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Boost your IT excellence

Blog post
April 17, 2023

Bernhard Skritek-Deim, Till Unger, and Zeno Lobe

When it comes to corporate IT projects, ultimately hardly anyone is satisfied: they are too slow, deliver too little business value, and swallow any amount of cash. In future, this problem could intensify even further, due to the growing demand.

Digitalization is here - in full force, at all levels. For years, companies have been investing massive sums to update old back-end systems, to introduce modern e-commerce solutions and to implement new technologies such as Artificial Intelligence. For this, companies must not only renew their IT system landscape, but also ensure the effectiveness and efficiency of their IT organizations, so that they can face up to the challenges of digitalization.

The past few years have radically accelerated this trend. Recently, the Covid pandemic has shown clearly how important digitalization is. Digital change went into overdrive, and investments in IT systems increased with this trend. As the global CEO survey by PwC recently showed, just under 69% are looking to invest in new technologies, and in 60% of cases this is to acquire new capabilities.
Although the global economy is currently foundering, studies show that companies will invest significantly more in their IT landscape moving forward.

According to Gartner, the expenditure of an average IT department is increasing by 4.3% this year. By 2030, up to over 40% growth is expected. But despite this high expenditure, the rumblings at all levels are about tensions between CEOs and CTOs – in some cases, the frustration is high. According to surveys, there are three main reasons:

The business value added from IT investments is too low. 71% of all CIOs report that the management is demanding greater value-added from IT¹
The transition is too expensive. 57% of CEOs are very concerned about the growing expense of IT projects²
The pace is too slow. The constant delays with IT projects are one of the factors that generate the greatest tensions between CEOs and CIOs³

^{1 Gartner, 2021

2 IDC, 2022

3 Gartner, 2022}

Everything at once – but without a plan

The causes of these symptoms often lie deep. For instance, many companies start their transformations in silos – what’s missing is a business IT strategy involving all areas. The hoped-for benefits are not realized. The result is frustration. Poor collaboration between IT and the rest of the company intensifies this effect.

The technology is often complex and out-of-date, or the processes and services are not particularly harmonized. On top of this, there is a phenomenon that we like to refer to in our discussions with clients as the “everything at once” syndrome. The transformation should take place as quickly as possible at all levels, but without any prioritization. That can’t work.

Four options for action to improve IT performance

As a solution, we recommend four simple guidelines to our clients.

IT resources are limited and the demand backlog, including an unhealthy ratio of pure maintenance jobs to important innovations, is long. The solution is called prioritization. Instead of just managing what’s already there, time windows for innovations need to be ensured on a continuous basis. In the mid- to long-term, IT departments should reduce the scope of the “technical debts” and thus maintenance expense.

This prioritization of implementation projects should be as fact-based as possible. For this, the requirements need to be recorded, including indicators such as labor costs, duration, cost estimates and business value-added. In the agile context, this parameterization is established as the weighted shortest job first (WSJF) method. The roadmap derived from this is vital – along it, projects are monitored to ensure constant progress, the right prioritization and corresponding value-added.

In the past, separate IT and business areas often led to more time-costly and inefficient coordination. The result? The IT outcomes were expensive and did not correspond to the requirements. The solution is closer integration, and thus collaboration of IT and business in an integrated team. This does not necessarily lead to changes in the organizational structure, but can be mapped using virtual or interdisciplinary teams. Responsibilities across both areas are carried jointly in this model, to frame processes in a more agile way and to take better decisions. That makes it possible to integrate the technology seamlessly into the end-to-end business processes and product management.

New technologies demand new knowledge. With digitalization, a highly-qualified workforce becomes ever more important. One option for accessing and bundling expert knowledge and a larger resource pool is an effective partnering system, for instance by developing near- and off-shoring and shared service centers. The work is outsourced or centralized, in order to leverage both cost and know-how efficiencies. But why stop at searching company locations? Think global! IT centers in multiple locations attract new employees. With the trend to home offices, it is no longer necessary to bring all the talents together under one roof. Collaboration is increasingly hybrid – physical and virtual. The results a team achieves are what counts. For that, information exchange via digital collaboration platforms needs to be seamlessly possible, regardless of where the employees are located.

Market and customer requirements demand a more flexible, modular IT architecture. The focus needs to be on a lean core for finance and product management processes, with an array of global master data standards. Differentiation is achieved by modularizing the surrounding systems, particularly those for the customer experience. For e-commerce applications, an approach that Gartner calls “composable commerce” is possible, in which system solutions can be rapidly integrated, but then also swapped out. This approach permits greater flexibility, scalability, and enables companies to react more effectively to changed customer requirements or market conditions.

Prospect: A gradual, but consistent approach is needed

What does that mean for businesses? The guidelines we have outlined offer orientation. Strategic guardrails help in prioritizing business values. Closer integration of business and IT, but also better parameterization of IT projects, should be operationalized step by step, for instance when implementing initial strategic projects. Simplifying the system landscape and building up the global talent ecosystem are mid- to long-term projects, but they require immediate initialization by elaborating an individual target vision.

Contact us

Dr. Bernhard Skritek-Deim

Partner, Strategy& Austria

Till Unger

Director, Strategy& Germany

Zeno Lobe

Director, Strategy& Germany

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