Shift to digital business disrupts traditional IT

2016 is set to be a year of shifts for IT – shuffling budget dollars, reconfiguring business processes, and recasting tech talent.

Worldwide IT spending is forecast to surpass $3.6 trillion, a gain of 1.5% compared to 2015, according to Gartner. While the spending increase is modest, the funds will enable companies to advance not-so-modest business transformations. Most organizations are in a transition to becoming digital businesses, according to Gartner, and tech pros are at the center of these changing business models that blend digital and physical worlds in order to better serve customers, drive revenue and increase productivity.

Going digital means different things for different organizations. For some companies digital transformation means changing the way they interact with partners and customers. Starwood Hotels, for example, developed a keyless entry system that allows guests to use their smartphones to unlock doors. The city of Montreal built mobile apps that show the schedule and progress of snow plows so residents can move their cars out of the way and avoid towing. For others it can mean a significant transformation of their business model. Mining and construction equipment maker Caterpillar, for example, recently teamed with analytics startup Uptake to develop predictive diagnostics tools so customers can better gauge the health of their equipment and optimize machine availability.

In practice, executing new business opportunities that span the digital and physical worlds requires organizational changes, process changes and cultural changes. Mobile, cloud, analytics and sensor technologies underpin these digital initiatives, which are leading companies to adjust their tech spending habits within IT and across the organization.

Carrie Johnson, senior vice president of research at Forrester, says CIOs are cautiously optimistic about 2016. “It’s not going to be a year of untethered spending, of course, but what they’re optimistic about is the amount of budget they’re able to shift toward business technology projects versus IT projects,” Johnson says.

Technology and systems that are designed to win, serve and retain customers – such as data analytics, e-commerce and CRM — are becoming the priority, she says. Forrester predicts the fastest growth will be in cloud applications and platform services, mobile app development and analytics, while hardware spending will lag. Traditional IT investments won’t go away, but within IT the emphasis will be on consolidating core systems and simplifying infrastructure to cut costs in order to prioritize business technology projects.

Long-familiar technologies such as CRM and data analytics certainly aren’t new, but expectations are higher as 2016 gets underway. Many big data efforts “have pulled a lot of data together but not enabled much action based on it,” Johnson says. Looking ahead, companies aim to collect, analyze and deliver customer intelligence to the front lines and to customer-facing systems; they want to be in a better position to anticipate market opportunities. “What we’re looking at this year is a shift to insights, which will mean investment in more predictive analytics tools and sophisticated algorithm tools, so they can do more interesting things with the data.”

There also will be a shift in how data and analytics initiatives are handled. In the past, too many projects were initiated at a department level. “Departmental-level investments created interesting actions in a silo. The investment now is coming at an enterprise level to aggregate the hundreds, in some cases, of analytics solutions,” Johnson says.

As tech priorities change, so will the scope of technology that IT needs to support – directly and indirectly.

Digital transformation efforts often include technology that has sprouted outside of IT’s control, involving everything from smart mobile devices to social media and technology embedded in products, and that won’t change. IT leaders know they’re not the only avenue for technology acquisition and implementation. The ongoing challenge is to ensure IT is partnered with line-of-business managers, eyeing the same strategic goals, and in a position to support any tech initiatives that emerge from departments such as marketing or finance, says Jason Hayman, research manager at TEKsystems.

“Organizational alignment will be the number one challenge” for IT, Hayman says.

Staff roles must change, too. IT leaders should be prepared to look at their existing team and consider if it’s still serving the business — in terms of employee skill set, agility, and a willingness to focus on a new way of operating, Johnson says. “We’ll continue to see business-savvy CIOs taking a pretty hard look at their organization and recasting it.” 

It’s a movement that starts at the top of the IT structure.

“The idea that it is the job of the CIO to drive revenue versus keeping the lights on and cutting costs – that is the biggest shift that we expect to see in 2016,” Johnson says. While many tech leaders are still tasked with improving operating performance and boosting productivity through technology, they’re also being asked to help shape corporate strategy and influence product development. “We’ll see a continued bifurcation of the IT-focused CIOs versus the business technology-focused CIOs who are at the table, in discussions about how to drive revenue, and investing in the systems and processes to drive revenue,” she says.

For many tech leaders, it’s a good opportunity to engage more with business peers. “Imagine if you’re a CIO, and you get to be in the business of rethinking the company’s business model and the technology needed to support and drive it – versus making sure your company’s on the latest version of Outlook,” Johnson says.

IT execs can learn what motivates customers, and then invest in and design those solutions, Johnson says. “Everybody likes in their career to be learning something new, and this is bringing CIOs a lot closer to the end customer.”

Beyond the CIO, companies need tech people who can help bridge the divide between technical and business environments.

That’s one reason hiring is on the rise. A solid 78% of hiring managers anticipate bringing on more tech people in the first six months of 2016 compared to the second half of 2015, according to tech career site Dice. Among those who see more hiring on the horizon, 71% plan to boost their teams by 11% or more.

When looking for new IT talent, hiring managers are focused on softer skill sets – the ability to communicate clearly, manage a project, take complex concepts and boil them down into simple, logical-to-follow terminology for non-tech individuals, Hayman says. “It’s finding folks who actually understand the goals of the business and what the business is trying to accomplish.”

Working more closely with finance, sales, and marketing requires a different skill set and a different type of worker. “Folks coming into IT need to make sure they have those skill sets, and folks who have been in IT for a while need to make sure that they’re either brushing up on the skills they already have or acquiring new ones,” Hayman says.

Specifically, companies are “looking for people who are comfortable with agile methodologies versus traditional waterfall development methodologies. They’re looking for engineering and development talent to develop customer-facing applications. They are looking for change agents — which is a very new way of thinking about IT staff,” Johnson says. “They’re looking for folks who can bring along the rest of the organization with them, and get them excited about new customer-focused projects.”  

Finding people with an entrepreneurial approach to development can be tricky, “but they’re there,” Johnson says. “It’s often just a matter of ferreting them out, and bringing them out from under traditional reporting structures or process structures.”

The trouble is, while tech pros are being asked to do more, companies aren’t necessarily prepared to do what it takes to train and retain the people they want. Hiring is on the rise, but salaries don’t seem to be following the same upward trajectory. Fewer IT leaders expect salary increases in 2016 than in years past, according to new data from TEKsystems 

“Only about half of the IT leaders surveyed said that they expect to increase salaries in 2016, even for some of the most difficult-to-fill IT roles. And even when they’re increasing salaries, they’re not increasing them by leaps and bounds. Close to 70% said they’re only increasing salaries by about 5%,” Hayman says. “It’s something that we find surprising.”

This failure to properly adjust salaries is particularly surprising given the competitive IT labor market. “It’s really difficult in IT right now to attract and retain the best and brightest. There’s a huge skills gap, and the demand is insatiable,” Hayman says. “Whether it’s security, cloud, mobility or big data — if you have skill sets within those areas, or you’re doing things to support those trends, it’s just huge right now,” Hayman says.

Dice finds restrictive salaries are impacting companies’ success with the offers they’re making: 64% of hiring managers and recruiters told Dice that salary guidelines have prevented positions available now from being filled, a jump from the 58% who said this last year.

When top tech prospects could easily have multiple offers to choose from, companies need to understand what they’re up against in today’s job market, TEKsystems’ Hayman says. “Organizations really need to make sure they’re paying people appropriately.”

“There’s going to be a war for digital skills,” Johnson warns.