The impact of digitalization on CIOs across the globe
Job satisfaction and confidence levels are at an all-time high for CIOs, but the annual Harvey Nash global CIO report also reveals digitalization is putting increased pressure on the need to address skills shortages and the management of IT.
CIOs are reporting the highest levels of job satisfaction in years, despite the ‘greatest technology skills shortage since the Great Recession’ and the need to completely reinvent IT delivery. That’s according to Harvey Nash/KPMG’s 2016 global CIO survey report, The Creative CIO, which claims technology chiefs have found their stride again. Pressure on organizations to digitally transform themselves has cemented the strategic importance of IT, elevating the CIO role. Separate ‘chief digital officer’ roles are on the way out and tech leaders now have a clearer path to the top, boosting their morale and sense of purpose.
More CIOs now report directly to the CEO (34%) than they have at any time in the past decade, up from 24% in 2015. Significantly, CIOs feel they are making more of a direct contribution to the business. They are making money for the business, rather than simply saving it (two-thirds of CIOs said this was now the CEO’s expectation).
Skills shortages hindering progression
That CIOs are feeling so validated will serve them well given the challenges they face. The 2016 survey of 3,352 technology leaders in 82 countries reveals a skills crisis so acute it eclipses anything seen since the recession of nearly a decade ago.
Of the CIOs interviewed 65% believe that a lack of talent will prevent their organization from keeping up with the pace of change, a 10% increase in just 12 months. The technology skills shortage is felt most by IT leaders in the Asia-Pacific region, with seven out of 10 reporting insufficient talent to address their organization’s ambitions.
Although data analytics is the most in-demand skill for the second year running, at more than a third, the biggest jump in skill demand is digital, up by a fifth. Larger organizations have the greatest demand for digital skills: 29% of businesses with 5,000 employees or more crave these, compared to 17% of companies with a sub-500 head count. And, unsurprisingly, security skills are highly sought after. Almost a third of CIOs said they’d responded to cyber-attacks in the past two years. Only a fifth (22%) of CIOs feel confident that their organization is ‘very well prepared’ to identify and respond to cyber-attacks, compared to nearly a third in 2014.
CDO no more?
The report confirms that digital strategies have become central to businesses, with more than a third of CIOs now claiming their organizations have enterprise-wide digital strategies, compared with just over a quarter last year. This year also revealed that the trend of appointing chief digital officers (CDOs) might be slowing. In 2015 the number of CDO roles being created was up by almost 150%. This time the leap was only marginal (19% of participating companies now have the role, compared with 17% a year ago).
The existence of the CDO role is linked closely to IT budget size. Companies spending above $100 million are twice as likely to have a CDO as those with IT budgets below that amount.
Where CDOs do exist, they are twice as likely to report to the CEO (46%) than to the CIO (21%), the CEO being most likely to ‘own’ digital (in 21% of organizations), compared with IT (16%) and marketing (9%).
Adam Woodhouse, a director at KPMG, believes that by next year the trend of having separate CDOs will start to reverse. “The CDO role will start to collapse back into the CIO role,” he comments. “It has served its purpose, attracting attention and focus, but now ‘digital’ is embedded in the business.”
Increased emphasis on Agile and DevOps approaches
As well as putting CIOs center stage, digital priorities are changing the way organizations think about and manage IT. Companies aren’t just looking for specific technology skills (e.g. mobile, cloud, social, big data); they are also looking for new approaches to planning, development and deployment.
With digital disruption rife in most markets, CIOs are under pressure to deliver innovation faster and more nimbly, driving a need to restructure IT and adopt more fluid and collaborative Agile/DevOps approaches, for example. In this year’s survey, 59% of CIOs cited Agile methodologies and 28% cited DevOps as the preferred path to improving responsiveness. Organizations with sales of more than $100m were mostly likely to be moving towards Agile and DevOps strategies.
Woodhouse predicts that this will be reflected in the skills gaps that will be evident in next year’s survey. “Traditionally, the skills problem has been more to do with companies not being able to pay enough to attract the talent they need, or that those people haven’t wanted to move,” he says. “But many of the roles companies need to fill are new. Finding someone with 15 years’ management experience in retail banking to lead DevOps is impossible. These people just don’t exist so organizations need to accept that they’ll need to recruit differently, use partners or automate where they can.” The need to rethink IT strategy also explains the high demand for project management, business analysis, and development and architecture skills in 2016. Outsourcing has come to be seen as a solution to skills gaps, rather than as a means to cut costs. One in 10 CIOs (10%) at smaller organizations suggest they will rely on contingent staff for more than three quarters of their team – five times higher than the rate indicated by CIOs at large organizations.
The ‘Creative CIO’
As CIOs distance themselves from the role of firefighter and order-taker, to flex more strategic muscle they need to develop more market awareness. Almost a fifth in the survey couldn’t say where disruption might come from in their market, suggesting they are not ideally equipped to help the business prepare a pre-emptive strategy. This need for 360-degree vision and proactive business strategy forms the basis of the ‘Creative CIO’ persona the report claims tech leaders now need to assume. This describes a “transformational business leader, technology strategist and business model innovator.”
As well as looking outwards, this type of CIO needs to build strong relationships across the business. According to the 2016 survey, the strongest relationships are still largely confined to operations and finance (CIO ‘comfort zones’), when really they should also include HR, sales and marketing, and other business functions.
CIOs must also accept that the business wants to drive its own choices, buying off-plan cloud-based apps to get the job done, a trend IT leaders need to harness rather than curb. Encouragingly, they are overcoming fears about the risks of cloud to significantly ramp up their investments across platform, software and infrastructure as a service. Nearly half (49%) of CIOs indicated plans to make a ‘significant’ investment in SaaS in the next one to three years, up from 31% in the previous survey, but the biggest jump is expected to come from PaaS, with significant investment set to grow from 20% to 37%.
All of this ties in with the need for technology leaders to simplify IT, using more flexible platforms and next-generation operating models such as Agile and DevOps. Legacy project approaches are about as useful to digital innovation challenges as legacy IT systems.
Confident but not complacent
When it comes to their current performance, CIOs are not reluctant to value themselves highly. Confidence is remarkably high this year: more than three-quarters (77%) believe themselves to be in the top 20% of their IT leader peer group for performance.
But they shouldn’t be complacent. “While the CIO is enjoying unprecedented influence, [this year’s survey] shows the role is being stretched in many directions,” Albert Ellis, CEO of Harvey Nash Group, comments. “From grappling with an increasing cyber-security threat to working with the board on innovation and digital transformation, CIOs in 2016 are dealing with a more varied range of challenges than ever before, many of which are far removed from traditional IT. Adaptability, influencing skills and an ability to keep a clear head in uncertain times are becoming increasingly important business skills for today’s CIO.”
And there are high prizes to play for. “The adage that CIO stands for ‘career is over’ is no longer true,” Woodhouse says. “The route to the top has reopened; so much of business is technology-led now, and the digital remit so integral, that if CIOs can focus on the customer journey, on simplicity and on speed and time to market, they’re very well positioned to take the helm.”