agree more. What business one is in, largely shapes and determines the place of IT. In a retail setting, which at its simplest level, is about buying and selling goods at a MARGIN, IT must be able to recognise exactly that: buying and selling goods at a margin.

    If you sit at the table and talk about the latest operating system or more efficient servers ( however important that might be ), everything will be going above my head. But talk about how best and cost-effectively you can source goods, move them, and market them, we will be singing from the same hymn sheet.

    When they do that, their role shifts from IT Department, to Strategic Business Support Unit ( or something like that ).

  1. Vol #28 – Beware of those who agree with you @ margueriteorane.com

    […] With rapid advances and breakthroughs in technology and the speed with which business must adapt, is the role and function of your IT department outdated? Does your IT leadership, steeped in technical competence, understand their new imperative? – click to view article […]

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