A decade ago, a leading analyst firm chided chief information officers for spending 80 percent of their budgets on running and maintaining the business, noting that such an allocation was “dead money.” More needed to be invested in growing the business.
Since then, IT functions have made stunning progress, bringing lights-on investments down to 55 percent of their current budgets, according to Protiviti’s annual survey of technology leaders. Yet organizations still may not be investing enough in innovation at the expense of compliance, security and maintenance. At the same time, considering the greater impact of technology disruptors in the form of digitization to harvest new sources of value through business model innovation and improve collaboration between IT and the core business, more progress is needed to mature the performance of security and privacy capabilities across the enterprise.
The results of our survey magnify the current state of operations, challenges and competing priorities in IT functions throughout all industries. When mismanaged or underfunded, some activities can potentially dim the lights on the entire organization. Technology leaders also want their investments to deliver the greatest impact, in terms of both enhancing and protecting enterprise value. In addition, they are trying to adopt agile processes in order to deliver solutions more effectively. Among the questions they continually consider: Will this software as a service opportunity reduce operations and maintenance costs that can be reallocated into security and innovation investments that protect and transform the business? Will this digitization project improve measurably the delivery of our products and services to our customers?
Our notable findings:
- Cloud computing adoption is accelerating rapidly. Nearly two out of three companies are focusing on and investing in cloud adoption. Close to one in four applications, infrastructure and platforms are cloud-based today, and within three years this ratio is expected to increase to one in three.
- Digitization investments are on the rise. Not surprisingly, a majority of companies are focusing on and investing in digitization, with higher numbers of financial services, healthcare, and consumer products and retail organization pursing digitization initiatives. Of note, cost represents a major barrier to digitization efforts.
- IT transformation projects abound, but there are hurdles. A majority of organizations are undergoing a major IT transformation. However, there are significant roadblocks, both technological (legacy systems and processes) and cultural (change management problems and skills gaps) in nature.
- Data and analytics are advancing. Many organizations are investing data projects and their analytics capabilities and have made significant progress, though they face barriers that include cost, time-to-value, security, and finding qualified talent to reduce the risks associated with implementation.
- While technology budgets are increasing, investments in innovation may not be sufficient. IT leaders continue to struggle to fund all of their ever-increasing activities sufficiently. Despite IT budgets that continue to increase, cost still figures as a widespread barrier for companies to execute cloud adoption and digitization in an agile manner. Overall, organizations allocate a majority of their technology budgets to IT operations and maintenance combined, with far fewer dollars devoted to business model innovation and leveraging technology disruptors to drive digitization.
- Cybersecurity issues remain top-of-mind for executives, though investments may not be measured properly in terms of performance. IT security and incident response capabilities dominate the priority lists for CISOs and CIOs, but whether current IT budgets and investments are measured properly is another question.