May 26, 2016

The Hackett Group: Digital Transformation Fundamentally Reshaping Business and Redefining the Role of IT

IT Budgets & Staff to Grow in 2016

MIAMI & LONDON, May 26, 2016 - Demands on the IT organization to support digital business transformation are a significant factor behind the expected growth of IT budgets by 3.3 percent in 2016, and expected staffing increases of 1.5 percent, according to new IT Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT).

Companies have made massive investment in technology in recent years, while talking about the arrival of the digital era. However throughout this period most companies have mainly been focusing on improving their linear "legacy" processes, rooted in their industrial-age past. IT has typically maintained its historic role as a "utility," providing the technology platforms to support these initiatives. Few companies have exploited the opportunity to truly digitize the business, seamlessly connecting internal resources, customers, supply chains partners, and service providers.

But The Hackett Group's research now shows that the majority of companies are recognizing that digital business transformation must be at the core of their business strategy, and that technological advances have the potential to fundamentally transform their business. Digital transformation is enabling companies to transition from a business model based on a linear value chain to the creation of customer-centric value networks.

In today's world, digitally-connected customers are at the heart of demand-driven fast-moving value networks. In this environment, the most agile companies – i.e., those that can respond more quickly to customer feedback or new market opportunities – will win in the marketplace. This shift towards digital business transformation has profound implications for traditional IT organizations, which must transform to support the demands of the digital enterprise.

The Hackett Group's research also shows that in the face of struggles to grow revenue and increasing business risk, enterprise cost reduction is a major priority for companies in 2016, and companies expect to reduce or maintain budgets and staffing this year in most other core business services areas, including finance, procurement, and HR. In part, companies are funding IT due to its ability to help improve efficiency and drive cost reduction in these areas.

The Hackett Group's research recognized talent and data management as the two key business challenges facing IT. It also recommended that as part of their overall IT strategy organizations focus on developing the following competencies in 2016: sourcing of critical skills; value-based portfolio management; data management and analytics leadership; IT cost management; and IT business alignment.

A complimentary version of the research is available for download, following registration, at this link:

"IT budgets are increasing at the highest level of any business services area we look at. Unfortunately, this doesn't mean that IT has sufficient funding to meet everyone's needs. For 2016, IT must continue improving its own efficiency and create self-funding opportunities to drive innovation and reduce costs across finance, procurement, HR, and other areas. IT is in a unique position to help the business manage cost," said Scott Holland, The Hackett Group Principal and Global IT Advisory Practice Leader.

"At the same time, technology's strategic role in the business is dramatically expanding. IT must truly transform itself to be effective in its new role, as it is being asked to develop and implement digital business transformation initiatives that dramatically change the way companies go to market. IT suddenly finds itself in the position to directly impact the bottom line, by designing and supporting new customer-facing systems that are often driven by technology innovations such as cloud-based infrastructure and applications, virtual business and technology networks, and business analytics," explained Mr. Holland.

"In the same way that Uber's digital business model has transformed the world of taxis and car services, this convergence has the potential to impact many other existing industries and companies, possibly changing them beyond recognition," said Mr. Holland. "We're already seeing substantially altered business models, products, and services, dissolving boundaries between some traditional industries, and the creation of entirely new industries."

The Hackett Group's study found that while IT organizations currently rank their greatest value contribution as being the provisioning of high-quality and reliable technology services to the business, they aspire to dramatically increase the value contribution from initiating and leading digital business transformation strategies and initiatives, and aspire to make this the highest-value IT service. This shift will require profound transformation of all components of the IT service delivery model.

For 2016, The Hackett Group's research found that the leading transformation priority by a wide margin was talent initiatives, including improving specialist skills, leadership skills, and business acumen. A clear secondary priority is around information-driven initiatives, including: improving data stewardship and governance; implementing key performance indicators and reporting strategy; improving performance management; and rollout of business intelligence and analytics applications.

The Hackett Group's 2016 IT Key Issues research, "The CIO Agenda: Balancing Risk, Cost, and Innovation" is based on results gathered from executives from nearly 180 large companies in the US and abroad, most with annual revenue of $1 billion or greater.

About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 52% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group's clients and partners to achieve world-class performance.