By Thor Olavsrud, CIO | July 30th, 2014
As a result of the confluence of disruptors such as cloud technology, mobile, social media, and big data and analytics, organizations today are rethinking their IT infrastructure from the ground up — and it’s not just IT architects and data center leaders involved.
Business leaders across the C-suite are looking to IT infrastructure as fundamental to driving competitive advantage and helping them optimize revenue and profit, and they are paying close attention, according to a new study by the IBM Institute for Business Value and Oxford Economics. In the study, 40 percent of companies indicated that non-IT functions will be involved in making infrastructure decisions in areas such as end-user devices, security and cloud computing.
“You don’t often see the foundation of a building, but we all know it’s critically important,” says Jacqueline Woods, co-author of the report and global vice president for Growth Solutions in the Systems and Technology Group at IBM. “IT infrastructure has that same intrinsic value.”
“The biggest takeaway was the recognition that IT infrastructure enables competitive advantage,” she adds. “It allows us to lean into workloads and the trends for analytics, mobile and social. When we’re able to fully leverage those trends through technology, we get an advantage.”
Even so, less than one-third of IT executives said they are effectively collaborating with line-of-business leaders to provide IT infrastructure solutions to support their business.
The study surveyed 750 IT executives — CIOs, CTOs and other senior IT leaders — in 19 industries and 18 countries.
The study found that more than 70 percent of senior IT executives perceive IT infrastructure as essential to enabling competitive advantage or optimizing revenue and profit. But even with that recognition, only about one-third of respondents felt their IT infrastructure was prepared to address the demands imposed by mobile technology, social media, big data and cloud computing. Fewer than 10 percent of companies reported that their IT infrastructure was fully prepared to meet the demands.
But a small cadre of companies told a different story. Dubbed “Strategic IT Connector” organizations in the study, these organizations rated themselves as excelling in at least three of five leading practices identified by IBM:
- Establishing a well-defined enterprise IT infrastructure strategy and roadmap.
- Collaborating effectively with the business to provide IT infrastructure solutions to support business needs (such as improving one-to-one customer engagement).
- Using the IT function as a broker of technology services for the organization (for example, providing expertise to the business in selecting software-as-a-service and other cloud computing opportunities).
- Supporting cross-functional teams of infrastructure domain experts to identify, source and implement IT infrastructure solutions.
- Collecting, analyzing and documenting performance measures.
Their industry peers, who did not rate themselves as excelling in any of the areas, were dubbed “Siloed Operators” in the report.
The 17 percent of companies deemed Strategic IT Connectors in the study were significantly more prepared to address infrastructure requirements than Siloed Operators, including greater preparedness in the areas of cloud (52 percent versus 10 percent), mobility (36 percent versus 28 percent) and analytics and big data (44 percent versus 39 percent).
Strategic IT Connectors were also significantly more likely to identify themselves as outperforming their industry peers in revenue growth (30 percent versus 10 percent) and profitability (45 percent versus 25 percent). They were also more likely to have a higher than average industry net profit margin compared with their industry peers (62 percent versus 26 percent).
“They took a position and point of view on IT infrastructure that was not tactical but more strategic in nature,” Woods says. “They also tended to be more collaborative at the enterprise level, focused on utilizing infrastructure as a catalyst to drive business results.”
Still, two-thirds of respondents to the survey said they will be increasing their spending on IT infrastructure over the next several years (though the Strategic IT Connectors were significantly more likely to increase infrastructure spending by more than 10 percent). Among all parties, Strategic IT Connector or not, reducing overall infrastructure costs was the primary driver for increasing investment in infrastructure: 33 percent of all respondents said they will spend more today to reduce future operating costs.
But after that, drivers diverge. Strategic IT Connectors rated “achieving greater competitive differentiation” at essentially the same importance as reducing infrastructure costs, whereas Siloed IT Operators rated it much lower on their list of top drivers. Siloed IT Operators rated “improved operational efficiencies” as about on par with reduced infrastructure costs, followed by dynamic pricing, new or enhanced revenue opportunities, achieving greater standardization, more effective disaster recovery and faster application development/deployment. Only after that did achieving greater competitive differentiation come into the picture.
“When you think about infrastructure, it’s not one thing,” Woods says. “It’s many things. You have to think about optimizing all the various components to optimize your overall business value. Think about infrastructure as a strategic vehicle to improve your overall results.”
When considering how IT infrastructure can deliver competitive advantage for their businesses, IBM recommends IT leaders ask themselves the following questions:
- In what ways can your organization use IT infrastructure as a tool to achieve competitive differentiation in the marketplace? What examples show that this is already happening to some degree?
- To what extent is your IT infrastructure equipped to handle new workloads associated with mobile, social and analytic applications?
- To what extent are your infrastructure choices determined by line of business requirements?
- How will you prepare your existing IT infrastructure to address emerging issues and disaster recovery scenarios?
- What is your organization’s strategy for incorporating various forms of cloud technology (for example, private, hybrid, public) into the larger, existing IT infrastructure? What challenges has this posed for the IT organization?