SaaS, silos and shadow IT: Business units now dominate IT budgets
- 10 April, 2019 10:05
IT departments need to reinvent themselves as a strategic, value-adding function, so they can empower line of business departments to drive digital transformation
While marketing has been procuring enterprise-grade 'martech' solutions independent of IT for the past three to five years, a new study reveals for the first time that sales, human resources, field workforce management and customer services groups now control their budgets for enterprise solutions.
Customer service and field operations have surged ahead in terms of decision-making power for enterprise applications - even surpassing marketing.
But this has also led to business-wide integration challenges at unprecedented levels across Australia and New Zealand, according to IBRS, in its report on The 2019 State of Enterprise Software.
While SaaS has allowed business units to easily acquire and run enterprise-grade business solutions that are specific to their needs, the ease of acquisition and deployment also means that many organisations are now creating silos of information and processes.
As such, says IBRS, integration is proving to be a challenge for the growing number of organisations where business units have procured cloud-based applications with only superficial ICT involvement. Deployment of technologies without or with minimal ICT involvement is referred to in the industry as 'shadow IT'.
IBRS, for instance, notes that human resources departments that procured SaaS based e-learning and human capital management solutions from cloud services without IT involvement are now struggling to obtain a consistent view of staffing.
“The industry has reached a tipping point as we enter the cloud maturity era, and organisations are no longer comfortable to wait for legacy software vendors to ‘catch up’ to new technologies,” says Ed Chung, CEO of TechnologyOne, which commissioned the study.
“IT departments need to be reinventing themselves as a strategic, value-adding function, so they can empower line of business departments to drive digital transformation in line with the organisation’s integration strategy,” he states.
“If outdated technology or resistant-to-change IT teams are standing in the way of a department’s digital transformation aspirations, they will go around them.
“Gone are the days when IT could take months, possibly years to gather requirements, plan, select and implement enterprise software, and then expect immediate uptake and employee satisfaction,” says Chung.
Dr Joe Sweeney, principal analyst at IBRS, says ease-of-use was the common theme among executives' view of an ideal enterprise solution.
“Ease doesn’t just refer to the interface, but rather the entire experience of working with the software, the ability of the solution to solve immediate problems and automate industry-specific processes,” says Sweeney.
Business leaders should seek advice from IT regarding the ability of any solution to integrate with existing solutions, impact to cross-functional business processes, implementation and change management, and ROI modelling
The study, undertaken October through December 2018, interviewed 261 Australian and New Zealand senior executives, with the titles of CIO, CTO, CFO and HR director.
IBRS says one of the most significant findings of the study is that cloud-delivered enterprise systems are breaking down the traditional dynamics between business and ICT.
Thus, ICT must stop being solely focused on operational system uptime and instead focus more on improvement and innovation.
“If they don’t, business units will work around them,” says IBRS.
The study also predicts "a tidal wave" of new enterprise software solution spend this year.
Many organisations have held back enterprise solution upgrades or replacements, either adopting a ‘wait and see’ approach to cloud, or delaying until their existing vendors catch up with technology.
But IBRS’ research found that most businesses agree they can’t wait any longer. It says 2019 to 2020 is set to be the year for enterprise software upgrades and replacements.
The upgrade and replacement plans vary greatly among industries.
For instance, among utilities, water, ports and airports, a staggering 92 per cent are planning to replace ageing or buy new enterprise solutions within the next two years, though they have the lowest ratio of projects already underway among all industries (just 13 per cent).
Organisations in aged care, disabilities and social services are undergoing significant structural change due to recent legislation and a competitive market model.
IBRS reports 74 per cent of organisations in this category will replace or adopt entirely new enterprise solutions this year.
Another 11 per cent are upgrading existing solutions. This represents a tidal wave of change for organisations in this industry sector in 2019.
Nearly three-quarters (72 per cent) of educational institutions (higher education, vocational training, colleges), meanwhile, are planning to replace or adopt new enterprise solutions in 2019.
Nearly a third of these educational institutions are also upgrading existing systems.
In local government, around 58 per cent of councils plan to upgrade existing enterprise solutions this year, with nearly half looking to procure entirely new solutions.
IBRS says local government executives view cloud services as essential for the delivery of greater citizen engagement.
The situation is different in the finance sector. The majority of finance executives report their enterprise solutions are up-to-date and are not planning significant upgrades or replacements in the coming year.
The report has recommendations for both ICT leaders and their executive peers on how to work together in the cloud-based environment.
Business leaders should take care when selecting SaaS enterprise solutions and seek advice from IT groups regarding the following: the ability of any solution to integrate with existing solutions, impact to cross-functional business processes, implementation and change management, and return on investment modelling, says IBRS.
They should engage with senior IT executives to determine the most appropriate enterprise solution architecture for the organisation, whether these are pre-integrated enterprise, core services and satellite apps enterprise, or the service mesh enterprise.
“In short, business executives should recognise that IT groups often excel at project management, not just from an individual view of the business, but from a holistic view of the organisation. And they should leverage that expertise.”
ICT leaders, meanwhile, should prepare for a shift in how enterprise technology is procured.
This involves restructuring the IT group to be an internal ‘as a service’ change agent for the organisation.
“The focus must shift from minimising technical risk to advising business stakeholders as to how to solve their specific business needs, while also helping the organisation avoid redundant investments and fragmentation of processes between cloud services, or the creation of isolated information silos,” the report states.
Finally, CIOs and their teams should “get ahead of any integration problems” by working with business executives to identify the organisation’s enterprise solution architecture.
This will help them to become viewed as a trusted advisor to business units seeking to procure new SaaS systems.
Get the latest on digital transformation: Sign up for CIO newsletters for regular updates on CIO news, career tips, views and events. Follow CIO New Zealand on Twitter:@cio_nz
Send news tips and comments to email@example.com @divinap