In 2018, despite the extensive discussions on digital transformation since 2012, the reality for many organizations does not mirror a digital utopia. A recent global survey of 3,958 IT leaders conducted by Harvey Nash and KPMG revealed that only 32% of organizations have a comprehensive digital strategy. Interestingly, most digital strategies are still in their early stages, often limited to surface-level initiatives. Moreover, 78% of CIOs express dissatisfaction, rating their digital strategies as only moderately effective or worse.
Similarly, a report from IT service provider Logicalis echoes the sentiments of numerous executives, highlighting limited progress, IT predominantly focused on operational tasks, and significant obstacles to change. Out of 890 surveyed CIOs, a mere 5% perceived their organizations as digital innovators, while 25% classified their entities as laggards.
So, what impedes IT leaders’ progress?
Contrary to the common belief of a resource shortage, the actual challenge lies in the misallocation of resources. Despite Gartner’s prediction of a 6.2% growth in worldwide IT spending to $3.7 trillion in 2018, IT is allocating a substantial portion of its budget to maintaining existing systems instead of fostering growth and innovation.
This misallocation fosters a toxic environment characterized by low integration, sluggishness, and a skills gap. It results in technical debt, inefficient processes, and elevated costs, creating a significant divide between an organization’s digital aspirations and its current state—a digital transformation chasm.
To overcome this gap, IT leaders in many organizations are recognizing the need to optimize costs as a means to fund digital transformation initiatives. Even modest efforts in cost optimization, based on the author’s experience, can yield substantial reductions ranging from 15% to 50%. The focus should be on three key areas:
- Strategy:
- Align IT with business objectives, emphasizing organizational competencies over specific technologies.
- Evaluate IT’s engagement with business leadership in tech-related decisions.
- Identify opportunities for technology consolidation across business units and enhance governance processes.
- Execution:
- Assess IT capabilities, including service delivery processes, infrastructure, and people.
- Prioritize eliminating technical debt and inefficient processes that do not contribute to business needs.
- Consider the suitability of the technology footprint in terms of scalability, age, cost, capability, and security.
- Explore the potential of cloud computing for cost savings and improved ROI.
- Financials:
- Align IT budget with strategy, prioritizing initiatives that increase revenue, reduce costs, and mitigate risks.
- Identify areas for automation and the elimination of repetitive labor.
- Address redundancy in IT resulting from acquisitions.
- Evaluate existing IT contracts in comparison to market rates.
In conclusion, as technological advancements accelerate, organizations that do not liberate themselves from legacy IT constraints risk falling behind. While it’s not too late to navigate the digital transformation chasm, IT leaders must swiftly reallocate resources to the right projects, people, and technologies to drive business results and performance.