Business-led IT: Why it needs to come out of the shadows

In the past, business-led IT spending – and by that I mean technology investments outside the IT budget – has been viewed by IT as unusual or threatening and pejoratively labelled "shadow" or "rogue" IT.

Whatever the perceptions, we all agree this trend is here to stay. According to CEB's latest research, business leaders now spend an additional 40p on technology for every £1 spent through the traditional corporate IT budget. Interestingly, much of the business-led IT budget is dedicated to innovation and new capabilities. In fact, we estimate that three quarters of all spending on IT innovation now occurs outside the traditional IT budget.

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When it comes to the department breakdown, marketing teams are the biggest contributor to business-led IT spending, accounting for 25 per cent of the total, just ahead of sales (23 per cent) and way in front of HR and Finance who account for 8 per cent each.

Harnessing the benefits of business-led IT

So what should CIOs make of all this? Rather than a threat, business-led IT should be seen as positive development and a novel solution to longstanding CIO concerns such as underinvestment in technology and a lack of appreciation among business leaders for the impact that technology can have on productivity and business growth. Business-led IT investments are additive (they don't divert money away from the CIO's budget) and they often focus on collaboration tools, analytics and technologies to engage customers or improve, whether it's a new CRM tool or social media analytics. If spent wisely, these investments can give a competitive advantage to a specific part of the business, whether finance, marketing or sales.

CIOs should focus their efforts in helping business leaders get the maximum value from their 40-pence-on-the-pound investment. This will dispel myths about IT being a bottleneck that is concerned with controlling technology rather than trying to find ways of using technology to boost corporate performance. To harness business-led IT, CIOs should do the following:

Act as an adviser and educate employees and business leaders

Although there are (as always) grey areas, you can broadly define what categorises 'good' and 'bad' business-led IT. "Good" investments are generally those which solve a specific issue and also have the flexibility to either stand apart from the rest of the business, or be hosted between different departments. In contrast, the wrong kinds of projects tend to be those which require extensive support from dedicated in-house specialists, burning money and duplicating resources. Meanwhile basic commodity investments – such as printers or servers – should also be considered much more carefully.

For "good" business-led IT, IT teams need to help executives build up a range of skills. For example, providing advice on managing projects and dealing with vendors, some of whom will be looking to exploit those with less tech-savvy backgrounds. As business-led IT comes more and more of a reality, the IT teams need to be able to coach business leaders and provide an opinion on how technology investment will impact the wider business strategy. This means working directly with the CEO and other executive team members.

Change IT staff perceptions around "shadow IT"

CIOs will need change perceptions about how IT staff view "shadow spending" and help their teams understand its value. Almost one third (60 per cent) of IT employees believe that business-led IT "always creates risks," while over 60 per cent think it shouldn't be allowed at all. Once this perception change has set in, the goal of the IT department should be to improve the success rate of these technology investments – regardless of who came up with the idea.

Invest the time in digital skills

In many cases, business leaders and employers are seeking out their own tools to analyse and present data. But these tools are only valuable if employees have the skills and judgment to use them effectively for decision making, and unfortunately only 38 per cent of employees fit this profile. The rest fall into the trap of either over-relying on data and failing to challenge the results, or else rejecting in the data in favour of their own (often unreliable) instincts. CIOs need to do more to help build up the right skills through training and coaching.

Appreciate the risks

Unsurprisingly, a huge consideration for CIOs is around the risks of business-led IT. Business leaders, for all their willingness to lead their own technology projects, are not yet always well-equipped to manage information risks on their own.

CIOs need to make it easier for business partners to engage with IT on issues of risk sooner rather than later. When it comes to data privacy and security, it may be that each side disagrees on the trade-off between potential risk and business value. Either way, this conversation needs to happen before investing in new technologies.

Whichever way you look at it, business-led IT should no longer be seen a "shadow" or "rogue". On the contrary, so long as the CIO retains oversight and can educate the rest of the business about the risks, it can often be a better, cheaper way to achieve the goals of the IT department, especially when it comes to new innovations.

Andrew Horne is managing director of CEB. Elena Chobanova is a senior research analyst for CEB CIO Leadership Council.