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Innovating for growth: IT’s role in the new global economy - How can IT improve its image? - EY - Global

Innovating for growth: IT’s role in the new global economyHow can IT improve its image?

Summary: Below we look more closely at the survey results, and suggest the way forward for aspiring IT groups.

1. Build stakeholder confidence


From the survey

  • A majority of respondents believe IT should better understand business needs and improve its ability to communicate.
  • Around 3 in 10 respondents are not satisfied with the way IT communicates with the business – rising to 4 out of 10 for non-board members. Weaknesses in communication could ultimately damage an organization’s overall reputation.

Our viewpoint: building relationships is a “must have”

Amid growing demands for greater transparency and improved governance, CIOs have a vital role to play in helping organizations reassure stakeholders.

IT can provide vital data and reporting to demonstrate that financial, operational and environmental performance meets regulatory standards, improve the accuracy of forecasting and show that risks are recognized and managed effectively.

By building close relationships with all the major internal stakeholders, the CIO can better understand the challenges facing senior management and the agenda of regulators, shareholders and financial markets.

2. Cost competitiveness


From the survey

  • There are concerns over IT’s ability to manage its budgets: only 55% of non-board respondents are satisfied with the IT function’s budget planning and control.
  • CIO’s relatively high opinions of their financial control skills are not fully shared by peers in other departments.
  • CIOs also have differing views on how much the organization is actually spending on IT – quoting a considerably lower figure than their C-suite counterparts. Again, the perception of IT as a costly function appears to linger in the minds of management.
  • In light of the significant outlay on IT, it’s not surprising that half of those participating in the survey feel IT should improve its budget planning and control skills.
  • Keeping the board informed of expenditure is a high priority in times of uncertain cash flow, yet over 4 in 10 respondents (42%) say their organization does not report the results of IT costs and contracts to the board, which again suggests a lack of oversight.
  • Just 39% say their organization measures return on IT investment.

Our viewpoint: at the heart of cost optimization efforts

As companies move from simple cost reduction to cost optimization, IT can help create a permanently lower-cost business model.

  • Up-to-date data and analysis
    One valuable contribution is to provide accurate, up-to-date data and analysis. This enables sales and marketing teams to identify and focus on higher margin brands and customers.
  • Purchasing patterns
    Equally, procurement professionals can gain a clearer picture of purchasing patterns, to rationalize suppliers, strike volume deals with certain partners and reduce the range of purchases within each category.
  • Telephone and video conferencing
    Telephone and video conferencing is cutting travel costs significantly as well as reducing the carbon footprint. And self-service websites and computer response answering services can lead to lower staffing levels.
  • Artificial intelligence
    Artificial intelligence is a further source of savings. Real-time supply chain optimization drives highly effective warehouse management and more accurate stock replenishment, while in financial services, dealers can trade complex products faster. Organizations that service customers in their homes or businesses have also used IT to improve effciency, by planning their routes better, which leads to fewer vehicles, shorter journeys and lower fuel costs.

3. Operational agility


From the survey

  • Functions across the business appear to be asking for innovative IT solutions to compete more effectively and optimize costs. Although most respondents feel that their IT functions are actively contributing to innovation, almost three-quarters (73%) feel that more could be done.
  • 66% of respondents think the IT function needs to develop skills to drive innovation and change in order to play a more central role in their organizations’ activities.
  • Not all respondents are fully satisfied with IT’s attempts at innovation. Whereas 61% of CIOs are either very or fairly satisfied with how the IT function is driving business innovation and change, only 55% of the C-suite and 45% of non-board members share such views.
  • In light of the significant outlay on IT, it’s not surprising that half of those participating in the survey feel IT should improve its budget planning and control skills.
  • Keeping the board informed of expenditure is a high priority in times of uncertain cash flow, yet over 4 in 10 respondents (42%) say their organization does not report the results of IT costs and contracts to the board, which again suggests a lack of oversight.
  • Just 39% say their organization measures return on IT investment.

Our viewpoint: accelerating the speed of response

IT has contributed immensely to business success in the past decade but it’s clear that management wants even more innovation.

As the survey indicates, outsourcing can aid agility yet many businesses are currently focused primarily on the savings this can bring. And by revisiting the opportunities opened up by cloud computing and virtualization, organizations can become more flexible at lower cost, avoiding investment in infrastructure.

IT has to continue offering more than just operational support and help create competitive advantage.

Examples from industries
In food retailing technology is helping companies differentiate by improving stock control and marketing, enabling them to send out offers and change prices in real time.

Manufacturing companies, on the other hand, may look to get more out of their supply chains, to reduce ordering times and stock levels and ramp production up or down to meet changing customer needs.

In a service industry, speed of response in customer care may be more of a priority to differentiate the offering.

4. Customer reach


From the survey

  • 74% of respondents expect to pursue a growth strategy over the next three years and the majority expects IT to play a prominent part in such plans.
  • Effective segmentation: segmentation is becoming more precise and sophisticated as companies strive to target the most profitable customers.
  • IT should be championing the systematic collection, analysis and presentation of customer market data to identify where the higher-margin opportunities lie.
  • Moving into new markets brings a number of logistical challenges, not least providing service to different time zones, and IT can help ensure that customer care is geared up to support these changes.
  • Understanding the customer is the key to effective marketing, and IT can be at the center of a continuous feedback culture that encourages sales and service staff to provide information on existing and potential clients.

Our viewpoint: a more discerning approach to growth

Growth in the future may have to meet stricter expectations, with a higher emphasis upon sustainable profitability.

Segmentation is becoming more precise and sophisticated as companies strive to target the most profitable customers. IT should be championing the systematic collection, analysis and presentation of customer and market data to identify where the higher-margin opportunities lie.

Existing clients should naturally be a rich source of future business and many companies are looking to broaden the range of products and services offered, support account management and develop the customer life cycle concept.

By taking a more selective path, some companies may resist the temptation to expand into certain emerging markets. Others may even choose to take the tough and controversial decision to contract, exiting existing segments and axing renowned brands where margins are low or negative. Once more, IT can support such difficult choices, providing profitability analyses to help challenge long-held assumptions.

Moving into new markets brings a number of logistical challenges, not least providing service to different time zones, and IT can help ensure that customer care is geared up to support these changes.

Understanding the customer is the key to effective marketing, and IT can be at the center of a continuous feedback culture that encourages sales and service staff to provide information on existing and potential clients.


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