Chief information officers and IT executives at leading companies face complex challenges in creating and delivering value related to technology investments, as well as defining that value across the enterprise, according to a new survey conducted by the Management Solutions and Services Group at Deloitte & Touche LLP, and IDG Research Services Group.
The report, "Achieving, Measuring and Communicating IT Value," includes revealing data on the dichotomy between the expectations of IT organizations and the real and perceived value of IT in reaching business goals.
The primary objective of the study, conducted in late 2002, was to determine how companies are utilizing and evaluating their IT investments - from cost reduction to resource allocation to performance improvement and business value. Two hundred IT leaders from financial services, retail/wholesale/distribution and government organizations, with annual revenues ranging from $250 million to $5 billion, responded to a set of questions probing the expectations and value of IT departments, the technology they procure and implement, and the relative contribution and alignment of IT with the larger enterprise.
Survey responses illustrated contrasting expectations of IT executives with those of their organizations, coupled with a murky view of technology as related to business objectives. The results show a strategic quandary for CIOs:
- Nine out of 10 IT executives say that IT value is either critical or very important to their company.
- Two out of every three respondents acknowledge that IS groups have not been successful in measuring and communicating IT value.
- Nearly half the respondents say that executive management consistently understates the value of information technology.
"In conducting the survey and analyzing the results, we saw a common dilemma emerge," said Dean Nelson, leader of Deloitte & Touche's Integration, Development and Infrastructure practice in the U.S. "CIOs and other IT leaders are under increasing pressure to deliver real business value from IT investments, but are challenged when it comes to quantifying and communicating that value."
Indeed, while respondents express increasing focus on delivering IT value, clear priorities in 2003 are scarce. When asked to identify the top IT engagements undertaken or planned this year, responses were evenly distributed among hardware and software upgrades, security and cost reduction, exhibiting a fragmentation of IT efforts with no prevailing focus. That said, 84 percent of those surveyed report they are not among the decision makers who assess IT value, suggesting a service and maintenance-oriented model as opposed to one utilizing IT as a strategic business partner.
Also included in the report are analysis and comparison of vertical industry trends by Deloitte & Touche practice leaders in manufacturing, financial services and consumer business, as well as the proprietary Deloitte & Touche IT Value Management Framework, a seven-step toolkit for creating and communicating IT value.
"Achieving, Measuring and Communicating IT Value" includes industry-specific analysis and perspective from Deloitte & Touche industry leaders, including:
Manufacturing: 60 percent of the survey respondents from the manufacturing sector cite decreased costs as the primary measurement of IT value. This follows recent trends in the manufacturing industry to scale down large projects and implement more moderate spending.
"We're seeing issues raised in the survey that closely resemble challenges facing our clients," said Doug Engel, national manufacturing industry leader at Deloitte & Touche. "Companies are looking to simplify IT environments, adopt strategies for outsourcing and shared services, and employ a tactical ERP in the context of an increasingly stringent spending environment."
Financial Services: Despite a tough environment caused by market turbulence and shaken investor confidence, roughly 47 percent of financial services CIOs plan to increase technology budgets in 2003, versus only 14 percent whose IT expenditures will decrease.
"Smart financial services companies are using technology as a tool to provide returns in other areas of the business," said Randi Brosterman, national financial services industry leader for the management solutions practice at Deloitte & Touche. "A focus on cost reduction has been joined by selective outsourcing and data center consolidation - establishing a more important role for CIOs in aligning business goals to IT."
Consumer Business: IT spending is most significant among consumer business respondents, of whom 53 percent are expecting an increased budget this year (only 5 percent expected a reduction in spending). Consumer business respondents were unanimous in stating that their companies consider IT value either critical or very important.
"While consumer business represent a diverse business segment whose behavior is difficult to predict, intelligent systems integration has emerged as a strategic priority," said Vicky Eng, the consumer business leader for the management solutions practice at Deloitte & Touche. "Consumer businesses are seeking efficiencies with a back to basics approach; squeezing value from legacy systems while shoring up their overarching data infrastructure."