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This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Mark Bartram
VP, Gartner
Executive Programs
Research by Dave Aron
Taming the Digital Dragon The 2014 CIO Agenda
Informed by Gartner's Annual CIO Survey
2,339 chief information officers
From 77 countries
Representing more than $300 billion of IT spending
150 Gartner analysts and executive partners helped shape
the report
2
Percentage of Respondents by Country
APAC/Pac
17%
EMEA
39%
N. Am.
38%
Lat. Am.
6%
World:
2,339 Respondents
77 Countries
U.S.: 34%
Canada: 4%
U.K.: 7%
Australia: 5%
Brazil: 4%
Japan: 4%
Italy: 3%
France: 3%
Benelux: 4%
Germany: 3%
Switz.: 2%
Nordics: 6%
Africa: 2%
India: 2% Iberia: 1%
China: 3%
Mexico: 1%
39 Responses from 77 countries in total (those with the most responses listed here)
Expected Budget Changes by Continent, 2013-2014
APAC/Pac
0.9%
EMEA
-2.4%
N. Am.
+1.8%
Lat. Am.
7.3%
45%
38%
17%
World
+0.2%
2012-2013: -0.5%
2012-2013: -1.0%
2012-2013: -1.1%
2012-2013: -1.6%
2012-2013: +0.4%
38
Expected Budget Changes by Industry
40
- 2.8%
- 1.6%
-1.1%
-0.8%
0.5%
0.5%
0.6%
0.8%
1.9%
2.5%
2.8%
3.9%
6.6%
6.7%
Government
Other
Utilities
Manufacturing & Natural Resources
Communications
Services
Transportation
Retail
Media
Banking
Insurance
Healthcare Providers
Education
Wholesale Trade
Taming the Digital Dragon: The 2014 CIO Agenda
1. Welcome to the Third Era of Enterprise IT
2. Create Powerful Digital Leadership
3. Renovate the Core
4. Build Bimodal Capability
5. Craft Your Digital Legacy
3
"There is a growing disconnect between our increasingly nonlinear world and the linear mindsets, practices and
institutions that we deploy in our work."
John Hagel, co-chairman, Deloitte Center for the Edge
The Digital Dragon Is Upon Us "My business and its IT organization are
being engulfed by a torrent of digital opportunities. We cannot respond in a timely fashion, and this threatens the
success of the business and the credibility of the IT organization."
"The IT organization has the right skills and capabilities in place to meet upcoming
challenges."
4
IT Budget Changes Are Incremental, but That Does Not Reflect the Digital Era Demand
On average,* 2014 IT budgets are flat (+0.2%)
(At least) 27% of IT spend is outside the IT organization.
In IT 74%
In Marketing
6% Other 20%
*Weighted average IT budgets change — weighted by 2013 IT budget size
45%
17%
38%
Increasing
Decreasing
Flat
5
We are here
We Are Entering an Era of Enterprise IT
Focus Technology Processes Business Models
Capabilities Programming, system
management
IT management, service
management Digital leadership
Engagement Isolated, disengaged
internally and externally
Treat colleagues as
customers, unengaged with
external customers
Treat colleagues as partners,
engage external customers
Outputs &
Outcomes Sporadic automation and
innovation, frequent issues
Services & solutions,
efficiency & effectiveness
Digital business innovation,
new types of value
IT Craftsmanship IT Industrialization Digitalization
6
We Need a Three-Part Response to Tame the Digital Dragon
Renovate the core of
IT.
Create powerful
digital leadership.
Build bimodal capability.
• Clear digital roles
• Savvy digital executives
• Digital vision & digital legacy
• Cloud/Web-scale infrastructure
• Information
• Talent
• Sourcing
• Agile development
• Multidisciplinary teams
• Innovative partnerships
• New risk/speed trade-offs
Digitalization IT Industrialization
7
1. Welcome to the Third Era of Enterprise IT
2. Create Powerful Digital Leadership
3. Renovate the Core
4. Build Bimodal Capability
5. Craft Your Digital Legacy
Taming the Digital Dragon: The 2014 CIO Agenda
8
The Chief Digital Officer Role Is on the Rise
Asia/Pac:
11%
No. Am.:
5%
EMEA:
6%
Lat. Am.:
7%
Industry %CDOs
Media 21%
Communications 13%
Services 11%
Banking 10%
Insurance 9%
Retail 9%
Healthcare Providers 5%
Government 5%
Manufacturing & Natural Resources 5%
Wholesale Trade 3%
Education 3%
Transportation 4%
Utilities 1%
"If the CEO asks 'Who is in charge of digital?' and gets multiple responses, then there is no digital leadership."
Baron Concors, CIO of Yum Restaurants International, former CIO and CDO of Pizza Hut
Gartner predicts a tripling of the CDO role by 2015.
"For the CIO,
there is a
strong
opportunity,
and also a
responsibility,
to be part of
this new digital
game.
However the
organizational
model plays
out, there will
be a strong
push for the
digital future."
Gianni Leone,
CIO and CDO,
Miroglio Group
Mythbuster: The CDO role is not limited to media or information-intensive industries.
9
"I have to play
Dr. Jekyll and
Mr. Hyde as I
move between
the two roles,
making sure I
apply the
correct set of
rules
depending on
the hat I'm
wearing —
traditional IT
versus leading
digital trans-
formation."
Gianni Leone,
CIO and CDO,
Miroglio Group
The Scope of the CDO's Role
CDO
CEO CMO CIO Other
CDO's Reporting Line
42% 22% 16% 20%
CDO's Team CDO is sole
advisor
Small team of analysts
Resources to pilot
CDO
Substantial devt.
Develop and run
9%
23%
15%
27%
26%
CDO
CDO's Background
Bus. strategy
IT
Marketing
Combination
Other
Don't know
15%
19%
20%
36%
7%
3%
CDO-CIO Integration
Neutral/
Unclear
35% Clear
65%
Mythbuster: The CDO is not, in general, a lone advisor. Most CDOs have a team.
10
A Digitally Savvy CEO Gives You Wings
CIO POWER
CIO POWER
IT EFFECT.
IT EFFECT.
USER SAT.
USER SAT.
BUS.
PERF. BUS.
PERF.
8% of Enterprises Have CEOs Whose Digital Savvy Is Very Weak
7% of Enterprises Have CEOs Whose Digital Savvy Is Strong
Growth Focus
"We believe it's important to embed digital in the role of every key executive."
Willem Eelman, global CIO, Unilever
Growth Focus
12
1. Welcome to the Third Era of Enterprise IT
2. Create Powerful Digital Leadership
3. Renovate the Core
4. Build Bimodal Capability
5. Craft Your Digital Legacy
14
Taming the Digital Dragon: The 2014 CIO Agenda
Technology Priorities Represent Two Complementary Goals
Ranking Based on How Many CIOs Cited Each as a Top-Three New Spending Priority for 2014
15
Renovate the Core
Increased adoption of public and
private IaaS, PaaS, SaaS,
BPaaS
Use of SMBs/
startups; new
categories of partners,
e.g., mobile, design,
analytics
More federated ERP, multi-
enterprise, cloud components,
mobile support, embedded analytics
Hybrid Cloud Volume/velocity/
variety; in-memory; advanced analytics
16
"In my previous role overseeing an Indonesia mobile payments initiative, we had to simulate 5 million customers,
three banking gateways and 10 telecommunications companies. Public cloud was the only cost-effective way, and
I got to see the power of it." Larry Matias, CIO, Jollibee Foods
The Future Still Looks Cloudy
When will more than half of
your business run on public*
cloud infrastructure +
SaaS?
2011: 1,993 respondents; 2014: 2,252 respondents
*2011 survey asked about cloud; in 2014, specified public cloud
% of 2011 Survey
Respondents
% of 2014 Survey
Respondents
In 2011 and 2014, 23% said
"Never"
"We are looking for an architecture that could serve 1 billion people. We could afford traditional infrastructure
when customers came to the bank once a month. Now they may access their accounts via mobile phones 10
times per day. The cost per transaction must approach zero to make this usage viable for the bank."
Luis Uguina, global head of Remote Channels and New Digital Business, BBVA
19
"Potential benefits of cloud include cost savings and other capabilities, such as agility, innovation and time to
market. It is often the latter that is the real impetus. These benefits are often less quantifiable, but are more and
more commonly cited as the true drivers and value of cloud."
David Mitchell Smith, Gartner Fellow
Public Cloud Is Being Deployed to Support Agility
Have made significant cloud investments
50%
14%
13%
10%
12%
Agility
Cost
Innovation
Quality
Other
Main Reason Payback
17
Sourcing: Time for Change
70% will change their technology and sourcing relationships in the next 2 to 3 years for a variety of reasons:
"IT sourcing
strategies must
be structured to
enhance IT
agility and
address the
needs of digital
businesses.
Organizations
that don't adapt
their strategies,
and the
competencies
required to
execute them
effectively, will
fail to achieve
the value
opportunities
presented by a
highly digitalized
future."
Ian Marriott,
Gartner
Research VP
57%
Price/
Price Structure
55%
Service
Quality
52%
Flexibility
46%
Ability to
Partner
45%
Innovation
28%
Scale
46% need to work with new categories of partners, e.g.: Mobility
Big Data
Cloud
Analytics
Digital Agency
Social 21
CIOs Do Not Feel That the Innovation Will Come From the Usual Suspects
Gartner annual CIO Survey, 2013; percent of respondents mentioning each brand; 1,305 respondents (last 10 years)/1,255 respondents (next 10 years)
Oth
er
Which technology company has been most influential over the past 10 years?
Which will be in the next 10 years?
22
The CIO Golden Rules for Working With Smaller Partners
I. Build a competency center around working with smaller companies; recognize that it is much more than a procurement exercise.
II. Consider a broad range of partners: startups, incubators, universities, crowdsourcing, local SMBs, citizen development.
III. Design the relationship for win-win: Don't try to push smaller companies into accepting the minimum price/maximum delivery — they might say yes because they want to work with you, but it might kill them.
IV. Keep the legals light and focused on intellectual property. Don't focus on the liabilities if they fail.
V. Expect to put a project management/delivery wrapper around small partners — let them focus on and bring what they are good at.
VI. Think about the partner's cash flow as well as its profit; you may need to adapt your payment processes (lower latency, higher frequency).
VII. Develop the ability to do quick, lightweight audits of potential small partners. (Neither you nor they can afford to do slow, heavy ones.) Focus on the people and their capabilities.
VIII. Make every effort not to constrain partners in terms of methodology, tools or approach. Focus on the outputs.
IX. Don't try to lock small partners into working only with you. Manage intellectual property issues in conventional ways.
24
Look to Close Digital Talent Gaps
Talent Area Description
Digital Design The ability to design compelling customer experiences in a digital
context, including consideration of the capabilities of mobile and
other devices, with a flavor of simplicity rather than complexity
Data Science The ability to analyze large volumes of data; to mine social,
multimedia and unstructured data; and to conduct near-real-time
data analysis
Digital
Anthropology
The ability to understand how information and technology interact
with human behaviors
Startup/SMB
Management
The ability of larger and more mature organizations to work with
much smaller and less mature organizations for mutual benefit
Agile
Development
The ability to develop solutions in a much more iterative and
collaborative manner
"Digital is different, and I think that less than a quarter of my team is ready and able to make the transition."
Anonymous CIO 25
1. Welcome to the Third Era of Enterprise IT
2. Create Powerful Digital Leadership
3. Renovate the Core
4. Build Bimodal Capability
5. Craft Your Digital Legacy
26
Taming the Digital Dragon: The 2014 CIO Agenda
Bimodal IT Offers a Way to Get Unstuck
Waterfall development
Known vendors
Strong governance
Minimized risk
Technology teams
Traditional Mode Nonlinear Mode
Mythbuster: Nonlinear need not be limited to where speed is needed, for experiments, or for non-mission-critical initiatives.
Stuck in the middle
"Fit for no one"
"The reality is that
you do have to
operate at two
speeds, and some
of that you do by
creating dedicated
teams for each.
Focusing on the
big systems,
making them run
smooth, while at
the same time
having disrupters
to innovate,
together with
marketing and the
customer,
exploiting digital."
Willem Eelman,
global CIO,
Unilever
Agile dev.
Small/ innovative partners
Lightweight
"Just good enough" governance
Managed risk
Multidisciplinary teams
When speed or innovation is needed, or there is a high
degree of uncertainty
27
Almost Half of CIOs Have Begun the Bimodal Journey
45% of CIOs currently have a second fast / agile mode of operation.
Those who do run traditional, iterative and lightweight projects in proportions: 50/25/25
Mythbuster: Nonlinear is not only about software development.
But most have not exploited all the facets of bimodal:
47% operate separate teams.
43% partner with small businesses.
8% use crowdsourcing/innovation
marketplaces.
28
To Compete in a Digital World, We Need to Complete Our Bimodal Capability
CIO
Functional/
Process Silos Run Grow/
Change
CIO
OOCIO
D
CTO
CDO
Run
CIO
OOCIO
D
CTO
P&L Owners
Multi- disciplinary
Product Teams
CTO
CDO
OOCIO
Run
Grow/
Change
Chief technology officer, acting as chief operating officer of IT
Chief digital officer, acting as digital change agent
Office of the CIO, running IT as a business (strategy, governance, security and risk, etc.)
Run = every aspect of IT needed to keep the business running
Grow/change = every aspect of IT needed to execute on growth and change
Demand management = internal demand/relationship/account managers facing off to BUs
IT Craftsmanship IT Industrialization Digitalization
29
D
The CIO Golden Rules for Building a Bimodal IT Organization
I. Be clear and create principles of what goes into conventional IT, and what goes into nonlinear. Default criteria: need for speed, need to innovate, high levels of uncertainty.
II. Design all components to form a consistent nonlinear environment: structure, staffing, sourcing, governance, metrics, tools.
III. Apply lightweight architectural governance to ensure that nonlinear mode initiatives don't make a mess, but governance shouldn't be too heavy/slow.
IV. Provide sufficient focus on the ability to refactor/industrialize nonlinear mode into conventional mode IT, and to unleash conventional systems into the nonlinear world when the need arises.
V. Consider skills and cultural aptitude (e.g., neophilia, tolerance for risk/uncertainty) in staffing the nonlinear mode organization.
VI. Be brave about the need for new people/skills/culture in nonlinear; don't set yourself up for failure with the wrong people.
VII. Don't use placement in the nonlinear mode organization as a reward for your best staff; they may not be a cultural fit.
VIII. Manage communications so that conventional and nonlinear mode IT are seen as important and exciting places to work.
IX. Manage the cultural distance of the nonlinear mode team from the core of the company — not too near, not too far.
32
1. Welcome to the Third Era of Enterprise IT
2. Create Powerful Digital Leadership
3. Renovate the Core
4. Build Bimodal Capability
5. Craft Your Digital Legacy
33
Taming the Digital Dragon: The 2014 CIO Agenda
In This Time of Transition, CIOs Are Reflecting on Their Lasting Impact
"Solutions for our country: payment system, digital signature system and
economic solution systems that our citizens need."
"I will transform education from paper-based with siloed data to digital
information provided in real time that impacts students,
teachers, parents and administrators."
"IT will be the experts, but technology will be everyone's job."
"The people I have trained and mentored wherever
they may apply themselves."
"IT generates revenue."
"Enabling a workforce for the next generation that
sees business for the first time via a digital lens, and has the tools to operate
without borders."
"Collaborative digital leadership."
"Cloud infrastructure with digital services."
"Increased patient empowerment through digital health solutions."
"Using digital technologies to personalize content and create better engagement
opportunities."
34
Recommended Gartner Research Overall/Digital:
"Hunting and Harvesting in a Digital World: The 2013 CIO Agenda," Mark P. McDonald, Dave Aron (G00248536)
"Let's Get Digital: A Template for Digital Business Strategy," Dave Aron, Lee Weldon (G00257724)
"The Gartner Travel Guide to the First Digital Decade," Lee Weldon, Jeffrey R. Cole, Mark P. McDonald, Stephanie Woerner (G00255443)
"CEO and Senior Executive Survey 2013: As Uncertainty Recedes, the Digital Future Emerges," Mark Raskino, Jorge Lopez (G00247308)
Digital Leadership:
"CEOs and CIOs Must Co-Design the C-Suite for Digital Leadership," Mark Raskino, Dave Aron, Patrick Meehan, Jennifer S. Beck (G00258536)
"Does Your Business Need a Chief Digital Officer?" Dave Aron (G00238298)
"Toolkit: Chief Digital Officer Job Description," Dave Aron, Diane Berry, Lily Mok (G00249735)
"Early Trends in Recruiting Chief Digital Officers," Ken McGee (G00258352)
"The Three Types of Digital Business Leader," Dave Aron, Laura McLellan, Yvonne Genovese (G00251979)
Renovate the Core:
"Develop a Strategic Road Map for Postmodern ERP in 2013 and Beyond," Alexander Drobik, Nigel Rayner (G00252735)
"Hybrid Cloud Is Driving the Shift From Control to Coordination," Daryl C. Plummer, David Mitchell Smith (G00252934)
"Use Web-Scale IT to Make Enterprise IT Competitive With the Cloud," Cameron Haight, Daryl C. Plummer (G00250754)
"Approaching cloud services strategically helps Banco Bilbao Vizcaya Argentaria simplify platforms and processes while enhancing productivity," Dave Aron, Mark P. McDonald (G00231037)
"The Art of Innovating by Partnering With Small Companies," Dave Aron, Nick Jones (G00239799)
Bimodal Capability:
"Innovate Like a Startup: The CIO's Front Office Toolkit," Leigh McMullen, Richard Hunter, Jeffrey R. Cole (G00254272)
"Toolkit: Pace-Layered Application Strategy Starter Presentation," Bill Swanton (G00249808)
36
This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Thank you.
Channel 4: Working With Small Partners to Drive Innovation
Channel 4 is working with small partners to drive innovation.
Launched in 1982 and based in the U.K., Channel 4 is a publicly owned, commercially funded TV broadcaster focusing on innovative content, with revenue of £941 million (US$1.54 billion) and a staff of 800.
CIO Kevin Gallagher oversees two work streams: conventional IT to run the business, and content and services, such as websites and games, to complement specific TV shows created by third parties.
Gallagher explains that the TV business is agile by nature, with a need to be innovative, have tight, non-negotiable deadlines, have a wide variety of IT and OT, and partner with small specialist organizations.
"The small companies we work with may consist of only two or three people," said Gallagher. "Fortunately, it is in our DNA as a program maker to work this way."
Recent examples include using a company expert in Apple and Google Play ecosystems to negotiate the App Store process, and using universities to develop algorithms for sales.
Lessons from Channel 4:
• Use different skills. Small companies require a much more hands-on approach.
• Help your partners succeed. Let them focus on what they are good at.
• Get to know your partners. Visit them at their premises. Ensure that you are comfortable working with them.
• Help your partners stay alive. Pay them regularly because it helps them manage their cash flow. Don't overburden them with administrative/legal tasks.
• Be pragmatic about risk. Be prepared to manage scope down if necessary.
23
IPC Makes a Commitment to Agile
IPC, a U.S.-based purchasing cooperative owned by North American Subway franchisees, provides procurement, IT and other services to 30,000 restaurants in the U.S. and Canada. The company's mission is to make the franchisees more profitable and competitive. IPC has a staff of 250, half of whom work in IT.
CIO George Labelle joined in 1999. "We had a lot of unhappy stakeholders. Business analysts would get requirements and pass them on to developers, who would code and hand off to QA people for testing. Upon receiving the solutions, the stakeholder would then say, 'What the heck is this? It looks nothing like what we asked for six months ago.'"
Labelle became enthusiastic about agile, but his initial approach was too naïve. Initial efforts were trying to do traditional waterfall development in shorter cycles.
Culture and mindset had to change. He augmented agile with test-driven development and automated testing. This process was very rigorous.
There were six months of big churn. Some staff left (about 15%) because they couldn't or didn't want to make the transition. Now IPC is 100% committed to agile, using approaches like Scrum and kanban. The remaining staff is fired up.
Direct results have been substantial:
• Built a payment processing system that saved franchisees $20 million. Reinsourced a point-of-sale system where relationships with vendors weren't going well. Created a platform with weekly releases to stores (and it has only been down 60 minutes in the past 4.5 years); it also allows rapid exploitation of business opportunities, like one-to-one marketing at the cash till.
• Other departments have begun adopting agile approaches. "They especially like the daily stand-up sessions, the transparency and the ability to hold people accountable."
30
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