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?
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.
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.
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