IT More Appreciated, But Culture Precludes Dependence

by Jack Loechner, Dec 30, 2011, 6:15 AM

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According to the McKinsey sixth annual “McKinsey Global Survey,” executives say their companies are boosting IT spending. Looking ahead, executives expect IT to create new platforms to support innovation and growth, help guide strategy with data and advanced analytics, and stay on top of possible new roles for mobile devices.

Among respondents to this survey, the highest current priorities for IT mirror those of previous surveys: improving the effectiveness and efficiency of business processes and reducing IT costs. Also, 40% of respondents indicate that providing managers with information to support planning and decision making is quickly becoming a critical priority, up from 30% just a year ago.

When asked what their organizations’ ideal priorities would be, executives cite more growth-oriented goals. For example, creating new products and services is a priority for 47% of respondents. In contrast, only 17% cite reducing IT costs.

Satisfaction with IT’s effectiveness is increasing among business executives, says the report. Greater numbers of non-IT executives report being very or extremely happy with IT performance across several measures, ranging from a high of 61% for providing basic services cost-effectively (such as e-mail and technical support for laptops and desktops), to a low of 26% for proactively engaging with business leaders on new ideas or system enhancements.

Current IT Priorities (% of Respondents; Ranked by 3 Groups)
Priority	% of Respondents	Non-IT Execs	IT Execs	“Ideal” Priority
Improving effectiveness of business processes	47%	1	2	1
Improving efficiency of business processes	45	2	3	4
Reducing IT costs	44	5	1	7
Provide information to support planning and decision making	40	3	4	3
Creating new products or services	29	4	6	2
Ensuring compliance with regulations	23	6	8	8
Entering new markets	20	7	5	5
Managing risk	14	8	7	6
Source: McKinsey Global Survey, December 2011

With a combination of rising faith in IT, the realization of competitive challenges ahead, and a more positive business outlook, executives expect to increase their new investments in IT capabilities in 2012, with almost a quarter expecting to increase investments by more than 10%. More than 60% expect to increase or maintain their IT operating expenses, a shift from last year when 60% of respondents expected the IT budget for operational spending to either decrease or hold steady.

Expected Annual IT Budget Change, 2012 (vs. Previous Year; % of Respondents)
	Operating Expenses	New Investments
Increase	38%	58%
No change	23	17
Decrease	31	17
Don’t know	8	8
Source: McKinsey Global Survey, December 2011

Respondents indicate that just over half of their current budgets go to infrastructure and core transactional applications. But when asked where they expect to be spending in three years, those two areas shrink to 41% of the total, while end-user communications and collaboration, innovation, and analytics capabilities increase to 46%, from 35% currently.

Respondents highlight three barriers, in particular, to more effective use of data and analytics in decision making:

• Cultural preference for experience over data
• Lack of skills in synthesizing and translating the analytics and data for decision makers
• Concerns that the data quality is poor

Barriers to Use of Data and Advanced Analytics (% of Respondents)
Barrier	% of Respondents
Company culture prioritizes experience over data	19%
Lack of skills in translating data for use	17
Data quality too poor to use effectively	16
Lack of sufficient data	12
Little or no interest in changing decision making process	10
Lack of analytical skills to carry out analysis	9
Inability to discretely quantify benefits for business	8
Decision makers unaware of available data	6
Source: McKinsey Global Survey, December 2011

As technology becomes a more important factor in reshaping industries, survey respondents say their organizations’ boards of directors should play a more active role in deciding how technology is incorporated into overall strategy. Respondents say that the most important technology-related discussions at their board meetings revolve around approval or review of very large IT projects; but ideally, they say, discussions should address forward-looking assessments of technology trends.

Most Important Technology For Board to Address (% of Respondents)
Addressable issue	Current %	“Ideal” %
Forward looking discussion on how tech will affect industry	28%	55%
Yearly discussion on how IT enables broader business strategy	28	39
IT talent, succession and mentoring	14	22
Approval or review of very large IT projects	41	19
Source: McKinsey Global Survey, December 2011

Executives say their companies still rely upon a mix of data and experience in decision making, although they are increasingly looking to analytics tools for support. In fact, respondents say their companies are shifting decision making to incorporate more data and analytics in almost all corporate functions, with 60% citing marketing and sales as where this is likely to occur.

But, despite the promise of big data to reshape strategy and decision making, more than 75% of respondents to this survey report that their organizations’ greatest benefits from data use flow from clear and timely reporting of financial and performance metrics. Only about half say they seek to use data to provide new business insights or develop new information-based products and services.

For additional information from McKinsey, please visit here.

 

 

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