The Situational IT Leader

Survey Results & Insight February 2013 The Situational IT Leader PwC s Western Australia IT Leaders Survey FY13 www.pwc.com.au

PwC s Western Australia IT Leaders Survey FY13 IT Leaders in Western Australia are facing unprecedented pressures and competing demands from the business to deliver rapid technology innovation while maintaining or reducing IT spend. Top 3 key focus areas for FY13 Reporting and analytics Major Software/ERP implementation BYOD and Mobility Aligning IT with business Top 3 critical success factors for FY13 Improved project execution Enhanced service delivery IT Leader s key challenges 60% of IT Leaders do not report directly to the CEO 70% of organisations do not fully include IT in the business planning cycle The lack of available IT talent in WA is a significant challenge for 52% of IT Leaders

PwC s Western Australia IT Leaders Survey FY13 1 The Situational IT Leader in WA Be more strategic. It s a mantra chief information officers (CIOs) and IT Leaders have heard repeatedly for more than a decade from the CEO, the chief financial officer (CFO), and other business colleagues as well as analysts, consultants, and the media. Easy to say, but hard to define or do. The CIO job, as typically understood, is difficult enough. For many, expanding the role to include being a major contributor to business strategy is a pipe dream at best, a nightmare at worst. Yet it can t be shrugged off as one more nonsensical demand or faddish request, especially in the reset economy we have today in Western Australia. Internal and external forces will soon compel CIOs and IT Leaders if they aren t already to be more strategic in serving the business without giving up any traditional IT responsibilities. The message to be strategic tells the CIO to broaden beyond the narrower role of technology operations manager and to become a true business executive a fully contributing member of senior management in identifying and capitalising on opportunities. Thus, the Situational WA IT Leader. Just how strategic a CIO and IT Leader should be if at all varies according to your company s needs and expectations, and your skills and interests. The best CIOs and IT Leaders are beginning to act as chief innovation and process officers. Indeed, CIOs are the only C-suite executive who has to know how the business works end to end. More so than other executives, this advantage provides today s IT Leaders in WA with insight and leverage into making the business run better. But being strategic isn t always what your company wants. In the recent economic downturn most companies have asked CIOs and other executives to focus on the tactical efficiencies and cost cutting rather than developing new business and technology strategies. PwC believes the focus is fundamentally changing toward a demand for more strategic involvement by CIOs, but without losing the tactical strengths favoured recently.

2 PwC s Western Australia IT Leaders Survey FY13 Introduction Chief Information Officers (CIOs) and IT Leaders in Western Australia are facing unprecedented pressures and competing demands from the business to deliver rapid technology innovation while maintaining or reducing IT spend. PwC recently asked 80 IT Leaders in WA what their biggest challenges and opportunities are, in particular adapting to recent challenging market conditions and increased business demands to utilise technology innovation to enable operational efficiency and differentiation. This is the first time that this survey has been carried out in WA. No comparators to previous surveys exist, and consequently in this first year we focus our attention on how the results of the survey relate to WA IT Leaders experiences and challenges. I am delighted to publish this years results and I look forward to discussing these findings in more detail with you. Sincerely, Justin Scanlan Partner Perth Technology Leader Survey approach The survey was conducted in July 2012 at WA s inaugural IT Leaders Summit using real-time voting technology. The questions covered demographic information about each organisation including general information about IT (e.g. staffing, structure and spend); and specific questions on IT strategy, priorities and challenges. Profile of respondents Over 50% of respondents work in the Mining, Oil & Gas, or Construction & Engineering sectors. 57% of IT Leaders who participated are from companies with more than 1,000 employees. Nearly 60% of IT Leaders work at organisations with an annual revenue/budget of $500m or above. Two thirds of IT Leaders surveyed have totally or mostly in-house IT services. Only 3 % have total outsourced IT services.

PwC s Western Australia IT Leaders Survey FY13 3 Market context The WA economy has consistently outperformed the Australian economy in recent times. It grew 6.7% in real terms in 2011-12. WA s per capita gross state product (GSP) was the highest in Australia and 55% higher than the national average of $63,754 1. Despite this economic success, organisations are facing increased cost and performance pressures as a result of unstable commodity prices, foreign exchange exposures and a high labour cost. As a result, there are increased pressures being placed on organisations to not only introduce significant productivity and cost savings but also drive innovation through new technologies. In addition, the convergence of operational technology with mainstream IT provides new opportunities and challenges for organisations in WA. The opportunity to better utilise technology to drive strategic change is not negotiable. CIOs now face a new test of leadership, one that requires an agile mindset so that they may foster and adapt IT in order to better deliver on results. PwC believes the IT Leader s dilemma consists of two forces pushing the role and the business benefit in opposite directions. The first force is simplifying what used to be challenging. More and more technology becomes standardised, plug-andplay, and commonplace. Software as a Service, Infrastructure as a Service and broader Cloud services are demonstrating that technology does not require an expensive, dedicated set of fixed resources. The traditional enterprise IT we re familiar with is disappearing. In this world, a CIO is a vendor management officer, and most of the technology essentially takes care of itself. The CIO is dead. The second force clears the path for more strategic value and promises more clout and responsibility than CIOs have ever had before. The best CIOs are beginning to act as chief innovation and process officers. This is because they re the only C-suite executives who have to know how the business actually works from one end to the other. This advantage gives them insight and leverage into making the business run better. PwC s 14th Annual CEO survey clearly shows CEOs and executive management s desire for CIOs to take on greater strategic roles. Interestingly, only 55% of CEOs believe the CIO always speaks the language of the CEO and proposes new ways to advance strategic business priorities. In many industries today the CIO is becoming increasingly thought of as a chief innovator, chief strategist, chief process officer, or all three. Long live the CIO! 55% of CEOs believe the CIO always speaks the language of the CEO 1 Australian Bureau of Statistics. Australian National Accounts. State Accounts. November 21 2012.

4 PwC s Western Australia IT Leaders Survey FY13 WA IT leaders point of view Locally, IT Leaders believe their FY13 budgets will be cut back, despite the opportunity to use technology to drive productivity. CEOs are asking their management teams to refocus on positioning their companies for growth while continuing to reduce cost. Indeed, 70% of CEOs surveyed said they are investing in IT to reduce costs and become more efficient 2. The role of today s IT Leader becomes increasingly challenging balancing delivering technology innovation rapidly to drive business growth with keeping IT budget in check. Comparing the top technology priorities of Western Australia IT leaders with IT leaders globally gives an insight into the unique challenges that are faced by WA CIOs. While business intelligence and mobile technologies are high on a CIO s agenda both locally and internationally, cloud computing was not considered a priority by WA IT Leaders with only 23% stating that this is a key focus area. This may indicate that cloud services are becoming more mainstream, or that local cloud services are not mature. Major software/erp implementation is a WA-specific priority with it being the second most frequently cited focus area by WA IT Leaders. Top 4 WA IT Leader s Technology Priorities Top 4 Global Leader s Technology Priorities 3 01 Reporting and Analytics 01 Analytics and business intelligence 02 Major software/erp implementation 02 Mobile technologies 03 Bring Your Own Device (BYOD) and Mobility 03 Cloud computing (SaaS, IaaS, PaaS) 04 Establishing an IT strategy 04 Collaboration technologies (Workflow) 2 PwC. 14th Annual Global CEO Survey 2011 Main Report. 3 Gartner. The 2012 Gartner CIO Agenda Report.

PwC s Western Australia IT Leaders Survey FY13 5 Integration with business Close to 70% of respondent organisations do not fully incorporate IT in their business planning cycle. Many IT Leaders struggle with aligning the IT Strategy into the broader strategy of the organisation. Nearly 70% of IT Leaders surveyed report that IT is not fully included in the business planning cycle, reducing the effectiveness of IT in taking a major role in implementing the business strategy. In addition, results show that the lack of IT strategy buy-in by senior level management in their organisation caused considerable frustration among 39% of IT Leaders. This is disappointing given the role of technology in enabling strategic change in an organisation has never been stronger. Is IT included in the business planning cycle? Yes fully 31% Partially 47% Not at all 22%

6 PwC s Western Australia IT Leaders Survey FY13 IT strategy focus areas 61% of CIOs do not report directly to the CEO. Problems with the integration of IT Strategy into business and getting buy-in of IT Strategy at executive level are found to occur more frequently in organisations where the head of IT/CIO reports to the CFO or COO. Who does the head of IT/CIO report to? CEO (or GM/MD) CFO (or other Finance role) COO (or other Operations role) 13% 40% 34% More than half of IT Leaders say that business integration is the most important IT business critical success factor. A lack of good communication and interdepartmental collaboration between IT and management causes disorganisation, poor business- IT alignment, and ultimately inability to realise strategic objectives. To ensure IT provides business value and the adaptability required for their organisations to thrive in an increasingly complex and fast faced environment, IT Leaders ranked aligning IT with business as most important for FY13, followed by improved project execution and enhanced service delivery. What are your 3 critical success factors for FY13? None of the above 13% Business integration/ Partnership 51% Improved project execution 43% 70% of organisations do not fully include IT in the business planning cycle Improved service delivery/ Management (e.g. ITIL) IT Strategy buy-in Effective IT organisation structure Securing appropriate budget Infrastructure/ Applications stability Establishing an effective PMO Improved value from procurement/ sourcing 43% 40% 35% 26% 23% 14% 9% What are your 3 critical success factors for FY13? Outsourcing 6%

PwC s Western Australia IT Leaders Survey FY13 7 Reporting and analytics is key The top focus area for IT leaders is to create a competitive advantage for business by leveraging data and advanced analytics. Using business intelligence and analytics to leverage informational assets is the primary focus of 48% of IT Leaders. While this may be more relevant for large companies who predominately have the largest volumes of data, the results also indicate that this is a concern across most business sectors. Organisations are requiring flexible reporting that gives them the ability to drill down to varying layers of detail and IT Leaders are required to obtain this information from an ever shifting mass of information that is not readily available in enterprise information systems. What are the 3 focus areas for your IT technology strategy? Reporting and analytics Major software/ ERP implementation BYOD & mobility 38% Establishing an IT strategy Collaboration/ social media 29% Security 26% 48% 40% 35% Application portfolio rationalisation Cloud computing (IaaS, SaaS, PaaS) 25% 23% Virtualisation 15% Desktop/Office tools refresh 14% The volume and variety of data is rapidly increasing as stakeholder interactions and business complexity evolves. This provides an opportunity for leading organisations to formulate and adopt a comprehensive strategy for analytics and decision support in order to realise sources of advantage. PwC believes that with a business focus, not technology focus, organisations can drive superior performance and demonstrably increase economic value through enhanced information management, analytics, and decision making capabilities.

8 PwC s Western Australia IT Leaders Survey FY13 ERP and mobility are priorities for the WA IT Leader 40% of IT Leaders see major software/erp implementation an important part of their IT strategy. Large scale software implementation, particularly ERP, is a key concern for 40% of IT Leaders. The implementation or significant upgrade of an ERP is a significant change event for an organisation, impacting the conventional business model and core business practices. IT leaders are concerned about the complexity of these projects, given there is a high risk of the project not achieving its business goals or being scoped incorrectly. It is estimated that between 50% and 60% of ERP implementations are perceived as failures 4. Additional concerns arise with solution selection, data quality assurance, other technical issues and adoption at different organisational levels. Given that less than 40% of ERP implementations are successful and fully deliver upon business objectives, WA based organisations embarking on this journey require a tight Project Governance and robust planning and control. As BYOD goes mainstream in the enterprise, over one third of respondents view BYOD support, security, and integration a key IT focus. The consumerisation of IT has led to an increase in employee-supplied devices in the workplace. Over 40% of devices used to access business applications are personally owned by the employees themselves 5. While these tools enable increased productivity by workers, it challenges the IT Leader in controlling access to sensitive information by non-corporate devices and securing the data once it leaves the confines of the corporate network. 38% of surveyed IT Leaders stated that BYOD is one of their key focus areas. The level of support that the organisation is willing or able to provide to personal devices used for work is an additional concern for IT Leaders. Providing integration on an increasingly wide selection of devices, platforms and applications places a larger burden on an organisation s IT support infrastructure. BYOD and mobility is a key focus of 38% of IT Leaders 4 Ganly D. Address Eight Key Factors for Successful ERP Implementation. Gartner. November 2012. 5 PwC. The Consumerisation of IT. November 2011.

PwC s Western Australia IT Leaders Survey FY13 9 IT Leader s frustrations Keeping pace with changing business needs and requirements. The most frequent cause of concern for 53% of IT Leaders surveyed is the constant flux in business demands from their organisations. This is perhaps not surprising when you consider over 70% of WA organisations surveyed do not fully incorporate IT in their business planning cycle. In today s business world, change is the only constant. Almost all of the respondents organisations experienced business restructuring, transformation, or some sort of change brought about by organic or inorganic growth. Only 9% experienced neutral company growth. None showed downsizing. Acquisitions, divestments and expansion of operations place demands on the IT function in many organisations in WA. The responsibility then rests on the IT Leader to implement a flexible, robust and agile IT strategy in the face of constantly changing business environment. What are your top 3 frustrations? Constant changing demands from the business Unrealistic expectations from the business Lack of IT Strategy buy-in at senior level in business Lack of sufficient investment Available IT talent 27% Lack of opportunity to drive IT strategy throughout business IT regarded only as a cost Unsuitable technology architecture High cost and performance of service providers 24% 18% 17% 12% 39% 29% 53% 48% Employee churn 8% This indicates a lack of understanding of technology within the business and/or a breakdown in communication processes between the business and IT. PwC believes this can be improved through better IT Governance and Strategy planning.

10 PwC s Western Australia IT Leaders Survey FY13 Top talent challenges facing IT Leaders Over half of the IT Leaders see a lack of available local IT talent as a major challenge. With the current growth rate of WA industries, acquiring new IT talent whilst retaining existing IT staff is a critical concern for IT leaders. The survey results indicate that a lack of IT talent is the biggest people challenge for WA IT Leaders with 52% stating it as a major factor in maintaining a stable operational base of IT skills in the organisation. Compounding the problem are the salary demands made by existing IT staff, where 45% of respondents believe this is their second biggest people challenge in talent retention. In addition to an ageing workforce, the demand side for IT talent outstrips supply from traditional sources (e.g. schools, colleges and universities) requiring an increasing number of the IT workforce to be sourced from overseas. WA currently has a significant shortage of IT graduates emerging from higher education, tertiary and vocational. This is a significant issue for the State moving into the future. It is up to all IT organisations in WA to consider stimulating more interest by offering internships and graduate programs for young people in WA. What are the greatest people challenges facing your organisation? Lack of available IT talent in the makret Appropriate retention strategies Recruitment processes Employee value proposition Employee churn (IT) 16% 34% Lucrative offers from other companies 30% 31% 28% 52% Salary demands 45% The lack of available IT talent is a challenge for 52% of IT Leaders

PwC s Western Australia IT Leaders Survey FY13 11 Conclusion Many of the challenges facing WA IT Leaders are also faced by IT leaders and CIOs globally. One of the key challenges facing the WA IT Leader is integrating IT strategy into their organisations. Several of the challenges and frustrations, such as unrealistic expectations of IT and a lack of IT strategy buy-in by executives, result from this lack of or insufficient integration and inter-departmental collaboration. Put simply, the CIO role is often not taken seriously by many WA based organisations. Many CIOs struggle to establish a seat at the executive table and many CEOs and CFOs fail to communicate business strategy and tactics to CIOs in a timely manner. Given the convergence of operational technology and information technology and an increased demand across all key sectors in WA for productivity improvements, the CIO should be seen as the key enabler to this objective. In particular, given the rapid advances in technology. Some priorities, such as major software and ERP implementation, are WA-specific. Interestingly, while cloud computing was considered to be a top priority of global IT leaders, it is not one of the key focus areas among WA IT Leaders. This may indicate that the Australian Cloud market has still not matured its commercial models or that Cloud may be becoming more mainstream in IT organisations. The increasing demands of business are expanding the traditionally defined role of the CIO. IT leaders are now being required to focus on growth, performance and efficiency while facing pressures to reduce IT spend. This increased responsibility also gives unparalleled insight into the business as a whole, giving the IT Leader leverage into making the business run better. Regardless, the WA IT Leader has an opportunity to drive valuable business change by taking the initiative to work with Executives to plan, execute and realise the benefits of smart technology investments.

12 PwC s Western Australia IT Leaders Survey FY13 Publications PwC has developed a significant amount of thought leadership in Technology and Innovation PwC Technology Forecast http://www.pwc.com/us/en/technology-forecast/index.jhtml PwC Centre for technology and innovation (CTI) http://www.pwc.com/us/en/technology-innovation-center/index.jhtml

PwC s Western Australia IT Leaders Survey FY13 13 Contacts Justin Scanlan Partner and Leader of Western Australia Technology Practice + 61 (8) 9238 3265 justin.a.scanlan@au.pwc.com Chris Hannan Director + 61 (8) 9238 5250 chris.hannan@au.pwc.com Jodie Hatch Director +61 (8) 9238 3616 jodie.hatch@au.pwc.com JoAnn Theriault Director +61 (8) 9238 3628 joann.theriault@au.pwc.com The Survey was conducted at the inaugural WA IT Leaders Summit hosted by Business Insights Australia. This paper was produced in conjunction with Business Insights Australia, Australian Computer Society, Justin Scanlan, Chris Hannan, Tony Long, Kam Ling Chau and Stephan Dahinden.

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