We will pause this week from continuing our Mission Vision Values conversation thread to look back at leading through IT Decisions, focusing on the decisions involving and impacting people.
We first discussed IT Decision making in the February 6th article:
In this article, I focused on IT Governance as a structure to help you align your IT Strategy with the Business Strategy. In support of these concepts I shared two reference books for your consideration:
A month later we discussed the role IT Strategy plays in aligning Business Strategy and IT Strategy.
To Digital Strategy or not to Digital Strategy, is it now still an IT Strategy
In this article, I provided a high–level perspective of the relationship of the digital revolution to the creation of an IT Strategy aligned to the business. I further expanded on that perspective with access to an expansion of the IT strategy framework:
Both references outline proven processes that generated great conversations. Some conversations were very supportive and appreciative of the structure while others were not and some stated that the pace of change in their organization is too fluid to allow for a governance framework. Still others felt they were too small to need a framework. All of these arguments have some merit, but they can’t convince me that there isn’t a need for IT governance.
So why are we back here?
Simply, because too many of my recent conversations with IT Leaders revolve around IT budgeting and roadmap development struggles. Most people who spoke to me were raising concerns that their business was expecting more with flat or declining capital and operating budgets while still looking to grow the business. The last time I saw these heightened levels of concerns was right before and during the 2008 crisis. Realizing this caused me to ponder and research what might be happening. To my frustration, my research revealed conflicting positions.
As I am not an economist by any stretch, I can only guess based on what I have been hearing, seeing, and reading. I believe that some of the issues are being generated by the uncertainty of the political climate in our world. One can only wonder and question how much of an impact trade disputes and other geopolitical tensions are having around the United States. How about the still-unresolved Brexit saga casting a shadow over the UK’s economic prospects in Europe or the trade tensions generated by China’s conflict with Hong Kong.
To further inform us of the impact of the economic situation and to inform of us of a state of contrast, Gartner published a report in July 2019 that provided a more in-depth analysis. I am sharing a few paragraphs here with encouragement to read the article;
“Worldwide IT spending is projected to total $3.74 trillion in 2019, an increase of 0.6% from 2018, according to the latest forecast by Gartner, Inc. This is slightly down from the previous quarter’s forecast of 1.1% growth.”
“Despite uncertainty fueled by recession rumors, Brexit, trade wars and tariffs, we expect IT spending to remain flat in 2019,” said John-David Lovelock, research vice president at Gartner. “While there is great variation in growth rates at the country level, virtually all countries tracked by Gartner will see growth in 2019. Despite the ongoing tariff war, North America IT spending is forecast to grow by 3.7% in 2019, and IT spending in China is expected to grow 2.8%.”
“Although an economic downturn is not the likely scenario for either 2019 or 2020, the risk is currently high enough to warrant preparation and planning. Technology general managers and product managers should plan out product mix and operational models that will optimally position product portfolios if a downturn should one occur” said Mr. Lovelock.
Further research did not reveal any real surprises. I was expecting and found that cloud applications and cloud infrastructure are the top priorities for US companies with a net 80% and 61%, respectively increasing spending in these areas. Legacy systems integration (24%) and data center automation (1%) have the least spending options. None of this was out of alignment with what I am hearing from my clients.
Where I was surprised and perhaps disappointed was in learning that IT Staffing levels are expected to be fairly flat at a time where digitalization, A/I, and security concerns are driving the need for talent at record highs. The impact the budget had on both internal and outside resourcing resonates with my clients.
In my search for answers, I came across the Harvey Nash KPMG CIO Survey 2019. In it I believe I found a small piece of clarity behind the challenge. The press release opens with dramatic and insightful words:
“Almost two-thirds (63%) of organizations now allow technology to be managed outside the IT department, a shift that brings with it both significant business advantages and increased privacy and security risks”, reveals the 2019 Harvey Nash/KPMG CIO Survey.
“When IT spend is managed away from the direct control of the CIO, companies are twice as likely to have multiple security areas exposed, and more likely to become a victim of a major cyber-attack.
The largest technology leadership survey in the world, analyzing responses from organizations with a combined technology spend of over US$250bn, reveals for those organizations where the IT team is formally involved in decision making around business-led IT, business advantages include improving time to market new products (52% more likely to be ‘significantly better than their competitors’) and employee experience (38% more likely to be ‘significantly better than their competitors’).
However, four in ten (43%) companies are not formally involving IT in those business-led IT decisions.”
The report ends with conflicting statements:
“More technology leaders reported increases in IT budgets under their control than at any time in the last 15 years.
The jump in those reporting increases (from 49%to 55%) is the largest seen, with the one exception of 2010, when organizations were still clawing their way out of the global recession.
For technology projects where the CEO prefers to ‘save money’ almost half (45%) of respondents report budget increases compared to just 38% last year, suggesting many CIOs are investing to save, for instance through automation.”
Why conflicted? Investing to save is an interesting concept. It assumes business understanding of the drivers behind the savings and the commitment of ownership to achieving it, including the trailing costs of transformation. There is a cost to every decision made along with tradeoffs and implications.
Investments made without IT involvement are pretty daunting as support costs are most likely not included in the ROI or operating budget planning until they are in production. This situation puts the burden on IT to absorb the expenses often under unreasonable expectations. This, too, resonated with my clients.
Still, in 2019, I see business leaders with the aspiration of organic growth and expansion through acquisition without a real understanding of the operating cost impact of their decision. I’ve seen, in several cases, the genuine expectation that the existing staff can absorb expansion and growth without the need for additional resources.
To CEO’s, CIO’s, and other business leaders that believe this can be – I caution you. I get that change is happening faster than most IT organizations can keep up with and in many cases than what organizations can afford. In these cases, strong governance becomes even more critical to maximizing investment and to assuring ownership and commitment to execution.
I am happy to discuss with anyone who has an interest.
We will continue our discussion next week by looking at values.
Until next week!
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