IT: Fundamentals Trump Technology in Hackett Group Study

Cloud computing and virtualization may be taking a back seat in IT priorities this year according to the latest annual survey of key IT issues released recently. In fact, getting back to IT fundamentals will be vital to helping enterprises reach their goals, but it won’t be easy. The Hackett Group’s latest report, 2012 IT Key Issues: Coming to Terms with the “New Normal,” found that among its Advisory Program members, volatility is part of the new business landscape. In the present global economy, financial uncertainty abounds.

“The percentages of companies emphasizing growth, operating margin, and presence in emerging markets have all increased over prior years,” the report points out, which explains why 92 percent of respondents rated “Accelerate revenue growth” as important or extremely important, and 90 percent gave that rating to “Improve operating margin.” Both of these priorities rose by over 3 percent from the 2011 study.

The push for globalization is driven in part because “new growth will be hard to achieve in the West’s slow or stagnant markets.” In addition, IT, HR, finance, and procurement functions have “lagged other aspects of the business,” but survey participants see that changing. Although 22 percent of those surveyed report that their supply chain is predominantly global or they’re pushing for a maximum globalization position, 37 percent expect to be in that position in 2-3 years. When it comes to internal operations and back-office support (including finance, HR, and IT), the goal is more aggressive: 13 percent report a predominant/maximum position today but over one-third (34 percent) say they’ll be there in 2-3 years.

Planning is always tough, but this year it’s especially challenging. In previous years, companies have built into their assumptions variability of key inputs and outputs of roughly 5 to 10 percent; today that figure is closer to 25 percent. When you compound that variability -- a 25 percent variation in energy costs plus a 25 percent potential difference in customer demand -- and you see the problem.

All these factors point to the need for business agility, which means enterprises will need to collect and analyze high-quality data to be confident in their decisions -- which, in turn, means they’ll be relying more than ever on IT. To that end, the study found that 69 percent say implementing business intelligence and analytics applications will be a top technology focus in 2012; data stewardship and standardizing on master data and data cleaning rated second on this list, at 64 percent.

To support these needs, the list of IT key issues for 2012, according to the study, include:

• Improve business relationship management and IT/business alignment (69 percent)
• Reduce technology infrastructure and application portfolio complexity (67 percent)
• Technology enablement of transactional processes (60 percent)
• Technology enablement of transactional processes (53 percent)

What’s getting in their way? It’s the fundamentals: IT departments are stymied in unlocking the “full potential of existing technology investments” (67 percent) and are challenged by the “quality of information and KPIs for performance management” (59 percent). These and other roadblocks, Hackett says, highlight to two main points: “Improving fundamental IT service delivery capabilities is of critical importance,” and “Excelling at IT fundamentals is more important for enabling the business strategy than mastering leading-edge technologies.”

The Hackett Group’s study asked “executive management and leaders of business support functions” in finance, human resources, IT, procurement, and supply chain at Global 1000 companies about their “functional priorities and initiatives” for 2012.

-- James E. Powell
Editorial Director, ESJ

Posted on 03/12/2012