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."