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IT, Business Exec Gulf Widens, McKinsey Says

Just as more businesses recognize IT's strategic importance, dissatisfaction with IT's effectiveness is growing, McKinsey research shows.
IT Jobs: Best Paying Titles Of 2014
IT Jobs: Best Paying Titles Of 2014
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As more businesses recognize IT's strategic importance, dissatisfaction with the group's effectiveness has grown, according to a new report. As a result, many organizations believe that a change in their IT management is necessary to fix it.

McKinsey & Co.'s latest Global Survey results highlight a shift in organizations' current priorities for IT. For example, concerns about managing costs are down, from 52% last year to 31% this year, while more executives say their organizations use IT to improve business effectiveness -- up 12 percentage points to 61%.

To support these priorities, businesses have shifted their spending: Of respondents, 64% said their budgets for new investments will increase next year, up from 55% last year. According to the report, the largest share of IT budgets is spent on infrastructure, which has been the norm for the last several years, followed by core transactional applications. Most expect infrastructure spending to decline.

[Sometimes you just have to jump in and figure things out. Read Throw Future IT Leaders In Pool's Deep End.]

But as businesses focus on and invest in IT's ability to enable productivity, business efficiency, and product and service innovation, the report found that overall satisfaction with the group's performance has declined.

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Executives from the business side are less likely this year to say that IT performs effectively in sharing knowledge, delivering year-over-year productivity gains, tracking customer-or segment-level profitability, creating new products, and entering new markets, according to McKinsey.

While executives from the business side judged IT's effectiveness more critically this year than last, IT executives were more negative about their own performance: Only 13% said their IT organizations are effective at introducing new technologies faster or more effectively than competitors, down from 22% the year before.

"These results likely reflect the overall rising expectations for corporate IT -- that it can, for example, provide service comparable to the consumer-grade cloud and mobile applications that are readily available outside the business," McKinsey said.

To fix IT's shortcomings, most respondents pointed to improving business accountability, reallocating funding to priority projects, and improving the level of IT talent.

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Twenty percent of executives also identified replacing IT management as a fix, up from 13% two years ago. And 28% of IT execs said new management would boost effectiveness.

"Amid the increasing pressure and dissatisfaction, the enthusiasm to replace management highlights the concerns of some IT organizations that their leaders cannot manage change in rapidly evolving circumstances," McKinsey said.

Two-thirds of respondents acknowledged that developing talent is a significant challenge. CIOs, for example, dedicate an average of only 8% of their time developing talent. To counteract this, the report advised, CIOs must be more involved in developing a better culture for employees.

Other fixes to address talent challenges include improving compensation (46%), defining more structured career paths (41%), and focusing on more exciting work within IT (38%).

"As IT continues to evolve as an important strategic tool, the required skills and staff are becoming harder to find and retain," McKinsey said. "CIOs must be more involved in developing a talent-friendly culture within their organizations to tackle current and future talent issues."

Trying to meet today's business technology needs with yesterday's IT organizational structure is like driving a Model T at the Indy 500. Time for a reset. Read our Transformative CIOs Organize For Success report today. (Free registration required.)