A research summary report with key highlights from Taming the Digital Dragon: The 2014 CIO Agenda

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1 17 20 November Gold Coast, Australia gartner.com/au/symposium A research summary report with key highlights from Taming the Digital Dragon: Dave Aron and Graham Waller In the IT industry, we have become immune to new buzzwords and constant messages about how everything is changing. But this time, everything really is. All industries in all geographies are undergoing radical digital disruption a digital dragon that is potentially very powerful if tamed, but a destructive force if not. As a result, CIOs are facing all of the challenges that they have in the past, plus a torrent of digital opportunities and threats that must be addressed at the same time. In every enterprise, digitalization is raising critical questions about strategy, leadership, structure, talent, financing and almost everything else and IT leaders have no other option than to find the answers. How we got here It would be tempting to think that the CIO and IT organization just need to absorb some of the new technology and societal trends into what they are doing already to do it just a bit faster, cheaper and smarter. But if we dig deeper, we see something more fundamental going on. We are moving to a new, third era of enterprise IT (see figure below). The third era of enterprise IT has arrived Focus Capabilities IT craftsmanship Technology Programming, systems management IT industrialization Processes IT management, service management We are here Digitalization Monetize Adapt Offer Ideate Engage Create Business models Digital leadership There is a growing disconnect between our increasingly nonlinear world and the linear mindsets, practices and institutions that we deploy in our work. Engagement Isolated; disengaged internally and externally Treat colleagues as customers; unengaged with external customers Treat colleagues as partners; engaged with external customers John Hagel, co-chairman, Deloitte LLP Center for the Edge Outputs and outcomes Sporadic automation and innovation; frequent issues Services and solutions; efficiency and effectiveness Digital business innovation; new types of value

2 Digital is different. And I think that less than a quarter of my team is ready and able to make the transition. Anonymous CIO The first era of enterprise IT Up until about the year 2000, we were in the first era, where IT could help do new and seemingly magical things automating operations to create massive improvements in speed and scale, and providing business leaders with management information they never had before. The downside was that the IT organization was often a little unreliable, almost like a mad inventor who could do wonderful things but was neither timely, nor dependable, nor a good communicator. Beyond this, the IT department was normally an isolated subculture not seen as an integral part of the business. From inside IT, the rest of the business was seen as an annoyance, a distraction from building beautiful technical architecture. The second era of enterprise IT All this came to a sudden end with the Y2K problem and the dot-com boom and bust. There was less tolerance for an unreliable black box IT organization in the business. We entered the second era of enterprise IT, and have been in it ever since. This has been an era of industrialization of enterprise IT, making it more reliable, predictable, open and transparent. It has also been an era of processes, services, standards and smart sourcing an era of ITIL, COBIT, Prince2 and PMBOK, and of the IT organization professionalizing and treating the rest of the business as its internal customers. This second era has been necessary and powerful, but with one casualty: disruptive innovation in end-user organizations and arguably also in the IT industry. There has been relatively little innovation in enterprise IT in the past decade or so. IT budgets have been tight, and appetite for risk has been low. The process, service and internal-customer lens has led to an internally focused, incremental-improvement view. However, in the past few years, technological and societal trends around technology have been building and maturing, such as the Nexus of Forces (social, mobile, cloud, information and analytics), the Internet of Things (integrating sensor networks, factory networks and technology in products and consumer devices with enterprise IT), 3D printing, and new currencies and payment mechanisms. The third era of enterprise IT Now we are entering a third era of enterprise IT, where these new trends are not only improving what businesses do with technology to make themselves faster, cheaper and more scalable, but also are fundamentally changing businesses with information and technology, shifting the basis of competition and the portfolio of businesses that people are in, and in some cases, creating new industries altogether.

3 What CIOs and IT leaders must do now A three-part response is needed to tame the digital dragon IT industrialization Clear digital roles Savvy digital executives Digital vision and digital legacy Build bimodal capability Agile development Multidisciplinary teams Innovative partnerships New risk/speed trade-offs Create powerful digital leadership Renovate the core Digitalization Cloud/Web-scale infrastructure Information Talent Sourcing The biggest risk is not taking any risk... In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks. Mark Zuckerberg, founder and CEO, Facebook In a three-part response to the digital business challenge, the IT organization must: Create powerful digital leadership. Ensure that the business s digital leadership vacuum is filled and that every business executive becomes digitally savvy and an advocate for change. It s imperative that CIOs and IT leaders communicate a vision that excites and mobilizes the IT organization, helping colleagues and staff understand that the status quo is no longer an option. Renovate the core of IT. Make sure that the engine room of IT the infrastructure, operations, core applications (such as ERP), services and sourcing models are purposed not just for the present but for a highly digitalized future that will require exponentially greater speed and scale. Emphasize information as a competitive asset, and form relationships with suppliers that encourage, rather than stifle, innovation. Reimagine the core Increased adoption and integration of public and private IaaS, PaaS, SaaS and BPaaS Nextgeneration information capabilities Volume/velocity/variety; in-memory databases; advanced analytics; unstructured and multimedia data Postmodern ERP/apps Hybrid cloud More-diverse partnerships More-federated ERP, multi-enterprise solutions, cloud components, mobile support, embedded analytics Use of SMBs/startups; new categories of partner (e.g., mobile, design, analytics) Build bimodal capability. Resolve the age-old tension between the need to provide safe, reliable and integrated enterprise IT and the ability to exploit unexpected business moments experimenting with, and capturing value from, new technologies, and societal and industrial trends at digital speed. Far more than agile software development, this requires creating separate multidisciplinary digital innovation teams, working with small businesses and startups, and adapting governance and metrics for a lightweight, second-stream capability.

4 What digital means Gartner defines digital as all electronically tractable forms and uses of information and technology. It is bigger in scope than the typical company definition of IT because it includes technology outside a company s control: smart mobile devices (in the hands of customers, citizens and employees), social media, technology embedded in products (such as cars), the integration of IT and operational technologies (such as telecom networks, factory networks and energy grids) and the Internet of Things (physical objects becoming electronically tractable). CIO technology priorities for 2014 Investment priority Ranking based on how many CIOs cited each as a top 3 new spending priority for 2014 BI/analytics 1 Rank Exploit the new Infrastructure and data center 2 Mobile 3 ERP 4 Cloud 5 Networking, voice and data communications 6 Digitalization/digital marketing 7 Security 8 Industry-specific applications 9 Customer relationship management 10 Renovate the core Legacy modernization 11 Collaboration 12 Conclusion The digital future needs your vision for change. Craft a compelling digital legacy, and factor it into your plans, operations and communications. The combination of powerful digital and societal forces the digital dragon has created much broader and deeper opportunities and threats than the scope of traditional enterprise IT can possibly address. CIOs and IT leaders must act fast and act smart to protect their companies, their public-sector agencies, their IT organizations and themselves. In our current third era of enterprise IT, strategy, leadership, structure, talent, financing and almost everything else are being called into question by an influx of digital threats and opportunities. Change is inevitable, and those organizations with the vision, skills and commitment to adopt change early will secure a significant and lasting competitive advantage. Gartner clients may download the full research report by logging into their gartner.com account and searching for Taming the Digital Dragon: Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner s prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner. com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner s research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity.

5 17 20 November Gold Coast, Australia gartner.com/au/symposium THE WORLD S MOST IMPORTANT GATHERING OF CIOs AND SENIOR IT EXECUTIVES Join us for Gartner Symposium/ITxpo 2014, November, on the Gold Coast, Australia This year, we offer an intensive, end-to-end exploration of what digital business means, how it works, why it matters, and the steps CIOs and IT leaders must take right now to achieve it. Gartner Symposium/ITxpo 2014 is the only IT leadership conference that views the new digital business reality through a holistic, how-to lens, giving CIOs and senior IT executives a road map that will accelerate digital transformation, uncover new opportunities, devise relevant metrics, secure digital interests and help them take their rightful place at the head of the digital business table. Find out more at gartner.com/au/symposium ABOUT GARTNER Gartner, Inc. (NYSE: IT) is the world s leading information technology research and advisory company. We deliver the technology-related insight necessary for our clients in over 13,000 organizations to make the right decisions, every day. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, USA, and has 5,800 associates, including more than 1,450 research analysts and consultants, and clients in 85 countries.