2013 IT outlook: Innovation trumps cost-cutting

IT leaders have talked for years about the need to better align IT with the business objectives. Now there's a sense of urgency.

The economic recovery is moving at an unsteady pace, but the emphasis on cost-cutting that dominated IT agendas in recent years is sharing the spotlight with a more interesting imperative: innovation.

"In spite of pressure to decrease costs company-wide, we're significantly increasing our IT investment in 2013," says Michelle Kaufman, director of IT at Supplies Network, a St. Louis-based wholesaler of business supplies and services. "We're writing software to automate numerous processes throughout the company, which long-term will make us leaner and more efficient. We're investing in our managed print technology and in our B2B connectivity options, both of which drive revenue. We're investing in technology like VMware View and Microsoft Terminal Services to enable a remote workforce to meet the needs of the business regardless of location. All of these have long-term payoffs."

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Companies have always relied on IT to increase efficiencies, and for years IT leaders have talked about better aligning IT with business objectives to spur innovation. What's different today is the sense of urgency.

The global financial crisis, which knocked the stuffing out of IT spending, created pent-up demand for technology, and companies are still in catch-up mode. At the same time, the mainstreaming of new technologies, specifically cloud computing, is putting pressure on organizations to rethink their approach to IT.

"Cloud computing has accelerated the pace of change, undeniably," says Andi Mann, vice president of strategic solutions at CA Technologies. With the availability of cloud services, start-ups in industries such as retail, healthcare and media, for instance, can set up shop without making enormous capital investments in tech. "We've seen new competitors come into crowded markets and totally disrupt those markets, and they can do it on a dime because they don't have to buy infrastructure or set up a data center."

But it isn't just cloud computing. Other disruptive technologies at work include mobile computing, social media and tools such as virtualization that make IT more agile.

"These are changing the way that businesses are delivering new products and services to their customers," Mann says. "They can do it faster because of agile computing. They can do it at scale because of cloud. They can reach a richer, wider audience with social media. They can deliver products and services in entirely new ways, to entirely new audiences, using mobile."

IDC says worldwide IT spending in 2013 will exceed $2.1 trillion, up 5.7% from 2012. The biggest driver of that growth will be sales of smart mobile devices, including smartphones and tablets, which will grow by almost 20% in 2013. IDC is also forecasting healthy growth in global software and services spending.

As cloud, mobility and virtualization deployments continue, there's an opportunity for IT to play a more active role in driving new business growth. It's a daunting transformation for IT, and it won't happen overnight.

Efficient or innovative?

While driving revenue was an early goal of IT, over time the job shifted to modernization as information technology seeped into virtually every business activity, leaving precious few cycles for anything else.

"Most businesses today primary rely on IT to increase their organizational efficiency," says Bask Iyer, CIO at Juniper Networks. That's an improvement from say, 10 years ago, when IT was seen primarily as a money pit. However, "IT is largely falling short of expectations to drive growth in new areas," he says.

Juniper sponsored a study conducted by the Economist Intelligence Unit that asked 474 IT and business executives from the U.S., Germany, Japan and the U.K. about how the role of IT is changing. When survey respondents were asked to describe the primary job of IT, their top three answers were telling: to improve efficiency in business processes (cited by 52%); to fix hardware and software issues (32%); and to improve security to mitigate potential IT-related threats (25%).

Very few businesses said they're successfully collaborating with IT on strategic initiatives such as identifying new market opportunities (9%), identifying new innovations (6%) and developing a competitive strategy (5%).

To change that, IT practitioners need to come out from behind the scenes, get to know the line-of-business executives and end users, and become more collaborative, Iyer says.

Preconceptions will have to be overturned. Business executives have given IT low marks when it comes to enabling and supporting innovation, Mann says. Many don't think IT has the right skills, and tech folks don't have a reputation for being receptive to new ideas from the business.

Making changes "starts with convincing your peers that you can help drive innovation, that you're more than just a service department, more than just a butler to the business groups," Mann says.

It's important for IT to demonstrate a willingness to consider cloud computing, for instance, for its speed and agility -- even if it means giving up control. "Show them you're ready to adopt mobile technologies, and support bring-your-own-device. Stop saying no to all these things," Mann says.

If you don't, business executives will take matters into their own hands. In some cases they already have, by buying their own mobile devices and inking contracts for cloud services without going through IT.

This concept of rogue IT shows up more in headlines than in reality, but the threat should still serve as a wakeup call. "You can get in front of it, find the best options, and present those to your business peers," Mann says. That won't eliminate the threat, but mapping out how IT can be "better, safer, cheaper, and easier to manage" than alternatives will reduce the desire to seek options.

Business collaboration is imperative. Kaufman of Supplies Network says "we avoid silos in decision-making, so business executives aren't off making technical decisions on their own. It's a key aspect of my role to understand their needs and to provide them with the right IT solution whether it's in the public or private cloud."

Likewise, Christus Health has processes in place to deal with the pull of rogue IT projects, says CIO George Conklin.

"We have organizational commitment to governance over IT that reduces the probability that someone will go off on their own without engaging my folks to ensure we are doing the right things," Conklin says. "We have done a lot to educate people and have a governance structure in place that ensures [any SaaS or cloud services] are thoroughly vetted and part of the plan," Conklin says.

Kevin Christ, senior director of Alvarez & Marsal Business Consulting, suggests it's a better use of IT's time and energy to guide business users who want a say in IT than it is to try to stop them from being involved in purchasing decisions. With BYOD, for example, most CIOs have thrown in the towel and moved on to focus on managing the attendant security, performance and access considerations, he notes.

"Increased business involvement is a positive trend as long as it does not lead to complete exclusion of the IT function," Christ says. "IT shops that are seen as value-added are rarely left out of the decision. The IT shop that is viewed as enabling is usually consulted, while the IT shop that is an inhibitor often faces the end-run."

Finding the talent

One of the biggest barriers to IT innovation is talent. On the bright side, the jobs picture is healthy.

Seventeen percent of CIOs said they plan to expand their IT departments in the first quarter of 2013, which is nearly double the number (9%) who were planning increases in the fourth quarter of 2012, reports Robert Half Technology.

Companies have resumed hiring and expanding their workforces as the economy has shown signs of improving, but the mood remains one of cautious optimism, says Jack Cullen, president of IT staffing specialist Modis.

The biggest issue is how the tax burden for companies might change this year. But that uncertainty, while a concern, so far isn't halting hiring. "Companies need to continue to hire. There's still a backlog," Cullen says.

Finding the talent remains a challenge, however. More than half (63%) of the CIOs polled by Robert Half said it's challenging to find skilled professionals today. The skill sets in greatest demand are: database management, cited by 48% of CIOs, network administration (47%), and web development/website design (33%).

"Hiring has been a challenge [in 2012], especially in virtualization, SAN and programming," says Kaufman of Supplies Network. "We focus on hiring self-motivated employees who are strong problem solvers. If they're not quite where we want them to be technically, we absolutely will invest in training to get the right person prepared for the job," Kaufman says.

The hiring picture is also complicated by the imperative to transform IT. In the search for candidates, business acumen has become as important as technical skills.

Conklin of Christus Health understands firsthand the pressure to find both business-savvy and technically strong IT pros. "Our hiring challenges are at two extremes," says Conklin, who oversees IT at the Dallas-based healthcare provider, which runs more than 60 hospitals and long-term care facilities and 175 clinics and outpatient centers in the U.S. and Mexico.

Healthcare organizations are morphing from traditional disease-driven operating models to a focus on wellness that includes emerging programs such as accountable care organizations. (An ACO is a network of doctors and hospitals that shares responsibility for patient care in an effort to improve care while driving down costs.) So Christus Health needs to hire technical people with solid business skills who can keep up with operational objectives in an industry that's changing all the time.

"Systems we buy will have to be adaptable, and the people we have on board need to understand both ends of the business well enough to not paint us into a corner by doing things that either won't work or will require significant rework in the future," Conklin says.

At the same time, the need for traditional technical expertise is unabated. The changing nature of healthcare "requires us to have very talented, extremely technical people on board who understand the complexities of building secure networks and applications families that will be adaptable for the future," he says.

Is IT ready to be innovative?

"IT leaders are definitely up to the challenge, and a lot of them are further along than they think," Mann says of the imperative for innovation. "They need to develop new skills and approaches, but they'll do it."

Budget remains a hurdle. IT teams need to figure out how to be innovative when they don't have the time or money to do much more than keep the lights on, Mann says.

Business knowledge is essential, Christ says. Top-performing CIOs take the time to meet key customers and suppliers, they know their competitors, and they know the agendas of their peers in the C-suite because they talk continuously, he says. "They're conversant in the language of the industry, not just in technical terms," Christ says. "They expect the same of the IT leaders reporting to them and evaluate them on business understanding."

IT needs buy-in from the CEO, Iyer says. The CEO needs to reinforce that IT is a critical function, and insist that IT play a role in driving business growth.

Confidence is another necessity.

I tell my folks the example of someone who runs a music store. If you go to the shop, the music guy knows the acoustic guitar, the electric guitar, the piano. He can play all those instruments -- but that doesn't make him Eric Clapton. I tell them I'm Eric Clapton. I do this gig for a living. I can go play with any guitar you give me, I can go do this at any company. I may not know the difference in detail between every acoustic guitar or electric guitar, but I can still play Layla and you can't.

— Bask Iyer, CIO, Juniper

Iyer, who is a CIO at a technology company, is often challenged to defend his department's work, particularly since his end users are extremely tech-savvy.

"I tell my folks the example of someone who runs a music store. If you go to the shop, the music guy knows the acoustic guitar, the electric guitar, the piano. He can play all those instruments -- but that doesn't make him Eric Clapton. I tell them I'm Eric Clapton. I do this gig for a living. I can go play with any guitar you give me, I can go do this at any company. I may not know the difference in detail between every acoustic guitar or electric guitar, but I can still play Layla and you can't."

Not every CIO has to contend with end users who are engineers, but many face the same skepticism that IT can drive business growth. "You have to [assert yourself] without arrogance, but with some confidence and some sense of humor," Iyer says.

For years IT has wallowed in the shadow of Nicolas Carr's divisive 2003 Harvard Business Review article, "IT Doesn't Matter," which, in asserting that IT investments fail to provide companies with a strategic advantage, seemed to diminish the talents of IT.

Today, there's an opportunity for IT to reclaim its role as a trusted adviser on technology and play an active role in driving innovation, Mann says. Just about every business today depends greatly on technology, and if a company isn't getting the most out of technology, it won't succeed.

Technologies such as cloud, mobile and social can highlight IT's potential for innovation, Mann says. "This makes IT not just relevant again, but important."

Ann Bednarz covers IT careers, outsourcing and Internet culture for Network World. Follow Ann on Twitter at @annbednarz and check out her blog, Occupational Hazards. Her e-mail address is abednarz@nww.com.

Copyright © 2013 IDG Communications, Inc.

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