A report from The Economist Intelligence Unit A blended future: The changing mix of IT service delivery and consumption Sponsored by A blended future: The changing mix of IT service delivery and consumption Contents About this report Executive summary Drivers of change Business-unit needs   CIO response 10 Building a shared model 13   15 case study: Test and learn at Expedia case study: IT service delivery at Kaiser Permanente Conclusion 16 Appendix: survey results 17 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption About this report A new global survey of executives confirms a changing mix in how IT services are delivered and consumed both currently and over the next three years The survey was conducted by The Economist Intelligence Unit (EIU) in December 2013 and sponsored by EMC Respondents include chief information officers (CIOs) and line-of-business executives (LOBs) The findings and insights complement an earlier EIU study that assessed the emergence of CIOs as strategic leaders in a setting of continuous business and technological change John Kim, senior vice-president global products, Expedia Edward Mesrobian, chief technology officer, Expedia Phil Fasanso, chief information officer, Kaiser Permanente Julie Vilardi, executive director of emerging technologies and clinical informatics, Kaiser Permanente The report draws on two main sources for its research and findings: Jeroen Tas, CEO informatics, solutions and services, Philips Healthcare l A survey that included responses from 205 executives worldwide whose responsibilities involve the delivery and consumption of IT services A large majority of respondents are personally located in Europe (40%), North America (29%) or Asia-Pacific (23%) Nearly 50% of the companies represented in the survey have more than US$500m in revenue, while about one-third have US$5bn or more Respondents hail from 19 different industries, with financial services (17%), manufacturing (15%) and IT/Technology (13%) leading the pack Judith Spitz, senior vice-president and CIO, Verizon IT Strategy and Planning l A series of in-depth interviews with senior executives and academics We thank them for their valuable insights Interviewees © The Economist Intelligence Unit Limited 2014 Klas Bendrik, group CIO, Volvo Cars Jeanne Ross, director and principal research scientist, Center for Information Systems Research, MIT Sloan School of Management A blended future: The changing mix of IT service delivery and consumption Executive summary Information technology (IT) has a decisive impact on what a modern organisation can So more line-of-business executives (LOBs) want to control IT directly to run their current businesses and innovate for competitive advantage “Technology has advanced to the point where it is less expensive to experiment with radically new experiences,” says John Kim, senior vice-president of global product development at Expedia, the world’s largest online travel agency At the same time, chief information officers (CIOs) and other IT professionals understand in depth how technology and business processes function and relate to each other, not only at the departmental level but for the organisation as a whole “Almost any core capability in a modern organisation involves mixing data with some kind of business process,” says Dr Jeanne Ross of MIT’s Sloan School of Management “That’s where the IT unit becomes so valuable They understand what technology can or cannot do.” Both LOBs and CIOs acknowledge they must work more closely, according to the EIU survey and interviews, but not necessarily under the same rules that governed in the past LOBs want the flexibility to use whatever technology and services help them achieve their business goals CIOs are realistic about giving LOBs more influence and control over IT decisions and resources The result is a changing mix of internally developed and externally sourced technologies and third-party IT services © The Economist Intelligence Unit Limited 2014 This Economist Intelligence Unit study, sponsored by EMC, analyses the emergence of a “blended future” of IT service delivery and consumption in which the enterprise IT function proactively markets its services to business-unit customers, bringing the full range of internal and external IT expertise to bear on business-unit needs In this scenario, IT and business organisations collaborate closely to create common service definitions and performance metrics to gauge the real impact of IT on business outcomes The blended model transitions the roles of both CIOs and LOBs away from just overseeing IT assets towards managing risks and opportunities Key findings of the report include the following: l CIOs and LOBs agree that the growing availability of easy-to-use technology services from third parties, along with employee expectations for greater control over the technology they use at work, is driving this trend towards supplementing internal IT capabilities with external resources l At present, LOBs are sourcing more technologically mature third-party IT services for their business units—services that are easily, quickly or inexpensively acquired in the market but are not ultimately responsible for a firm’s competitive advantage Communications (59% of surveyed respondents), storage and back-up A blended future: The changing mix of IT service delivery and consumption (54%), servers (48%) and web hosting (44%) comprise the lion’s share of third-party IT infrastructure spend for business units l Greater adoption of external IT capabilities— whether directly by the IT organisation or by the business unit—will change the focus for CIOs going forward One-quarter of participants say that CIO responsibilities for security, risk and compliance management will increase substantially over the next three years Similar percentages of respondents expect significant expansion of CIOs’ roles for information management and analytics (25%), IT services management (23%) and vendor management © The Economist Intelligence Unit Limited 2014 (21%) Only 12% of surveyed executives anticipate that traditional CIO functions such as technology infrastructure management and internal applications development will increase substantially over the next three years l The survey findings and interviews suggest a service-centric rather than asset-centric vision for enterprise IT, in which the internal IT department acts more as an advisor and broker of best-of-breed solutions to business units Sixty-three percent of LOBs surveyed say third-party technologies and services brokered from external providers but managed on the inside will increase over the next three years A blended future: The changing mix of IT service delivery and consumption Drivers of change Organisations increasingly engage with their customers and business partners through digital channels and technologies Therefore, how IT is accessed and managed has a material effect on what a modern organisation can It is not surprising that more LOBs are looking to wield technology as a native capability At the same time, because technology underpins the vast majority of contemporary business processes, IT leaders have unique insight into how an organisation really executes its business IT professionals understand in depth how information systems and business processes function and relate to each other, not only at the departmental level but for the organisation as a whole Q Until recently, both CIOs and LOBs lived in largely separate camps CIOs focused on backoffice efficiency and stability of organisation-wide IT systems, while most LOBs looked to IT for business applications but not for competitive advantage But the rise of mobility, computing-asa-service, social media, and other technology and consumer trends has transformed how CIOs and LOBs deliver value to the organisation To gain more flexibility to respond to rapidly changing conditions, both LOBs and CIOs are moving towards a blended model of IT service delivery that merges internal IT capabilities with third-party services Success under this new paradigm requires at least as much organisational Which of the following statements best describe the main forces driving changes in the CIO’s role in your business? (% respondents) Business units and functions have increasing options and opportunities to acquire technology services from third parties 45 The consumerisation of IT and proliferation of easy-to-use technology services have complicated compliance with enterprise IT policies 40 Employees increasingly expect greater control over the way they use technology in their work 38 The consumerisation of IT and proliferation of easy-to-use technology services have reduced the need for centralised control of IT resources 26 The consumerisation of IT and proliferation of easy-to-use technology services have driven the IT organisation to serve more as a provider of guidance and less as a provider of services 22 The company is trying to leverage IT in revenue generation or other strategic initiatives 21 Source: Economist Intelligence Unit survey, December 2013 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption ❛❛ It can’t just be an IT innovation or a business-unit innovation for the organisation ❜❜ Klas Bendrik, Group CIO, Volvo Cars innovation as technology innovation The EIU survey and follow-on interviews reveal that business units are taking greater control over the IT solutions used in their operations and decision-making A little more than 80% of LOBs say that they currently obtain IT services directly from third-party providers or develop them on their own, and more than half both Many LOBs are bypassing internal IT channels to source external technology and IT services because comparable services are not available from corporate IT, or are not timely enough in their delivery This comes in addition to the fact that IT capabilities have become simple to buy on the open market CIOs and LOBs agree on the two primary drivers towards supplementing internal IT capabilities with external resources Forty-three percent of CIOs and © The Economist Intelligence Unit Limited 2014 45% of LOBs cite the growing availability of easy-to-use technology services from third parties, while 41% of CIOs and 42% of LOBs mention employee expectations for greater control over the technology they use at work However, this doesn’t mean that LOBs and CIOs intend to neatly divide IT responsibility in half with the CIO focused on back-office efficiency and LOBs on innovation Instead, both LOBs and CIOs recognise the need to work more closely together at both the tactical and strategic levels “It can’t just be an IT innovation or a business-unit innovation for the organisation,” says Klas Bendrik, group CIO for Volvo Cars in Sweden “Collaboration is about creating a corporate asset that contributes to both top-line growth and bottom-line efficiency.” A blended future: The changing mix of IT service delivery and consumption ❛❛ The IT supply side is not the major limiting factor anymore We can use our own resources We can use somebody else’s resources … The question is whether an organisation can absorb the necessary changes to use these capabilities effectively ❜❜ Jeanne Ross, Director and Principal Research Scientist, MIT Sloan School of Management Business-unit needs LOBs not seek to own or control IT for its own sake LOBs seek agility Faced with customers who can review products and prices with their mobile phones and share positive or negative experiences on social networks, business units must pivot to become more oriented towards customer experience In such a rapidly changing environment, LOBs want the flexibility to use whatever technologies and services are necessary to achieve their goals According to the survey, 46% of LOBs say they obtain external technology services because comparable services from internal IT are either not available or take too long to deploy Another 46% Q of LOBs want an IT services catalogue that lists both internal and external capabilities that can be tapped by business units Most important, nearly two-thirds (63%) of LOBs expect that the use of external IT resources brokered by internal IT departments will grow over the next three years— far more than any IT services delivery mode The dramatic expansion of third-party IT offerings is one reason why LOBs are increasingly requesting external IT sourcing, according to Dr Jeanne Ross, director and principal research scientist at the Center for Information Systems Research at MIT’s Sloan School of Management “The IT supply side is not the major limiting factor anymore,” she says Which of the following statements best describe your motives for obtaining IT services from outside of your corporate IT function? (% LOB respondents) Comparable services are not available from corporate IT 46 Corporate IT is too slow in delivering services 29 Corporate IT is too expensive 28 External IT providers have a more client-centric approach to IT solutions Solutions from external providers are technologically superior 28 26 Corporate IT is not adequately familiar with emerging technologies 19 Corporate IT imposes too many restrictions 16 Corporate IT does not understand the needs of our business/industry 10 Source: Economist Intelligence Unit survey, December 2013 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption Q Which of the following IT services does your business unit develop locally or obtain from third-party providers? (% LOB respondents) Communications (e-mail, messaging, telephony, videoconferencing) 59 Storage and back-up 54 Servers and computing 48 Web hosting 44 Analytics 42 Employee collaboration and file sharing 40 Information or data services 38 Mobile applications 36 Customer relationship management 34 Other business process applications 34 Social media Partner/Supplier collaboration 30 25 Source: Economist Intelligence Unit survey, December 2013 “We can use our own resources We can use somebody else’s resources We can outsource We can use cloud Basically, if we want to something with IT, we can it The question is whether an organisation can absorb the necessary changes to use these capabilities effectively.” The survey reveals that, for now, LOBs are sourcing more technologically mature third-party services for their business units LOBs are typically focused on business-unit-specific solutions and services that are easily, quickly or inexpensively acquired in the market but are not ultimately responsible for a firm’s competitive advantage Concurrent with greater demand by LOBs for external sourcing is a re-evaluation of the metrics for gauging IT value by CIOs and other management For most of its history in the enterprise, the value of IT was measured largely by operational-level metrics such as cost per stored megabyte, cost per transaction, or IT availability © The Economist Intelligence Unit Limited 2014 metrics such as uptime and mean time between failures These metrics were important for maintaining IT efficiency and resiliency But they were too removed from measuring the value of IT for business outcomes in terms that could be understood by most LOBs A focus on operational metrics was not unusual for many large organisations Much of the past decade’s enterprise IT spending was aimed at automating and streamlining existing business processes to go online Only in the past five to seven years have many large organisations completed the process of transitioning to digital channels as a primary means for interacting with customers and business partners According to Judith Spitz, senior vice-president and CIO for Verizon IT Strategy and Planning, that heavy lifting has enabled the company to change its view of IT from primarily a transactional partner that delivers operational efficiency to a strategic partner that improves customer service and drives A blended future: The changing mix of IT service delivery and consumption case study: Test and learn at Expedia ❛❛ We are strategic partners in the business’s success and are measured by the same yardstick as our marketing and operations teams ❜❜ Expedia Inc is the largest travel company in the world with an extensive portfolio of online travel brands, including category leaders like Expedia com and Hotels.com Collectively, Expedia brands operate across 150 travel-related websites in more than 70 countries In 2013, the company recorded nearly US$40bn in gross travel bookings on over 400 airlines, more than 260,000 properties, and dozens of cruise lines and rental-car companies According to John Kim, senior vice-president of global products, Expedia enables its millions of users to navigate complex choices related to travel within an interface that is both intuitive and fast In such a massive, high-speed environment, product development decisions involve a balancing act in which innovation must be justified against the investment of talent and resources required to bring a new feature up to Expedia-level scale “For example, we know that customers would love to see new ways to view pricing for flights, hotels and other travel services We also know that building these types of experiences can be both very complex and very expensive What makes this a complex problem is there are infinite possibilities for how we it But we don’t know if it is worth our time and effort, for any given option, unless we go out and test it,” he says Testing, in this case, means that multiple revenue growth That switch has changed the metrics against which IT value is judged “Years ago, IT was measured in transactional terms—how often did we deliver projects on time and on budget, what percentage of the requirements did we deliver? Those metrics are nothing more than table stakes now Today, IT is measured by whether Judith Spitz, Senior vice-president and CIO, Verizon IT Strategy and Planning © The Economist Intelligence Unit Limited 2014 versions of the Expedia.com website are running live with a portfolio of features across the globe at any one time Not only must these websites function properly for booking travel, but the websites must also generate data and insight that help guide product development decisions Moreover, effective product innovation involves more than experimenting with the user interface Edmond Mesrobian is Expedia’s chief technology officer in charge of ensuring that back-end performance enhances the front-end customer experience According to Dr Mesrobian, there are infrastructure and back-end operations decisions that can’t be boiled down to simple business decisions For example, Expedia procures fraud control services from a third party, but not necessarily because of lower cost “The goal is to partner with best in class, especially when you’re trying to crack a problem that is not core to your business model and yet you need to be world class at executing against it,” he says Both executives collaborate closely because any new product or feature results from highly interconnected IT systems in which innovative work on the front end must be understood in the context of how it affects the back end In that sense, the test-and-learn methodology runs through one continuous fabric we are enabling a competitive advantage for Verizon—are we delivering shareholder value in terms of the customer experience, simplifying the businesses, helping to win and retain customers? We are strategic partners in the business’s success and are measured by the same yardstick as our marketing and operations teams.” A blended future: The changing mix of IT service delivery and consumption Q Which of the following statements best describe your company’s strategy for transforming its IT delivery model over the next three years? (% CIO respondents) We will increase the use of IT and business process outsourcing to reduce the need for enterprise IT services 32 We will transform our IT function to adopt an IT service model that offers fee-based services to LOBs and operates in parallel with external providers 31 We are satisfied with our current IT service delivery model and we not currently plan to revise it 25 We will work to compete effectively against third-party solutions 24 We will devolve many IT functions to business units 21 We recognise the need to re-think our IT service delivery model but we have not yet established strategic directions 15 Source: Economist Intelligence Unit survey, December 2013 costs and capabilities are far more transparent In addition, this evolution will require new skill sets for both IT and lines of business Organisations will need to develop an innovation and collaboration mindset at the top of CIO and LOB ranks, not simply for cracking business problems at the enterprise level, but also for operating at the ecosystem level as more technology-based opportunities require collaboration in the marketplace In the automotive space, the race to connect cars to online services has become a strategic imperative for every global player Recently, Volvo Cars and Ericsson struck a far-reaching arrangement that includes communications and information services managed by Ericsson for Volvo cars The driver signs up for various digital services 14 © The Economist Intelligence Unit Limited 2014 without knowing that Ericsson is running the back end Making this collaboration work starts with the human resources mix, says Volvo Car group CIO Klas Bendrik: “From an IT perspective, roughly one-third of the staff working on connected cars come direct from Volvo, one-third are coming from Ericsson or a telecoms background, and one-third are being recruited from outside industries such as retail and customer service.” Such a diversity of talent not only brings the right skills to bear on the current challenge, but also sets the stage for further innovation, says Mr Bendrik “When you apply different capabilities from different industries to serve the customer, you open up pathways for creating new experiences and benefits that feed back to the ecosystem,” he says A blended future: The changing mix of IT service delivery and consumption case study: IT service delivery at Kaiser Permanente One way that Kaiser Permanente evolves its IT capabilities is embedding IT executives at the division level across various business units 15 Headquartered in Oakland, California, Kaiser Permanente (KP) is one of the US’s largest not-forprofit health plans with more than 9m members and nearly 17,000 physicians KP’s information systems range from life-critical clinical systems to insurance billing systems to patient self-help and marketing systems to the corporate IT infrastructure that serves KP’s 170,000+ employees According to CIO Phil Fasano, KP’s service delivery strategy uses high tech to enable hightouch human delivery of healthcare services for its members Reaching that point requires sustained, significant automation and innovation in IT The lynchpin for much of that automation has been electronic medical records (EMR) EMRs have emerged as the core data currency for all of the various KP systems However, the deployment of EMR constitutes more or less table stakes for modern health organisations “All of the basic elements of healthcare have changed over the last seven years because of all the automation that has been put in place Now, we’re building on that investment to take it to a new level for our members,” says Mr Fasano One way that KP evolves its IT capabilities is embedding IT executives at the division level across various business units According to Mr Fasano, there are division-level CIOs for care delivery systems, health insurance, corporate systems and so forth These IT executives participate in © The Economist Intelligence Unit Limited 2014 business-unit meetings and are in effect part of the staff of the LOB leaders Their mission is to deliver technology capabilities, whether developed inhouse or sourced externally, against the charter and objectives of a business unit Goals and reality for IT innovation merge in the area of new-product development Julie Vilardi is KP’s executive director of emerging technologies and clinical informatics According to Ms Vilardi, over the past few years the consumerisation of IT has penetrated even the highly regulated borders of healthcare For example, external providers are now offering texting solutions designed for physicians Although most of these systems are compliant with patient privacy laws (also known as HIPPA in the US), the ease with which physicians can download and use texting solutions required KP to jump in front of the trend rather than trying to restrict it “We pulled a group together to perform a market scan of all the solutions out there towards making a recommendation,” says Ms Vilardi “We also communicated with selected vendors what we believe should be our enterprise standard for texting solutions The other piece is that every solution must go through security, compliance and risk assessment before it’s officially accepted into the organisation Back in the office, we don’t tell clinicians that they must install texting But if that’s a direction they’ve decided to go, we will tell them which vendor they should use and why.” A blended future: The changing mix of IT service delivery and consumption ❛❛ Business and IT must craft the customer experience together That’s when the magic happens ❜❜ Jeroen Tas, Philips Healthcare Conclusion In an environment of pervasive technology and non-stop technological innovation, more organisations are looking to CIOs to be architects and strategists who can collaborate with LOBs across the full range of business processes At the same time, lines of business are investigating external technologies and services on an ongoing basis rather than relying on a central IT department to propose them first The goal of both parties’ evolving roles is business agility Agility means more than just using new technologies Agility requires an IT asset or service brought inside of an organisation to be integrated with the flow of data, decisions and business processes that define how a modern firm does business “Success demands as much operational innovation as IT innovation,” says Kaiser Permanente’s Julie Vilardi The EIU survey and interviews pointed out that progressive organisations are taking concrete steps to adopt a blended IT service delivery model: l CIOs and LOBs define target outcomes in business-value language with business-relevant metrics l CIOs and LOBs participate in leadership meetings to determine which parts of an IT portfolio comprise an organisation’s competitive 16 © The Economist Intelligence Unit Limited 2014 advantage and which execute the general operating model l CIOs and LOBs directly embed specialists within each other’s departments in order to learn each other’s needs and capabilities l CIOs and LOBs develop common policies for security, compliance and other organisational standards for information systems and data to aid internal IT development or external IT sourcing l IT generates catalogues of approved technology resources and services for LOBs, some of which are internally developed and others that are available on the open market The survey and interviews demonstrate that an innovative mindset is the most important shared skill for CIOs and LOBs moving to a blended model for IT service and delivery “It’s about having people inside who can use all of these technology capabilities to design and deliver a superior customer experience,” declares Jeroen Tas of Philips Healthcare “And it doesn’t matter if we’re talking about the CIO or the LOB Business and IT must craft the customer experience together That’s when the magic happens.” A blended future: The changing mix of IT service delivery and consumption Appendix: survey results Several survey questions were posed to CIOs only, several to LOBs only, and the remainder to all respondents In your opinion, how effective is your company in each of the following performance indicators compared with its peers? Percentages may not add to 100% owing to rounding or the ability of respondents to choose multiple responses Revenue growth Please rate on a scale from “well above average” to “well below average” (% respondents) Well above average Somewhat above average Average/On par with peers Somewhat below average Well below average Profitability 18 40 15 33 38 71 38 Market share 17 34 35 12 Innovation 15 39 33 12 Effective use of IT 11 27 40 20 Regulatory compliance 19 42 33 Which role in your company has primary decision-making authority for allocating resources to integrate new technologies into the enterprise? (% respondents) CEO CFO CIO CTO Heads of business units Internal business infrastructure technologies 24 41 Other 11 12 Technologies that focus on customer-facing functions 20 30 29 Technologies related to product/service functionality 18 28 14 28 If your company had to choose a single delivery model for all of its IT needs, which one would be most effective from your perspective? (% respondents) Centrally provided IT (developed and delivered by corporate IT) 40 Locally provided IT (developed and delivered by business-line IT) 19 IT procured from third parties, brokered by corporate IT 25 IT procured from third parties, managed by business-line IT 11 Don’t know/Not applicable 17 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption Which of the following statements best describes the role of the CIO in formulating your company’s business strategy? Please select one (% respondents) The CIO is viewed as a key member of the executive team and participates fully in business-wide strategic decisions beyond matters that involve the use of IT 38 The CIO participates in business-wide strategic decisions, but only when these involve the use of IT 31 The CIO is seen mainly as a provider of IT services and is only consulted about strategic business decisions in which IT is considered a critical component 19 The CIO is seen mainly as a provider of IT services and is not consulted about strategic business decisions Don’t know/Not applicable Which of the following statements describe the role of the CIO in managing your company’s IT resources? Please select all that apply (% respondents) The CIO exercises control over all IT systems across the enterprise and must approve all additions and modifications to the IT infrastructure 51 The CIO is responsible for ensuring the smooth operation of the centralised enterprise IT infrastructure but does not control IT procurements by business units for use entirely within their own operations 41 The CIO is the company’s principal IT strategist and leads the identification, selection and implementation of new technologies throughout the business 41 The CIO is the company’s top IT advisor and collaborates with LOB executives to help them make critical decisions regarding the use of IT systems 30 The CIO collaborates with the CTO to align IT strategies with broader business objectives 21 Don’t know/Not applicable Which of the following statements best describe the main forces driving changes in the CIO’s role in your business? Please select up to three (% respondents) Business units and functions have increasing options and opportunities to acquire technology services from third parties 45 The consumerisation of IT and proliferation of easy-to-use technology services have complicated compliance with enterprise IT policies 40 Employees increasingly expect greater control over the way they use technology in their work 38 The consumerisation of IT and proliferation of easy-to-use technology services have reduced the need for centralised control of IT resources 26 The consumerisation of IT and proliferation of easy-to-use technology services have driven the IT organisation to serve more as a provider of guidance and less as a provider of services 22 The company is trying to leverage IT in revenue generation or other strategic initiatives 21 Don’t know/Not applicable Other 18 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption Which of the following statements best describes the role of LOB executives in managing your business units’ IT resources? Please select one (% respondents) LOB executives require corporate approval to acquire IT solutions for their business units 41 LOB executives can acquire IT solutions for their business units as long as they not contravene corporate policies 22 LOB executives can acquire IT solutions for their business units, but they cannot duplicate or ignore core elements of the enterprise IT infrastructure without corporate approval 22 LOB executives have complete freedom to acquire IT solutions Other Don’t know/Not applicable Which of the following statements describes the role of LOB executives in developing corporate IT strategy? Please select one (% respondents) LOB executives not fully participate but are consulted about business-wide corporate IT strategy whether it directly affects their business units 33 LOB executives participate fully in high-level, business-wide decisions concerning corporate IT strategy 25 LOB executives are consulted only about corporate IT strategy that directly affects their business units 25 LOB executives play little if any role in development of corporate IT strategy 13 Other Don’t know/Not applicable Which of the following statements best describe the main forces driving changes in the role of LOB executives in IT decisions? Please select up to three (% respondents) Employees increasingly expect greater control over the way they use technology in their work 42 Business units and functions have increasing options and opportunities to acquire technology services from third parties 40 The consumerisation of IT and proliferation of easy-to-use technology services have complicated compliance with enterprise IT policies 34 The consumerisation of IT and proliferation of easy-to-use technology services have reduced the need for centralised control of IT resources 32 The consumerisation of IT and proliferation of easy-to-use technology services have driven the IT organisation to serve more as a provider of guidance and less as a provider of services 26 The company is trying to leverage IT in revenue generation or other strategic initiatives 26 Other 19 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption How will your company’s expenditure on the following IT service delivery methods likely change over the next three years? Please select one in each row (% CIO respondents) Increase substantially Increase moderately No change Decrease moderately Decrease substantially Enterprise IT systems, storage and networks deployed by the corporate IT function 19 46 28 Local IT developed internally by LOB IT specialists 14 26 44 8 Third-party IT from external service providers, brokered by the corporate IT function 14 39 40 Third-party IT from external service providers, sourced by LOB IT specialists 11 24 51 IT solutions developed or sourced by individuals or small teams without control from either corporate or LOB IT 18 27 39 Which of the following statements best describe your company’s strategy for transforming its IT delivery model over the next three years? Please select all that apply (% CIO respondents) We will increase the use of IT and business process outsourcing to reduce the need for enterprise IT services 32 We will transform our IT function to adopt an IT service model that offers fee-based services to LOBs and operates in parallel with external providers 31 We are satisfied with our current IT service delivery model and we not currently plan to revise it 25 We will work to compete effectively against third-party solutions 24 We will devolve many IT functions to business units 21 We recognise the need to re-think our IT service delivery model but we have not yet established strategic directions 15 Other Don’t know/Not applicable How will traditional CIO responsibilities change over the next three years? Please select one item in each column (% CIO respondents) Increase substantially Increase moderately No change Decrease moderately Decrease substantially Services management (including provisioning, metering and billing) 23 39 33 Vendor management and services brokering 21 36 39 Infrastructure management 12 38 11 39 Applications development and management 12 37 39 10 Information management and analytics 25 39 33 Security, risk and compliance management 25 43 31 Technical consulting 13 38 42 Business strategy and consulting 16 20 © The Economist Intelligence Unit Limited 2014 47 33 2 A blended future: The changing mix of IT service delivery and consumption Do you agree with the following statements about your company’s policies towards IT that is implemented without informing or seeking support from corporate IT (“shadow IT”)? Please select one from each row (% CIO respondents) We are mitigating the risks of shadow IT by promoting a more informed and proactive approach to information and security across the company 78 We regard shadow IT as counterproductive and we actively discourage it 68 We explicitly forbid the use of shadow IT and we prevent or stop its use wherever we find it 61 We want to discourage shadow IT and we believe we can so in positive ways by offering assistance from corporate IT 61 We assist LOB decision-makers to make their own IT decisions by disseminating a catalogue of services/providers 55 We dislike shadow IT but we recognise that LOBs sometimes adopt it for good reasons 54 We have liberalised our policies concerning shadow IT on the grounds that it is inevitable 43 Our policies not encourage or discourage the use of shadow IT 38 How important will the following skills be to enable CIOs to lead IT adoption and deployment across the enterprise under evolving service delivery models? Please rate each skill from “essential” to “unimportant” (% CIO respondents) Essential Important Neutral Somewhat unimportant Unimportant Communication skills to collaborate more effectively with business stakeholders and lead by persuasion 49 31 16 Innovation skills to serve as a change agent and propose business solutions outside of traditional boundaries 42 39 16 Organisational knowledge to understand the needs of diverse business units and integrate those into enterprise-level strategies 41 38 20 Business skills to participate in high-level strategic decisions across the enterprise 39 39 18 IT security skills to mitigate the risks of a more decentralised IT delivery model 28 46 25 Other 13 21 13 © The Economist Intelligence Unit Limited 2014 42 31 A blended future: The changing mix of IT service delivery and consumption Does your business unit develop IT solutions internally? Does your business unit obtain IT solutions or services directly from third-party providers? (% LOB respondents) (% LOB respondents) Yes Yes 57 81 No No 40 18 Don't know/Not applicable Don't know/Not applicable 81 81 Which of the following IT services does your business unit develop locally or obtain from third-party providers? Please select all that apply (% LOB respondents) Communications (e-mail, messaging, telephony, videoconferencing) 59 Storage and back-up 54 Servers and computing 48 Web hosting 44 Analytics 42 Employee collaboration and file sharing 40 Information or data services 38 Mobile applications 36 Customer relationship management 34 Other business process applications 34 Social media 30 Partner/Supplier collaboration 25 Other Don’t know/Not applicable Increase substantially Increase moderately No change Decrease moderately Decrease substantially Don’t know How will your business unit’s reliance on the following IT service delivery methods likely change over the next three years? Please select one in each row (% LOB respondents) Increase substantially Increase moderately No change Decrease moderately Decrease substantially Enterprise IT systems, storage and networks deployed by the corporate IT function 11 39 41 81 Local IT developed internally by LOB IT specialists 34 46 10 Third-party IT from external service providers, brokered by the IT function 10 53 27 10 Third-party IT from external service providers, sourced by LOB IT specialists 39 43 12 IT solutions developed or sourced by individuals or small teams without control from either corporate or LOB IT 22 22 © The Economist Intelligence Unit Limited 2014 47 11 14 A blended future: The changing mix of IT service delivery and consumption Which of the following statements best describe your motives for obtaining IT services from outside of your corporate IT function? Please select up to three (% LOB respondents) Comparable services are not available from corporate IT 46 Corporate IT is too slow in delivering services 29 Corporate IT is too expensive 28 External IT providers have a more client-centric approach to IT solutions 28 Solutions from external providers are technologically superior 26 Corporate IT is not adequately familiar with emerging technologies 19 Corporate IT imposes too many restrictions 16 Corporate IT does not understand the needs of our business/industry 10 Other Don’t know/Not applicable What role does corporate IT primarily play when your business unit obtains IT solutions from third-party providers? Please select one (% LOB respondents) Corporate IT offers advice and assistance in identifying, selecting and implementing third-party IT solutions 44 Corporate IT actively brokers all arrangements with external IT providers 30 Corporate IT offers an optional brokering service to manage relationships with external providers 16 Corporate IT is not involved in our internal development of IT solutions nor acquisitions of IT from third-party providers Other Don’t know/Not applicable What additional services would you like to be available from your corporate IT function that are not currently provided? Please select all that apply (% LOB respondents) IT services catalogue that incorporates both internal and third-party offerings 46 Technical advice and recommendations 44 Guidelines for using third-party services 39 Staff from IT function embedded in our business unit 39 Brokering services for third-party services 27 Other 23 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption Do you agree or disagree with the following statements about the outcomes of your company’s IT delivery methods? Please select one in each row (% respondents) Strongly agree Somewhat agree Neither agree nor disagree Somewhat disagree Strongly disagree Every business unit in our company has timely access to the latest IT solutions 13 45 18 18 16 Our corporate IT function is seen as an enabler of innovation 16 33 29 Our corporate IT function is open to new technologies and approaches 25 38 21 13 Our corporate IT function provides solid infrastructure for our core business processes 24 36 27 12 Our corporate IT function allows flexibility for business units 17 33 26 20 15 Our corporate IT function actively supports the acquisition of specialised solutions from third-party providers 19 35 27 What is the single most important challenge that your company faces in developing the optimal IT service delivery strategy? Please select one (% respondents) Encouraging the IT function, LOBs and third-party providers to work in partnership to develop innovative solutions to business needs Strongly Somewhat Neither agree Somewhat Convincing LOB executives that the centralised IT function understands and is in the best agreetheir needsagree norposition disagree to address disagreethem 19 Lack of business knowledge on the part of corporate IT specialists 13 Finding new ways of ensuring IT security in a more decentralised IT delivery model 11 Lack of technical knowledge on the part of LOB executives Lack of necessary technical skills within the corporate IT function Lack of senior management vision Lack of financial resources Other 24 © The Economist Intelligence Unit Limited 2014 Strongly disagree 33 Don’t know A blended future: The changing mix of IT service delivery and consumption What are your company’s global annual revenues in US dollars? Which of the following best describes your job title? (% respondents) (% respondents) CIO or equivalent 41 Less than $500m 20 SVP/VP/Director $500m to $999m 35 21 Head of Business Unit $1bn to $4.999bn 13 27 Head of Department $5bn to $9.999bn 10 11 $10bn or more 21 What are your main functional roles? Select no more than three (% respondents) In which region are you personally located? General management 42 Strategy and business development (% respondents) Western Europe 37 38 Marketing and sales North America 25 29 Finance Asia-Pacific 19 23 Operations and production Latin America 16 Risk Africa 13 Customer service Middle East 12 Supply-chain management Eastern Europe R&D Human resources In which country are you personally located? Procurement (% respondents) United States of America Legal 28 United Kingdom IT 25 India Other Singapore Australia, China, Germany, Hong Kong, Italy, Japan Are you involved in your business unit’s purchasing and consumption of IT services? Austria, Bahamas, Barbados, Belgium, Brazil, Canada, Malaysia, New Zealand, Nigeria, Norway, Oman, Pakistan, Sweden, Switzerland, Thailand, Turkey, Uruguay (% respondents) Yes 100 Do you have budgetary or profit-and-loss management responsibilities within your area of the business? (% respondents) Yes 100 25 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption What is your primary industry? (% respondents) Financial services 17 Manufacturing 15 IT and technology 13 Professional services Healthcare, pharmaceuticals and biotechnology Chemicals Energy and natural resources Automotive Consumer goods Retailing Aerospace and defence Education Entertainment, media and publishing Government/Public sector Logistics and distribution Telecoms Transportation, travel and tourism Construction and real estate 26 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper 27 © The Economist Intelligence Unit Limited 2014 London 20 Cabot Square London E14 4QW United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com New York 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com Hong Kong 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com Geneva Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]... of America Legal 28 3 United Kingdom IT 25 0 India Other 5 3 Singapore 3 Australia, China, Germany, Hong Kong, Italy, Japan 2 Are you involved in your business unit’s purchasing and consumption of IT services? Austria, Bahamas, Barbados, Belgium, Brazil, Canada, Malaysia, New Zealand, Nigeria, Norway, Oman, Pakistan, Sweden, Switzerland, Thailand, Turkey, Uruguay (% respondents) 1 Yes 100 Do you have... infrastructure management and applications development will increase substantially over the next three years Taken together, the survey data suggest that CIOs are expanding their role to manage a portfolio of IT capabilities that include internal infrastructure assets, local and externally developed applications, and third-party IT services Some of these capabilities will originate from the IT organisation... information systems initiatives outside the purview of central or local IT organisations However, they are also realistic about the growing capability of individuals and teams to meet many of their own information needs The survey reveals that while 68% of CIOs regard shadow IT as counterproductive and actively discourage it, 78% are mitigating risks by taking a more proactive approach to information and. .. consumerisation of IT and proliferation of easy-to-use technology services have driven the IT organisation to serve more as a provider of guidance and less as a provider of services 26 The company is trying to leverage IT in revenue generation or other strategic initiatives 26 Other 2 19 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption. .. assets and capabilities that have not undergone an explicit approval process by the organisation And some CIOs are embracing external IT solutions as aggressively as their LOB counterparts Although automotive manufacturing and healthcare seem worlds apart in terms of industry concentration, both Klas Bendrik, group CIO of Volvo Cars, and Phil Fasanso, CIO of healthcare company Kaiser Permanente, told the. .. units (and severely under-utilised) With the help of virtualisation and cloud computing, IT can deploy a general pool of data, application and infrastructure resources drawn upon by multiple business units that pay for usage The shared asset and services approach drives up utilisation, drives down cost and gives LOBs a better understanding of the relationship between their units’ IT consumption and. .. within each other’s departments in order to learn each other’s needs and capabilities l CIOs and LOBs develop common policies for security, compliance and other organisational standards for information systems and data to aid internal IT development or external IT sourcing l IT generates catalogues of approved technology resources and services for LOBs, some of which are internally developed and others... budgetary or profit -and- loss management responsibilities within your area of the business? (% respondents) Yes 100 25 © The Economist Intelligence Unit Limited 2014 A blended future: The changing mix of IT service delivery and consumption What is your primary industry? (% respondents) Financial services 17 Manufacturing 15 IT and technology 13 Professional services 9 Healthcare, pharmaceuticals and biotechnology... corporate IT (“shadow IT )? (% CIO respondents who agree) We are mitigating the risks of shadow IT by promoting a more informed and proactive approach to information and security across the company 78 We regard shadow IT as counterproductive and we actively discourage it 68 We explicitly forbid the use of shadow IT and we prevent or stop its use wherever we find it 61 We want to discourage shadow IT and. .. integration expertise ❜❜ Jeroen Tas, CEO of informatics, solutions and services, Philips Healthcare the ability to innovate solutions outside of traditional boundaries (42%) emerged as the most essential for adoption of new models of IT service delivery These skills will be at a premium as CIOs anticipate even greater demands from LOBs in areas such as mobility, Big Data and social media that cut across ... business unit’s purchasing and consumption of IT services? Austria, Bahamas, Barbados, Belgium, Brazil, Canada, Malaysia, New Zealand, Nigeria, Norway, Oman, Pakistan, Sweden, Switzerland, Thailand,... to a strategic partner that improves customer service and drives A blended future: The changing mix of IT service delivery and consumption case study: Test and learn at Expedia ❛❛ We are strategic... infrastructure assets, local and externally developed applications, and third-party IT services Some of these capabilities will originate from the IT organisation Perhaps just as many IT capabilities