Logicalis Survey Shows One in Four CIOs Have Lost Control of ICT Spending

Solution Provider Says Line-of-Business Power Shift Dictates Transformation of Corporate IT into Internal Service Provider

NEW YORK, December 3, 2014 – According to a new study from Logicalis, an international IT solutions and managed services provider (www.us.logicalis.com), its second annual Optimal Services Study, CIOs are becoming increasingly aware that line-of-business executives wield greater influence over IT purchasing decisions and are actively re-shaping IT departments as internal service providers in response.

To read the full Optimal Services report, “Establishing the Internal Service Provider,” click here.

In the survey of top IT pros spanning 24 countries, CIOs acknowledged that the balance of power in information and communication technology (ICT) spending has shifted decisively toward line-of-business executives and shows no sign of slowing down as the “shadow IT” trend increasingly takes center stage.

  • 57%: More than half of CIOs think line of business (LOB) colleagues have gained more power over the last 12 months.
  • 28%: More than a quarter admit that LOB colleagues already hold the balance of power in IT decision-making, making at least one-half of these decisions.
  • 64%: A growing number believe the trend will continue over the next three to five years (compared with 44 percent of CIOs who said the same 12 months ago).
  • 66%: Two thirds of CIOs report that the IT department is responsible for managing LOB-purchased technologies and services.

In response, CIOs are seeking to embrace a new infrastructure and service-management-focused role. “In working with our clients, it is clear that businesses don’t want a technology solution.  They want their business needs to be met.  That means the CIO’s role must change from that of a technology provider to one that is laser focused on delivering IT services that meet line-of-business users’ needs,” says Mike Martin, Senior Vice President, Solutions and Services, Logicalis US.  “In the past, when line-of-business executives went around IT to get these services – something that’s come to be known as ‘shadow IT’ – it was frowned upon from the top down.  But the survey validates what we have already discovered about shadow IT; it’s simply a means to an end.  Shadow IT is no longer seen as a way for business users to ‘circumvent’ IT; instead, it is the natural result of an unfulfilled need and an indicator of the way corporate America will define, procure, deliver and use technology going forward.  This is a change in thinking for the CIO who has been accustomed to leading a technology-defined IT organization to what must now become a services-driven organization focused on business outcome, and it’s something Logicalis is ready and prepared to help our CIO customers accomplish.”

CIOs recognize, however, that there is much work to do in order to deliver this service-defined transformation.  They must become experts in service integration and transform their IT skills base into one that is focused on service delivery.

Service Integration Experts

LOB executives want access to a growing number of market offerings delivering transformational line of business applications.  This means the selection, integration, governance and management of “as a service” offerings will be as important as maintaining in-house technologies.

  • 57%: More than half of CIOs agree that, by 2016, 80 percent of IT budgets will be based on providing service integration for a broad portfolio of internally and externally sourced IT and business services.
  • 76%: Over three-fourths of CIOs already believe that the IT function in their organization is services focused rather than technically focused.
  • 41%: Well over one-third of CIOs expect to rename their IT department in the next two years to reflect its growing service management role.

Transform the IT Skills Base

CIOs will have to recruit specialists with broader, business-IT-oriented skills.  They will need to actively reduce the level of technology their teams maintain in house.  And they must now succeed where they have previously failed –refocusing the CIO role on strategic activities.

  • 34%: More than one-third of CIOs cite ‘technical skills’ as the top priority when recruiting IT staff.  The remaining two-thirds instead look first at business skills like communication, service management and business analysis.
  • 65%: Nearly two-thirds of CIOs are prepared to pay more for business-oriented IT pros.  In fact, 25 percent of CIOs expect to pay five to 10 percent more, while 22 percent of CIOs expect to pay between 10 and 20 percent more for these skill sets.
  • 47%: Nearly half of CIOs today admit they want the majority (50 percent or more) of their IT services to be provided or managed by external service providers, including those providing cloud services like infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS).
  • 84%: Most CIOs indicated a desire to spend at least half (50 percent or more) of their time on strategic initiatives, up from 74 percent of CIOs who said the same 12 months ago.  While this may be their desire, however, it is not always reality.  Today, more than half (55 percent) of the CIOs surveyed are still spending 70 percent or more of their time on low-value, day-to-day tasks.

Commenting on the findings, Chris Barnard, Associate Vice President, IDC, says, “The 2014 Optimal Survey Results confirm major trends IDC observes within the industry with the shift to a new technology platform, the Third Platform, which is built on mobility, cloud, big data analytics, and social technologies. This creates challenges for the CIO and IT organizations as they struggle to balance strategic and operational choices.

“With the IT function at the heart of business growth and innovation as we move to the Third Platform, it is clear that the CIO and IT organization will have to adjust as business outcomes become the key metric of ICT projects. Discussions need to move from being technology focused toward supporting business goals by acting as a services broker or provider.  An external partner such as Logicalis should understand the key role of the network and provide complete enterprise platform lifecycle services with a keen understanding of the IT estate and future business/technology evolution.”

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About the Research

All figures are drawn from a survey of 177 CIOs and IT directors from mid-market organizations across 24 countries spanning Europe, North America, Latin America and Asia-Pacific.

About Logicalis

Logicalis is an international IT solutions and managed services provider with a breadth of knowledge and expertise in communications and collaboration, data center and cloud services, and managed services.

Logicalis employs over 3,800 people worldwide, including highly trained service specialists who design, specify, deploy and manage complex IT infrastructures to meet the needs of almost 6,000 corporate and public sector customers.  To achieve this, Logicalis maintains strong partnerships with technology leaders such as Cisco, HP, IBM, CA Technologies, EMC, NetApp, Microsoft, VMware and ServiceNow.

The Logicalis Group has annualized revenues of $1.6 billion from operations in Europe, North America, Latin America and Asia Pacific and is one of the leading IT and communications solution integrators specializing in the areas of advanced technologies and services.

The Logicalis Group is a division of Datatec Limited, listed on the Johannesburg and London AIM Stock Exchanges, with revenues of approximately $6 billion.

For more information, visit www.us.logicalis.com.

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