Tech spend outside IT creates opportunities but also potential risks

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A recent survey of CIOs found that 70% of organisations across Australia 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.

The ‘2019 Harvey Nash/KPMG CIO Survey’ of 254 Australian IT leaders, found business-led IT is creating more value than ever before, but with it comes a need for better governance. When IT spend is managed away from the direct control of the CIO, companies are more than twice as likely to have multiple security areas exposed, and more likely to become a victim of a major cyber-attack. Security and privacy risks rise for those business heads that sidestep the direct control of the IT department. Interestingly, 68% of Australian CIOs stated that up to 1 in 5 jobs are set to go to robots in time.

A total of 254 respondents in Australia were included in the global survey of 3,645 CIOs, which was conducted between December 2018 and April 2019 across 108 countries. The responses from the Australian CIOs revealed that organisations where the IT team is formally involved in decision making around business-led IT, business advantages include improving time to market new products (24% more likely to be ‘better than competitors’) and employee experience (30% more likely to be ‘better than competitors’).

However, 41% of companies in Australia are not formally involving IT in those business-led IT decisions. These organisations are twice as likely to have multiple security areas exposed than those who consult IT , 41% less likely to be ‘very or extremely effective’ at building customer trust with technology, and 12% more likely to have been targeted by a major cyber-attack in the last two years. These risks are uncovered at a time when cyber security reaches an all-time high as a board priority (64% vs 56% last year).

The huge opportunity to capitalise on the value of business-led IT, but also manage its risks, comes at a time of significant change for the business, the CIO, and the IT department, as the survey found:

  • Fewer CIOs sit on the Board – although the influence of the CIO remains intact (65% this year view the role as gaining influence, compared to 62% in 2018), fewer CIOs now sit on the Board – dropping from 55% to 49% in just 2 years.
  • Artificial Intelligence (AI) and automation driving huge change – as the IT department is being tasked by its Board to use AI/automation to improve efficiencies (up 6% this year as a Board priority), this is leading CIOs to expect that up to 1 in 5 jobs will be replaced by AI/automation within five years. This is likely to lead to a significant reorganisation of roles across the business. However, 68% of CIOs believe that new jobs will compensate for job losses to AI/automation.
  • Skills shortages – technology leaders are still struggling to find the right talent with 58% of organisations saying a skills shortage prevents them from keeping up with the pace of change, compared to 60% last year. The three most scarce skills are Big data/analytics (45%), Cyber Security (44%), and AI (38%).

“Business-led IT is creating more value than ever before,” said Bridget Gray, MD Australia of Harvey Nash. “More Australian technology leaders reported increases in IT budgets under their control than at any time in the last 15 years, demonstrating the scale of the opportunities and risks facing CIOs. Those that get the balance right between innovation and governance will be the winners. At the same time, Boards are asking their CIO and technology team to prioritise automation of jobs. In a market characterised by skill shortages in key areas, how organisations adapt to automation will increasingly become a priority, and many are not at all ready.”

Guy Holland, Partner in Charge, KPMG Digital Delta, added: “Technology has rapidly emerged from the IT department to become the key driver of business strategy. But this research shows the IT team is often excluded, at a great cost to security and governance. In this world, a holistic approach is key to success. Organisations that put technology in the hands of value-creators while simultaneously connecting the front, middle and back office will be the ones that win in the market. The future of IT is a customer-obsessed, well-governed, connected enterprise where the CIO plays a key role in supporting transformation.”

Digital leaders, which are organisations who consider themselves ‘very effective’ or ‘extremely effective’ at using digital technologies to advance their business strategies, performed better than their competitors on every aspect surveyed:

  • These aspects included time to market (55% vs 28% for the rest), customer experience (65% vs 37%), revenue growth (55% vs 28%) and profitability in the last year (50% vs 28%).
  • Digital leaders are also more likely to introduce ‘major new changes to products and services’ in the next three years (56% vs 38% for the rest), and focus on making money – 75% of CEOs in digital leader organisations want their technology projects to ‘make’ rather than ‘save money’, compared to 54% for the rest.

Some 70% of IT leaders also feel their diversity and inclusion initiatives within their teams are only moderately successful at best; and there has been only minimal growth in women on tech teams, 24% this year compared to 23% last year, and no change in the percentage of female technology leaders at 11%.

More technology leaders reported increases in IT budgets under their control than at any time in the last 15 years, jumping from 49% to 56%.