Company boards are often unable to understand and evaluate the investment required for large information technology programs, and less than half of the largest technology projects in the last three years have met or exceeded return on investment targets, according to research by recruitment specialists Korn/Ferry International. The wide-ranging study compiled by the firm's head of chief information officer practice, Gail Pemberton-Burke, a former CIO at Macquarie Bank and chief executive at BNP Paribas Securities Services, also highlighted that 50 per cent of chief executives and 57 per cent of CIOs believed there was inherent wastage or inefficiency in current expenditure.
The study painted a picture of CIOs believing their IT investment strategy was better understood by both the CEO and non-executive directors (NEDs) on the board than was actually the case. It found that 73 per cent of CIOs said they had provided the board with a three- to five-year technology vision and road map, whereas only 47 per cent of NEDs and 49 per cent of CEOs agreed with that. "The data strongly shows the CIOs believe they have presented a vision and a road map where the board and CEOs do not agree. I think that's possibly an example of a communication divide between those groups," Ms Pemberton-Burke said.
"One of the things that commonly occurs is that what has been presented by the CIO to the board and CEO is so detailed that the board and CEO don't really grasp what the vision is. Either that or the CIO just hasn't cracked it yet and is not giving the board and CEO what they are seeking."
The Korn/Ferry study incorporated responses from Australian Stock Exchange top 100 companies, some large unlisted companies and government departments. It found that three-quarters of the organisations had ageing IT legacy platforms that would need replacing in the next three to five years at an average cost of $58 million. A quarter of the survey respondents said the required investment would exceed $100 million.
Ms Pemberton-Burke said for most of the participating organisations, the legacy platform replacement projects would be the largest, most costly and complex change initiatives they had undertaken in their history.
There was also a clear divergence of opinion about the cost of legacy platform replacement. NEDs believed they would cost an average of $75 million, CIOs estimated $56 million and CEOs $43 million.
This highlighted a need for more IT savvy on company boards. Ms Pemberton-Burke said CEOs and boards needed to ensure they had suitably qualified and experienced talent leading the forthcoming transformation work.
"When hiring new CIOs, businesses want someone who can keep the trains running, also someone who has been successful in big transformations in the past, and then also someone who has really good communication skills and can articulate the journey that the organisation needs to go on in terms of refreshing or upgrading technology," she said.
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