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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
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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.

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.

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.)

Kristin Burnham currently serves as's Senior Editor, covering social media, social business, IT leadership and IT careers. Prior to joining InformationWeek in July 2013, she served in a number of roles at CIO magazine and, most recently as senior ... View Full Bio

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User Rank: Author
4/10/2014 | 1:39:21 PM
Re: CIOs and their troops
Very few CIOs stay put for 8 years. Many are out after 3 years.
User Rank: Strategist
4/10/2014 | 11:54:53 AM
Re: CIOs and their troops
I knew one CIO that received his position after spending a few years recruiting IT resources for a major personnel placement firm.  He was convinced that and an MBA fully qualified him to run an enterprise IT group.  Among his strategic gems, "You can't manage who you can't see."  That brought globalization and asperations for anything not SMB size to a screeching halt even though the company was already a multinational.  All proposals reflected this limited vision.  Keeping up with a market as diverse as IT (software, hardware, infrastructure or development) requires an increasingly large, mountain of effort.  Show me an IT executive (but any CXO could fit)  that has spent over 8 years in place and I will show you a firm that has become stagnant, but the fact 28% would be that honest about themselves is surprising. 
Lorna Garey
Lorna Garey,
User Rank: Author
4/9/2014 | 5:16:04 PM
Re: McKinsey dichotomy
When we do similar surveys we sometimes parsed the data by IT pro and business respondents. The differences in perception are usually stark. But, this year's budget survey shows the situation isn't so bad. The percentage reporting business units with tech budgets outside IT's purview was down seven points from 2013, and overall tech spending edged up slightly.
Charlie Babcock
Charlie Babcock,
User Rank: Author
4/9/2014 | 4:01:06 PM
McKinsey dichotomy
Let's see, 61% of business execs say "their organizations use IT to improve business effectiveness," an increase of 12%. At the same business execs were "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." The first stat probably has to do with legacy systems, while the latter reflects what the business wants from new applications. Anyone seen this dichotomy before, satisfaction with IT coupled to dissatisfaction?
User Rank: Ninja
4/9/2014 | 2:12:28 PM
Pot calling kettle black
They should have same survey about McKinsey instead of IT, love to see those scores. Could I tell you some stories about them....
Shane M. O'Neill
Shane M. O'Neill,
User Rank: Author
4/9/2014 | 1:11:13 PM
Re: Positive Signs
Though these numbers are disappointing, it's worth noting that business execs still WANT IT to be a strategic partner and will invest in IT's ability to enable productivity and innovation. But the noted dissatisfaction with IT's efficiency indicates there are serious growing pains in getting to this strategic partnership.
User Rank: Author
4/9/2014 | 12:41:49 PM
Positive Signs
One positive sign: Management is less interested in using IT to cut costs and more interested in using it to expand their businesses and move into new sectors. We're finally emerging from the shadow of recession. This isn't to say, however, that IT budgets are rising across the board. The clarion call is to shift IT spending buckets, from infrastructure and ongoing support to new applications and innovation. 
User Rank: Author
4/9/2014 | 12:40:34 PM
CIOs and their troops
"28% of IT execs said new management would boost effectiveness." This seems to point to CIOs losing cred with their lieutenants and other rising IT leaders, for inability to keep pace with change. Does that figure surprise you, readers, or ring true with your organization's current mood?
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