Research
Hackett: IT Struggling to Enable Digital Transformation Of Both the Enterprise and the IT Organization
MIAMI & LONDON, August 2, 2018 — IT organizations are currently struggling with the challenge of enabling their company’s digital transformation while at the same time transforming the IT function itself into a more customer-centric, innovative and agile operation, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT). While these two missions are interdependent, given the finite resources of time, talent and capital, most IT organizations are finding it difficult to strike a balance, the research found.
A public version of the research, “Envisioning World-Class Digital IT,” is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/wcit1806sm
World-class IT organizations now spend 22 percent less on IT per employee than typical companies, while also achieving higher levels of effectiveness, the research found. For a typical company with $10 billion in revenue, attaining world-class performance can bring as much as $41 million in potential savings annually which can be reallocated to fund digital transformation and innovation initiatives.
One key to achieving these cost saving is that world-class IT organizations spend dramatically less on running their operations, including spending 51 percent less on infrastructure management, 43 percent less on end-user support and 25 percent less on application maintenance per employee. World-class IT organizations reduce run costs by managing complexity much more effectively than peers, operating with half the ERP systems and customer databases, for example. Demand management is a critical strategy for top performing IT organizations, which approve 44 percent fewer IT projects than typical companies but deliver high-value projects at least 4x faster and on average complete significantly more IT projects on time, on budget and to spec.
Reducing run costs enables world-class IT organizations to dedicate more funding to building new capabilities, including infrastructure, applications and updates, and access to big data sources. It also enables world-class IT organizations to focus more on innovation, investing twice as much on emerging technologies, the research found.
“In today’s world IT must transform itself into a true valued business partner and demonstrate the ability to enable business value creation,” explained Scott Holland, principal and Global IT Executive Advisory Practice leader, The Hackett Group. “At the same time, it’s critical that they maintain a focus on being good corporate stewards, optimizing the overall performance of the IT function. It can be hard to maintain the right balance as they do this, and stay lined up on both targets. But it can be accomplished.”
Fully implementing digital tools to automate IT’s service delivery lifecycle has the potential to reduce operating costs further for both world-class and typical companies, largely by reducing run costs, the research found. Digital transformation driven by IT also has the potential to reduce process costs by an average of 25 percent in other corporate G&A functions, including corporate finance, procurement, and HR.
Four out of the top five areas where IT has been focusing its internal digital transformation are related to run processes. Three run processes see the largest percentage of both pilots and completed transformation projects: end-user support (including IT service desk); IT operations (network and data center); and risk and security management.
Cloud-based applications are also becoming increasingly popular, in IT as well as in the other G&A areas where The Hackett Group focuses. The number of G&A organizations with broad adoption of cloud-based applications is expected to double or triple in the next two to three years, the research found. While cloud-based applications are not necessarily cheaper than traditional on-site deployments, the cloud generates significant benefits by eliminating customization, applying upgrades systemically and effectively outsourcing the optimization of technical infrastructure.
In addition to operating at lower cost, world-class IT organizations are significantly more effective than peers. They deliver core functionality of high-profile, high-value applications in 90 days or less, while typical IT organizations take at least 4x longer. World-class IT organizations are also much more likely to deliver projects on time, on budget and to spec. They are 3x more likely to use rapid development and iterative methodologies. Demand management emerges as a key approach that world-class IT organizations use to achieve successful project delivery. They green-light 44 percent fewer IT project requests than peers.
“Demand management is a key issue that IT organizations struggle with, and an Achilles heel for many,” said Richard Pastore, senior research advisor, IT Executive Advisory Program, The Hackett Group, “IT leaders are being pressured to keep costs down, but demand for their resources is exploding due to digital transformation, which now accounts for nearly 30 percent of the total projects in the pipeline. Plus, there’s a significant risk of business units developing their own shadow IT efforts in digital transformation, going directly to consultants or vendors to get what they want done.”
“World-class IT organizations address these issues head-on,” said Pastore. “They carefully manage demand and approve far fewer projects than typical IT organizations. As a result, they are much more likely to succeed at the projects that they do execute, and drive far greater value to the enterprise.”
The Hackett Group’s research found that IT must help the business transform its processes, products, delivery channels, and decision-making insights. For this, IT must apply its five core enterprise transformation capabilities: technology innovation; modern digital architecture design; advanced cybersecurity; accelerated service delivery; and advanced data and analytics. While none of these capabilities are particularly new or foreign to IT, The Hackett Group’s Digital Readiness Assessment shows that in most cases, there is significant need for improvement in IT’s capability maturity if IT organizations are to be an enabler rather than a bottleneck to achieving the full benefits case of digital transformation.
World-class IT organizations are those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive IT benchmark.
The Hackett Group’s world-class IT research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of large global companies. A public version of this research, is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/wcit1806sm
About The Hackett Group, Inc.
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices digital transformation firm to global companies, offering digital transformation including robotic process automation and enterprise cloud application implementation. Services include business transformation, enterprise analytics, 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 and SAP practices.
The Hackett Group has completed more than 17,850 benchmarking studies studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 90% of the Fortune 100, 80% of the DAX 30 and 57% 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.
