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IT not prepared to lead business change

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Although CIOs and IT should be key drivers of business change, few of them are prepared for the task.

This is according to a new report, “Innovating for Growth”, released today by Ernst & Young, wherein 73% of respondents say the CIO could become a key figure in driving business change, yet just 15% believe the IT function is very well prepared for future demands.
The report reveals that businesses believe that the IT function can help manage future economic and business trends, such as consolidating markets, geographical shifts in economic power and increasing regulation.
Grant Brewer, Ernst & Young IT advisory leader, comments: “The expectation that IT contribute directly to the value of the business is clear, and the role of the CIO has been changing to reflect this expectations. The IT function is frequently expected to drive innovative business improvements, sometimes as a critical participant in new product or service design. This requires that IT leaders need to understand the new dimensions of the global economy, especially in emerging markets so that IT leaders can work more closely with business leaders to address the opportunities and challenges that lie ahead of organisations.
“It is especially true of CIO leaders that need to contribute to growing businesses across Africa. IT can take a leading role in resolving the challenges, such as logistics, financial reporting, consistent processes or cross border tax, that organisations experience when trying to develop new markets in Africa.
“The CIO in Africa can become a leading driver of change in organisation, although in most cases the IT function is not prepared effectively for this role or the future change they will need to negotiate”, Brewer adds. “IT needs to understand the business better, and engage other business leaders more deeply.”
Despite the uncertain economic climate, 42% of respondents claim that IT spend has risen in the previous 12 months. Notably, spending increased most in India (71% of respondents), Brazil (56% of respondents), South Africa (56% of respondents), China (54% of respondents) and Australia (53% of respondents). Nonetheless, just 39% of respondents say their organization has measures in place to quantify the return on this outlay. Larger companies (with turnover over US$5 billion per year) are more likely to measure return on IT investment.
There are concerns over IT’s ability to manage budgets: only 55% of non-board respondents are satisfied with the IT function’s budget planning and control. Conversely, 73% of CIO respondents are satisfied with budget planning and control. CIOs also have differing views on how much the organisation is actually spending on IT, quoting a lower figure than their C-suite counterparts: 73% of CIOs are very or fairly satisfied with the IT function's management of budget planning and control versus 61% of C-suite, 55% of non-board and 63% of global respondents.
A large majority of respondents, 81%, believe IT should better understand business needs and improve its ability to communicate. With companies under pressure to report on financial and environmental performance, effective communications are a growing priority. However, around three in ten respondents are not satisfied with the way IT communicates with the business, rising to four in ten for non-board members. Respondents from larger companies ($5-billion plus annual turnover) are the most critical of IT’s ability to understand and communicate with the business.
Brewer says: “IT needs to establish a permanent low cost business model that is critical in emerging markets, which requires a more fundamental change in perspective than simple cost cutting. The challenge in achieving this is recognizable in the financial services industry in South Africa today.
“Business management is looking to IT to contribute more innovatively to the growth and profitability of the business, whilst still requiring that IT create efficient day to day technology operations. Given this more complex view of IT, it is critical that the CIO actively engage the executive leadership and the board to establish clear and realistic expectations. This is particularly important given the requirements around IT governance that King III places on board members in South Africa.
“The changing requirements placed on IT leadership will require news skills and capabilities. These will need to be developed, and include strategic thinking, innovation, risk and portfolio management, communication and a better understanding of how to take advantage of emerging technologies more rapidly.”