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Beyond disruption How Australian organisations can transform and thrive in the digital age
Foreword 3
Businesses with organisational-wide transformation strategies excel at digital 4
Technology savvy leaders update the board regularly 6
Increasing shift in CIO reporting line 7
A digital future needs executive-level leadership 8
Acceptance of digital disruption remains low 10
Business unit digital strategies which focus on product digitisation miss the bigger picture 12
Systemic digital companies waste less on IT 13
Broader digital strategies create more 'disruptors' 14
Challenges remain with business unit IT spending 15
Is your business unit innovation spend too high? 16
Organisation-wide data critical for CEO decision making 17
Conclusion 19
Methodology 21
Contents
Welcome to the new era of digital disruption. Today, CEOs and boards are constantly under pressure to ensure their organisations are both relevant and resilient in the face of rapid technological and social change. It is against this backdrop that DXC Technology is pleased to contribute a new perspective on the challenge of digital disruption and how Australian companies can adopt best practice to thrive in this unprecedented time of change, all backed by independently produced research from Telsyte.
DXC Technology was born out of digital disruption. Our business was formed in April 2017 through the merger of several leading technology brands in Australia and around the world. We recognised that we had to change to survive in the digital world; and our own learnings through this transformation were eye opening, but not surprising, as we had seen it many times working with our 3,000 customers in the region.
It became apparent to us that leaving strategic technology decisions to our disparate business units was simply not sustainable. While IT vendors have hugely benefitted over the years from meeting the varied technology needs of parts of organisations, often this does not solve the bigger picture. Decisions about the future of a business need to be driven by the very top executives in any organisation. Digital transformation needs to be considered enterprise-wide from the outset. As companies have experimented with emerging technologies that underpin any digital strategy such as big data analytics, artificial intelligence, cloud infrastructure, automation and cybersecurity, it becomes clear the true power of innovation comes from applying a digital strategy across the organisation.
DXC Technology believes it is time to advocate a more holistic approach to digital transformation. Telsyte’s local research of more than 400 Australian organisations shows companies with an enterprise-wide digital strategy are spending less on IT projects and are better positioned to compete and innovate. They have technology savvy CEOs and boards, as well as CIOs that are critical to developing a true digital strategy, not just responsible for more mobile apps or product and service development.
On the surface this concept makes a lot of sense. In practice it requires strong leadership and a solid ecosystem of technology partners with the scale and ability to help organisations shift from a siloed approach to achieving sustainable organisation-wide business benefits.
With this I am pleased to introduce you to Beyond disruption. I hope the findings in this research study will help your organisation take on today’s digital challenges and thrive now and in the future.
Seelan Nayagam Managing Director DXC Technology Australia & New Zealand
Foreword
In Australia digital strategies are common, but the approach to digital varies significantly. When looking at the distribution of digital strategy, many Australian organisations are in early stages of developing digital strategies. What is a digital strategy? Telsyte defines digital strategy as beyond what IT was traditionally responsible for — what might be called digitisation. Digital is about redefining business —
Businesses with organisational-wide transformation strategies excel at digital
Figure 1. Digital strategy segmentation, Australia organisations
its proposition, its business models and trends that are increasingly driven by customers. Telsyte investigated the approach to digital to try and determine at what stage of maturity organisations were in their digital journeys, and if there was an optimal approach. The findings show that companies with an organisation-wide approach to digital are best placed to fend off competitive threats and innovate in the digital era.
4
No digital strategy (9%)
• Little ability to enter new markets
• Slow to change
• Lack of business intelligence
• Prone to disruption
• IT is not empowered
• Nearly half outsource most IT delivery and have few in-house IT staff
• Only spending a third as much on innovation than others
• Half do not update boards on IT or report directly to board
Face significant challenges unless they embrace change and ‘reboot’ culture
Investigating digital strategy (25%)
• Lack capability to move quickly on digital
• Behind more agile competitors
• Leadership is more complacent about the impact of disruption on their business or industry
• Focused on creating efficiencies by transforming rather than disrupting others
• More science and R&D focused than other organisations
Interested in partnering with organisations that can help them leapfrog more developed competitors
Business unit varied digital strategies (34%)
• Trying to deliver value sooner
• Varied product and service portfolios
• Might lack holistic digital visions and goals
• Still exposed to company and industry disruption
• Innovating in silos
• Of all, spend the most of IT budget on innovation but possibly less efficently
• Might be hitting internal bottlenecks when trying to grow ideas
• Not as strong with digital leadership at the highet levels
Innovation typically about introducing new digital services, mobile apps and projects rather than structurally or culturally changing the organisation
Organisational-wide digital strategy (32%)
• Prepared for digital-driven competition
• Capability to spearhead industry change and disrupt others
• Can innovate across the business
• Product, service and industry focus built on common platforms
• Less waste of IT budget and resources
• More likely to be disrupting their own products and other industries
• Focused on digital transformation
• Three quarters have IT directly reporting to the board
Data-driven businesses that are using technology coherently to protect their business and attack others
Defining digital terminology
Digital concepts have attracted numerous interpretations. In this study and research, respondents were asked to use the following definitions when responding to survey questions.
• Digital transformation: This involves the use of IT and digital technology to change how the business operates. This could involve a change from a manual process to an automated one, or an overhaul of existing legacy technology. A successful digital transformation program will give the business a new strategy and operating model.
• Digital strategy: This relates to the overall direction setting for digital. A digital strategy defines the existing capability of IT and how it plans to apply technology for business outcomes.
• Digitisation: This is the use of technology to standardise and improve business processes. Digitisation can remove extraneous processes and barriers to change through automation and cost cutting. Working towards operational excellence and scale are example of digitisation, as is personalisation of services. Digitisation is what IT has traditionally been responsible for.
The 25 per cent of businesses investigating a digital strategy are focused on creating efficiencies by transforming their own organisation, rather than disrupting others. These companies are more research and development focused than others and are more likely to partner with organisations that can help them leapfrog competitors.
The two main approaches to digital strategy are business unit led (34%) and organisation-wide (32%). The first segment spend the most amount of their IT budget on innovation and have a mobile app centric approach to innovation. They do not have as strong digital leadership and are generally less concerned about disruption. The challenge these organisations face is a failure to see the bigger picture and
Key points
• Businesses have traditionally approached digital strategy at a business unit level which might be agile but comes with risks.
• Organisation-wide strategies are more likely to see the bigger picture and better prepare the business for disruption.
• Successful digital strategies require cultural change, which is best driven by CEOs and boards — leaving this to business units is not best practice.
simply equate innovation with creating more apps and digitisation projects. These organisations might have agile business units and have very good teams working on projects, but without empowerment to work aacross the whole organisation, the skills might be wasted in a silo.
Businesses with an organisation-wide approach to implementing a digital strategy are more likely to have the levers to control the future of their business and are more savvy spenders with third-party service providers. They are more likely to be disrupting their own products and other industries — future-proofing them for any uncertainty. With an IT team providing updates directly to the board, they can use technology coherently to protect their business and attack new markets.
5
Company boards of directors are tasked with overseeing the “big picture” of the organisation including profits, compliance, competition and the long-term business plan. Traditionally, IT was buried under another layer of management and did not report to the board directly.
In recent years, Telsyte’s research has uncovered a growing trend of Australian IT leaders providing updates directly to the board. As the businesses invests more in digital, the board is looking to see ROI and keep more informed of digital plans and roadmaps.
Some two thirds of organisations have IT departments reporting to the board of directors with regular updates. When
Technology savvy leaders update the board regularly
Figure 2. How often IT departments update to the board of directors
Key points
• Traditionally IT was insulated from the board who are concerned with overall strategic issues. This must change for the organisation to remain relevant due to digital disruption.
• IT and digital are now key enablers of change and new business models, which is why board reporting is imperative.
• More digitally strategic organisations have IT regularly updating the board and more support from the board for digital initiatives.
6776 74
58
32
2318 21
31
20
10 6 5 11
48
Yes, regularly Only occasionally No
Total (n=403) Org. wide digital strategy(n=131)
BU varied digital strategy(n=158)
Investigating (n=79) No digital strategy (n=35)
looking at this within companies by their digital strategy maturity, a stark contrast is found. Organisations with an organisation-wide digital strategy are 10 per cent more likely to have regular reporting of IT to the board. Conversely, less than one third of organisations without a digital strategy are reporting IT to the board.
IT has a strategic imperative with more CIOs reporting into Australian company boards. However implementing an organisation-wide digital strategy requires a cultural change, which is best driven by CEOs and a board that understand the strategic impediments of a digital strategy.
6
Q. Does the IT department in your organisation report to a board of directors with regular updates?
With more IT departments providing regular updates to the board, IT leaders are also experiencing a shift in their reporting line.
Telsyte’s research over the past four years shows a clear trend in more CIOs reporting directly to the board. IT and digital initiatives are bringing more innovation to product and service development and it is showing at board level.
The rate of CIOs reporting directly to the board (43%) has more than doubled since 2014 and there is less reporting to the CFO and COO.
IT is as strategic as a company finance or operations unit because more products and services are IT-driven. This places the CIO alongside the CFO and COO for strategic relevance. IT leaders stuck in the legacy model of reporting to the CFO or business unit leader must convince the CEO and board of the importance of having a seat at the executive table.
Q. Who does the CIO report to in your organisation? (multiple choice)
(%) 2018 2016 2014
The Board of Directors 43 25 19
The CEO 59 64 60
The CFO 9 17 12
The COO 8 14 10
The CMO 3 11 5
Others 1 1 1
1 in 3 CIOs have multiple reporting lines, including operations, CEO and/or board of directorsFigure 3. The CIO chain of command
Organisations without strategic reporting lines risk losing dialogue with the IT team and opportunities for growth and innovation. It is also imperative for key issues such as cyber security risk management.
This shift in reporting lines is also happening across the business, with strategic functions like marketing and operations being taken on by the CEO in more instances.
This not only relates to the trend in a more organisation-wide approach to digital but is a critical feature. Digital marketing programs can quickly impact how products and services are delivered. Digital innovation cannot be left to the business units, including the IT function, alone.
Increasing shift in CIO reporting line
Key points
• More Australian ITleaders are reportingdirectly to the board asCEOs gain more interestin digital.
• CIOs stuck in the legacyreporting line model mustwork to promote theirrelevance to gain moresupport for IT programswhich can transformthe wider business.
• A CIO empowered bythe CEO and board canbring a company-wideinnovation imperativewhich will be missedif buried in siloedbusiness units. 7
As Telsyte’s research shows, the IT function and its leadership are becoming more strategic at board level. For digital initiatives to be as effective as possible, it is now incumbent upon CEOs and leadership teams to step up and realise the potential of efficient and innovative digital service delivery.
IT can deliver operations and transformation programs, but CEOs and boards must support this leadership and decision making. Regarding IT as a “department” is an old paradigm that is fast changing as organisations seek company-wide digital transformation.
According to Telsyte’s survey, organisations in Australia on average plan to increase their IT headcount by 4.8% in 2018, which will create a need for around 30,000 new workers.
Q. How will the number of IT staff in your org. change over the next 12 months?
Future IT outsourcing strategy
Percentage (%) Total(n=403)
Outsource more (n=112)
Outsource less (n=98)
No change (n=193)
Increase by 20%+ 1 2 2 –
Increase by 11%-20%
13 6 32 5
Increase by 5%-10% 30 43 31 23
Increase by less than 5%
17 28 15 12
No change 38 18 19 60
Decrease headcount
1 3 1 –
Average change head count
4.8% 5.1% 8.0% 2.8%
A digital future needs executive-level leadership
Figure 4. Australian organisations 2018 IT staff employment
Average IT headcount increase
4.8%Representing ≈ 30,000 new IT jobs*
1 * Calculated by Telsyte based on employment figures for IT workers using Australian Bureau of Statistics (ABS) occupation and industry classification in 2016
Key points
• CEOs and other executives need to see IT as central to innovation as industries start to depend on digital.
• IT jobs are set for growth, but one third of full time workers are concerned increasing automation is a threat to job security. CEOs must step in and support the value of people.
• Even companies looking to outsource more are not significantly reducing head count, indicating a strong need for digital skills which can offset job losses.
Despite this growth, Australian full time workers are expressing concerns over job security due to increasing automation. Telsyte research indicates as many as one in three full time workers fear losing their job due to technology or automation in the future. This is despite a large skills gap in emerging technology areas such as cloud, IoT and software development.
This trend demonstrates why IT is strategically important for all companies. Non-technical CEOs will be forced to deal with skills shortages, and job losses due to rising automation.
This uncertainty represents another opportunity for the CEO to step up and confirm the importance of IT skills in an increasingly digital world. It also reinforces the need for digital strategies to be endorsed and driven by the CEO and boards of companies in a managed, organisation-wide approach.
Automation fears remain high*
1-in-3Full time workers are concerned they might lose their job to a machine or robot in the future.
9
* Source: Telsyte Digital Consumer Study, 2018
Business leaders are well aware of the innovation and transformation potential of digital and emerging technology, but surprisingly, the rate of acceptance of digital disruption is low.
This is concerning as Australian businesses continue to feel the brunt of competition brought about by industry disruption.
Only around half of business leaders believe their organisation’s products, or the industry it operates in, is being disrupted. This is a combination of highly regulated industries, such as healthcare, and a failure to recognise the impact of more agile market entrants, particularly from overseas.
A quarter of leaders have a bleak view of their industry and believe it is already being digitally disrupted. This is calling for a rethink of how the organisation will participate in the industry of the future.
Acceptance of digital disruption remains low
Figure 6. Digital disruption impacting Australian industries
Key points
• Only half of Australia’s business leaders see their organisation or industry as being disrupted — this must change quickly to avoid irrelevance.
• Highly regulated industries are less likely to be disrupted, but will face upheaval at some point.
• Most businesses are taking a reactive approach to disruption. Will this be good enough to keep them in business?
Entire industry sector is being digitally disrupted25%
Products and services are not being disrupted21%
Some products or services are being disrupted27%Our industry is not
being disrupted27% Wholesale trade (n=13)
Transport and Storage (n=21)
Education and Training (n=24)
Agriculture (n=10)
Construction (n=32)
Health Care and Social Assistance (n=32)
Manufacturing (n=31)
Retail trade (n=24)
Others (n=43)
Banking and Finance (n=24)
Information Media andTelecommunications (n=62)
Professional, ScientificTechnical Services (n=65)
Utilities (n=10)
Public Administrationand Safety (n=12)
Total % (n=403)
Our entire industry sector is being digitally disrupted (%)Some of our products or services are being disrupted (%)
12 37
12 15
14 26
20 30
23 20
25 7
26 13
29 39
30 23
32 32
36 41
40 7
49 26
25 27
17 1717
Q. How is digital disruption impacting your organisation?
Q. What is your organisation’s approach to digital disruption?
Do nothing, business as usual18%
Keep an eye on it and react if and when it begins to impact us60%
Developing ways to digitally disrupt our industry12%
Looking to partner with digital disruptor organisations10%
10
Telsyte’s research also explored how organisations are responding to the possibility of being disrupted. The majority (60%) are keeping an eye on digital trends and will react if and when it impacts their organisation.
The challenge with a “wait and see” approach to disruption is it might be too late to compete with a more agile company set up to take on an established market. Global media companies had plenty of opportunity to create a video streaming service, but the new entrant, Netflix, became the market disruptor, and is set to cannibalise the value of audiences generated through decades of traditional services. The same force could impact any industry.
Q. What is your organisation’s approach to digital disruption?
Do nothing, business as usual18%
Keep an eye on it and react if and when it begins to impact us60%
Developing ways to digitally disrupt our industry12%
Looking to partner with digital disruptor organisations10%
11
Interestingly, nearly one in five organisations are not actively doing anything to combat the threat of digital disruption.
A further 22 per cent are either spearheading their own disruption programs or looking to partner with digital disruptor organisations. These organisations are already feeling the threat from digital alternatives and will be positioned to offer customers alternatives as their industry transforms.
More Australian businesses need to embrace digital, and review ways to disrupt their own businesses and the wider industry they participate in. Only by disrupting the status quo and changing the company culture as a whole will future organisations grow and expand into new market opportunities.
Q. How does your organisation’s transformation programs align with its digital strategy?
By digital strategy (%)Org. wide
digital strategy (n=131)
BU varied digital strategy
(n=158)
Investigating (n=79)
No digital strategy (n=35)
Keep an eye on it and react if and when it begins to impact us
60 59 70 30
We are already developing ways to digitally disrupt our industry
13 20 3 8
We are looking to partner with digital disruptor organisations
12 8 13 2
Do nothing, business as usual 15 13 14 60
Figure 7. Organisations' approach to digital disruption
A digital strategy can consist of a range of tactical outcomes for the business — from transformation programs to customer marketing campaigns. A challenge for many organisations is business units focusing on digital for their own projects. In addition to introducing risk, this approach misses the opportunity to apply digital for wider business benefit.
Telsyte investigated the type of digital strategy by the organisation’s maturity. The more mature organisations, which have a company-wide approach, are focused on digital transformation, driving process efficiencies and developing new products and services. These can all deliver positive outcomes for the business and prepare for changes in the competitive landscape.
Strategies driven by business units are focused on increasing the number of products and services, which might be tactically suited for that department, but lack direction for the entire organisation. For example, using multiple suppliers or technologies to develop customer experiences leads to inefficiencies, customer frustration and failing to see the potential of company-wide benefits of a clever innovation or feature.
Business unit digital strategies which focus on product digitisation miss the bigger picture
Key points
• Mature organisations focus digital on positive outcomes for the business, and prepare for changes in the competitive landscape.
• Business units focused on increasing the number of products and services are missing bigger picture opportunities.
• Using digital to rationalise business activity is high on the agenda. This is the practical outcome of digitisation.
Q. How do your organisation’s transformation programs align with its digital strategy? (Multiple response)
By digital strategy (%)Total
(n=403)
Org. wide digital strategy
(n=131)
BU varied digital strategy
(n=158)
Investigating (n=79)
No digital strategy (n=35)
Focus on digital transformation 38 53 28 45 2
Drive process efficiencies 44 47 35 56 29
Develop new products and services 35 42 33 27 36
Rationalise business activity 31 36 32 33 10
Rationalise suppliers 24 30 24 21 13
Reduce products and services 17 28 17 6 5
Increase products and services 35 27 48 31 24
Figure 8. Australian organisations transformation alignment with established digital strategy
Another trend identified in Telsyte’s research is approximately one third of all organisations investigating, or which already have, a digital strategy are looking to rationalise business activity. Digital can integrate applications and remove complexity, both big wins when preparing for disruptive threats.
19%
3.5
7.1
7.0
3.2
4.0
6.8
5.2
5.4
5.2
5.4
No change to outsourcing (n=193)
Decrease outsourcing (n=98)
Increase outsourcing (n=112)
No digital strategy (n=35)
Investigating (n=79)
BU varied digital strategy (n=158)
Org. wide digital strategy (n=131)
Large (n=183)
SME (n=220)
Total (n=403)
12
Each year Telsyte investigates how Australian companies are intending to change their IT spending in the following year. Spending intentions are generally consistent for both small and large organisations, which plan to spend between 5 and 6 per cent more in 2018, which is a level higher than inflation and wages growth.
An interesting finding is spending growth by digital maturity. Organisations with
Systemic digital companies waste less on IT
Figure 9. Australian organisation 2018 IT budget changes
Key points
• IT spending intentions are consistent at between 5 and 6 per cent growth.
• Business unit level digital strategy companies are looking to increase IT spend more without potentially achieving company-wide outcomes.
• Companies not looking to change their service provider arrangements are increasing spending less. Stability is delivering value.
19%
3.5
7.1
7.0
3.2
4.0
6.8
5.2
5.4
5.2
5.4
No change to outsourcing (n=193)
Decrease outsourcing (n=98)
Increase outsourcing (n=112)
No digital strategy (n=35)
Investigating (n=79)
BU varied digital strategy (n=158)
Org. wide digital strategy (n=131)
Large (n=183)
SME (n=220)
Total (n=403)
Q. How will your organisation’s total annual IT budget* change in 2018 compared to 2017 (% average increase)
By digital strategy:
By future outsourcing strategy:
business unit level digital strategies are looking to increasing IT spending the most — is this a sign of wastage? Is this approach sustainable against competitors with a more coherent organisation-wide strategy? The figures would suggest so.
Companies with an organisation-wide strategy seem to be spending their IT budgets more effectively and are better positioned to use IT for change.
* Including budget spent by IT and non-IT business units
Businesses are continuously investing in their own products and services, but often these investments are not enough to stave off the competitive threat of disruption.
Telsyte looked at how likely an Australian company is to invest in a new product or service which could be disruptive to their own or another industry.
Most (37%) businesses are developing new services specific to their own industry. There is merit in improving established processes for business benefit, but nowadays the effective use of digital can impact any organisation — from mining to transport companies.
When digital strategies are tied to business units, the main focus areas are mobile apps and R&D. The business units
Broader digital strategies create more 'disruptors'
Key points
• When digital strategies are tied to business units, the focus areas are on tactical mobile apps and exploratory R&D. These activities can easily miss the big picture.
• Organisations with a broad digital strategy are more likely to develop new products or services, but also have disruptive plans not specific to their own industry — the future disruptors.
• The siloed approach of business unit strategies is out of control and not compatible with modern digital businesses.
Q. How do your organisation’s innovation programs align with its digital strategy?
%Total
(n=403)
Org. wide digital strategy
(n=131)
BU varied digital strategy
(n=158)
Investigating (n=79)
No digital strategy (n=35)
Develop new services specific to your industry
39 45 28 51 22
Develop web applications for your organisation
32 43 34 22 15
Develop mobile apps for your organisation
35 42 43 17 26
Develop new products specific to your organisation
30 35 29 27 27
Do scientific research and development
37 30 42 46 13
Develop new services not specific to your industry
20 28 20 12 12
Develop new products not specific to your industry
18 26 18 8 18
Figure 10. Australian organisations innovation alignment with established digital strategy
14
are looking after their own digital interests, and this frequently involves new channels to market in the form of mobile apps.
Organisations with a broad digital strategy are much more likely to develop new products or services not specific to their own industry. These companies are exploring new opportunities with digital and are the future disruptors. For many, digital is considered too hard to implement across an organisation and have chosen a business unit led path. The next stage for many is to take these pilot projects and new centre of excellence initiatives organisation-wide.
The innovation challenge is to look beyond point apps to take advantage of industry trends and opportunities.
In recent years it has become strategic for business units to take control of more of their IT product and service requirements alongside the central IT function.
Professional people are becoming more IT literate and the advent of cloud and mobile apps allows more people to procure IT service easily. However, the concept of “shadow IT”, where business units manage their own IT, is changing in 2018. The perceived benefits of siloed IT are becoming less important, and the focus of the business is more on the basics and company-wide strategies.
This approach can result in the business unit getting the value it needs sooner, but it can also result in challenges with higher costs, security and inconsistency.
Challenges remain with business unit IT spending
Key points
• Business unit IT spending can deliver value sooner, but it can also result in challenges with higher costs, security and privacy issues and technology choice inconsistencies.
• Inconsistent use of IT can lead to large divisions of digital capability between the various business units.
• It is becoming more prudent for CEOs to “wheel back” IT to control projects centrally with an organisation-wide approach.
15
Telsyte’s research indicates nearly one in four Australian companies have problems with line-of-business IT procurement, mainly related to higher costs. This reaffirms the importance of having a company-wide digital and IT strategy. With everyone on the same page, the business units, in conjunction with IT, can formulate a consistent approach to digital initiatives and industry transformation.
Non-IT business unit spending is now larger than that for the central IT department for 1 in 8 organisations. This trend of inconsistent use of IT can lead to large divisions of digital capability between the various business units within the company.
Figure 11. Problems arising from non-IT business units purchasing IT products and services
No77%
Yes23%
Q. Has your organisation experienced any problemsarising from non-IT business units purchasing IT products and services? (n=288)
Q. What problems arise for IT and the whole organisation when non-IT business units procure the IT services they need? (n=73)*
11%
25%
29%
35%
37%
38%
49% 19%
14%
17%
20%
13%
Auditing/regulatory requirements
Poor technology/fit-for-purpose decisions
Integration requirements
Lack of transferable skills
Inconsistent technology selection
Security (including data loss/privacy)
Higher costs
To determine how organisations with different digital strategies are spending their IT budgets, Telsyte investigated the split by operations (keeping the lights on), transformation (modernising processes) and innovation (new ideas).
Companies with business unit level digital strategies are spending more on innovation compared with the industry average. This might work well for that business unit, but as we have seen, this approach introduces the risk of siloed, inconsistent data sources throughout the business. It also raises the question whether the level of innovation spend by this approach is optimal, or maybe there is wastage?
This comparatively higher level of spending is also a sign of overspend, and possibly more waste compared with what is spent by companies with an organisation-wide digital strategy.
Key points
• High innovation spending within a business unit could be inefficient and fraught with risk.
• Innovation at the business level misses broader benefits and can result in uneven capability within the organisation.
• IT spending on innovation is increasing as the desire to disrupt is strong, but the executive team must guide the outcomes.
Figure 12. Share of IT budgets, by digital strategy
42 4235
44
59
30 3130
30
29
28 2735
2612
Total (n=403) Org. wide digital strategy(n=131)
BU varied digital strategy(n=158)
Investigating (n=79) No digital strategy (n=35)
Operations (keeping lights on) Transformation (e.g. modernising processes) Innovation (new ideas)
Is your business unit innovation spend too high?
16
Australian IT and business leaders need to ask if business unit varied digital strategies are resulting in the returns they could otherwise gain from using a more organisation-wide approach.
Telsyte’s research shows innovation share of IT budget is up 4 per cent year-on-year, indicating a strong appetite among Australian companies to use IT for new initiatives. With around 30 per cent of the IT budget spent on innovative or transformative activities, Australian companies are building a solid platform for growth and new product development. This is why it is imperative to lead digital innovation programs from the top so they benefit the entire company. Too much of the IT or business unit budget can be wasted if innovation programs do not deliver tangible outcomes.
The ability to operate, transform and innovate in a digital world will be underpinned by data. As data becomes more real time and transactional, the use of big data processing techniques will drive decision making beyond what is possible using traditional means.
For a CEO, company-wide data is critical to make the right decisions. No longer can CEOs rely on gut feel to convince their boards, or indeed shareholders, that their decisions are the right ones.
Telsyte research shows Australian companies are substantially investing in their big data and analytics capability. Among organisations planning to increase outsourcing, nearly half are looking at big data and analytics services as an area in which they need help from partners.
The road to data-driven decision making can be challenging for many organisations. Most organisations have data that sits in silos and is not readily able to be accessed or considered when making decisions.
Organisation-wide data critical for CEO decision making
Key points
• Complex systems and applications pose a challenge for data extraction and data-based decision making, increasing the urgency for a holistic digital strategy.
• Nearly 3 in 10 companies cite a lack of an organisation-wide approach to data as holding back big data capability – this must change to remain relevant in a data-driven world.
• Big data is the life blood of executive decision making, and more leaders will be forced to move away from “gut feeling” and will need an organisational-wide view.
17
Figure 13. Challenges with the adoption of big data analytics in organisations
Other areas benefitting from an organisation-wide approach:
• Cybersecurity • AI • Vertical industry platforms • ERP / CRM • IaaS Lack of partner/service provider skills
Integration with data sources
Lack of business cases
Lack of understanding by organisation management
IT infrastructure requirements
Turning data into insights (analytics)
Lack of in-house skills
Cost of big data services
A standard, organisation-wide approach
Cost of big data software 31%
28%
26%
25%
23%
22%
21%
20%
19%
19%
14%
11%
12%
Q. What do you see as the main challenges relating to the adoption and use of big data in your organisation?
Telsyte also investigated the main challenges relating to the adoption and use of big data. The main hindrance (as is often noted) is the cost of the software to build up a real-time data analytics capability.
However, a close (and fast growing) second reason is a lack of a standard, organisation-wide approach to the emerging digital field of big data analytics. If data analytics is synonymous with digital strategy, it's clear at a fundamental level that an organisation-wide approach to digital is needed to handle data.
Big data is quickly becoming the life blood of executive decision making, but it’s just one example of where organisational level control, strategy and execution will be critical to the outcomes. Similar can be said of cyber security, automation, cloud-based platforms and other technology areas which few businesses can ignore.
Other challenges include lack of skills and the ability to turn data into insights. There is an opportunity for companies to engage with service providers to plug these capability gaps, improving time-to-market and the ability to innovate.
Australian companies are facing a new level of competitive threats in the era of digital disruption. The CEO and executive team must act now as the risk of being left behind is too high to ignore.
• To stave off new forms of competition, and thrive with their own innovations, organisations need to move away from digital strategies tied to separate business units and develop a company-wide approach.
• Only half of Australia’s business leaders see their organisation or industry as being disrupted — this must change quickly to avoid irrelevance.
• The board is being updated on IT developments more frequently, but it must also get more involved in how digital strategies are being applied to holistic concerns like competitive analysis, compliance and core product and service development.
Conclusion
Figure 14. Telsyte digital strategy forecast 2018 to 2022
9 74 3 1
25
12 1410 8
34 3631
2825
32
45
51
59
66
2018 2019 2020 2021 2022
No digital strategy Investigating BU-varied digital strategies Org. wide digital strategy
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• An organisation-wide approach to digital leads to better managed non-IT business unit spending, and more consistent approaches to cyber security, big data, and artificial intelligence.
• An overall digital strategy has the flow-on effect of greater cost reduction and increased innovation.
• The CIO is the key change agent for digital strategy. Hurdles like existing culture, skills development and employee fears are best handled at a company level, with buy-in from the CEO and board.
• The CIO needs to be elevated to a level where they can become an agent for transformation, rather than just delivery.
• Digital transformation needs to be considered enterprise-wide from the outset with the support of empowered CIOs and technology savvy CEOs and boards.
Most Australian organisations will head down this path according to Telsyte. Telsyte forecasts an organisation-wide approach to be adopted by two-thirds of companies by 2022 as those without a digital strategy become a slim minority, and business unit level driven strategies become more of a test bed for innovation, rather than the main vehicle for organisational change.
Beyond 2020, Australian organisations without (including no plans for) a digital strategy will dissipate, and the rate of companies still investigating digital will reduce to a small minority, with many able to leapfrog directly to a brighter digital future.
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While business-unit strategies won’t go away quickly, particularly in larger organisations including government agencies, there is a clear imperative to make digital work across the organisations. This will only be achieved when the IT and digital leaders are demonstrating the value of digital right across the company.
In preparing this study, Telsyte conducted an online survey of 403 business and technology decision makers across Australian organisations with greater than 20 employees in November 2017. Sampling was conducted across all industries, with 45 per cent of respondents coming from organisations with greater than 200 employees.
The respondent was required to have a strong understanding of their organisation’s business strategy, IT and technology purchasing decisions, and was not limited to the CIO or IT department. Definitions were provided to respondents to ensure harmonisation of responses. The survey took around 30 minutes to complete. The sample is representative of the top 54,202 operating businesses in Australia. The survey had a confidence interval of +/-4.87 at a confidence level of 95 per cent. Interviews were conducted via an online survey completed by respondents on computers, tablets and smartphones.
Respondents Percentage*
Total respondents 403 100%
By number of employees
20 to 49 68 17
50 to 199 152 38
200 to 499 52 13
500 to 1,999 72 18
2,000 or more 59 15
By head office location 403 100%
NSW 169 42
VIC 125 31
QLD 45 11
WA 27 7
SA 21 5
Other 16 4
By role or title of respondent 403 100%
CEO/MD/Company Director 73 18
General/Senior Manager 53 13
CIO 42 10
IT Manager 96 24
Other IT leadership role 139 34
Methodology
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* subject to rounding
Respondents Percentage*
By industry 403 100%
Professional, Scientific and Technical Services
65 16
Information Media and Telecommunications
62 15
Construction 32 8
Health Care and Social Assistance 32 8
Manufacturing 31 8
Retail trade 24 6
Banking and Finance 24 6
Education and Training 24 6
Transport and Storage 21 5
Wholesale trade 13 3
Public Administration and Safety (Government)
12 3
Agriculture, forestry, fishing and hunting
10 2
Electricity, gas and water supply 10 2
Others 43 11
22
* subject to rounding
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About Telsyte
Telsyte is Australia’s leading emerging technology analyst firm. Telsyte analysts deliver market research, insights and advisory into enterprise and consumer technologies. Telsyte is an independent business unit of DXC Technology. Visit www.telsyte.com.au for more information.
Learn more at www.dxc.technology/au/digital
www.dxc.technology/au
About DXC Technology
DXC Technology (DXC: NYSE) is the world’s leading independent, end-to-end IT services company, helping clients harness the power of innovation to thrive on change. Created by the merger of CSC and the Enterprise Services business of Hewlett Packard Enterprise, DXC Technology serves nearly 6,000 private and public sector clients across 70 countries. The company’s technology independence, global talent, and extensive partner network combine to deliver powerful next-generation IT services and solutions. DXC Technology is recognized among the best corporate citizens globally. For more information, visit DXC.technology.
© 2018 DXC Technology Company. All rights reserved. MD_7958a-18. March 2018
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