In today's cloudy and hyper-connected world, IT executives are being tasked to do more in the face of ever-shrinking IT budgets. The fact is that organizations in all industries are faced with the challenge of going digital to satisfy a new tech-savvy and increasingly demanding workforce and customer base. In the retail industry, customers want to be able to shop from whatever device or location they are, use mobile payment technologies and receive their purchases or services almost instantaneously. Procuring and managing the IT infrastructure to support these new demands requires significant up-front investments, which are complex to deploy and manage, and often are so poorly implemented that they don't deliver the ROI management is expecting. On top of that, technologies are changing at an extremely rapid pace, making it more of a cat-and-mouse game for in-house IT teams to keep up with the latest and greatest innovations.
Surprisingly, instead of seeing increased investment in IT to meet the challenges of going digital, a recent Gartner report states that worldwide IT spending is set to decline 0.5 percent in 2016. While that may not seem like a huge decline, think about the fact that IT budgets were already tight to begin with. In the retail and consumer goods market, for instance, IT spending budgets typically represent about one to two percent of overall revenue, even though the overall industry average is three percent.
In this environment, IT leaders cannot count on incremental funding and must carve out the funds and resources from their existing operations in order to make the investments required to support their organization’s growth agenda.
Where is the money going to come to fund the investments required to compete in an increasingly digital world?
Most organizations are commonly spending 75% to 85% of their IT budget and effort on “keeping the lights on.” The high focus on the routine operational activities of just keeping the existing operations running isn’t going to cut it as it leaves very little time or money for delivering the innovation required to compete in the 21st Century economy.
Why is this percentage so high? The reality is that there is an epidemic of poorly run IT in Corporate America. Most IT operations are being run very inefficiently, with fragmented processes, limited tools, deficient change controls, poor business alignment and inadequate levels of service. Business executives outside the IT function are also at fault as they lack sufficient IT knowledge and commonly set up unrealistic expectations that are not going to be met. The result is that organizations are in a perpetual state of “IT fire-fighting” where they are stuck in a reactive versus proactive mode of operations.
A critical characteristic of a High Performing IT organization is that they have dramatically altered the pendulum of IT spend and operations away from “keeping the light on”, so that there is significantly more time and focus spent on supporting the corporate growth agenda through innovation and implementation of new technologies. Changing this balance is how you “Unlock Hidden Value” and free up incremental funding and human capital to take on critical tasks of building an IT platform for your organization to compete in the 21st Century.
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