IT Driven Investment Is a Thing of the Past — Use IT Budgets to Invest in Your Business, Gartner Counsels
Gartner scenario for IT organisations: delivering alliances, change and growth
Egham, UK 18 October, 2004 — The outlook for IT organisations and service providers is for accelerating change in most aspects of their roles and structures and for a major increase in complexity. In a preview into this year's Gartner Symposium/ITxpo, Gartner underlined how, in the coming years, business partnerships and integration of services will become critical centres of IT value, while multi-sourcing will be the standard delivery model. This will drive new styles of IT organisations, new roles for IT services businesses and new challenges for CIOs.
Many companies have experienced significant improvement in their markets throughout 2004 and Gartner said IT leadership teams must change from a cost-containment orientation to revenue enhancement and growth. The next three years will differ dramatically from the previous four for most IT management teams.
Drivers of Change for IT Organisations and Service Providers
According to Gartner, five key trends will drive change for IT organisations and service providers:
The use of external service providers will continue to grow; strategic sourcing and supply/demand alignment will become critical processes.
Enterprise partnerships will become a critical focus of IT value.
The growing business focus of IT value and business transformation requires new leadership styles.
The scope and importance of IT continue to grow in all industries and geographies, despite threats to its credibility.
Business pressures for consolidation and federalisation increase IT technical and relationship complexity. Application integration and architecture are vital inside and outside the enterprise.
According to John Mahoney, Managing Vice President, IT Services and Management at Gartner, this presents an excellent opportunity for CIOs to enhance credibility and influence business strategy. However, he warned failure to understand this shift in environment also presents tremendous risk to the health and possibly survival of the business as a whole.
"The top issues for IT management transformation through 2008 will be to enable business agility and growth, control IT costs, deliver quality service and demonstrate value for the business — all at once," said Mr Mahoney. "The list goes on to include moving from owning IT to contracting for business service; blending technology, process and business skills organisation-wide, and maintaining integrity of corporate systems despite the invasion of consumer devices into the business environment."
"The massive shift in role and responsibility that we foresee will fundamentally change the IT organisation as we know it today. We predict that by 2008, 50 percent of IT organisations will refocus on brokering services and shaping business demand, rather than on delivering IT services directly," said Mr Mahoney.
"Furthermore, by 2009 design and management of business processes and relationships will supersede management of technology as the leading value contribution for more than 50 percent of former IT organisations in $1 billion-plus enterprises and for more than 30 percent of existing IT services businesses."
Effective fusion of business, technology and business relationships will be critical. Gartner predicts that businesses that understand how to generate real business advantage from fusing technology, business process design and business relationships will outperform those that do not by at least 15 percent per year.
Organisational and Business Models for the Future
Organisational and business models will need to change significantly to accommodate and profit from this shift. Gartner forecasts that at least one-third of 2004 CIO roles will transform or disappear by 2009. One of the most fundamental modifications Gartner foresees is the division of IT leadership and organisation roles. A new business transformation role is emerging that will cause the strategic IT leadership role to split into business technology and business network leaders.
"The IT leadership role has been in transition ever since it was created and that evolution is accelerating," said Mr Mahoney. "One of the primary changes is the need for CIOs to play an increasing role external to the organisation. By 2008, CIOs will need to spend more than 50 percent of their time on relationships outside the enterprise to ensure they deliver the expected business outcomes."
All this points to an end to the IT organisation and IT investments as we know them and a move towards more strategic business thinking. According to Mr Mahoney, "There are no more IT investments — only business investments — and playing a leading role requires that IT leaders have greater direct business accountability to participate in growth initiatives."
This does not just mean changes to the CIO's role. It means fundamental shifts in the very make up of the IT organisation, its position in the wider enterprise and the future provision of IT services. Gartner predicts that by 2008, at least 60 percent of IT organisations will reduce their in-house workforce by at least 50 percent compared to 2000.
Mr Mahoney said that successful long-term partnerships with effective service providers hold the key to future business agility. "The reality is that as IT technical operations move out of the enterprise, the power shifts from users and vendors to service providers. In this IT service provider-centric landscape, defining the right IT service delivery model lies at the heart of delivering expected business outcomes. We recommend that IT organisations consider culture, industry and ingrained views regarding service-level expectations and the business value of IT in making this key decision." As such, Gartner advised IT organisations to use measures based on business outcomes rather than IT service levels, predicting that by 2008, at least half of outsourcing deals will come to rely on this model.
Leadership Road Map and Priorities
All-in-all, Mr Mahoney predicts turbulent and challenging times ahead for IT organisations and IT service providers alike. However, he advised CIOs to build IT organisation capabilities in 10 key disciplines of IT Management. The capability requirements for each discipline will vary from organisation to organisation, however, it will engender an environment where technology, business process design and business relationships can be successfully fused to deliver real business advantage.
Summarising, Gartner points to four key recommendations for IT leaders to follow:
Build capabilities in business process design, delivery and transformation
Blend capabilities in business and technology throughout the organisation
Deliver business outcomes, not technology outputs, and use a service-oriented organisation
Exploit and business connectedness internally and externally
About Gartner Symposium/ITxpo
Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency.
In Cannes an integral part of the Gartner Symposium is the ITxpo showfloor, where more than 80 technology companies will give attendees and press an opportunity to see and experience the latest technology solutions.
About Gartner:
Gartner, Inc. is the leading provider of
research and analysis on the global information technology industry. Gartner serves more
than 10,000 clients, including chief information officers and other senior IT executives
in corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth analysis
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analysts and consultants, in more than 75 locations worldwide. For more information,
visit www.gartner.com.
