March 8, 2016
3 Ways IT Spending Is Changing
by Chris Curran
It’s not just competition from start-ups that causes upheaval. It’s also the response within incumbents as they feel the pressure of technology.
The technological environment in which most businesses operate continues to grow more complex and competitive, at an ever-faster pace. It’s not just the competition from innovative, well-funded start-ups that causes upheaval. It’s also the response within established incumbents as they feel the pressure of digital technology. Three examples follow.
• New spending patterns. Budgets are shifting to reflect the new realities in IT: lower costs with cloud-based services, digital technology that permeates every aspect of the business and business leaders’ increased awareness of the art of the possible. Business units accustomed to depending on shared functional resources for, say, mobile customer apps now feel free to engage outside resources to develop their own. Departments can opt for pay-as-you-go collaboration services instead of investing in stand-alone systems, and functions such as marketing have their own tools with which to collect, analyze and act upon data. In 2015, the majority of technology spending (68%) came from budgets outside the IT organization, a significant increase from 47% the prior year. Although the democratization of technology across an organization is generally a good thing, it can have such unintended consequences as duplicative efforts, incompatible systems, inadequate attention given to cyber-risks and off-strategy investments.
• New digital leadership. Enterprise technology used to be the sole domain of the IT function, led by the CIO. Now there is a trend toward broader-based oversight. Some companies are expanding the CIO role to foster a more direct connection between technology and strategy. Other companies are creating a chief digital officer (CDO) or similar role to lead digital transformation efforts. In some companies, titles for leaders who oversee digital strategy include the chief experience officer and chief data scientist. This trend focuses C-suite attention on a company’s Digital IQ, which is valuable; however, it also adds to potential uncertainty regarding responsibilities and governance.
• A new digital debate. Every company has its own point of view about the value of digital technology and how it should be managed. Some of the executives we surveyed define digital as activities related only to the innovation of products and services. Others see it as integrating technology into all parts of the business. Still others say digital is merely a synonym for IT, and some use the term in reference to customer-facing initiatives or data analytics activities. Does this splitting of hairs over definitions really matter? It does if the CEO means one thing and members of the executive team hear something else, especially if it isn’t fully clear who is accountable for the digital strategy.
All this fluidity creates a considerable challenge for business leaders intent on capitalizing on digital technology. Thankfully, there are ways of raising your Digital IQ. You can integrate your digital strategy and business strategy, which means getting top leadership directly involved; you can redesign your innovation practices; and you can invest in a few critical forms of digital prowess, including data analytics, cybersecurity and the building of a digital road map.
This piece was written with:
- Tom Puthiyamadam, a principal with PwC US, based in New York. He leads the firm’s management consulting practice. He also leads its digital services practice and oversees its Experience Center, which helps clients create next-generation experiences for their customers, employees and partners.
- Chrisie Wendin, an editor and technology writer with PwC’s Thought Leadership Institute, based in Silicon Valley.