What CIOs Have on Their Minds and Where They’ll Invest in 2014

Adeesh Sharma

Source: EY-CIO Klub Enterprise IT trends & Investment survey 2014

The objective of this survey is to give insights to CIOs on technology priorities and to enable them to benchmark their respective organizations’ technology road map with their peers. The CIO of 2014 is optimistic and looking forward to making significant investments for the development of IT and new solutions to achieve business expansion and customer satisfaction. The respondents have consistently selected fundamental solutions over fancy futuristic technologies and so, after the slump of the past couple of years, CIOs will need to revamp their fundamentals, and get them right before moving on to more complex solutions.

Survey Methodology

More than 200 CIOs from various organizations across major industries participated in the survey. The questionnaire used in this survey was designed to gather relevant information about IT investments, initiatives, priorities and technologies domains. Apart from the survey, EY conducted roundtable discussions with few CIOKLUB members at select locations for their perspective on IT initiatives. Key themes from the discussions have been considered for the report. EY downloaded the results of the survey to conduct an analysis and used cross tabs to identify the patterns of various IT domains across specific industries, and the size and type of industry. Responses of 199 out of 211 respondents, who completed the survey, were considered as complete and used for the analysis. Partial responses have been ignored for the purpose of this analysis.

Let’s now look at the key findings of the survey:

75% respondents will increase their IT budget between 1% to 20%

This is quite unlike the previous few years — in 2010, organizations were still recovering from the economic downturn of the previous year and the survey results indicated a cautious approach, with the CIO focusing on improving efficiencies. In 2011, though the economic growth had slowed, the outlook was bright as focus was shifting back to the India growth story. Innovation and building customer-centric and intelligent enterprise was the need, which was rightly projected by CIOs. However, in 2012, the economy once again showed sluggish growth, resulting in a need to develop lean, agile and resilient IT. In 2013, although IT spend increased, it was restricted to addressing inflation and rising costs with a focus on enhancing customer centricity.

Respondents chose internal process efficiency and agility, enhanced customer experience and innovation to drive competitive advantage as top-three business drivers for IT and indicate compliance with regulatory requirements, cost savings and risk mitigation amongst the lowest three priorities However, this varies slightly from industry to industry.

Survey results indicate that enhanced customer experience and compliance with regulatory requirements is marginally more important for banking and financial services and technology sectors, while infrastructure, industrial and consumer products sectors are leaning toward internal process efficiencies and agility. As compared to this, the automotive sector will focus on innovation to drive competitive advantage. This seems to be in-line with the activities of the past year whereby EY has seen an increase in new technology roll outs in the banking sector such as the new Real Time Gross Settlement (RTGS) system, the Green Banking Channel geared to provide customer self-service options and microchip enabled debit and credit cards.

At the same time, sectors such as industrial products, which typically require large capital investments, have demonstrated less freedom to take on the risks associated with adopting new technologies. Consumer product organizations are looking at developing new business models to establish demand-driven supply chain, direct customer relationships and effective use of digital media.

On the flip side of the same coin, EY has observed interesting trends in the IT risk universe of organizations whereby majority of organizations (65%) have chosen continuous availability of critical IT resources as one of the two top risks. EY believes this is a significant area of focus for the CIOs in the upcoming years. However, these results vary by sectors; for the banking and financial services sector (FS), continuity is equally important as security and privacy (29% versus 25%), whereas for telecom, media and technology (TMT) sector organizations, staffing concerns (e.g., loss of key IT resources, inability to recruit IT staff) outweigh those as seen in all other sectors (TMT is at 13% vesus financial services at 0% and average across all sectors is at 8%).

56% respondents point consolidation of cloud solutions as priority

Just a few years ago, cloud computing was little more than a speck on the horizon. However, today, “cloud” is no longer considered an emerging technology and cloud-based services have entered the mainstream. From EY’s observation in the market, a significant majority of organizations have either adopted or are planning to adopt some form of cloud computing technology. This is also demonstrated in the survey results where 56% of respondents indicated IT consolidation and cloud services to be their number one priority as part of this year’s IT agenda.

EY’s observations of the survey results show an interesting trend where respondents have favored the adoption of private cloud over public cloud. In the sample survey, this trend is seen distinctly in the banking and financial services sector, where private cloud adoption is at 33%, while public cloud adoption did not have any takers. Comparatively, in the telecom, media and technology sectors, private and public clouds have found almost equal amount of acceptance. This trend seems to make sense in the current Indian scenario where CIOs want to first get the basics of virtualization right — by focusing on private cloud before the wide spread adoption of public cloud. Deployment of the private cloud not only cuts costs, but also provides improved efficiency, scalability, virtualization, improved monitoring and enhanced security.

CIOs’ dilemma of investing in Big Data

Business intelligence and analytics has become one of the top priorities across organizations this year with more than 34% respondents ranking this on top of their FY14–15 IT transformation agenda. Big Data is increasingly becoming the ”biggest” topic of discussion and debate for the CIOs. As the popularity of Big Data has grown over the years, its meaning got diluted with some relating it to large volumes of data, some to increasing productivity and some as a marketing gimmick.

With rapidly changing data from social media, videos, location surveillance, audio/images and machine-generated data, the ability to capture billions of these raw data points and transforming it into actionable intelligence is making Big Data relevant for organizations today. Organizations using Big Data can have a more complete picture of their customers, products, operations and competitors to drive innovation (new products and services), operational efficiencies, customer delight, increased revenue and low costs. In organizations today, typically 60% of the data stored is structured, while unstructured data makes up for the remaining 40%. In the years to come, the unstructured data is expected to grow rapidly, driving Big Data explosion.

Top 5 trends in Business Intelligence

• Data visualization goes mainstream: Visual analytics allows business users to ask interactive questions of their prepared data sets and get immediate visual responses, which makes the whole process engaging. This trend will foster a strong data analysis culture where business users will look for data and perform visual analytics before making decisions.

• Predictive analytics is reality: Over the years, organizations have built platforms and infrastructure with a significant emphasis on hindsight — “What has happened” reports that help organizations check their rear view mirrors. In 2014, there is increased acknowledgement that enterprises need to start developing insights and foresights. With better insights and a forwardlooking predictive view, organizations are less reactive and are able to be more proactive and shape their outcomes.
• Collaborative BI for decision support: Organizations are striving to bring together appropriate personnel, expose all the necessary information to make a sound actionable decision for a definitive edge over competitors, and results in happier customers, partners, and employees. In-database analysis for modelling: Organizations are increasingly using analytics system consisting of an enterprise data warehouse built on an analytic database platform. Capabilities of these platforms to provide parallel processing of large datasets, partitioning and scalability geared toward analytics are increasingly being used in mission critical applications for real time decisions.

• In-memory BI: Organizations are embedding predictive analytics in their operational systems. Enterprise organizations relying on structured will now utilize a hybrid model, combining structured and unstructured data. Traditional BI and predictive analytics will work in tandem thanks to more user-friendly applications.

63% respondents are using mobile computing to enhance collaboration
As seen in survey results, enterprise mobility has been around for some time now in the form of messaging and collaboration tools and currently more than 63% of respondents are using this form of messaging and collaboration. This is enabled by today’s ever-evolving smart phones, availability of 3G and 4G networks and the abundant availability of innovative mobile applications. 25% of the respondents have marked enterprise mobility as their number one IT transformation priority for 2014–15. Amongst these, 50% of the organizations have revenue in excess of INR10 billion and have indicated an increase in the IT budget for the year.

On the other hand, majority of respondents (47%) have said that they are either considering or will consider using this technology for management reporting and dash-boarding in the near future. We can expect that in near future, key mobility deployments are expected to be seen for business intelligence dashboards, board level reporting, documentation management and sales force automation. The focus of CIOs today is limited to using enterprise mobility for its basic function of collaboration.

This might be explained by the fact that 36% of CIOs are not considering implementing technologies such as bring your own device (BYOD), while a majority of them who have adopted BYOD, at 42%, have only used employee education as a risk-control mechanism. As seen in the survey, mobile device management (MDM), network level controls and end-point security solutions have seen very limited adoption. However, the financial services sector deviates from the norm here, where the survey results show a significant adoption of these technologies, (47% for MDM and 56% for network level controls) in addition to employee education.

Challenges for adopting enterprise mobility
Security: Security is seen as the number one challenge to the adoption of enterprise mobility. With the advent of BYOD, organizations struggle to control the extent of data that is stored on employee’s devices. The proliferation of mobile applications that the employee downloads for personal use, alongside corporate applications, creates a further risk from a data protection perspective. Additionally, a lost or stolen device with sensitive data stored on them is a major concern.

Governance: Since mobility does not fall within any of the traditional IT silos, it poses a unique governance challenge. This affects application development, business process, infrastructure and operational processes.

Cost: The cost of mobile devices and enabling their wireless connectivity comes at a high price.

Social media usage marches on
As seen in the IT transformation agenda, social media is getting a place at the CIO table, but only as a younger brother to its more powerful and hefty bigger brothers in the CAMSS digital technologies. Only 9% of respondents have chosen it as their top priority for the year. As observed, the early adoption of social media is primarily as an internal collaboration tool.

This is evident from the fact that 51% of respondents use it for easier and faster ability to access knowledge and experts. However, as seen in survey results, approximately 30% of the respondents plan to introduce and approximately 15% respondents are evaluating introduction of social media platform in their organizations during the next year.

While the potential benefits and opportunities associated with the social trend are exciting, there are also new risks and information security issues that must be addressed. Organizations active in social media conversations often lead the way with customers and employees. They do not only turn to social media when things go wrong, but regularly engage and build loyalty.

They may generate revenue growth through better targeting and reduce costs by eliminating less-effective advertising. Compliance-monitoring analytics can filter social media content to identify posts involving topics of interest or concern, as well as key contributors of such content.

These contributors can then be further analyzed. For example, they can be grouped and classified based on their connections to other social media users, demographics, message patterns, personal interests and behavioral patterns. This added insight can help organizations understand how to properly address potential problems.

Security: focusing on internal versus external threats

The survey results revealed that 56% of the respondents cited employees’ lack of awareness about phishing and spam and 37% of the respondents cited open vulnerabilities in systems as major reasons for security incidents. These are clear indicators that CIOs today need to focus on internal threats v. external threats. EY has observed this as a global issue.

According to EY’s Global Information Security Survey 2013 (GISS), 50% of respondents cite a lack of skilled resources as a barrier to value creation. Similarly, where only 20% of previous survey participants indicated a lack of executive awareness or support, 31% now cite it as an issue. Due to this, though information security departments in organizations are moving forward, the support from other parts of the organization is lagging behind.