After years of neglecting IT spending, CEOs of major firms are planning to increase investment in digital technologies in an attempt to grow their businesses.
Pumping more money into IT and digital technologies was the top spending priority for the 410 business leaders questioned by analyst house Gartner for its annual CEO and Senior Executive Survey. The survey focuses on firms with an annual revenue of more than $250m.
CEOs are keen to back technologies that will win them new business, favouring investment in customer-facing areas such as digital marketing, e-commerce and customer experience management.
The stance marks a departure from the prevailing attitude over the past decade, said Mark Raskino, Gartner fellow in executive leadership and innovation research. The instinct of business leaders during that period had generally been to minimise IT spending, even prior to the 2008 economic crisis.
“If you look at that period from 2003 – 2008, the five year economic boom period before we have a crash, at that point the talk was about offshoring, outsourcing and ERP standardisation projects. In that boom period IT in the business was generally being kept under control, put a lid on, even cut.
“There was a sense that IT was a hygiene factor. That you needed to have it but it wasn’t differentiating. People had bought into the idea that IT was something of a commodity, that’s why we did all that offshoring and outsourcing.
“Now after the big recession CEOs are waking up and saying ‘Hang on a minute, I’m seeing mobile, social and cloud-based changes to industries. There’s some very differentiating stuff going on with technology. It isn’t all packaged and I need to do something about that’.”
The next step for CEOs and CIOs is working out which technologies fuel growth in their business. Responses to the Gartner survey revealed executives have vastly differing levels of understanding about digital technologies, and Raskino recommended CIOs attempt to educate the board about current technologies and how they can serve business goals.
While technology investments are likely to be spread across “sales, marketing, digital, IT and other budgets”, business leaders need to ensure that spending serves a wider business goal, said Raskino.
To help figure out which technologies could make the biggest impact on a company’s bottom line, Raskino said businesses are introducing another senior role, the chief digital officer or digital leader.
“The propensity to have a digital leader, a chief digital officer or VP of digital has been growing over the past couple of years and is continuing to grow,” he said.
“Business leaders are changing their position and saying ‘I’m going to change the IT capability of my firm from being service provider, order taker and outsourcer to having a technology competency in my company that helps change my business model and innovate my product.
“That’s why we see people reaching for these digital leaders, these are the agitators, the agent-provocateurs, the change agents.”
The 2014 survey found one quarter of firms have a CDO, and half of companies are likely to have someone in a digital leader role by the end of 2015.
While some individuals may leave CIO posts following the introduction of the CDO, the CDO role will work alongside, rather than replace the CIO, with the CIO implementing the strategy set out by the CDO, said Raskino.
“The CIO is in one sense well-served by a partner who is creating an intelligent agenda for the use of technology, but at the same time is slightly challenged.
“The kind of things this person will ask for and the pace at which they want to go are unusual. They don’t want risk-minimisation, long-term committees and waterfall methodologies. They want agile, they want it done yesterday and to take the higher risk for higher reward.
“If you’re doing technology to win customers that’s about entrepreneurship, which is about taking risks, whereas traditional IT tends to be about minimising risk. So there’s a bit of a clash there.”
However Raskino doesn’t expect these CDO roles to be a permanent fixture, expecting instead that these jobs will last several years, long enough to realise the necessary technology-led change projects within a business.
“Once that job is done and they have changed the technology attitude and capability inside the company then they’ll tend to ebb away and the ongoing issues will be handled by the existing C-suite names,” he said, adding that similar short-lived roles were created to effect technology-led change in the early 2000s.
The Gartner CEO and Senior Executive Survey 2014 — ‘Risk-On’ Attitudes Will Accelerate Digital Business is available on Gartner’s website.