IT More Appreciated, But Culture Precludes Dependence

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.

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