taming the digital dragon the 2014 cio...

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.

Mark Bartram

VP, Gartner

Executive Programs

Research by Dave Aron

Taming the Digital Dragon The 2014 CIO Agenda

Informed by Gartner's Annual CIO Survey

2,339 chief information officers

From 77 countries

Representing more than $300 billion of IT spending

150 Gartner analysts and executive partners helped shape

the report

2

Percentage of Respondents by Country

APAC/Pac

17%

EMEA

39%

N. Am.

38%

Lat. Am.

6%

World:

2,339 Respondents

77 Countries

U.S.: 34%

Canada: 4%

U.K.: 7%

Australia: 5%

Brazil: 4%

Japan: 4%

Italy: 3%

France: 3%

Benelux: 4%

Germany: 3%

Switz.: 2%

Nordics: 6%

Africa: 2%

India: 2% Iberia: 1%

China: 3%

Mexico: 1%

39 Responses from 77 countries in total (those with the most responses listed here)

Expected Budget Changes by Continent, 2013-2014

APAC/Pac

0.9%

EMEA

-2.4%

N. Am.

+1.8%

Lat. Am.

7.3%

45%

38%

17%

World

+0.2%

2012-2013: -0.5%

2012-2013: -1.0%

2012-2013: -1.1%

2012-2013: -1.6%

2012-2013: +0.4%

38

Expected Budget Changes by Industry

40

- 2.8%

- 1.6%

-1.1%

-0.8%

0.5%

0.5%

0.6%

0.8%

1.9%

2.5%

2.8%

3.9%

6.6%

6.7%

Government

Other

Utilities

Manufacturing & Natural Resources

Communications

Services

Transportation

Retail

Media

Banking

Insurance

Healthcare Providers

Education

Wholesale Trade

Taming the Digital Dragon: The 2014 CIO Agenda

1. Welcome to the Third Era of Enterprise IT

2. Create Powerful Digital Leadership

3. Renovate the Core

4. Build Bimodal Capability

5. Craft Your Digital Legacy

3

"There is a growing disconnect between our increasingly nonlinear world and the linear mindsets, practices and

institutions that we deploy in our work."

John Hagel, co-chairman, Deloitte Center for the Edge

The Digital Dragon Is Upon Us "My business and its IT organization are

being engulfed by a torrent of digital opportunities. We cannot respond in a timely fashion, and this threatens the

success of the business and the credibility of the IT organization."

"The IT organization has the right skills and capabilities in place to meet upcoming

challenges."

4

IT Budget Changes Are Incremental, but That Does Not Reflect the Digital Era Demand

On average,* 2014 IT budgets are flat (+0.2%)

(At least) 27% of IT spend is outside the IT organization.

In IT 74%

In Marketing

6% Other 20%

*Weighted average IT budgets change — weighted by 2013 IT budget size

45%

17%

38%

Increasing

Decreasing

Flat

5

We are here

We Are Entering an Era of Enterprise IT

Focus Technology Processes Business Models

Capabilities Programming, system

management

IT management, service

management Digital leadership

Engagement Isolated, disengaged

internally and externally

Treat colleagues as

customers, unengaged with

external customers

Treat colleagues as partners,

engage external customers

Outputs &

Outcomes Sporadic automation and

innovation, frequent issues

Services & solutions,

efficiency & effectiveness

Digital business innovation,

new types of value

IT Craftsmanship IT Industrialization Digitalization

6

We Need a Three-Part Response to Tame the Digital Dragon

Renovate the core of

IT.

Create powerful

digital leadership.

Build bimodal capability.

• Clear digital roles

• Savvy digital executives

• Digital vision & digital legacy

• Cloud/Web-scale infrastructure

• Information

• Talent

• Sourcing

• Agile development

• Multidisciplinary teams

• Innovative partnerships

• New risk/speed trade-offs

Digitalization IT Industrialization

7







8

The Chief Digital Officer Role Is on the Rise

Asia/Pac:

11%

No. Am.:

5%

EMEA:

6%

Lat. Am.:

7%

Industry %CDOs

Media 21%

Communications 13%

Services 11%

Banking 10%

Insurance 9%

Retail 9%

Healthcare Providers 5%

Government 5%

Manufacturing & Natural Resources 5%

Wholesale Trade 3%

Education 3%

Transportation 4%

Utilities 1%

"If the CEO asks 'Who is in charge of digital?' and gets multiple responses, then there is no digital leadership."

Baron Concors, CIO of Yum Restaurants International, former CIO and CDO of Pizza Hut

Gartner predicts a tripling of the CDO role by 2015.

"For the CIO,

there is a

strong

opportunity,

and also a

responsibility,

to be part of

this new digital

game.

However the

organizational

model plays

out, there will

be a strong

push for the

digital future."

Gianni Leone,

CIO and CDO,

Miroglio Group

Mythbuster: The CDO role is not limited to media or information-intensive industries.

9

"I have to play

Dr. Jekyll and

Mr. Hyde as I

move between

the two roles,

making sure I

apply the

correct set of

rules

depending on

the hat I'm

wearing —

traditional IT

versus leading

digital trans-

formation."

Gianni Leone,

CIO and CDO,

Miroglio Group

The Scope of the CDO's Role

CDO

CEO CMO CIO Other

CDO's Reporting Line

42% 22% 16% 20%

CDO's Team CDO is sole

advisor

Small team of analysts

Resources to pilot

CDO

Substantial devt.

Develop and run

9%

23%

15%

27%

26%

CDO

CDO's Background

Bus. strategy

IT

Marketing

Combination

Other

Don't know

15%

19%

20%

36%

7%

3%

CDO-CIO Integration

Neutral/

Unclear

35% Clear

65%

Mythbuster: The CDO is not, in general, a lone advisor. Most CDOs have a team.

10

A Digitally Savvy CEO Gives You Wings

CIO POWER

CIO POWER

IT EFFECT.

IT EFFECT.

USER SAT.

USER SAT.

BUS.

PERF. BUS.

PERF.

8% of Enterprises Have CEOs Whose Digital Savvy Is Very Weak

7% of Enterprises Have CEOs Whose Digital Savvy Is Strong

Growth Focus

"We believe it's important to embed digital in the role of every key executive."

Willem Eelman, global CIO, Unilever

Growth Focus

12






14


Technology Priorities Represent Two Complementary Goals

Ranking Based on How Many CIOs Cited Each as a Top-Three New Spending Priority for 2014

15

Renovate the Core

Increased adoption of public and

private IaaS, PaaS, SaaS,

BPaaS

Use of SMBs/

startups; new

categories of partners,

e.g., mobile, design,

analytics

More federated ERP, multi-

enterprise, cloud components,

mobile support, embedded analytics

Hybrid Cloud Volume/velocity/

variety; in-memory; advanced analytics

16

"In my previous role overseeing an Indonesia mobile payments initiative, we had to simulate 5 million customers,

three banking gateways and 10 telecommunications companies. Public cloud was the only cost-effective way, and

I got to see the power of it." Larry Matias, CIO, Jollibee Foods

The Future Still Looks Cloudy

When will more than half of

your business run on public*

cloud infrastructure +

SaaS?

2011: 1,993 respondents; 2014: 2,252 respondents

*2011 survey asked about cloud; in 2014, specified public cloud

% of 2011 Survey

Respondents

% of 2014 Survey

Respondents

In 2011 and 2014, 23% said

"Never"

"We are looking for an architecture that could serve 1 billion people. We could afford traditional infrastructure

when customers came to the bank once a month. Now they may access their accounts via mobile phones 10

times per day. The cost per transaction must approach zero to make this usage viable for the bank."

Luis Uguina, global head of Remote Channels and New Digital Business, BBVA

19

"Potential benefits of cloud include cost savings and other capabilities, such as agility, innovation and time to

market. It is often the latter that is the real impetus. These benefits are often less quantifiable, but are more and

more commonly cited as the true drivers and value of cloud."

David Mitchell Smith, Gartner Fellow

Public Cloud Is Being Deployed to Support Agility

Have made significant cloud investments

50%

14%

13%

10%

12%

Agility

Cost

Innovation

Quality

Other

Main Reason Payback

17

BBVA Bank: A Sophisticated Multi-Cloud Vision

Sourcing: Time for Change

70% will change their technology and sourcing relationships in the next 2 to 3 years for a variety of reasons:

"IT sourcing

strategies must

be structured to

enhance IT

agility and

address the

needs of digital

businesses.

Organizations

that don't adapt

their strategies,

and the

competencies

required to

execute them

effectively, will

fail to achieve

the value

opportunities

presented by a

highly digitalized

future."

Ian Marriott,

Gartner

Research VP

57%

Price/

Price Structure

55%

Service

Quality

52%

Flexibility

46%

Ability to

Partner

45%

Innovation

28%

Scale

46% need to work with new categories of partners, e.g.: Mobility

Big Data

Cloud

Analytics

Digital Agency

Social 21

CIOs Do Not Feel That the Innovation Will Come From the Usual Suspects

Gartner annual CIO Survey, 2013; percent of respondents mentioning each brand; 1,305 respondents (last 10 years)/1,255 respondents (next 10 years)

Oth

er

Which technology company has been most influential over the past 10 years?

Which will be in the next 10 years?

22

The CIO Golden Rules for Working With Smaller Partners

I. Build a competency center around working with smaller companies; recognize that it is much more than a procurement exercise.

II. Consider a broad range of partners: startups, incubators, universities, crowdsourcing, local SMBs, citizen development.

III. Design the relationship for win-win: Don't try to push smaller companies into accepting the minimum price/maximum delivery — they might say yes because they want to work with you, but it might kill them.

IV. Keep the legals light and focused on intellectual property. Don't focus on the liabilities if they fail.

V. Expect to put a project management/delivery wrapper around small partners — let them focus on and bring what they are good at.

VI. Think about the partner's cash flow as well as its profit; you may need to adapt your payment processes (lower latency, higher frequency).

VII. Develop the ability to do quick, lightweight audits of potential small partners. (Neither you nor they can afford to do slow, heavy ones.) Focus on the people and their capabilities.

VIII. Make every effort not to constrain partners in terms of methodology, tools or approach. Focus on the outputs.

IX. Don't try to lock small partners into working only with you. Manage intellectual property issues in conventional ways.

24

Look to Close Digital Talent Gaps

Talent Area Description

Digital Design The ability to design compelling customer experiences in a digital

context, including consideration of the capabilities of mobile and

other devices, with a flavor of simplicity rather than complexity

Data Science The ability to analyze large volumes of data; to mine social,

multimedia and unstructured data; and to conduct near-real-time

data analysis

Digital

Anthropology

The ability to understand how information and technology interact

with human behaviors

Startup/SMB

Management

The ability of larger and more mature organizations to work with

much smaller and less mature organizations for mutual benefit

Agile

Development

The ability to develop solutions in a much more iterative and

collaborative manner

"Digital is different, and I think that less than a quarter of my team is ready and able to make the transition."

Anonymous CIO 25






26


Bimodal IT Offers a Way to Get Unstuck

Waterfall development

Known vendors

Strong governance

Minimized risk

Technology teams

Traditional Mode Nonlinear Mode

Mythbuster: Nonlinear need not be limited to where speed is needed, for experiments, or for non-mission-critical initiatives.

Stuck in the middle

"Fit for no one"

"The reality is that

you do have to

operate at two

speeds, and some

of that you do by

creating dedicated

teams for each.

Focusing on the

big systems,

making them run

smooth, while at

the same time

having disrupters

to innovate,

together with

marketing and the

customer,

exploiting digital."

Willem Eelman,

global CIO,

Unilever

Agile dev.

Small/ innovative partners

Lightweight

"Just good enough" governance

Managed risk

Multidisciplinary teams

When speed or innovation is needed, or there is a high

degree of uncertainty

27

Almost Half of CIOs Have Begun the Bimodal Journey

45% of CIOs currently have a second fast / agile mode of operation.

Those who do run traditional, iterative and lightweight projects in proportions: 50/25/25

Mythbuster: Nonlinear is not only about software development.

But most have not exploited all the facets of bimodal:

47% operate separate teams.

43% partner with small businesses.

8% use crowdsourcing/innovation

marketplaces.

28

To Compete in a Digital World, We Need to Complete Our Bimodal Capability

CIO

Functional/

Process Silos Run Grow/

Change

CIO

OOCIO

D

CTO

CDO

Run

CIO

OOCIO

D

CTO

P&L Owners

Multi- disciplinary

Product Teams

CTO

CDO

OOCIO

Run

Grow/

Change

Chief technology officer, acting as chief operating officer of IT

Chief digital officer, acting as digital change agent

Office of the CIO, running IT as a business (strategy, governance, security and risk, etc.)

Run = every aspect of IT needed to keep the business running

Grow/change = every aspect of IT needed to execute on growth and change

Demand management = internal demand/relationship/account managers facing off to BUs

IT Craftsmanship IT Industrialization Digitalization

29

D

The CIO Golden Rules for Building a Bimodal IT Organization

I. Be clear and create principles of what goes into conventional IT, and what goes into nonlinear. Default criteria: need for speed, need to innovate, high levels of uncertainty.

II. Design all components to form a consistent nonlinear environment: structure, staffing, sourcing, governance, metrics, tools.

III. Apply lightweight architectural governance to ensure that nonlinear mode initiatives don't make a mess, but governance shouldn't be too heavy/slow.

IV. Provide sufficient focus on the ability to refactor/industrialize nonlinear mode into conventional mode IT, and to unleash conventional systems into the nonlinear world when the need arises.

V. Consider skills and cultural aptitude (e.g., neophilia, tolerance for risk/uncertainty) in staffing the nonlinear mode organization.

VI. Be brave about the need for new people/skills/culture in nonlinear; don't set yourself up for failure with the wrong people.

VII. Don't use placement in the nonlinear mode organization as a reward for your best staff; they may not be a cultural fit.

VIII. Manage communications so that conventional and nonlinear mode IT are seen as important and exciting places to work.

IX. Manage the cultural distance of the nonlinear mode team from the core of the company — not too near, not too far.

32






33


In This Time of Transition, CIOs Are Reflecting on Their Lasting Impact

"Solutions for our country: payment system, digital signature system and

economic solution systems that our citizens need."

"I will transform education from paper-based with siloed data to digital

information provided in real time that impacts students,

teachers, parents and administrators."

"IT will be the experts, but technology will be everyone's job."

"The people I have trained and mentored wherever

they may apply themselves."

"IT generates revenue."

"Enabling a workforce for the next generation that

sees business for the first time via a digital lens, and has the tools to operate

without borders."

"Collaborative digital leadership."

"Cloud infrastructure with digital services."

"Increased patient empowerment through digital health solutions."

"Using digital technologies to personalize content and create better engagement

opportunities."

34

Craft Your Digital Legacy

35

Recommended Gartner Research Overall/Digital:

"Hunting and Harvesting in a Digital World: The 2013 CIO Agenda," Mark P. McDonald, Dave Aron (G00248536)

"Let's Get Digital: A Template for Digital Business Strategy," Dave Aron, Lee Weldon (G00257724)

"The Gartner Travel Guide to the First Digital Decade," Lee Weldon, Jeffrey R. Cole, Mark P. McDonald, Stephanie Woerner (G00255443)

"CEO and Senior Executive Survey 2013: As Uncertainty Recedes, the Digital Future Emerges," Mark Raskino, Jorge Lopez (G00247308)

Digital Leadership:

"CEOs and CIOs Must Co-Design the C-Suite for Digital Leadership," Mark Raskino, Dave Aron, Patrick Meehan, Jennifer S. Beck (G00258536)

"Does Your Business Need a Chief Digital Officer?" Dave Aron (G00238298)

"Toolkit: Chief Digital Officer Job Description," Dave Aron, Diane Berry, Lily Mok (G00249735)

"Early Trends in Recruiting Chief Digital Officers," Ken McGee (G00258352)

"The Three Types of Digital Business Leader," Dave Aron, Laura McLellan, Yvonne Genovese (G00251979)

Renovate the Core:

"Develop a Strategic Road Map for Postmodern ERP in 2013 and Beyond," Alexander Drobik, Nigel Rayner (G00252735)

"Hybrid Cloud Is Driving the Shift From Control to Coordination," Daryl C. Plummer, David Mitchell Smith (G00252934)

"Use Web-Scale IT to Make Enterprise IT Competitive With the Cloud," Cameron Haight, Daryl C. Plummer (G00250754)

"Approaching cloud services strategically helps Banco Bilbao Vizcaya Argentaria simplify platforms and processes while enhancing productivity," Dave Aron, Mark P. McDonald (G00231037)

"The Art of Innovating by Partnering With Small Companies," Dave Aron, Nick Jones (G00239799)

Bimodal Capability:

"Innovate Like a Startup: The CIO's Front Office Toolkit," Leigh McMullen, Richard Hunter, Jeffrey R. Cole (G00254272)

"Toolkit: Pace-Layered Application Strategy Starter Presentation," Bill Swanton (G00249808)

36

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.

Thank you.

Channel 4: Working With Small Partners to Drive Innovation

Channel 4 is working with small partners to drive innovation.

Launched in 1982 and based in the U.K., Channel 4 is a publicly owned, commercially funded TV broadcaster focusing on innovative content, with revenue of £941 million (US$1.54 billion) and a staff of 800.

CIO Kevin Gallagher oversees two work streams: conventional IT to run the business, and content and services, such as websites and games, to complement specific TV shows created by third parties.

Gallagher explains that the TV business is agile by nature, with a need to be innovative, have tight, non-negotiable deadlines, have a wide variety of IT and OT, and partner with small specialist organizations.

"The small companies we work with may consist of only two or three people," said Gallagher. "Fortunately, it is in our DNA as a program maker to work this way."

Recent examples include using a company expert in Apple and Google Play ecosystems to negotiate the App Store process, and using universities to develop algorithms for sales.

Lessons from Channel 4:

• Use different skills. Small companies require a much more hands-on approach.

• Help your partners succeed. Let them focus on what they are good at.

• Get to know your partners. Visit them at their premises. Ensure that you are comfortable working with them.

• Help your partners stay alive. Pay them regularly because it helps them manage their cash flow. Don't overburden them with administrative/legal tasks.

• Be pragmatic about risk. Be prepared to manage scope down if necessary.

23

IPC Makes a Commitment to Agile

IPC, a U.S.-based purchasing cooperative owned by North American Subway franchisees, provides procurement, IT and other services to 30,000 restaurants in the U.S. and Canada. The company's mission is to make the franchisees more profitable and competitive. IPC has a staff of 250, half of whom work in IT.

CIO George Labelle joined in 1999. "We had a lot of unhappy stakeholders. Business analysts would get requirements and pass them on to developers, who would code and hand off to QA people for testing. Upon receiving the solutions, the stakeholder would then say, 'What the heck is this? It looks nothing like what we asked for six months ago.'"

Labelle became enthusiastic about agile, but his initial approach was too naïve. Initial efforts were trying to do traditional waterfall development in shorter cycles.

Culture and mindset had to change. He augmented agile with test-driven development and automated testing. This process was very rigorous.

There were six months of big churn. Some staff left (about 15%) because they couldn't or didn't want to make the transition. Now IPC is 100% committed to agile, using approaches like Scrum and kanban. The remaining staff is fired up.

Direct results have been substantial:

• Built a payment processing system that saved franchisees $20 million. Reinsourced a point-of-sale system where relationships with vendors weren't going well. Created a platform with weekly releases to stores (and it has only been down 60 minutes in the past 4.5 years); it also allows rapid exploitation of business opportunities, like one-to-one marketing at the cash till.

• Other departments have begun adopting agile approaches. "They especially like the daily stand-up sessions, the transparency and the ability to hold people accountable."

30

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