Research: The devalued future of IT in a marketing world

Research: The devalued future of IT in a marketing world

Summary: New research demonstrates the changing role of IT. Here is advice to ensure your IT organization is not marginalized as a consequence of these changes.

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The world of IT is bifurcating into infrastructure providers and innovators. It’s time for CIOs to get on the right side of that wave.

READ MORE POSTS FROM THE IT PROJECT FAILURES BLOG

Gartner analyst, Mark P. McDonald, wrote a compelling piece showing IT growth rates over the last decade. Here's his graphic showing the trend: 

Gartner IT budgets

You can see that IT growth rates have declined dramatically and are rising slowly. Given high activity levels around computing that we see in the enterprise, Mark tries to reconcile these slowing growth rates. His conclusion:

It’s difficult to reconcile these budget numbers against the level of IT activity.  CIOs and IT have been busy over the past ten years.  Activity requires funding, so in an environment of flat budgets you have to ask where is the money coming from?

The answer is most of the money has come from IT sweating its assets and resources — doing more with less.  Or more accurately doing more while keeping the budget flat.  Outsourcing, offshoring, consolidation, renegotiating contracts all play a role in cutting IT costs and keeping them down, even in the face of increased transaction and data storage demands.  This has made IT infrastructure one of the most productive resources in the organization.

We can conclude that most organizations view IT as a means to increase productivity and efficiency, rather than a source of innovation and business transformation.

As another data point, Gartner analyst Laura McLellan predicts, "by 2017 the CMO will Spend More on IT Than the CIO." Her webinar on this topic includes the following slide, showing that marketing budgets are large and growing more rapidly than those in IT:

This next chart completes the picture: marketing is taking more control over its own technology budget and leaving IT in the dust: 

Gartner marketing vs IT budgets

The implications here are clear: the enterprise increasingly views IT as a commodity while marketing seeks to control its own technology destiny.

STRATEGY IMPLICATIONS FOR THE CIO

If you are a CIO, you can take several steps to prevent your IT organization from becoming marginalized.

Also read: Three tips to escape the tyranny of IT metrics

Consider the following points to help turn your IT organization into a source of innovation and transformation:

  • Execute with excellence: deliver your projects on time and within budget. When IT fails to deliver the basics, it loses credibility and undermines attempts to raise the bar in other areas. Make sure that IT supplies basic infrastructure, security, and reliability without a lot of fanfare. At the most basic level, IT should disappear because things just work.
  • Make friends with the business. Get engaged and meet with folks from marketing and the lines of business. If you do not understand what these folks need to get their jobs done, you diminish your capacity to offer beneficial assistance. Seriously, spend lots of time with them.
  • Take a leadership role. Having achieved delivery excellence and learned to understand the business, you are now actually in a position to make a change. Be strategic in your thinking, so the business perceives value in your proposals; if you can help drive a material transformation or improvement, the business will find your suggestions useful. 
  • Communicate with simplicity. After coming up with ideas, develop simple messages and language to test your ideas with folks from the business. Avoiding all technical jargon and concepts has two benefits: first and most important, it forces you to think clearly and crisply; second, simplicity increases the chances that the business audience will understand your intent and see the benefits.
  • Repeat and evolve. Becoming an innovation partner and breaking patterns of the past requires commitment, so be prepared to invest time and energy. Continue delivering with excellence, talking with the business, being a leader, and presenting your ideas in simple, clear terms.

The world of CIOs and IT is likely to split into infrastructure providers and innovation partners. To become a genuine partner to the business, start taking steps today. If you don't make a change soon, your IT organization may end up a commodity shop in a transforming world. 

Topics: Enterprise Software, CXO, IT Priorities

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7 comments
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  • Where experts gravitate

    "by 2017 the CMO will Spend More on IT Than the CIO."

    This sort of thing happens when the area of endeavor becomes recognized as a stupid place to try to save money. Two commonly-recognized examples are the creation of advertising materials, and legal services. With both, the money isn't in paying for the services themselves, it's in the consequences. A great ad makes a ton of money; a mediocre one wastes every dime spent on it. The second-best legal firm was cheaper, but they lost the case.

    Big companies often have in-house advertising agencies to prepare routine brochures, but when they're going to drop $60 million on a television campaign, they head to Madison Avenue to get the best. They all have legal departments, but when millions are at stake, they bring in Cravath, Swain or the Mofos.

    In-house IT is becoming viewed as a commodity for the same reason in-house ad agencies and in-house legal departments are: the very best people want to work for the glamorous hotshot firms, not Amalgamated Widgets. And the return on having the very best people work on your issue is so much higher than you get from The average Bear that it's worth every penny to hire the hotshots.

    I don't think it's realistic for someone heading up an in-house IT department to aspire to being an "innovation partner." It's impossible to get and retain serious innovators; even if you find some, you're like the Pirates trying to keep the Yankees from buying your best free agents. Besides, the company needs a good, solid IT department just as it needs a good legal department.
    Robert Hahn
  • Revenue growth is the big prize

    The easy costs have all been taken out, so IT focussed on revenue growth will get bigger budgets ie CMO budgets will grow more than CIO budgets, although both use software (which is "eating the world".
    bernard lunn
  • IT Should Move Up the ERP Value Chain

    A key challenge in my role as an IT ERP Director was to maximize business value with a shrinking budget. It was quite an education for a person with the majority of his experience in Tier I ERP Consulting. There are many options competing against IT organizations in providing ERP services (SaaS, Cloud, Off-shore and Near-Shore support models). Two key battlegrounds are ERP software development for customizations and ERP support.

    Show me an IT organization whose key competitive advantage is that they are internal and I will show you a shrinking IT department! There must be a major shift in IT’s value proposition for ERP support. In the next sections we will discuss some of the shifts IT ERP shops need to make to stay competitive and relevant.

    http://gbeaubouef.wordpress.com/2012/08/17/it-erp-value-chain/
    beaubouef
  • IT needs to support Marketing and Innovation more effectively or...

    Here's an interesting article from 2006, http://www.forbes.com/2006/06/30/jack-trout-on-marketing-cx_jt_0703drucker.html , referencing a long held Peter Drucker perspective that supports the points made in this article. Based on my experience, more IT departments rather than fewer are prepared and/or capable of making this leap so am expecting to see the pendulum swing over to marketing. Now whether marketing is better suited to deploy technology in support of the business remains to be seen, but I do think we're going to start finding out over the next few years.
    m2sbdav
  • Customer Engagement

    One of the toughest tasks for IT is engaging the functional customer in a meaningful way. Typically, the customer wants to place a cursory IT order, get it back in a very short time, then tweak it to death (because the requirements were so vague to start).

    Getting customers to actually lead an IT project is hard enough. Getting them to spend time with IT in a "get to know you" exercise will be even more challenging, especially if the IT resource lacks the social skills necessary.
    joshperkey
  • It's not really about Marketing

    Getting behind what is actually happening to CIO's. it is not just a question of the CMO "stealing" the budget, it is all about the IT function as such becoming marginalized, if IT doesn't get its act together. And what does tha mean? It means that IT must get close to the business - all parts of the business - and provide the services the business actually needs, whether they are stated clearly or not.

    As I told a customer just yesterday: Less than 2% of your Operating Expenses are IT. How much can you gain from gutting a quarter of that? One half of one percent! But if you do the right new projects, which might increase IT expenditures by 50% (i.e. to 3% of Opex!), you might be able to cut 10% of business costs (i.e. 9.8% of Opex). But this will only happen if IT works hard at discivering what will profit the business, either driving costs down or revenue up.

    Whether those initiatives are within Production, Sales, Marketing, Supply Chain or some other part of the business is not what matters. It is that IT must understand how the business actually delivers value to its customers and how it can enhance that value.
    Rolf Frydenberg
  • Symptom, not results

    This is a really good article, but what is missed is that the reason for the smaller budgets, smaller growth rate, etc.; is that the IT department was not providing the value it once was. Growth can not continue without return and while IT enables businesses to work more efficiently, there is a point where that efficiency is more expensive than the return. In 2007/2008 timeframe, we hit that point in many companies (probably before, but that is when it was looked at). Now you actually have to justify the costs and prove the efficiencies gained are actually achievable. That means getting closer to the business and actually understanding their problems, from their side. It also means anticipating issues and being ready for them before they know it is an issue. This is why these groups are reaching out to the cloud - internal IT is mired in procedure and red tape and just not responsive to needs in real time. Cloud solutions are dependent on those funds so they are already ready with the solution. You want IT to make a comeback internally, respond to business before they need you. The best way in my experience is to stop manageing the programs and start managing the solutions - e.g. look to solution providers and have an answer (typically a vendor offering) already tested and lined up as a solution partner before it is outsourced by Marketing, Sales, or any other Business Unit. IT's business value is not in maintaining the existing sytems - that is just a necessity. Their business value is in being responsive to the customers and their customers by providing what is needed, when it is needed, securely. Remember, Business Units have their own issues to worry about and view Data Security as IT's job. Take that as your value add and make sure you take care of their issues before they do.
    tihiggins