Achieving IT Excellence in the Age of Digital …...Achieving IT Excellence in the Age of Digital Disruption The IT transformation guide By The Hackett Group How to reimagine your

Achieving IT Excellencein the Age of Digital Disruption

The IT transformation guide

By The Hackett Group

How to reimagine your digital transformation strategy and drive maximum business value?

2020 IT KEY ISSUESResearch Report

Freshworks is pleased to o�er you this insightful market research from The Hackett Group on the incremental bene�ts that organizations can accrue through the digital transformation of IT. The research highlights how modern technologies such as cloud platforms and advanced analytics are acting as strategic enablers. The report also asserts the importance of enhancing IT’s business agility. For IT leaders this implies �nding new ways to fuel the transformation and quickly respond to changing market and economic dynamics.

At Freshworks, we believe your business deserves better software - software that’s ready to go, easy to set up and use, and requires minimal customization. For more information on how Freshworks can help you get the most of your IT, visit www.freshworks.com/contact

The Hackett Group I Key Issues I 2© 2020 The Hackett Group, Inc. All Rights Reserved.

Achieving IT Excellence in the Age of Digital Disruption

2020 IT KEY ISSUESComplimentary research

EXECUTIVE SUMMARY

Setting aside security, which is always a given at the top of the information technology (IT) priority list, we see a couple of key themes emerging from the top 10 most important 2020 objectives, as ranked by respondents to our Key Issues Study (Fig. 1). Improving analytics enablement and optimizing data to drive value are efforts to sharpen the most strategic digital tools in IT’s arsenal, and they are the key to creating new value in 2020.

By Richard Pastore, Michael Spires and Christopher Key

© 2020 The Hackett Group, Inc. All Rights Reserved. The Hackett Group I Key Issues I 3

IT is facing a dual value challenge in 2020: reducing costs and creating business value. Given economic uncertainty and market volatility, the focus on costs has again taken center stage. At the same time, the business expects growth and innovation to drive the top line. To be effective at both goals, IT must use 2020 to transform into an agile, customer-centric innovator with even more efficient processes and service delivery. Among the most critical areas of development in the coming year to support these goals are a reduction of technical complexity/debt, improving the ability to optimize data’s value, enabling enterprise analytics, and adopting elements of an agile operating model.

0 10 20 30 40 50 60 70 80


IT key issues in 2020

Source: Key Issues Study, The Hackett Group, 2020

1 6

2 7

3 8

4 9

5 10

SECURE DATA AND SYSTEMS Always the No. 1 priority, in 2020 anxious boards will ask whether they are investing the right amount in cybersecurity. IT must explain that the better question to ask is if investments are targeting the right priorities.

ALIGN SKILLS AND TALENT WITH CHANGING BUSINESS NEEDS IT’s gaps in analytics and data skills, creativity/innovation and customer-centric design are hobbling efforts to be a strategic business partner, threatening the function’s business relevance and creating the organizational context to sustain success.

IMPROVE ENTERPRISE ANALYTICS ENABLEMENTThe enterprise needs data governance, advanced analytics skills and an analytics operating model, which should help improve the dismal results that the tools have generated thus far.

BETTER ENABLE DATA AS A VALUE DRIVER The enterprise finally realizes that enormous value buried in all that data. It is depending on IT to help realize its full potential and weaponize this asset for competitive advantage.

MODERNIZE APPLICATION PLATFORMS Migrating to cloud platforms and applications will increase IT scalability and agility, but modernization must not be allowed to add to technical debt (see No. 5).

ACT AS A STRATEGIC PARTNER TO THE BUSINESSMost business peers see IT primarily as a systems administrator or technical consultant. To change that, IT needs a new skill profile (see No. 6) and a mission to converge business and technology strategies.

IMPROVE IT COST-EFFICIENCY Yes, it’s back. Corporate anxiety over the economy has put cost back on the enterprise front burner and onto IT’s top 10 list after a two-year absence. How can IT further economize?

IMPROVE IT AGILITY The ability to routinely pivot and respond quickly requires systemic change in IT – new governance, platforms, sourcing strategies, skills and organization models.

REDUCE TECHNICAL COMPLEXITY/DEBT The is a year of reckoning with the technical debt IT has accumulated from deferred system refreshes, replacement or integration. An aggressive systems retirement program is essential.

RATIONALIZE IT PROJECT REQUESTS The long-standing problem of pipeline backlog must be solved through an investment funding process wedded to business value priorities, with decisions and compromises made by business stakeholders, not just IT.


FIG. 1 IT’s most important function improvement objectives in 2020


Secure dataand systems

Improve enterprise analyticsenablement capability

Modernize applicationplatforms

Improve ITcost-efficiency

Reduce technicalcomplexity/debt

Align skills and talentwith business needs

Better enable dataas a value driver

Act as a strategicadvisor to the business

ImproveIT agility

Rationalize ITproject requests

79%

58%

52%

50%

44%

43%

43%

39%

37%

36%

Improving IT service agility and efficiency is the second key theme for 2020, and is targeted by the top 10 objectives of modernizing application platforms, reducing technology (infrastructure) complexity, rationalizing the IT project pipeline, and the general goal of IT agility improvement. These themes and actions are perfectly aligned with the top enterprise strategies for 2020 (as ranked by respondents), which are organic domestic growth and cost reduction. (For more context on enterprise 2020 priorities, see sidebar, “The enterprise agenda in 2020.”)

Importance is only one factor shaping IT’s agenda. The other is current capability. IT leaders must understand which objectives are well-supported by the function’s current capabilities, and which are most at risk due to weak IT capability. To identify these, we compared respondents’ importance ranking for each objective with their current ability to meet business expectations for each objective. In doing so, we were able to triage the objectives into three buckets based on the size of the gap between importance and capability levels.

FIG. 1 IT’s most important function improvement objectives in 2020


The IT organization agenda in 2020


The smallest gaps indicate objectives that most IT organizations are well-equipped to handle, depicted in green in the heat map below (Fig. 2). Those with moderate gaps, where IT has been inconsistent in meeting expectations, are colored yellow and prime targets for capability improvement. Those with the widest importance-to-capability gaps are objectives most at risk – denoted by red. These are IT’s most urgent capability development targets in 2020:

• Improve enterprise analytics enablement• Better enable data as a value driver• Improve IT agility• Reduce technology infrastructure complexity and technical debt

FIG. 2 2020 IT agenda development heat map: Rating priority vs. capability level


Improvement opportunityWell-supported Critical development area

Improve ITperformancemeasurement

Optimize ITresource

deployment

Improve ITcustomer-centric

design

Rationalize ITproject

requests

Improve ITcost-efficiency

Improve IT’sability to innovate

Modernizeapplicationplatforms

Align IT skillswith business

needs

Act as strategicadvisor tobusiness

Secure dataand systems

Better enabledata as a

value driver

Improve ITagility

Improveenterprise analytics

enablement

Reduce technicalcomplexity/debt

The IT organization agenda in 2020


The IT agenda is shaped by enterprise strategic priorities and operational plans, which in turn are driven by economic and business conditions. In 2018 and 2019, customer focus improvement was the dominant transformation initiative on the enterprise agenda, with cost optimization in second place. In 2020 this ranking has flipped (Fig. A).

The enterprise agenda in 2020

FIG. A Top 2020 business strategies for realization of financial objectives


SG&A cost optimization

Customer focus improvement

Product or service portfolio expansion

Data management or analyticalcapability improvement

Major technology platform upgradeor new technology introduction

Enterprise digital transformation

59%

56%

55%

47%

42%

41%

0 10 20 30 40 50 60


Concern over cost, driven by economic uncertainty domestically and globally, has motivated a majority of general and administrative functions to build recession into their budget planning. IT leaders in particular have taken this to heart: nearly 100% have taken at least one step in preparation for recession (Fig. B).

Cost, customer focus and product/service portfolio expansion/innovation were the top three enterprise initiatives in both 2019 and 2020. However, the next three most prevalent enterprise transformation initiatives are related to data, technology and digital in 2020 for the first time. This is a clearer signal than we’ve had before that the enterprise is anxious to extract value from analytics and has begun to understand the value of technology infrastructure modernization. IT’s 2020 priorities are well-aligned with these elevated goals.

The enterprise agenda in 2020

FIG. B Steps IT leaders are taking in anticipation of a 2020 recession


Domesticrecession

Globalrecession

39%

25%35%

30%

26%30%

DEVELOPED CONTIGENCY PLAN

ACCOUNTED FOR IN CAPITAL

EXPENDITURE PLAN AND BUDGET

ACCOUNTED FOR IN BASELINE

OPERATING PLAN AND BUDGET


Addressing development targets aggressively will help IT’s broader 2020 agenda succeed. To develop these capabilities as part of an overall function transformation program, we recommend focusing efforts through the lens of our digital service delivery model (SDM) (Fig. 3). This encompasses all aspects of the function’s operating model, with the central driver and focus being the customer, which in IT’s case is the internal stakeholder and the business end customer. Around the perimeter are six essential service delivery categories.

Our 2020 study results show transformational efforts taking place in all six elements, but IT leaders plan to concentrate their transformation first and foremost on analytics and information management, which should help close their capability gap in enabling enterprise analytics. The following are study findings associated with transformation in each service delivery category, most of which target the critical development objectives identified in the heat map.

Addressing IT’s critical development priorities

FIG. 3 Priorities for IT service delivery model transformation

1 Analytics and information management

2 Technology

3 Organization and governance

4 Human capital

5 Service design

6 Service partnering



In 2020, IT’s most common targets for analytics enablement will be data-specific, namely improving access and quality (Fig. 4).

FIG. 4 Actions planned by IT in 2020 to support data and analytics in the enterprise


Analytics and information management 1

FIG. 4 Actions planned by IT in 2020 to support data and analytics in the enterprise

Percentage of organizations

Improve data access

Improve data quality

Deploy data governance

Hire analytics talent in IT

Develop citizen data scientistsin the business

Hire analytics talent inbusiness functions

Develop sources of big data


43%

43%

33%

30%

30%

23%

15%

0 10 20 30 40 50


While data access management is a clear responsibility of IT, data and analytics ownership and governance are unresolved in many companies, a factor that handicaps enterprise analytics effectiveness. One-third of IT respondents will be implementing new data and analytics governance in 2020. Currently, in most companies, IT takes ownership for data architecture, data handling and master data management (Fig. 5). Business teams are typically responsible for data analysis and modeling. But responsibility for data science and visualization are much more fragmented.

FIG. 5 Responsibility for data/analytics service delivery in 2020


SERVICE NOT BEING PROVIDED IT OR IT-LED COE BUSINESS OR BUSINESS-LED COE THIRD PARTY

FIG. 5 Responsibility for data/analytics service delivery in 2020

Data architecture

Data capture/conversion/storage

Master data management

Data visualization

Data analysis

Data science

Statistical modeling/predictive analytics

15% 70% 12% 3%

11% 66% 20% 3%

11% 55% 31% 3%

16% 43% 41%

8% 31% 58% 3%

32% 26% 36% 6%

26% 21% 47% 6%

Analytics and information management 1

0 20 40 60 80 100


Analytics technology deployments will be scaled up more than any other digital tool in 2020. Fifty-five percent of IT respondents plan deployment increases in excess of 10% by volume in the coming year, with an average implementation increase of 20% (Fig. 6). Deployment of data visualization tools, a key component of analytics, is also among technologies with the highest anticipated deployment growth in 2020. Forty-eight percent plan growth in excess of 10%, with an average increase of 15%.

FIG. 6 Data and emerging technology adoption, 2020 growth and objectives realization

2 Technology


* The technology is used on a limited scale in isolated use cases. ** The technology is used at scale in applicable use cases. 1 Year-on-year percentage change in applicable adoption metric for each technology. 2 Some examples include return on investment, payback, cycle-time improvement, quality of service improvement and customer experience improvement.

LARGE-SCALE DEPLOYMENT*

PILOTS/SMALL-SCALE DEPLOYMENTS**

FELL SHORT OF EXPECTATIONSEXCEEDED EXPECTATIONSMET EXPECTATIONS

Advancedanalytics

Data visualizationtools

Cognitivecomputing/AI

Virtualassistants/chatbots

29% 63% 20% 56% 13% 31%

21% 29%

47%

27%

50%

53%

73%

15%

10%

2%

29% 51%

43%

6% 29%

92% 44%

50%

47%

27%

80%

52%

35%

9%

CURRENT ADOPTION 2020 GROWTH PROJECTION1 BUSINESS OBJECTIVES REALIZATION2

Data- related

technologies

Emergingtechnologies

0 20 40 60 80 10 20 40 60 80 100 0 20 40 60 80 100 0 20 40 60 80 100


These aggressive expansions in deployment come even though advanced analytics and data visualization tools have among the worst rates for meeting expectations among all the key technologies in our study. More than one-half of respondents (56%) say advanced analytics technology initiatives have fallen short of benefits expectations, and 50% also report the same letdown for data visualization. Only chatbots have been a bigger disappointment among digital deployments. For IT, the implications should bring greater urgency to improving the viability of the data that feeds the tools, and educating users on such success factors as how to ask the right questions and identify the types of data needed for effective analysis. Otherwise, there will be an escalating backlash against analytics, and the IT organization may bear the brunt of it.

Beyond analytics, we see 2020 as a year of process transformation. Legacy applications are being scaled back by many – an essential part of IT’s goal to reduce technical complexity and debt. Cloud-based applications and platforms will experience the most aggressive increases in adoption (Fig. 7).

As noted for analytics, several process technology adoption initiatives fell short of expectations in 2019, robotic process automation especially. But, as tools, talent and capabilities mature in IT and the user community, organizations with strong digital transformation plans and change management strategies should be able to move the results needle to a more favorable position in 2020.

2 Technology


FIG. 7 Process automation technology adoption and objectives realization


* The technology is used on a limited scale in isolated use cases. ** The technology is used at scale in applicable use cases. 1 Year-on-year percentage change in applicable adoption metric for each technology. 2 Some examples include return on investment, payback, cycle-time improvement, quality of service improvement and customer experience improvement.

Next-generation, cloud-basedcore applications

Cloud-based platforms(PaaS, IaaS)

Best-of-breedpoint solutions

Legacyapplications

Business processmanagement tools

Robotic processautomation

37% 49% 16% 27% 13% 60%

30% 11% 59%

16% 72%

31% 13% 56%

47% 53%

4% 19% 77%

14%

7%

-4%

29% 50%

28% 50%

51% 20%

17% 34%

14% 36%

73%86%

79%

78%

71%

51%

50%

70%

96%

88%

69%

53%

CURRENT ADOPTION 2020 GROWTH PROJECTION1 BUSINESS OBJECTIVES REALIZATION2

LARGE-SCALE DEPLOYMENT*

PILOTS/SMALL-SCALE DEPLOYMENTS**

FELL SHORT OF EXPECTATIONSEXCEEDED EXPECTATIONSMET EXPECTATIONS

11%

12%

12%

2 Technology

0 20 40 60 80 1000 20 40 60 80 100 0 20 40 60 80 100


In organizational service placement in 2020, we see a continuing shift toward self-service enablement for the delivery of technology services. Fifty-six percent of IT respondents report that they will increase the volume of work executed via self-service by an average of 4.4% over the coming year (Fig. 8).

While we see a continuation of IT service responsibility migrating to business units and functions, which improves IT responsiveness and customer-centricity, there is an even larger increase expected for corporate IT placement. This contrasts with study results of the past two years, which showed the slowest growth in corporate IT work. The sudden change may be an anomaly or a reaction to the increased emphasis by the enterprise on cost takeout, since IT service delivery costs can be economized through centralization.

3 Organization and governance

FIG. 8 Change in volume of IT work by location of service delivery


*Previously outsourced work moved back in-house ** Captive only, excludes outsourced

Projected change in workload in 2020(percentage of respondents citing

increase or decrease)

Decrease Increase

Projected workloadchange in 2020

(percentage of change)

30% 2.0%

4.0%

3.1%

1.3%

2.2%

1.3%

4.4%

0.9%

14% 57%

19% 46%

3% 21%

14% 30%

5%

5%

0%

29%

13%

56%

Global businessservices (GBS)*

Corporate IT

Business unit

Centers ofexcellence (CoE)

Outsourced

Insourced*

Offshored**

Self-service

8%


The talent profile that is emerging in IT emphasizes partnering skills more than technical know-how. Fittingly, the two largest talent gaps reported by IT in our study are nontechnical: creativity/innovation and customer-centric design. IT’s already-identified critical challenges – data optimization and analytics enablement – also show up as major gaps (Fig. 9). Most IT leaders predict no change or increases in these gaps in 2020. Closing the gaps will require a range of talent development practices, including contractual requirements with vendors to use their on-site teams to train IT staff.

FIG. 9 Current IT skill gaps and top projections for 2020 change

4 Human capital

FIG. 9 Current IT skill gaps and top projections for 2020 change

Current gap

Maj

or

Mo

der

ate

Litt

le t

on

on

e

Relationshipbuilding

Consultative skills

Agility andchange

orientation

DevOps andrapid

development

Strategicplanning androadmapping

Businessacumen

Analyticsand datamodeling

CURRENT GAP LARGEST PREDICTED GAP INCREASE/DECREASE IN 2020

Datasavviness

Customer-centricdesign

Creativityand

innovation

Source: Improving the Employee Experience Poll, The Hackett Group, 2019


Service design will continue to evolve in 2020, as IT becomes more customer-centric toward both internal and external stakeholders. As shown in Fig. 8 previously, 56% of respondents plan to migrate IT services to a self-service model, and the highest increase in volume of IT work will flow to self-service. Chatbots are becoming more common in self-service automation, but chief information officers (CIOs) should heed the overwhelmingly disappointing results reported from this technology (as seen in Fig. 6). IT should partner with business peers to determine how to turn around the performance of chatbots.

5 Service design


The most fundamental service-partnering change reported in our Key Issues Study concerns outsourcing. Historically a cost play, outsourcing in 2020 is far more about flexibility and capability access than cost reduction (Fig. 10). Clearly, outsourcing is becoming predominantly an agility lever. However, with the added emphasis on cost reduction in 2020, CIOs should continue to look for cost-cutting opportunities with outsourcers. Many of the latter have been undergoing their own digital transformation, using analytics, smart automation and cloud to make themselves more efficient. Smart CIOs are pushing vendors to pass on the savings to their customers.

FIG. 10 Top outsourcing motivations and services most commonly being increased

6 Service partnering


Percentage citing as top motivation

Increase resourceflexibility 35%

33%

30%

18%

8%

Access newcapabilities

About one-third of respondents plan outsourcing increases for:

• Risk and security management• Systems integration• Application development/ implementation

Free up resourcesfor more value-added

activities

Reduce costs

Build internal capabilitiesthrough outsourcer

partnership

0 5 10 15 20 25 30 35

© 2020 The Hackett Group, Inc. All Rights Reserved.

ABOUT THIS RESEARCH

For the 2020 edition of The Hackett Group’s annual Key Issues Study, executive management and leaders of finance, human resources, IT, procurement and GBS organizations organizations at a global set of midsized and large enterprises were asked in late 2019 about their strategic priorities and initiatives for the coming year.

The Hackett Group I Key Issues I 19

IT has an aggressive mandate for 2020, dominated by pressure to cut cost and add greater value to the enterprise. By reducing technical complexity and upping its game in data optimization and analytics enablement, IT will be able to perform as a cost-efficient, agile transformation and innovation partner to the business.

Strategic implications


RICHARD PASTORE Senior Director, IT Research Advisor

Richard Pastore develops and delivers research and related resources for The Hackett Group’s advisory programs, including IT. He has over 25 years of experience working with CIOs and their teams to apply thought leadership and best practices to help them extract the maximum business value from strategic investments in technology. Richard has spent the last 10 years designing, implementing, and managing IT and business transformation leadership programs, including best practices research, seminars, workshops and conferences, assessment tools, and frameworks for Fortune 1000 companies. He is former editor of CIO and vice president of the CIO Executive Council.

MICHAEL SPIRESPrincipal and Practice Leader, IT Transformation

Michael Spires has over 25 years of operational and strategic leadership experience, specializing in technology strategy, technology outsourcing, shared services, process improvement, merger integration, operations and cost improvement. He has guided executives at a number of Fortune 500 companies undergoing technology and operational transformations, including outsourcing, post-merger integration, and shared services design expansion and redesign. Michael has held industry roles in technology and operations for Fortune 100 firms, in addition to his 20-plus years of strategy and technology consulting roles.

About the authors


CHRISTOPHER KEYDirector, IT Executive Advisory Program

Christopher Key has nearly 20 years of consulting and professional services experience, specializing in IT and shared services center operations. He also has significant benchmarking expertise for global companies with complex organizational environments. During his tenure with The Hackett Group, Christopher has been responsible for providing client services, assessment and advisory expertise within its IT and Global Business Services Executive Advisory programs. Previously, he worked as a recruiting and placement specialist in the IT and business sectors.

About the authors

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Achieving IT Excellence in the Age of Digital …...Achieving IT Excellence in the Age of Digital Disruption The IT transformation guide By The Hackett Group How to reimagine your