CIOs told: You get the boring bits, leave the fun stuff to us

CIOs told: You get the boring bits, leave the fun stuff to us

Summary: Very little tech innovation is generated by the corporate tech department anymore, claims a report – here's why.

Many business executives now go it alone when it comes to technology. Image: Shutterstock

Corporate IT departments now deliver very little technology innovation — business execs are increasingly taking charge of IT buying.

For every $1 in the traditional corporate IT budget, business executives now spend another $0.40 on technology, according to a report by business consultants CEB, which said "corporate IT's monopoly of information technology has begun to unravel".

Marketing and sales chiefs spend the most, with HR and finance executives a step behind. Few CIOs realise that their fellow execs are spending quite so much; according to CEB, CIOs guessed that their business colleagues spend only half as much as they really do.

Most organisations see this spending outside of IT as a nuisance at best and a source of risk and redundancy at worst, labelling it "shadow IT" or "rogue IT", with CIOs and CFOs trying to stamp it out. But CEB argues the rise of what it prefers to describe as "business-led IT" is inevitable — and beneficial in challenging corporate IT's monopoly as the "internal arbiter of technology".

It said the majority of business-led IT spending goes on collaboration, analytics, and technologies that engage customers or enhance products, with spending typically led by customer service, sales, marketing, and product development chiefs.

Up to half of the business-led IT money goes on innovative new capabilities. In contrast, CIOs spend only seven percent of their budgets on innovation, using the rest for incremental improvements, compliance, maintenance, and operations. "As a result, three times as much money is spent on technology innovation outside the IT budget as it is within," CEB notes.

There are of course risks to business execs going it alone when it comes to tech; technologies that need extensive data integration or company-wide scale such as ERP are clearly best left to corporate IT. Buying commodity technologies is often better left to the CIO who can get better prices, and ensuring systems' security can be another potential headache for non-IT buyers.

Even worse, warned CEB, when experimenting with technologies, executives can be led astray by pitches from vendors and end up focusing on the technology and not how it will help achieve a strategic goal. As the report warns, non-IT execs can end up "ironically, behaving more like technologists than business leaders".

Perhaps unsurprisingly, vendors see business-led tech buying as a golden opportunity to circumvent savvy IT leaders and cost-conscious procurement professionals. Compared to sales to corporate IT, CEB estimates that technology sales directly to executives close in less than half the time — and have twice the contract value.

As such, business executives need help from corporate IT and procurement when negotiating with vendors, and should develop basic supplier management skills — as well as considering the security, integration, maintenance, and support costs of their projects.

Andrew Horne, managing director at CEB, said: "What CIOs are now realising is that business-led IT is another — often better, cheaper — way to achieve the goals of the IT department, particularly when it comes to innovation and testing out new digital capabilities. The goal is to improve the success rate of these technology investments, regardless of who came up with the idea."

Horne said this means the role of the CIO will change. "The aspiring CIO is no longer someone who can run technology projects and keep costs down. They need to be able to coach business leaders and influence business-led technology strategy. This means working directly with the CEO and other executive team members."

Further reading

Topics: CXO, Enterprise Software

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  • It Works

    PC's came into companies that had mainframes when accountants brought in their Apple ]['s in so they could run the VisiCalc spreadsheet - a program that changed everything. Tablets, phones, etc. are going to come in because folks recognize that they make work life better. If IT Departments aren't on the front-end, bringing in the new, sweet, awesome technology then they have to be right there to help the tryers, the experimenters, the "What If"ers to be successful, and then to take those lessons, and toys, and tools and deploy them in other places in the organization to make the whole thing better.

    If they don't, then they get ignored because they really are stupid and clueless.

    40% isn't surprising. I'm surprised it isn't 50-60%. That's not really shadow IT, it's Shadow R&D, and every CIO should embrace it. Their staff and their budget and cheerleaders just grew by an amount they could never hope to get approved. Now they have to make sure that they spoil those folks rotten. Duh.
  • IT Guys & Gals

    Wake up. NO, NO go back to sleep while the rest of us innovate!
  • Maybe it needs to be decentralized

    Perhaps the IT department needs to focus on infrastructure and standards while other departments get their own techies who are more attuned to the needs of those departments.

    Centralization breeds bureaucracy and depresses responsiveness. It always has and always will.
    John L. Ries
  • What IT isn't/is

    It's not a "one size fits all". It's not a generalization of tasks and needs. It's not R&D... at least not to all companies. And that's the problem I find with this general article from an unspecified source CEB? link to company and study data? Come on Mr. "UK editor-in-chief of ZDNet and TechRepublic". How about a properly fundamented article.

    IT is a service unit working for a company or group of. Ideally an IT division/department will adapt itself to specific needs, be it maintenance, development, R&D or IT generalization. An empowered IT department will ALSO evaluate/purchase/manage third party products and services to cover all bases.
    In my experience other departments should avoid tech purchases they are not qualified to operate, maintain or plain simply understand. All to often I see implementation failures, under/over sizing and over expenditure when IT is not involved. The business world is filled with case studies of multimillion dollar failures because those involved in the purchase couldn't understand the full ramifications and consequences of what was being bought.
    To round this up: generalizations and "studies" often are just that... not specific and useless without a proper context and need. Same goes for IT purchases that end up worst off when not done by the proper people. Cheers.
  • Tech Innovation and CTOs

    Tech innovation should be the remit of the CTO. The CTO must report into the COO. The CTO will work with Business Stakeholders and Execs. Please DO NOT leave it to the Business Execs. This will lead to huge costs later and vulnerable security risks.
    The CTO should lead innovation and work with the business; syphoning off those innovations that add business value and efficiency.
    I agree that CIOs tend to stifle innovation and understandably cautious. But there are exceptions. Top CIOs look for all types of innovation and take a pragmatic view.
    Innovation can take many forms:
    - Business
    - Process
    - Sourcing
    - Technical
    Innovation also takes investment and a corporate culture that recognises that they need innovation to take quantum leaps to remain competitive.
    Tor Clark
    Tor Clark
  • This could be an opportunity...

    If leaders in the business units and in IT can get past their political differences, this could be a great opportunity to improve innovation in a secure, compliant, and cost effective manner.

    When I first started in IT, it was less centralized and much more innovative than it is today. Eventually, companies got tired of increasing the IT budget, so they clamped down, and the cost cutting "do more with less" attitude ensued. With limited or declining budgets, IT was forced to centralize, cut costs, and cut labor, while maintaining an ever-growing infrastructure. Hence, IT's tolerance for change dwindled and service offerings became static.

    Today, both the business units and IT realize the need for more innovation, and that it comes with a cost. As this article states, business units are obviously willing to pay for it. Now it's up to IT and business leaders to come together to do it the right way, with the right amount of funding, the right amount of people, and the right people. It will take cooperation on both sides to make it happen.