Two out of three enterprises want to grow faster than the market in 2007 making competitiveness a key goal for CEOs. CIOs are aware of the business priorities in 2007 and the need to improve processes, workforce performance and attract new customers. However, CIO near-term priorities remain internally focused on IT services, according to a worldwide survey of more than 1,400 CIOs by Gartner Executive Programs (EXP). Gartner analysts warn that this disconnect will place CIOs and IT at risk.
The Gartner EXP CIO report Creating Enterprise Leverage: The 2007 CIO Agenda is the most comprehensive report to identify key CIO issues, as it draws on the responses of more than 1,400 CIOs. The worldwide survey represents CIOs with an average IT budget of $90 million, accounting for more than $100 billion of IT spending, as well as all major industries and countries.
"CIOs cannot rely on traditional actions — such as improving operational efficiency, reducing IT costs and automation that lead to commoditization — to meet executive expectations," said Mark McDonald, group vice president and head of research for Gartner EXP. "Success in 2007 requires making the enterprise different to attract and retain customers."
Mr. McDonald said there is a clear difference between the business executive's expectations of IT and what CIOs say is important in the near term and where they are focusing their attention (see Table 1). CIOs will need to reprioritize their work to meet near term business expectations. The difference between expectations and strategies creates tension and the potential threat to CIO credibility and standing.
Executives expect CIOs and IT to play a significant role in leveraging short-term performance and long-term competitiveness in 2007. Executives expect the top three business priorities (improve business process, control enterprise cost structure, and attract, retain and grow customers) to improve current capabilities (see Table 1), while priorities 4-8 are expected to build capabilities for the future.
"CIOs will need to concentrate on information as a leverage point to enhance efficiency, increase effectiveness and support competitiveness," Mr. McDonald said. "This also corresponds to the continued importance of business intelligence in 2007. As such, CIOs will continue to be responsible for IT — the mechanism. They can further play a greater role in leveraging information — the understanding that drives performance and innovation."
Worldwide IT budgets are expected to increase by an average of 3 percent in 2007, up slightly from 2006 IT budget increases of 2.7 percent. Fifty-one percent of CIOs expect a planned IT budget increase. Thirty percent of CIOs report no change in their budget from 2006 to 2007, while 19 percent of CIOs report a planned IT budget decrease.
Sixty-three percent of CIOs report that in 2007 their enterprise expects to increase its market share or expand its mission in 2007. That is approximately double as many as in 2006. Business executives expect IT to raise current performance and build new capabilities. "Doing more with less — cutting IT costs will not realize these goals," Mr. McDonald said.
"CIOs will need to create enterprise leverage because the pace and scale of customer demands are overwhelming budget growth and traditional approaches to change," Mr. McDonald said. "CIOs can use leverage to focus their actions and create significant results for the enterprise and its strategies. The challenge is that CIOs must continue to strengthen the core of IT and create new sources of leverage by focusing on IT leverage points rather than brute force change programs."
CIOs can create enterprise leverage when a focused effort produces significant results for the enterprise and its strategy. This means that CIOs need to exploit new approaches to transform the business. CIOs can draw on one or all the following sources of enterprise leverage:
- Technology -- Reducing enterprise cost structures, improving operational scale, or raising process performance through automation, integration and standardization. CIOs are delivering current services well, but 63 percent of CIOs do not have the right skills in the right amount.
- Agility -- Managing the speed, scale, cost and risk of change through applying change management disciplines -- managing the supply of change with the capacity for change.
- Information -- Gaining the business insight and understanding required to act in a changing environment. Only 36 percent of CIOs believe that management is using the right information to run the business.
- Innovation -- Bringing new ideas to the market successfully by evolving current capabilities, implementing new capabilities and gaining market acceptance for those changes. 86 percent of enterprises see innovation as critical to success, but only 26 percent of enterprises believe that their current innovation level is sufficient to achieve their strategy.