3. Partner with the Business

CIOs know that aligning with the business is critical to ensure successful digital transformation. UK business functions currently control 62% of technology investments, according to the 2018 IDG Research Survey.

European markets are consistent in this, with the UK at 62%, Germany at 64% and France at 66%. Apart from strengthening cybersecurity, CEOs’ top IT priorities include enabling global expansion, strengthening the business skills of IT staff and leading product innovation initiatives. Business leaders want to achieve these things whilst simplifying IT and reducing IT spending - no mean feat.

So, on average, European IT functions directly control around a third of the budget: slightly higher in the UK where 38% of technology products and services investment are directly controlled by IT. However, CIOs see purchasing power shifting back into their hands over the next three years, anticipating that they will gain 47% direct control over the IT budget.

Nevertheless, as the majority of the IT expenditure presently resides in the hands of business leaders, the challenge for many CIOs is to become a trusted partner, not just to advise on platforms or technology choices but also to position IT as an enabling force for innovation.

Business functions control 62% of technology investments, but CIOs see this falling to 53% within three years.

Topping the list of business initiatives that will be most significant in driving IT investment, UK-based CIOs listed: improving the customer experience, growing the business and improving profitability. These are indications that they understand the need to focus on the business impact of their strategic technology decisions.

However, to become a true partner, CIOs need a transformation plan that extends their traditional business case development beyond the typical ROI process, which remains focused on benefits such as reducing costs or boosting operational efficiency. In the accelerated pace of the digital world, it’s even more critical for CIOs to demonstrate how IT can help the business quickly execute new ideas, create new products and services faster, and deliver positive business outcomes – without the barriers long associated with IT.

Floriana Molone, Head of IT Customer Services and Deputy Director, London School of Economics, comments, “The challenge is for IT to be seen as a partner, and as a core part of the business, whereas five to ten years ago IT was just an internal provider, providing services to the business. For me, it’s been a journey - and still is a journey - to make sure I am anticipating their demands rather than them coming to me with demands or decisions that I am expected to deliver.”

Craig Partridge, Director, Data Centre Platform Consulting for HPE Pointnext, agrees, adding that IT must now help to facilitate business innovation.

“You still have traditional ROI where you make the case that something will work harder or be faster or is cheaper,” notes. “Now it’s also about making sure IT isn’t seen as a roadblock but, rather, as an innovation engine that can support the pace at which the business wants to move.”

“The more interesting projects for the business are the business, operational and consumer-led projects.”

– Simon Iddon
Group CIO, The Restaurant Group PLC

Top Business Drivers of Tech Investments

Heads of IT
Improve customer experience
33%
Increase operational efficiency
38%
Optimise worker productivity
26%
Grow the business
32%
Increase cybersecurity protections
32%
Improve organisation’s ability to attract and retain talent
21%
Improve profitability
31%
“At the LSC, we are establishing a business relationship management function so people within IT with customer skills actually meet the business...and understand their demands.”

– Floriana Molone
Head of IT Customer Services and Deputy Director, London School of Economics

The innovation engine that Partridge describes consists of a carefully-constructed mix of people, process, technology, and economics. It is built from the outside in, emphasising business outcomes in the form of improving customer experience, increasing operational efficiency, transforming business processes, and/or growing the business. As part of a broad transformation plan, the CIO needs to define how the infrastructure that enables these outcomes can meet a multitude of requirements, from performance and latency needs to security and compliance.

“Whereas business follows a transformational model and introduces new services, at some point we need to make sure the underlying IT infrastructure and platforms can cope.”

Simon Iddon, Group CIO, The Restaurant Group PLC

Hybrid IT and flexible consumption models

Adopting a flexible consumption model for IT services is a critical step toward meeting business expectations, because it ensures that IT can respond to changing business needs in a timely and cost-effective manner.

A positive trend that emerged from the 2018 IDG Research Survey is the move from on-premise infrastructure to a consumption-based cloud model. UK-based CIOs are leading the charge in Europe, with 44% of UK organisations having moved at least one portion of their on-premise IT infrastructure to a consumption-based model, compared with 36% for France and 32% for Germany. Moreover, 41% have moved their entire on-premise infrastructure, though French and German percentages are only slightly lower.

That said, consumption-based on-premise services will not reach a tipping point within the next two years across Europe, with 83% of organisations expected to deploy less than 50% through a consumption model two years from now.

Regardless, new consumption models deliver much more flexibility, enabling businesses to throttle up and scale back IT services, paying only for capacity used. In addition, as cloud services proliferate under Hybrid IT, CIOs can play up the potential benefits of shifting IT and data centre spending away from a costly upfront capital expense (CapEx) model to an as-a-service or pay-as-you-go operating expense (OpEx) model. Aquilent, a US-based government IT solutions provider, estimates that companies can achieve 75% to 90% savings with an OpEx model, compared to traditional data centre costs.

“It's my job to help the organisation understand that moving from a capital investment expense to an operational investment cycle enables us to better match and change capacity on demand,” says Randall Gaboriault, CIO and senior vice president of innovation and strategic development for Christiana Care Health System.

Gaboriault emphasises that the business isn’t really concerned about where systems run, just that they’re delivering the promised benefits to the business. “My customers don’t really care anymore how their services are being delivered,” he says. “They just care about getting what they need. Whether I deliver that through the cloud or on-premises is irrelevant to them.”

UK-based CIOs Crawford, Molone, Oliver and Iddon say consumption-based IT offers greater flexibility and choice, especially around budgeting and forecasting, and believe local adoption could increase as public cloud becomes increasingly commonplace.

“With hybrid IT models…whereas the old model was a one-off Capex investment, now it’s chargeable as a utility,” says Crawford. “We will see different types of models of charging IT-as-a-service coming in. I think it will come through as people adopt more public cloud services.”

Molone says the London of Economic School is at the ‘start of the journey’ of charging departments and students per use for IT services, starting first with storage.

“I can see it increasing because, as an IT department, we can only afford to provide for a basic service. Anything more than that and we need to start charging for pay-per-use.”

“To be seen as a real business collaborator, and not just a technology leader, the first thing I like to do is get out and visit our customers.”

– Alan Crawford
CIO, City and Guilds Group

Four Benefits of a Flexible Consumption Model

1

Reduce operational costs

  • Don’t make upfront payments
  • Pay for what you use
  • Optimize cash flows
  • Eliminate the cost of overprovisioning
  • Align IT costs with business demand
2

Decrease time to value

  • Increase available capacity in minutes, not months
  • Refresh as needed with simple change orders
  • Avoid long procurement processes
3

Reduce risk

  • Improve IT delivery
  • React quickly to market demands
  • Share utilization risk
  • Free up IT staff to focus on innovation
4

Scale to the cloud

  • Scale with public cloud services
  • Have one contract, one invoice, one usage portal

The importance of strong IT governance

Regardless of the consumption model, strong IT governance is critical. For example, Aetna’s IT organisation has built a robust portfolio management practice to help guide decision-making related to various IT services, according to Renee Zaugg, the firm’s Vice President of IT Infrastructure and Development. Business-controlled investments in technologies such as Microsoft Office 365 are put through a traditional ROI benefits analysis. Service catalogues provide a menu of available services, and Zaugg’s group provides full transparency by comparing the cost of its in-house services with those of leading IaaS, SaaS, and PaaS offerings. Other checks and balances come by way of a centralised procurement organisation, which ensures that the business doesn’t adopt technology that puts the enterprise at risk.

“Our services are generally one-third the cost of cloud services, once you add everything in,” Zaugg says. “We have a way to vet that, along with core infrastructure, to inform them so they can make the best business decision about where to invest.”

UK CIOs need to follow Zaugg’s lead to help dispel the myth that on-premises services are always a more expensive option than the cloud, especially if companies have already made a significant capital investment in data centre capacity.

Six Myths About IT Financials

The CFO just wants to cut costs and limit spending. OpEx is better than CapEx. Leasing is preferable to ownership from a cash flow perspective. Everything is moving to the cloud, so there’s no point in investing in the data center. The public cloud is always the cheapest option for running a workload. The public cloud eliminates management and administrative costs. 1 2 3 4 5 6
1 The CFO just wants to cut costs and limit spending. 2 OpEx is better than CapEx. 3 Leasing is preferable to ownership from a cash flow perspective. 4 Everything is moving to the cloud, so there’s no point in investing in the data center. 5 The public cloud is always the cheapest option for running a workload. 6 The public cloud eliminates management and administrative costs.
Reveal all myths
Key Play

3. Three principles for financing Hybrid IT

Three principles for financing Hybrid IT
Keep a close eye on operational expenses during cloud deployments.
Have a plan and goals to determine the effectiveness of cloud and hybrid cloud transitions. If those goals aren’t being met, find out why.
Don’t be afraid to “de- cloud” applications and services if they prove more expensive to operate in the new paradigm.

View the key play highlights

Take a Deeper Dive into Hybrid IT

The Strategic CIO’s Playbook

Create a game plan for accelerating digital transformation with the right mix of Hybrid IT.