IT Organizations at Crossroads on Digital Transformation

A majority of enterprise IT organizations appear to be having a hard time figuring out how to overcome issues that are hampering their ability to meet evolving business requirements a new study by The Hackett Group shows.

The analyst firm polled 150 IT leaders at large and medium sized organizations in the U.S. and in other countries about their strategic priorities for 2019 and their initiatives for addressing those objectives.

The responses showed that IT leaders in general see a need for fundamental changes to platforms and processes, and to resource and skills utilization. They perceive these changes as vital to modernizing their data architecture and to improving functional agility, analytical capabilities and customer-centricity. But they are struggling to figure out the next step.

Yet, Hackett's study showed that barely 17% of the IT leaders in the survey had any actual current or imminent plans for enabling this transformation. Less than one-in-10 have a project for modernizing their data architecture and barely 25% are addressing known talent gaps and skills alignment issues.

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Richard Pastore, senior director and IT research advisor at The Hackett Group says IT leaders at many firms appear to have hit a wall of sorts. "In past surveys we tended to have a lot of respondents telling us about specific initiatives they had for the coming year," Pastore says. "Between one-third and one-half have always told us they were working on improvements that would make them better business transformation partners."

Uncertain times

Now that many of those improvements have been implemented, technology leaders appear unsure about how to go about addressing some of the more intractable legacy issues such as IT's traditional lack of customer-centricity and business agility, Pastore says. "The low hanging fruit has already been picked," he notes. "Further improvement is taking much more thought, marshaling of resources and updating of skills."

Somewhat ironically, the uncertainty among IT leaders about what to do next is in stark contrast to the generally optimistic view that business stakeholders appear to have about IT's capabilities. Eighty percent of the respondents in The Hackett Group survey expect that IT will become a strategic business transformation partner within the next two to three years.

Hackett Group's study showed that IT's most important priorities for 2019 include digital transformation, data analytics, cybersecurity risk management and business process integration.

IT leaders, somewhat surprisingly, appeared confident in their ability to manage cyber and data risk. However, they seemed insecure about their ability to meet many other objectives, including improving functional agility, analytical capabilities, customer centricity and skills alignment.

Legacy obstacles

The Hackett study showed that a slew of legacy issues — technological and cultural — are contributing to the uncertainty. One of the biggest is the lack of skills needed to support strategic business requirements, especially in areas such as data analytics and data modeling. Concerns over the issue are so high that the respondents in the survey ranked critical talent as the second highest risk they face after cyber risks.

IT culture and organizational model are two other major issues, Pastore says. Most IT organizations still operate in a centralized fashion, although a growing number have begun moving from this model. Staff and funding typically tend to be located within a corporate IT structure when the need is for placing services and staff closer to the business customers, he says. IT staff still tend to be very technology focused and have only a minimal understanding of business requirements.

As a result, IT organizations are nowhere near as agile or as customer-centric as they need to be. IT still typically takes more than a year to deliver on most business projects, and staff are still valued for their ability to maintain stability and consistency rather than on innovation and responsiveness. Significantly, the skills in place at the business development management function at many organizations are often outdated and ill equipped to advise or to collaborate with business on new opportunities.

"It is not good enough to be the technologists anymore," Pastore says. "IT folks have to now be ambassadors to the business. They have to have a focus on the external customer more than they have ever had."

Where to focus next

The key focus for IT organizations should be on getting the right skills to support business requirements, the Hackett report said. IT and HR teams need to collaborate on identifying key skills gaps and in tracking and modeling changes in IT skills demand and availability. They should focus on addressing skills issues in particularly vulnerable areas.

IT organizations should focus on reskilling where appropriate. The model where IT owned all devices and blinking lights in the enterprise has changed, Pastore says. "All those things can be sourced," from other places these days, he notes. "All the folks who managed those things don't have a role anymore." IT leaders need to figure out how to reskill and redeploy these resources in other, more customer-focused functions, he says.

Organizations will need data scientists, data engineers and business analytics skills to support business in coming years. So IT teams need to focus on marshaling these resources via targeted hiring and training programs and pooling existing resources into an enterprise analytics center or center of excellence, the report said.

In order to support robust analytics functions, IT should also consider modernizing their data architecture by integrating existing database and deploying a data lake or central data repository the report said.

Many of the changes that IT will need to implement in coming years won't be easy, Pastore says. "The culture has to change," he says. "IT has to become more experimentation oriented and less risk averse. They have to become more accepting of failure."