cio from cost to value

8/8/2019 CIO From Cost to Value

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From cost to value2010 Global Survey on the CIO Agenda

KPMG INTERNATIONAL

IT ADVISORY


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2010 KPMG International Cooperative (KPMG International), a Swiss entity. Member irms o the KPMG network o independent irms are a iliated with KPMG International.KPMG International provides no client services. All rights reserved.


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PREFACEFrom compliance to cloud computing, rom budget cuts to business innovation:

its clear the CIO has dealt with signi cant change in these turbulent times. The

nancial crisis in 2008/2009 had a serious impact on IT investments. But as the

global economy recovers, technology-enabled business innovation is gaining

pace, and the role o IT is changing again. What will be on the CIOs agenda in

coming years? What are the main obstacles aced and where will the

opportunities be revealed?

We are pleased to present the results o our 2010 global survey on the CIO

agenda as part o the 2010 World Congress on IT in Amsterdam, the Netherlands.

A questionnaire based on KPMGs Technology Agenda was distributed among

4,500 CIOs on all continents. About 10 percent o the invitees responded, providing

articulate views o the challenges CIOs are currently acing. In this report, the key

ndings are presented with perspectives and visions rom leading CIOs in di erent

regions along with insight rom KPMGs technology leadership team.

We hope you nd this report interesting and thought provoking. We cordially invite

you to contact us personally, and to explore how your agenda compares to that oyour peers.

Bryan CruickshankGlobal IT Advisory

Kumar ParakalaEMA IT Advisory

Erik Schut Netherlands IT Advisory



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Management summaryFrom cost to value

Continuing globalization, greaterdemands rom stakeholders, stricterlegislation, a society in whichorganizations and individualsincreasingly operate in networks, andrapid technological developments. Allthese actors have an impact on theCIOs agenda. For the CIO, change

seems the only constant.

In the spring o 2010, KPMG conducteda worldwide survey on the CIO agenda

ocused on the ollowing:

IT value delivery IT sourcing Risk and compliance Optimizing IT costs IT project portfolio management CIO personal priority setting

The results are clear. In the next ewyears, CIOs envision a shi t in ocus

rom cost e ciency and compliance tovalue creation and innovation.

The days when IT was seen merely as ameans o improving e ciency seembehind us. These days, IT contributesdirectly to realising the business strategyand has a central role in management.According to CIOs, this requires the rightpeople in an organization to keep thedistance between the business and IT

as small as possible.

The survey analysis and ndingsprovided eight clear conclusions:



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Organizations wishing to create sustainable value need to get a grip on the way allin ormation is produced, collected and used, and they need to use IT to respond rapidlyto the changing market and society. Strategic and business alignment are key.

IT value dominates the CIO agendaIT is no longer about cost cutting,IT is about creating value

1

CIOs clearly realize that value is not created simply by technology, but by people exploiting itsfull potential. 90 percent of respondents mentions people as a major component of IT value.

People are the success actor behind IT valueIT value is not only about technology

3

Within the nancial sector, risk and compliance is clearly higher on the agenda than in othersectors. Two actors that contribute to this act are the high degree o regulation in the

nancial sector and the economic crisis. Because of the crisis, the emphasis of IT projects ison risk and compliance and sourcing and less on IT value.

Risk and compliance: high on the agenda in the fnancial sector

Economic crisis impacts the CIO agenda in the fnancial sector

5

CIOs expect use o collaboration tooling to increase signi cantly over the next ve years.Cloud computing also receives signi cant interest: 72 percent o respondents perceive thisas a good way o outsourcing IT unctionality.

CIOs in dynamic environments are frst to apply new ways o workingCollaboration tooling and cloud computing are the new kids onthe block

7

To a large extent, the daily ocus o any CIO depends on the sector in which he or sheoperates. CIOs in the nancial sector are comparatively more involved with daily operations,while CIOs in the manu acturing sector are looking more at ways to innovate and trans ormwith the help o IT.

The profle o a CIO determines the agenda or the utureDo not expect IT value rom a CIO with an operational profle

2

According to 56 percent o respondents, cost optimization should always be a part o anorganizations IT strategy, because it is a major competitive weapon. The focus is mainlyon higher business process e ciency and less on pure IT topics such as IT sta and ITcomponents.

Cost optimization remains importantFocus on process improvement

4

The rst big wave o outsourcing activity seems to be behind us, as this was mentioned lessoften as a major agenda topic in the survey. What is notable is that many CIOs are becomingmore critical o their sourcing providers: CIOs mentioned that they are paying much moreattention to the price-quality ratios and a large majority of respondents indicates that theyintend to increase pressure on sourcing partners.

Sourcing: the frst major outsourcing wave has endedCIOs want to get more value rom their sourcing providers

6

Many CIOs seem to be optimistic about the future. They expect both their project success

ratios and their returns on investment to grow in the coming years.

The CIO is optimistic about the utureIT is expected to be increasingly success ul

8



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1 The de nition was derived from Sojer, Schlger, Locher, The CIO Hype, Science and Reality, which distinguishes two important components: (1) focus onresponding aster to changing business needs by improving the ability to rapidly develop and integrate IT; (2) using IT to monitor business per ormance andincrease the speed of the business operational adjustments to market changes.

1IT value dominates the CIO agendaIT is no longer about cost cutting,IT is about creating valueIn the current economic climate, in ormation has become the ourth production

actor, becoming increasingly relevant compared to the traditional productionactors: labor, equity and raw materials. Furthermore, the nature o our society is

changing, as new generations see technology and the ever-present availability otechnology as completely natural. To them using technology is like breathing: ithas become an instinct.

This not only has radical consequences or the way IT has to be developed andapplied, but also or the role o a CIO. Organizations that want to create sustain-able value have to get a grip on all kinds o in ormation and use IT to react rapidlyto the changing market and society. It is their li eline to the uture.

The research clearly shows that CIOs realize this. They put IT value the abilityto better react to changing market conditions by using IT 1 highest on theiragenda or the coming years. Eighty percent o respondents put this in the topthree o the most important trends. IT value was closely ollowed by costoptimization (62 percent), port olio management (52 percent) and risk andcompliance (56 percent). Sourcing was mentioned relatively in requently

(35 percent) and CIOs rarely mentioned any other major trends themselves.

IT value was closely ollowed by costoptimization (62 percent), port oliomanagement (52 percent) and risk andcompliance (56 percent).



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Bryan Cruickshank(KPMG Global ITAdvisory) on ITvalue creation

Success ul IT value creation

needs to integrate and alignthe organizations Technology,Processes and People agendas.One of the major potentialpit alls is the inability o manyorganizations to ind suitablyskilled people to drive theIT-enabled businesstrans ormation agenda. O tenprecious time and the abilityto create value is lost asorganizations embark on

ambitious projects with thewrong people at the helm.CEOs and CIOs need to ensurethat su icient importance isattached to these aspectsduring project init iation.




Creating room or experimentationDubai-headquartered DP World has a network o49 marine terminals and 12 new developments in31 countries all over the globe and is one o theworld leaders in the eld o marine and logisticalservices. As CIO o a leading global ports operator,Yousif Almutawa views his job in considerably wid -er terms than baby-sitting IT. This new-generationCIO stimulates innovative thinking, encouragescreativity and is not a raid to experiment.


Life has very few certainties. ButAlmutawa is certain o one thing: theworld changes and so does the role othe CIO. The challenges are di erent

or each organization and each sector,but in essence, it boils down to everyorganization growing according to theknown S-curve and the act that CIOsare expected to contribute when

tapping into the next growth phase ina rapidly-changing world. Using hisown organization as an example,Almutawa explains what that means inpractice: DP World is one o theleading organizations in the eld omarine and logistical services. Weensure that reight is transportedsmoothly, swi tly and reliably rom onelocation to the next. But we considerour service to be more than justshi ting boxes. In the end, the in orma-tion about that box is key: this is whatis valuable and this is how we candi erentiate in the uture. As CIO,there ore, this is what I, together withthe wider organization, have to thinkabout. IT needs to not only supportbut also inspire. We have to have awide vision, be alert to how the worldis changing, translate those changesinto smart IT projects and communi -

cate this to the business in simple andtangible terms. Take Apple or exam-ple, it changed the entire musicindustry in a relatively short periodthrough the introduction o the iPod. ACIO has to have a sharp eye or suchchanges in his and other sectors.

The discussion with Almutawa is notreally about technology, but moreabout out-o -the-box thinking, creativ-ity and leadership. Regarding the latterAlmutawa is very outspoken: Leader -ship is one o the critical success

actors i value is to be realisedthrough IT investments. In the endsuccess is not about technology butabout the culture you create within anorganization. A culture in whichpeople, inside and outside the ITdepartment, share ideas and cooper-

ate with trust. A culture in which ITprojects receive suf cient manage -ment buy-in and support. A culture inwhich there is also room to experi-ment. The most success ul companiesin the world o er such room: theystart ten projects, of which maybenine will be stopped along the waybecause they arent working out. Butthe tenth is incredibly success ul .



Anyone who thinks that Almutawapreaches reedom to experiment bymerely playing the odds is wrong. Ocourse we work in a very structuredway when identi ying the value o IT orthe business and, also, we cantexperiment unlimitedly. I only becauseweve also had to cut costs as a resulto the economic crisis. DP World has

grown rapidly in recent years and as aresult o the many acquisitions, the IT

unction is more decentralized than inmany other organizations. That decen-tralization will partly remain in thecoming years. But sharing ideas and thestrategic use o IT is something that isapplied by the organization as a whole:In this respect we operate as oneorganization. Centrally, or instance, wecan get in ormation rom our systemswith which we retrieve the waste romthe processes worldwide. What isimportant is to convert data intovaluable knowledge.

Almutawa studied in Cali ornia, thebirthplace o the internet industry, andhas worked in various organizations,including in the telecoms industry. Hewas also involved with start-ups, andthat seems to have infuenced hisapproach. In general I think its good

when CIOs try to translate insights romoutside their own industry to their ownsituation. My background and experi-ence helps me to do just that. But whatis also important is whether you cancommunicate your insights and ideaswell to the business. You have to explainin a simple way in order to obtainsupport or your ideas, and especiallywant to avoid giving technical lectures.

Yousi Almutawa is CIOo DP World




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The pro le o a CIO determines hisagenda or the utureDo not expect IT value rom a CIOwith an operational pro leThe daily ocus o a CIO also determines his agenda. Although this appears anobvious statement, it is an important nding con rmed by the survey and shouldbe explained in more detail.

The daily ocus o a CIO depends to a large extent on the sector in which he orshe operates. The graph on page 7 shows that respondent CIOs in the nancialsector are comparably more engaged with daily operations (operational) whileCIOs in manu acturing are more ocused on searching or ways to innovate withthe help o IT (trans ormational).

Furthermore, the results show that a CIO ocusing on operations also puts otherrelated themes high on his or her agenda, including IT sourcing and cost optimiza-tion. These themes are much higher on the agendas o CIOs ocusing on opera-tions than CIOs ocusing on trans ormation.

The survey allowed CIOs to pro le themselves as either e cient or e ective(e cient meaning with a cost-oriented approach, e ective with a business-orientedapproach). The results show that CIOs with a cost-oriented approach predominantlyinclude the more conservative themes such as cost optimization and risk andcompliance on their agendas.

In addition, the results show that a CIOs agenda is also determined by hisposition in an organization. A CIO reporting to the CEO views IT more as a criticalbusiness enabler with a high strategic value than a CIO reporting to the CFO. The

ormer category o CIOs ocuses comparably less on operational themes such ascost optimization.

Finally, we identi ed di erences in each sector regarding the development thatCIOs think they will make towards higher levels o organizational maturity on thevarious themes. CIOs rom the nancial sector have comparatively less ambitiousexpectations, while CIOs in government organizations and public utilities answerprogressively: they expect, on average, to rise to a mature level somewhat asterin several IT areas.



Daily focus of CIOs per sector group

Operational Transformational

Financial servi ces Uti lities/government Ser vices

35%

30%

25%

20%

15%

10%

5%

0%

Manufacturing

CIOs with IT sourcing high on the agenda

TransformationalOperational

50%

40%

30%

20%

10%

0%

CIOs with cost optimization highon the agenda

TransformationalOperational

75%

70%

65%

60%

55%

50%

KPMGs view onCIO reporting

structure

Reporting to the CFO can be aconstraint i cost control stifesinnovation. Weve already seenmistakes made with outsourcingcontracts that were driven bycost models that just cant seeinto the uture. IT may be betteraligned to the business strategythrough better top table

representation reporting directlyto the CEO.

KPMGs view on CIO competencies

A CIO should have our important competencies. First, the ability tothink like the organizations customers and to understand clearly whatthey want and how they want it. Second, the ability to obtain a good

understanding o relevant technological trends and identi y their speci cbusiness bene ts. Third, the ability to manage IT investment or valuecreation. Finally, the ability to connect well with the organizationsbusiness leaders, to help them unravel the mysteries o technology.




Agenda setting by different types of CIOs (effective or efficient)

Effective Efficient

Cost optimization Portfolio management Risk and compliance

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%IT value

Opinion on IT, based on reporting structure

Reporting to the CEO Reporting to the CFO

IT asnon-critical

Running ITeffectively

Running ITefficiently

High strategicvalue of IT

Low strategicvalue of IT

70%

60%

50%

40%

30%

20%

10%

0%

IT ascritical

CIOs who expect to rise quickly in maturity

Rapid rise in risk and compliance Rapid rise in cost optimization Rapid rise in IT value

Financial Services Utilities/government Services

70%

60%

50%

40%

30%

20%

10%

0%Manufacturing




As CIO I work on the basis o the Triple T: trust, teamwork and transparency


Leonard de Villiers has decades of experience as a CIO, most recently as CIO ofthe ABSA Bank, one o the largest banks on the A rican continent. From CapeTown in South Africa, De Villiers gives his vision of the major current trends andhow you need to act as a CIO to achieve your organizations priorities. The Triple Tprinciple is central to everything we do: trust, teamwork and transparency.When asked or todays most importantIT trend, De Villiers doesnt hesitate: Othe trends identi ed in this research, Iwould immediately choose ITs added

value to business. At this time inparticular, it is essential to create valuethrough IT investments. In the case o a

nancial institution such as ABSA,working on single view o a customer,thereby ending thinking in silos, is anessential part o this. This is howcommercial opportunities arise whichwill be recognized and appreciated bythe business. The IT unction must helpthe business to achieve its growthstrategy under challenging market

conditions. There is a lot at stake and youhave to be able to act on developmentsrapidly and fexibly. Cost optimization isno longer the highest and only priority;we are again looking to the uture.

De Villiers sees numerous possibilities.For instance ABSA is currently investingin both internet and mobile banking(both through text messaging andmobile web applications), knowing that,on the A rican continent, these will be

attractive growth opportunities in thecoming years. These investments are allcustomer-centric. Such projects requireadequate unding, and De Villiers showshimsel to be a realist. The undingrequired for IT projects is always greaterthan the budget. We are currentlyrunning 26 large projects, but ideally wewould like to do more. We work in avery structured way, based on prioritiescalculated for projects, in order to obtainthe optimum results within the con neso our nancial restraints. This was verydi cult in 2009: a ter the unprecedent-ed credit crisis it was di cult to obtainproject funding. At that time the

emphasis was on cost optimization. In2010 it seems more is being done at anumber o organizations, which is agood thing, since many CEOs have

rescued their organizations rombankruptcy. Also in di cult times weshould not view IT as a cost item:organizations need to use IT to achievesavings, to work more cleverly and toinnovate. This year there is clearly roomat ABSA or innovations, although halof our 26 major projects have beeninitiated as a result o compliance andregulatory demands.

A CIO can have various roles when

realizing his vision or his organization.The research distinguishes betweeninspirator, innovator and trans ormator.De Villiers recognizes these roles butdoesnt believe it is possible to chooseone o the three: I really cant labelmysel , because I believe that I switchconstantly between roles, as necessary.Perhaps a situational approach is one othe key aspects o leadership. A CIO hasto act di erently at all levels strategic,tactical and operational.

During our conversation De Villiersplaces emphasis on the human actor asa basis or success. Because, in hisvision, it is not technology but talent thatdetermines the success o the ITdepartment. On this note he points tothe Triple T philosophy. ABSAs corporateslogan is today, tomorrow, together.This inspired us to develop our own TripleT or the IT department: trust, teamworkand transparency. These three pillars are

essential or success. You have to earntrust so that the business will respectyou, you have to continuously useteamwork in order to cooperate success-

ully on complex problems, and transpar-ency is very important in order to showwhy you are working on certain projectsand how the projects are progressing.

You have to take people with you in whatyou do and how you do it.

De Villiers also knows, like no other, thatthe distance between the business andIT has to be as small as possible in orderto make this philosophy a success.Alignment with the business is key.This year we started the get FITprogramme. FIT stands or Fluency inTechnology and what it boils down to isthat we had to amiliarize three thousand

people rom the business with varioustechnological developments and how weare going to use these technologicaldevelopments within ABSA. This was amajor success and next year we aim toreach ve thousand ABSA employees.

Finally: what other important prioritiesdoes De Villiers see? Project manage -ment. That will always be unrivalled inimportance because the majority of ITprojects can so easily get out of hand interms o time, quality or uncding. Andso we aim high at ABSA regardingexcellent project delivery.

Leonard de Villiers is CIOo ABSA Bank



People are the success actorbehind IT valueIT value is not only abouttechnologyIT value is clearly at the top o the CIO agenda. More important than the actualde nition is to understand what the respondents view as important componentso the concept o IT value. CIOs mainly see the value in supporting the business(i.e. increasing productivity, driving business innovation) and to a lesser extent inthe ability o IT to generate or increase business itsel (i.e. generating newrevenue streams, growing existing revenue streams).

Respondent CIOs clearly realize that value is not created just by technology, butby people exploiting its ull potential. 89 percent mentioned the aspect people asa major component of IT value. Other assets, especially hardware (21 percent),were mentioned much less o ten.

IT value is expected by CIOs to remain an important topic on the agenda in thecoming years. More than hal the respondents expect management to value theIT unction based on value creation selecting, as the most appropriate statement,IT creates business. Regarding this question, 24 percent agreed with the

alternative statement IT saves money, while 14 percent still selected the highlyconservative IT costs money.

The survey resulted in similarly diverse ndings regarding the question o howthe costs and bene ts o IT will be measured in ve years time. Almost hal theinterviewees expect the costs and bene ts to be measured in relation to thebusiness goals and strategy.

16 percent expect them to be measured by means o a dashboard unction. It isremarkable that almost a third (31 percent) expect measurement to be based onthe notion o IT as a cost centre: operations and IT spending.

3




Percentage of CIOs who expect the topic to be relevant

Efficiency/increased

productivity

Improveexternal

customersatisfaction

Enablegrowth

Enable globaloperations

Generate/enable

new revenuestreams

Grow existingrevenue streams

Enableregulatory

compliance

Enterprisearchitecture

Streamline the supply

chain

Create/enable

competitiveadvantages

70%

60%

50%

40%

30%

20%

10%

0%Enable/

drive

businessinnovation

Percentage of CIOs who deem the component to be relevant

Applications Processes OtherHardware

100%

80%

60%

40%

20%

0%People

The survey resulted in similarly diversendings regarding the question o how

the costs and bene ts o IT will bemeasured in ve years time.




KPMGs view on rotation

O ten the best IT leaders come rom a pro essional IT background and thenmake the transition over to business leadership. Its much harder to go theother way, as ully grasping the implications o technical details is di cultwithout a technology oundation.Organizations are increasingly investigating rotations, moving technicalspecialists around the business and vice versa. Underpinning this is theidenti cation o critical roles which have a substantial impact on pro t andloss, customers, regulators and reputation. Technical rotations do not alwaysneed to be months or years in duration, with single Day in the Life Ofexperiences o ten proving to be extremely bene cial.

An important rotation design principle is providing an integrated career pathor individuals earmarked or critical roles. These career paths o ten eaturehorizontal, non-linear and cross- unctional moves designed to give theindividual exposure to strategic and operational parts o a businesses. A key,and o ten overlooked, requirement is the care ul planning o these moves

or each rotation and the support rom the business to ensure both theindividual and the company bene t. Rotations are easy to do (simply movesomeone to another role) but di cult to do right (e.g. how do you knowwhich role is best, what does success look like and what developmentneeds does the move meet?).


The general manager

o the uture hasworked in IT

As IT Director WesternEurope for HeinekenBreweries, MaartenBuikhuisen doesntsimply ensure that ITruns smoothly. Because,

for Heineken, IT is muchmore than a supportunction, contributing in

a number o ways to thesuccess o the business.The most importantprecondition or thisrelationship is or IT tounderstand the businessand vice versa. So itsimportant to be up tospeed on each othersareas o expertise.IT is still a relatively young business

eld and, in terms o images, Bui-khuisen likens it to a young greenplant that still has some growing todo. His second association is with theimage o a basketball team interlock-ing hands. The message is clear: IT

has a great uture and can contributemuch to an organization. Provided thatpeople in the organization are capableo working well together.

A good example is the collaborationbetween IT and marketing. For acompany such as Heineken, market -ing has been one o the most impor-tant activities or many years, becausethe companys brands are its mostimportant assets. Originally marketing



was an area where IT played only alimited part, mainly a supporting role,ensuring that transactional processesran smoothly and reliably. Now,however, digital media are omnipres-ent and the breakthroughs aremassive. The resulting marketingopportunities are allowing the IT

department to really show its worth.As Buikhuisen says: IT doesnt onlydeliver the technology behind theprocesses but also the ideas andin ormation on which to base newinitiatives. This will only be success uli were involved right rom the start:we have to be at the table when theideas or new concepts are beingdeveloped so we can ensure newmedia are used to communicate withour consumers.

This is a major change from a few yearsago. In the old in ormation worldHeineken focused on the customers,the retail and catering industry, andoptimised its business using goodin ormation. In the new in ormationworld there are also possibilities orcommunicating with the (individual)consumer by smart use o digitalmedia, and this is obviously bene cialto marketing. What it boils down to isthat IT and marketing can worktogether seamlessly. Within Heinekenwe have Business In ormation Manag-ers who ensure tight connectionbetween IT and the business. Then theIT department doesnt inhibit newinitiatives but can identi y, early in theprocess, what is and what is notpossible, and also introduce ideas itsel .In this way IT becomes an initiatorinstead o an inhibitor. You have to earn

such a position: you have to show thatyoure not the classic nerd in thebasement but that you also under-stand business opportunities.

I people connect, you can actuallylearn rom each other and empowereach other.

O course, IT doesnt only create valuefor Heinekens marketing projects.The entire IT organization has to lookto the business. And vice versa: thebusiness should also be willing to lookat the (im)possibilities o IT. Anyonecan see that this is the dawn o a newin ormation world. The importance oIT is increasing and we dont yet knowwhat the new world is going to looklike. To anticipate this within theorganization, job rotation between thebusiness and IT will become critical.

In this regard Buikhuisen points outthat the typical competencies o ITpeople can also be o great valueoutside their discipline: An IT personis usually very analytical and strong interms of process thinking and projectmanagement. As ar as Im concerned,IT is the glue which holds companiestogether. Marketing traditionally thinks

more in terms o campaigns. With therise o digital media, however, we haveto ensure we dont see campaigns toomuch as one-o , isolated events, butsecure them structurally, or instancein the social media channels. Input

rom IT helps in this respect.

Thats why I see it as a logical develop-ment that the general manager o the

uture will also have worked in the ITdepartment.


Maarten Buikhuisen isIT Director Western Europe atHeineken Breweries



Cost optimization remains importantFocus on process improvementAccording to 56 percent o respondents, cost optimization should always be a partof the IT strategy. Probably because it is a major competitive weapon. However, 33 percent o respondents are o the opinion that cost optimization should not havea prominent place on the agenda, as this theme has already been addressedsu ciently. So cost optimization remains on the CIO agenda but the response showsthat the ocus is mainly on greater process e ciency and less on pure IT topics suchas IT sta and IT components.

Percentage of CIOs who think cost optimization impacts the topic

IT (related)projects

IT components IT staff OtherDaily operations

35%

30%

25%

20%

15%

10%

5%

0%Processesefficiency

4



19/32From cost to value 15 2010 KPMG International Cooperative (KPMG International), a Swiss entity. Member irms o the KPMG network o independent irms are a iliated with KPMG International.KPMG International provides no client services. All rights reserved.



Risk and compliance: high on theagenda in the nancial sectorEconomic crisis impacts the CIOagenda in the nancial sectorAs a result o the nancial crisis, risk and compliance is receiving more attentionin the boardroom, say 68 percent o the interviewees. Eighty two percent expectthe costs of compliance to increase in the next few years, with the majorityexpecting an increase of between 10 percent and 20 percent. However, howhigh this issue is on the agenda di ers signi cantly or each sector. Within the

nancial sector risk and compliance is clearly higher on the agenda than in othersectors, most likely due to the nancial crisis. Because o the crisis, the empha-sis of IT projects is on risk and compliance (and sourcing) and less on IT value.The lower score by the nancial sector regarding the area o IT value seems tobe the result o the immense pressure the nancial crisis has put on this sector.Important issues in risk and compliance are security (85 percent) and morespeci cally identity management (48 percent).

Risk and compliance on the agenda

Financialservices

ServicesUtilities andgovernment

80%

70%

60%

50%

40%

30%

20%

10%

0%Manufacturing

5




Percentage of CIOs who think the topic to be relevant

Regulatorycompliance

Identitymanagement

Pr ivacy Internalcompliance

Corporatesocial

responsibility

Datagovernance

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Security

Developments in risk and compliance

Uncertain Decrease Remain the same Increase

Role of the auditor Role of automated tools

100%

80%

90%

70%

60%

50%

40%

30%

20%

10%

0%Attention to risk and compliance Costs of compliance

Eighty two percent expect the costs ocompliance to increase in the next ewyears, with the majority expecting anincrease o between 10 percent and20 percent.

KPMGs view on

complianceThere is value in regulation.The cost o compliance hasrocketed as companies moved

rom writing policies anddischarging responsibilities totesting and demonstratingoperation e ectiveness.

IT can help address this. IT canand should drive enhanced

automation, analytics andreporting that are designed toreduce compliance costs.Further, extending or usingregulatory reporting or otherpurposes could shi t a number oregulatory endeavors into valuecreators, as much o the datarequired or regulatory reportingis o ten core or other initiatives,e.g. on customer insight.




Developments in IT sourcing

Price/quality ratio of sourcing contracts Pressure on sourcing relations

100%

80%

90%

70%

60%

50%

40%

30%

20%

10%

0%Number of sourcing contracts

Sourcing: the rst majoroutsourcing wave has endedCIOs want to get more value

rom their sourcing providersFor many years, the issue o sourcing was an integral part o the IT strategy inmany organizations and contributed signi cantly to per ormance. The rst wave ooutsourcing activity seems to have reached its end, as this theme was hardly

mentioned as an important agenda topic. It has become part o the day-to-dayactivities or most IT departments. Most respondent CIOs still expect the numbero outsourcing contracts to increase in the coming years. What also stands out isthat many CIOs are becoming more critical o their sourcing providers, mentioningthat they intend to pay much more attention to the price-quality ratio and a largemajority of respondents intending to increase pressure on their sourcing provider.

This indicates a maturity in terms o sourcing and a realization that sourcingshould show satis ying results. Regarding control, the gures also suggestgreater cost awareness. Over 71 percent o CIOs indicate that they use theirown audits to monitor their sourcing providers working methods.

Major decrease Decrease Remain the same Increase Major increase

6




Kumar Parakala (KPMG EMA IT Advisory) onoutsourcing

Outsourcing and offshoring of processes, not only for IT but also HR, nanceand other business unit processes are set to continue, as will organizationsestablishing their own captives on o shore locations. The challenge or these

programmes is not only to look at short-term cost optimization, but also at long-term value creation. The nancial sector has been through a tremendouslyturbulent period. It was all-hands-on-deck and the pressure to cut costs wasmassive. Financial institutions now need to ocus their growth agendas byleveraging IT (and CIOs).

Percentage of CIOs who think the assurance method to be relevant

Positive track record

ISO 27001/2 Openarchitecture

Opensource

OtherSAS 70

80%

70%

60%

50%

40%

30%

20%

10%

0% Your ownaudits

The rst wave o outsourcing activityseems to have reached its end, as thistheme was hardly mentioned as animportant agenda topic. It has becomepart o the day-to-day activities or mostIT departments.




CIOs in dynamic environments arerst to apply new ways o working

Collaboration tooling and cloudcomputing are the new kids onthe blockCIOs that work in a dynamic internal environment, or at least have the perceptionthat they do, are more inclined to try new concepts and technologies. They havehigher expectations o progressive technologies and concepts such as:

Collaboration management; e-Inclusion; Appointing a dedicated port olio manager.

Respondent CIOs expect use o collaboration tooling to increase signi cantlyover the next ve years.

Cloud computing too is generating signi cant interest: 72 percent o the respon-dents see this as a good way to outsource IT unctionality. As expected, thepre erence is or non-critical systems and or outsourcing near a private cloud.

KPMGs view on collaboration

The perception has always been that big wins come from big exciting projects, so executives may notrecognize that great bene t could be created through relatively simple services (e.g. collaborationenvironments). Also, it is di cult or pro essional IT managers to articulate the business case o thesetechnologies. Although intangible, the bene ts are real and companies need to be willing to watchconsumer trends and then pilot some o those simple solutions or employees. Much o it will notwork out but enough will be successful to make the projects and the knowledge gained from the

process worthwhile.

Interestingly, younger pro essionals pre er virtual interaction. For them, in-person meetings are restrictive, asthey dont allow people to be quickly pulled in, instant message or real-time input, share and edit documentson the fy, etc. For all these reasons ace-to- ace meetings will become the exception and not the norm. Thisis a cultural shi t and comes rom the desire to achieve more out o meetings in a shorter space o time.

7




Developments in IT expected by CIOsin different environments

Static internalenvironment

Dynamic internalenvironment

e-Inclusion Portfoliomanager

80%

70%

60%

50%

40%

30%

20%

10%

0%Collaboration

tooling

KPMGs view on cloud computing

Cloud computing seems to be o interest only or non-critical systems,but that will change.

The barriers to widespread adoption appear to be a lack o clearunderstanding and con usion, particularly around regulation. This isespecially true or nancial organizations, which are naturally wary o dataloss, security breaches and regulatory issues that could expose them to

nes in excess o the amount saved. We will eventually see cloudcomputing used or critical systems and data but that is still ve to 10years out. Eventually, companies will start to ask why they should devotemillions o dollars and hundreds o people to optimizing a data centre ullo computers, keeping them patched, keeping them running, monitoringthem, upgrading them and maintaining them i all o that is not their corebusiness. This thought process is seen by many as the logical outcome ooutsourcing.

What will bring about the change is new vendors or smart existing onesthat will provide services (i.e. applications plus guaranteed service levels)that address client needs. For example, Google is making commitmentsabout the territories in which data will be held or its corporate cloudo erings; this is signi cant and was not available 18 months ago.

Impact of collaboration tooling

Basic tooling Impacton internalcommunication

Majorimpact all the way

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Noimpact



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CIOs seem to be optimistic about the future. They expect project success ratesand returns on investment to grow in the next ew years.

Developments in portfolio management

Major decrease Decrease Remain the same Increase Major increase

Success ratio ROI of IT projects

100%

80%

90%

70%

60%

50%

40%

30%

20%

10%

0%Dependency on IT International projects

8

22 From cost to value 2010 KPMG International Cooperative (KPMG International), a Swiss entity. Member irms o the KPMG network o independent irms are a iliated with KPMG International.KPMG International provides no client services. All rights reserved.

The CIO is optimistic aboutthe futureIT is expected to beincreasingly successful


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Mark Britnell (KPMG in the UK) on CIO challenges in the healthcare sector

In many countries, the healthcaresector is on the verge o a radicaltrans ormation. One o the precondi-tions or making this a success is thatCIOs understand the issues in thehealthcare sector down to the smallestdetail, and are able to base theirreasoning on the patients perspectiveinstead o letting technology dominate.A CIO needs to have empathy with

healthcare. Fortunately, a shi t isoccurring. CIOs are increasingly playinga mature role within the sector.

There is no real doubt that a trans or-mation o the healthcare sector inmany countries is both desirable andunavoidable. For the Western world, itis imperative to improve the quality ocare while at the same time loweringcosts, i or no other reason than to beable to cope with an ageing population.

We will not achieve this by makingsmall changes. I we center the entirehealthcare system on the patient, thisradically new model will allow us to

take great strides in terms o costs aswell as quality. Our study, A Better Pillto Swallow, shows that both in the UK(Torbay) and Canada (Ontario) the abilityto look holistically at an individualsneeds and provide unding and caresupport rom pooled budgets hasreduced unnecessary bureaucracy andstreamlined the care process, therebymaking it more personal to the user,

and more e ective and e cient as aresult. Similarly, purchaser-providerpartnerships in di erent parts o the UShave demonstrated impressive results.

The current situation in the healthcaresector is characterized by legacysystems that are out o date and werenot designed with the patient in mind.These are o ten not t or use and tooexpensive or many hospitals. Instead,we should adopt a more personalized

approach and small, fexible applica-tions. Healthcare could then beorganized very di erently, but thisrequires an initial investment. One o

the biggest pit alls is that the healthcaresector will be con ronted with cynicismin society and politics. There willinevitably be doubts about the easibilityo a undamental modernization as, inpractice, major IT projects unfortunatelyquite o ten go wrong. That is why wewill have to work to improve the imageo IT and overcome the cynicism.

Mark Britnell is KPMGs Headof Health for UK and Europe

From cost to value 23 2010 KPMG International Cooperative (KPMG International), a Swiss entity. Member irms o the KPMG network o independent irms are a iliated with KPMG International.KPMG International provides no client services. All rights reserved.



Appendix


Background to the surveyAs a prelude to the global con erence on IT that takes place every two years(the World Congress on IT, one o the largest IT events worldwide), in January 2010KPMGs Global Advisory practice decided to per orm a worldwide survey o4,500 CIOs and IT decision makers.

KPMGs objective in producing this survey is to provide information to enableCIOs to set their priorities or the coming years. The survey was based onKPMGs own technology agenda, which was launched in 2007 and updated in2009. Speci c to the survey is an analysis o the CIOs pro le and its relation tothe priorities on his or her agenda. Since statistics alone show only part o thestory, the whitepaper was completed with interviews with CIOs rom di erentregions and KPMG rms pro essionals views on the main topics on the agenda.We hope these results will support CIOs in their decision-making.

As part of the process KPMG set up a dedicated project team, including aneditorial board with content matter specialists. Together with the editorial boardwe created a survey that was extremely valuable to respondents, as the eedbackwe received showed.


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Our methodologyThe objective of the survey was to understand the agendas of CIOs worldwide forthe coming years and to explore correlations in three areas:

1. Agenda topics and responses to various actual questions

2. Pro le o the CIO

3. Environmental actors, such as location, sector, and size o the organization

The questions, especially the content-related questions, were veri ed with theeditorial board o content matter specialists within KPMGs global network withthe aim o ensuring that the topics discussed were relevant and accurate. Thepro le-related questions were based on an article by M. Sojer, C. Schlger, and C. Locher on the position of the CIO.2

The exploration o correlations was based on a number o hypotheses, whichwere veri ed using statistical methods.

A total o 4,500 CIOs were approached to respond to the online survey. At theclosing o the survey, about 450 CIOs had responded, 300 o them had completedthe survey in ull. The results presented in this report were all statistically signi cant.

The interviews with the CIOs and the thought leaders were held through videocon erencing and con erence calls. The written versions were veri ed and agreedby the interviewees.

From cost to value 25

2 M. Sojer, C. Schlger, and C. Locher, The CIO Hype, Science and Reality, http://is2.lse.ac.uk/asp/aspecis/20060105.pdf




Glossary o terms

Cloud computing

A model or enabling convenient, on-demand network access to a sharedpool o con gurable computing resources (e.g. networks, servers, storage,applications and services) that can be rapidly provisioned and released withminimal management e ort or service provider interaction.

Cost optimization Activities per ormed by management to control IT spending. This includesboth the reduction o IT spending and the IT spending strategy.

e-Inclusione-Inclusion or digital inclusion is the term used within the European Union toencompass activities related to the achievement o an inclusive in ormation

society. In this vein, new developments in technology turn the risk o a digitaldivide into digital cohesion and opportunity, bringing the bene ts o theinternet and related technology to all segments o the population, includingpeople who are disadvantaged or speci c reasons, such as disabilities.

Globalization An indication o the global coverage o an organization measured in terms othe number o countries the organization is located in, how many continents itspans and how widespread its turnover is across these countries.

IT governanceThe leadership and organizational structures and processes that ensure that anorganizations IT unction sustains and extends the organizations strategiesand objectives.

IT sourcingIT sourcing is everything that can be considered important to managingIT that is not implemented within the boundaries o the organization itsel . Thisconcerns both sourcing strategy and managing sourcing relations.

IT valueActivities per ormed by management to increase the added value o IT invest-ments as well as the way in which IT adds value to the business.

Portfolio management

Activities that help organizations make sound decisions by prioritizing thedeployment o scarce resources to change initiatives and by maximizing thevalue of projects, programmes and portfolios to help achieve the organizationsstrategy.

Risk and complianceActivities per ormed by management to identi y, analyze and respond to risksin order to become, and remain, compliant with internal requirements andexternal laws and regulations.




Special thanks


The results o the survey would never have been completed without the help o a

large group o people. Special thanks are due to:

The project team: Gijs de Beus, David Broedersz, Anouk van der Burg, Marco Drenth,

Bas Huiskens, Wilco Leenslag, Nart Wielaard

The editorial board:Jan de Boer, Teo Grif oen, Kai Hang Ho, John Hermans,

Dione de Jong, Fiona Mel-Rossi, Arjan Vreeke, Ruben de Wolf

The steering committee:Jan de Boer, Peter Paul Brouwers, Erik Schut

The thought leaders and content matter specialists withinKPMGs global network of rms:Brigitte Beugelaar, Mark Britnell, Bryan Cruickshank, Floris Bongaerts,Paul Olieman, Kumar Parakala, Gaston Vankan, Maurice op het Veld

The CIOs interviewed:Yousi Almutawa, Maarten Buikhuisen, Jos Carlos da Fonseca,Leonard de Villiers

Michiel Kooper , project managerEdo Roos Lindgreen , partner in charge


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Contact

For more in ormation on how KPMGs Per ormance & Technology teamcan help your organization realize more value contact the ollowing:

In ormation Technology Advisory Global Contacts:

GlobalBryan CruickshankKPMG in the UK

Tel: +44 131 527 [email protected]

AmericasSteve HastyKPMG in the USTel: +1 704 371 [email protected]

Asia PacifcDanny Le

KPMG in ChinaTel: + 86 10 8508 [email protected]

Europe, Middle East and A ricaKumar ParakalaKPMG in India

Tel: +91 (80) 3065 [email protected]

NetherlandsErik SchutKPMG in the NetherlandsTel: +31 20 656 [email protected]

For more in ormation on KPMGsPer ormance & Technology practice

please visit: www.kpmg.com/ per ormance-technology

The in ormation contained herein is o a general nature and is not intended to address the circum-stances o any particular individual or entity. Although we endeavor to provide accurate and timelyin ormation, there can be no guarantee that such in ormation is accurate as o the date it is receivedor that it will continue to be accurate in the uture. No one should act on such in ormation without

appropriate pro essional advice a ter a thorough examination o the particular situation.

The views and opinions expressed herein are those o the survey respondents and interviewees and

2010 KPMG International Cooperative (KPMG International), aSwiss entity. Member rms o the KPMG network o independent

rms are a liated with KPMG International. KPMG Internationalprovides no client services. No member rm has any authorityto obligate or bind KPMG International or any other member rmvis--vis third parties, nor does KPMG International have any suchauthority to obligate or bind any member rm. All rights reserved.

KPMG and the KPMG logo are registered trademarks oKPMGInternationalCooperative (KPMGInternational)

kpmg.com
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