The Hackett Group: Lack of IT Capabilities Preventing Organizations From Unlocking Full Value of Digital Business

March 13, 2018
5 Min Read

Analytics and Talent are Two Top Priorities for 2018; IT Budgets Expected to Grow by Nearly 2 Percent As Spending Shifts Away from “Run” and Towards “Build”

MIAMI & LONDON, March 13, 2018 – Support for enterprise analytics and development of IT talent are two top priority areas for CIOs in 2018, as companies seek to unlock the value of digital business, according to new key issues research from The Hackett Group, Inc. (NASDAQ: HCKT). But companies’ efforts to deploy and derive value from digital tools are likely to be handicapped by low capability maturity in these two key areas and a lack of initiative to improve over the coming year.

The research also found that IT budgets are expected to rise by 1.8 percent in 2018. In addition, IT work and FTE resources are expected to shift in 2018, growing most in business units and centers of excellence, largely in support of digital transformation efforts. Meanwhile, outsourced FTEs are expected to contract. At the same time, IT organizations are shifting allocation of their operating budgets away from running operations and towards planning and building new systems.

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

Strategic Disconnects in Analytics & Talent

At the heart of the challenge of unlocking the value of digital business is a strategic disconnect between expectations and capabilities, the research found. Nearly three out of four study participants in The Hackett Group’s 2018 Key Issues research agreed that digital transformation will fundamentally disrupt their industry and the competitive landscape in which they operate, while 82 percent expect it to fundamentally change the operating model of their business. But the majority (60 percent) lack confidence in the resources and competencies of their businesses to execute their transformation strategy. Even more concerning to IT leaders, 64 percent of respondents express a lack of confidence in their IT organization’s ability to support transformation execution.

Enabling the enterprise-wide use of analytics for decision support is a top enterprise priority and business support objective for IT in 2018. Study participants predict a mainstream (widespread) adoption rate of advanced analytics technology over the next 2-3 years that is 11x the current adoption rate – the highest growth rate of any digital tool. Data visualization tools, and adjunct of analytics, had the second-highest growth rate. However, enterprise analytics capability improvement is not among IT’s most common planned improvement initiatives for 2018 – only 29 percent report ongoing or planned analytics capability improvement efforts in the coming year.

The Hackett Group’s research recommends that IT organizations focus on improving enterprise analytics capabilities in 2018, including stronger governance around data management and architecture practices as well as supporting the foundational tools that help enable analytics in the business. IT leaders need to field more resources, build more analytics platforms, and manage the data to feed machine learning algorithms, to help companies unlock the value hidden in enterprise data.

The Hackett Group’s research also found that in IT and across the enterprise access to talent will rival cybersecurity as the greatest business threat within the next two years. Aligning talent with future business needs is a top three priority for IT. However, the research again found that efforts to improve talent are not getting commensurate attention in 2018. Only 45 percent of study respondents across the enterprise have talent improvement initiatives underway or planned, and only 21 percent of IT leaders report plans to align IT skills and talent with changing needs of the business.

It’s critical that IT organizations improve their ability to develop and acquire talent, particularly in data management, advanced analytics and customer-centric design, the research found. Many companies are seeking to design services, products and delivery channels to enable digital customer experiences, requiring IT to have more customer-oriented design experience, including customer journey mapping and design thinking.

“These two areas are fundamental to digital transformation, and the wide chasm between their perceived importance and the ability to implement is very disconcerting. But it’s not hard to understand,” said Richard Pastore, The Hackett Group senior IT research advisor. “Implementing analytics is taking a back seat to more fundamental IT infrastructure efforts, like business platform modernization. And the challenges in implementing analytics effectively, including data architecture and management, are deeply embedded in enterprise infrastructure.”

According to Scott Holland, The Hackett Group principal and Global IT Executive Advisory Practice leader, “The impact of digital transformation on talent is also a critical factor. IT roles are being transformed by digital – more than one in four IT roles are already affected. Current staff are aging out and millennials show little interest in employers that have not fully embraced digital, and in working for companies located outside of technology innovation centers such as the U.S. West Coast. Data savviness, agility/ability to change, and creativity are increasingly critical skill sets that are lacking in most IT organizations. Companies that don’t address staffing challenges more aggressively will suffer, as they fall behind competitors in leveraging new tools, processes and business models.”

Shifts in IT Spending

IT organizations will be getting funds in 2018 to fuel transformation. Study respondents expect operating budget increases of 1.8 percent in 2018. This is a significant contrast with other business services areas covered by The Hackett Group. Finance, procurement, and HR are all expected to see flat or declining budgets in 2018, despite projected revenue growth of 3.6 percent.

The Hackett Group’s research predicts a significant shift in IT spending allocation, away from operational or “run” processes such as application and infrastructure maintenance, and towards processes associated with planning and building systems. Spending on plan and build processes is expected to rise by just over 5 percent, while run process spending is down 0.6 percent, a significant reduction given that is currently the largest spend category, representing 76 percent of IT’s annual operating budget. This shift should be an ongoing process, The Hackett Group recommends that IT organizations constantly strive to improve the efficiency of “run” processes, to self-fund their own transformation efforts.

The research shows a shift in the location of IT resources as well. The largest 2018 increase in IT staff and workload will occur in the business units, not in corporate IT. IT leaders anticipate a reduction in staff that are outsourced, with the outsourced workload remaining relatively flat.

The Hackett Group’s 2018 IT Key Issues research, “Driving Value from Transformation,” is based on results gathered from more than 160 executives in the US and abroad, most at large companies with annual revenue of $1 billion or greater. A complimentary version of the research is available for download, following registration, at this link:

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.