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Australian IT Industry Facing a ‘Digital Leadership Vacuum’
Source: itwire.com
Source Date: Monday, May 12, 2014
Created: May 13, 2014

Australia is lagging behind the rest of the world in the digital stakes when it comes to digital-leadership, according to a new global report which warns that our IT leaders need to take up the challenge of digitalisation or risk falling further behind.

In its annual global survey of CIOs, Gartner highlights the fact that Australian organisations have fewer chief digital officers – 1.8% compared to a global average of 6.6% - and outsource less and consumer fewer public cloud services than worldwide averages.

Gartner says that while Australian businesses expect IT to support growth, many are cutting IT budgets and falling behind the rest of the world in digitalisation, raising the prospect of a digital “leadership vacuum”.

With IT budgets shrinking by 0.1% (compared to global growth of 0.2%), Gartner says that Australian IT leaders have less money to fund growth.

And, according to Gartner vice-president Andy Rowsell-Jones, a closer look at IT spending in Australia shows 26% spending will be outside of the IT budget, which could raise “integration issues in the short term and governance issues in the long term.”

“If Australian IT leaders are to ‘tame the digital dragon’, they need to address three top priorities - developing digital leadership, renovating the core of IT, and building bimodal capability.”

According to the Gartner report, most Australian businesses have established IT leadership, strategy and governance, but have a vacuum when it comes to digital leadership.

Rowsell-Jones says that to exploit digital opportunities and ensure the core of IT services are ready, there must be clear digital leadership, strategy and governance.

Gartner recommends that all business executives need to become “digitally savvy”, and says that digital leadership needs to be clear and unambiguous.

“For Australian IT leaders, the challenge is making sure every business executive understands the importance and potential impact of the digital dragon,” Rowsell-Jones says.

“Whether your enterprise has a CDO or not (a role not yet common in Australia), we recommend that CIOs contribute to and, if necessary, lead the discussion about the implications of the ‘digital dragon’ on the enterprise.

“We expect the CDO role to become more common over the next five years. We expect its scope to grow, too. If your enterprise does not have a CDO, make sure you’re contributing to the debate.”

The Gartner survey reveals that, across the globe, 42% of CDOs are currently focused on digital marketing, but this number is falling as more CDOs become true advisors on digital business strategy to the CEO and board of directors, and so they move into the arena of business strategy.

So, where are Australian CIOs spending their money? According to Gartner, the focus is clearly on new opportunities, such as big data and mobile, which Rowsell says is unsurprising given the rapid growth in market adoption of mobile-data-enabled smartphones and tablets, the increased popularity of BYODs, and the explosion in devices capable of participating in the Internet of Things. “However, a lot of new spending is also going into improving core systems and capabilities – in other words, ensuring the infrastructure is fit for purpose to make IT digital-ready.”

Table 1: Technology Spending Focus: Australia vs. Global

Australia                       Global

1. Mobile                       1. BI/Analytics

2. BI/Analytics                 2. Infrastructure and Data Centre

3. Cloud                        3. Mobile

4. ERP                          4. ERP

5. Digitalisation/Digital Marketing            5. Cloud

6. Infrastructure and Data Centre           6. Networking, Voice and Data Communications

7. Industry-Specific Applications           7. Digitalisation/Digital Marketing

8. Networking, Voice and Data Communications    8. Security

9. Legacy Modernisation             9. Industry-Specific Applications

10. Security                        10. CRM

11. Cost/Efficiency                 11. Legacy Modernisation

12. CRM                            12. Collaboration

Source: Gartner, March 2014

Gartner’s survey data shows that one-fifth of Australian businesses and governments have made significant investments in public cloud, placing them slightly behind their global peers.

And, the analyst firm says that the other striking difference between Australian IT leaders and their peers is the type of cloud services being purchased.

According to Gartner, only 43% of Australian businesses have invested in SaaS, compared to a “staggering” 72% globally, and they warn this could lead to Australian businesses missing out on the flexibility benefits of SaaS, which offer turnkey solutions to IT service needs.

Gartner analysts said that for most organisations in Australia, the dialogue around public cloud has transitioned from concerns over service levels and security to a pragmatic discussion of what, when and how. This change, says Gartner, is driven by supply-side improvements from cloud services providers, an increasingly well-informed understanding of public cloud by business management, and pressure to achieve Web-scale architecture, performance and agility.

“Renovate the core of IT. Prepare it to be digital-ready. This includes making investments in mobile in the shape of app development, and bring your own device (BYOD) support,” said Rowsell-Jones.

“Underpin this with investments to make sure the IT ‘engine room’ is also digital-ready.”

Rowsell-Jones highlight the fact that in 2013, federal and state governments announced ‘cloud first’ strategies and procurement models for IT infrastructure and applications, and says that  while Australia’s public-sector migration to cloud delivery models is currently in its early stages, “it’s indicated that IaaS and SaaS adoption will make significant progress in 2014.” 

On attitudes towards sourcing, Gartner says this about Australia:

•    Australian IT leaders have long embraced strategic sourcing, mixing in-house with sourcing from offshore captive units, contractors and fully-fledged outsourcers. However, the survey data shows a different story. In contrast to the rest of the world, Australia is actually less ‘outsourced’ than its peers. Only 6% of Australian businesses are mainly or wholly outsourced, while 60% use mixed sourcing. This is compared to 10% and 63% respectively among global peers.

•    However, Australian IT leaders expressed a strong intention to embrace strategic sourcing more wholeheartedly, with 76% saying they plan to change their technology and sourcing approach in the next two-to-three years.

 

And, on building bimodal capability:

•    IT leaders are resorting to splitting their IT organisations in two, in response to the age-old tension between needing to provide safe, reliable and integrated enterprise IT, and being able to experiment with and capture value from new technologies and societal and industrial trends at high speed. Gartner calls this division into traditional and nonlinear IT functions ‘bimodal capability’ or ‘two-speed IT’.

 •    Australia is slightly behind the rest of the world in developing bimodal capability, with 41% operating some form of two-speed IT (compared to 45% ) but in touch with the adoption of this model.

“If you are not already bimodal, consider experimenting with separating conventional and "nonlinear" IT work streams, with conventional looking after more traditional waterfall development projects, and nonlinear looking after more short-term, agile and lean startup opportunities,” Rowsell-Jones concludes.

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