CIOs urged: Offer business analytics or lose budget

Gartner has said IT departments must offer data as an intelligence service to management if they are to avoid IT budget cuts in the future
Written by Brett Winterford, Contributor

Chief information officers who want to protect their IT budget from being slashed need to develop business analytic capabilities, according to new research from IT analyst group Gartner.

Pressure on IT budgets should be relieved by 2010, said Gartner analyst Marcus Blosch, but only among those IT departments that effectively align themselves with business goals.

Each year, the analyst group surveys 1,400 chief information officers (CIOs) from around the globe to predict upcoming trends. While the 2007 results aren't complete, Blosch presented an early snapshot at the Gartner Symposium in Sydney on Tuesday.

The recurring theme is that reducing IT costs, or "doing more with less", will no longer be the main focus of CIOs by the turn of the decade. Instead, the emphasis will shift to "making a difference with what you have".

According to Gartner's survey data, the top priorities for CIOs between 2004 and 2007 were the improving of business processes, controlling of costs and the management of security.

By 2010, those same CIOs expect the emphasis will shift to attracting and growing customers for the business and expanding the use of information within the business.

Improving business processes will remain a high priority in third place, and entering new markets will appear as a new priority in fourth. Using IT to directly improve revenue growth, the eighth most important goal of CIOs in 2006, has already climbed to the fifth-highest priority this year. The controlling of costs is expected to be the ninth-highest priority for CIOs by 2010.

Blosch expects that some chief financial officers (CFOs) will use the outsourcing and offshoring phenomenon to demand that IT budgets remain flat or even be reduced in the coming years. The only way to combat this is for CIOs to find ways that IT can make a more measurable contribution to the business.

"The smart CIO will leverage any savings gained from outsourcing to develop business-analysis capabilities," Blosch said. "More progressive IT organisations will build analytic groups within IT to help the wider business make better decisions."

Blosch said that the generic way CIOs have looked at solving business problems has involved the deployment of a new software module or IT project for each business problem that arises.

CIOs will move away from this "focus and force" approach to solving business issues, he said, to a more complex use of existing data within the organisation. Rather than deploy new applications, they will capture data that already exists within the company and offer it as an intelligence service to management.

Blosch used the example of retailer Seven-Eleven in Japan, where the IT department is closely aligned with the wider business's sales and marketing initiatives.

The retailer continually makes minor changes to how its products are displayed and marketed in a small number of stores as a "strategic experiment". The effect of these minor changes can be calculated using the point-of-sale data from those stores.

"If it works in one store, they do it in all stores," Blosch said.

By collecting and analysing that point-of-sale data, the IT department aligns itself with the organisation's marketing and product teams — one less reason for the CFO to cut down their budget.

"Its very difficult for management to understand the consequences of taking one percent off the IT budget if the money is being spent on the generic IT model [deploying a new application for every business problem]," Blosch said. "Nobody can see the impact, so it's an easy thing for the CFO to do."

"But, if, on the other hand, you link projects tightly with providing business value, changing the IT budget shows clearly which projects the business can't do and what revenue the business will miss out on as a result."

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