Wake up call for Chief Information Officers?
- IT function needs to improve understanding of business needs
- 51% of companies don’t measure return on IT investment
London, 8 April 2011 – According to a new report, Innovating for growth, released today by Ernst & Young, 73% of respondents say the Chief Information Officer (CIO) could become a key figure in driving business change, yet just 15% believe the Information Technology (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.
Dave Ryerkerk, Ernst & Young Global IT Advisory Leader, comments: “The role of IT has been changing – in some cases radically. As we see return to growth in developed countries and continued growth in developing countries, the function is increasingly expected to come up with innovative business improvements. IT leaders need to understand what is needed in the new economy and work closely with the business to address the opportunities and challenges.”
Investment increases but measurement lacking
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 organization 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 (US$5 billion plus annual turnover) are the most critical of IT’s ability to understand and communicate with the business.
Ryerkerk concludes: “As companies move from simple cost reduction to cost optimization, IT can help create a permanently lower-cost business model.
IT has contributed immensely to business success in the past decade but it’s clear that management wants even more innovation. The board and the CIO should therefore be clear about what is expected of IT to ensure that it continues to meet expectations.
In order to meet the needs of the business, IT will need to develop its skills in a number of areas. These include communication, budget planning and managing risk, as well as better understanding how to take advantage of emerging technologies.”
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Ernst & Young carried out a worldwide survey of chief information officers / chief technology officers and IT Director (or equivalent), C-suite and board directors, from a variety of organizations across a wide selection of industries.
A total of 869 telephone interviews were conducted in 15 countries.