Cutting IT costs is no longer a priority

IT industry leaders can be very critical of their own performance. In general, both business and IT leaders can be more negative about general IT performance than they were in past surveys, a new study from McKinsey states. Specifically though, the IT executives in the survey "scored or judge their own effectiveness in the industry more harshly than their business counterparts do. In comparison with top management and execs from the business side, they are more than twice as likely to suggest replacing IT management as the right solution for their issues."

These are some of the main issues of a new survey of 807 IT businesses and executives, published by Naufal Khan and Johnson Sikes, both with McKinsey. The main point of the report is that cost-cutting is no longer a top IT priority among benefits. There's now a strong emphasis on building the business process and increasing the effectiveness of the IT infrastructure. The bad news, however, is that IT tends to be heading in the opposite direction and being less effective at meeting business goals. Is it because the bar is being set higher for the business aspect of IT?

The survey finds that "improving the effectiveness of business processes" is the top-ranked IT concern at organizations, up from 47 percent in 2011 to 61 percent today. Reducing IT costs has dropped in priority, from 44 percent to 31 percent.

In kind, IT budgets are on the uptake. Approximately up to two-thirds of executives, roughly 64 percent, say their budgets for new investments will go up next year, up from 55 percent who said so in 2012, Khan and Sikes noted. However, executives are evenly split about whether or not operational spending will increase or decrease.

Only forty two percent of IT executives see their departments as being effective at managing their infrastructures, down from forty nine percent in 2012. Only twenty percent feel they are being effective at "pushing technology enablement or innovation in business processes and operations, down from twenty two percent the previous year.

Most of their IT budgets will go toward infrastructure—as they have said since 2010—followed by core transactional applications. Cloud is likely to be a game changer yet to come in this season, however. As Khan and Sikes observe: "Looking ahead three years, executives expect less of their budgets to go to infrastructure, perhaps because infrastructure is the area within IT department where the head count is most likely to have been reduced due to companies’ using cloud-computing technology."  The up and comers in the IT scope include analytics and innovation (two very broad terms), projected to get an increased piece of the IT pie in the years to come.

Two-thirds of IT executives report experiencing hardship when seeking the right people with the right skills to get this all done. Accordingly, McKinsey finds, the most acute needs for IT talent are in analytics, joint business and IT expertise, and mobile and online skills. This, of course, varies by industry -- for example, financial-services executives seek enterprise architecture skills, but are less focused on analytics then other industries. Companies engaged in B2C are much more likely to be seeking analytics skills than their B2B counterparts as well.

Conclusion: The exciting news: McKinsey survey observes that cost-cutting is no longer a top IT priority. The not so exciting news: expectations are much higher, with IT seen as less effective at meeting business goals.

Source: http://www.zdnet.com/cutting-it-costs-is-so-2011-7000027742/

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