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February 08, 2019

Will IT continue to improve as a transformation partner?

By Rick Pastore  – Senior Director, IT Research Advisor

It has often been said that the digital business will define the IT function’s future. It can be a springboard to IT becoming even more strategic and vital to the business. Or it can be the sinkhole to strategic irrelevancy and a role limited to operational responsibilities. The Hackett Group’s latest assessment of business perceptions of IT shows strides toward that brighter future of strategic partner. Yet, our research also shows further progress may be imperiled by a lack of commitment to further improvement.
At the end of 2017, 36% of IT’s business stakeholders said IT had the resources and competencies to act as their strategic transformation partners. We defined partnering as proactively identifying new business opportunities and addressing challenges in the stakeholder’s business unit or function. A year later, the number has risen to 49% — just about half see IT as a competent, effective strategic partner in their transformation effort.

Apparently, this improvement has greatly bolstered the faith of business stakeholders. Eighty percent of them, on average predict that IT will achieve a partner status within the next two-to-three years. Of course, there are a few qualifiers here. It may be relatively easy to satisfy an HR organization by swapping out clunky legacy tools for a modern, cloud-based all-in-one suite. Finance, on the other hand, has no easy technology fix, which may be coloring their current perception. Yet, even finance leadership seems to have faith that IT will come through (see below).

Percentage of stakeholders agreeing with the statement that IT is a strategic transformation partner, by business function

Source: Key Issues Study, The Hackett Group, 2019

 

However, IT respondents to our study also tell us what capabilities they are actively working to improve in the coming year. Generally, between one-third and one-half of respondents tell us they are working on improvements that will make them better transformation partners – things like IT agility, customer centricity, skills and culture. This year, we were alarmed to see that only 17% of respondents, on average, have improvement initiatives planned or under way for 2019. At the high end, one in four told us they had programs to update IT talent.  This is the most important improvement objective rated by IT leaders (after cybersecurity). Yet, 75% are doing nothing about it. Even fewer are working on IT’s agility or customer centricity goals.

Why this unexpected and sudden slacking off on formal improvement initiatives in IT? We think it may be that all the low-hanging fruit has been picked, and that further improvement seems such a daunting challenge that IT leadership is pausing to take stock and recalibrate it transformation focus. Our research shows most of IT’s internal transformation has focused on application development and operations. Far less has been done on talent and architecture modernization, as well as more intangible issues like culture and architecture.

It may be that IT leaders are deliberating where to concentrate their efforts next. Our research’s leading indicators tell us that the next focus may be on rearchitecting the function itself, shifting the organization model away from centralized corporate IT toward more product- and customer-centric teams and Centers of Excellence. Service placement too is slowly migrating away from corporate IT toward locations closer to end customers.  These are seismic shifts and could certainly be all-consuming endeavors for IT in the near term.

Wherever their new transformation targets may be, IT leaders had best get it in gear. Leaders should view the 80% partner projection as a goal and a challenge. But it is also a risk. Failing to live up to this high expectation will come with consequences.

Note – The Hackett Group’s 2019 IT Key Issues research is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/keyissuesit19q1blog