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The creative CIO agenda: Six big bets for digital transformation

There has never been a more exciting or challenging time to be a CIO. The fourth industrial revolution is here, being driven by the rapid introduction of diverse and disruptive technologies, creating enormous opportunities for both new and existing businesses. These technologies also have significant societal impacts as smartphones and apps saturate the developing world and a more tech savvy population eagerly adopts the latest new thing.

CIOs can lead their organisations through digital transformation but they will need to act fast, or risk being left behind. At KPMG, we have identified six key initiatives or 'big bets' that CIOs need to make now to enable their organisations to both defend against disruption and become disruptors themselves.

Bet 1: Journey to the cloud

Of all the disruptive technologies, cloud in all its forms has had the biggest impact and provides the foundation for most of the other technologies and their ability to disrupt.

The recent Harvey Nash/KPMG CIO Survey confirmed this journey to the cloud with the vast majority of respondents planning to make significant investments in cloud services. Over the next 1–3 years, 58 per cent of large organisations said they will make significant investments in IaaS, 56 per cent will make significant investments in PaaS, and 64 per cent will make significant investments in SaaS. Of the three, PaaS investments will grow the fastest with a 78 per cent jump expected.

As the market for cloud services has matured, it is being deployed well beyond serving as a utility for storage and servers. Applying a cloud-first strategy has many compelling advantages including freeing IT from the heavy burden of building and operating datacentres. This significantly reduces IT’s constant need for capital, which can now be deployed elsewhere and eliminates the need for a large operations staff.

With the appropriate governance processes in place, favouring SaaS solutions over internally developed ones helps the business become more self-sufficient, freeing up additional resources to work on more complex and high value initiatives.

Bet 2: Digital labour

The disruptive impact of digital labour could be enormous. According to Forrester, automation will displace 22.7 million jobs by 2025, and leading organisations are already reaping the benefits from early deployments of robotic process automation (RPA) based solutions.

One group already feeling the impact are offshore service providers that perform knowledge services. They are experiencing shrinking growth and are beginning to introduce cognitive platforms as an alternative to people.

For CIOs there are two roles to play: technology leader to enable business automation, and IT functional leader to automate IT delivery.

Bet 3: Omnichannel consumer experience

Digital transformation of business has caused a major shift in the balance of power in most markets. Customers are now in control of their interactions with brands, and businesses must create compelling customer experiences across all of their channels and touchpoints. The explosion in mobile devices has led to complex customer journeys where a transaction might start with research done in front of a computer, order placement from a smartphone, and pickup at a store. To remain competitive, businesses must re-design the customer experience to meet higher customer expectations by providing a seamless experience regardless of channel or device; they must provide an omnichannel consumer experience.

The challenge for CIOs is to re-architect the legacy transaction systems to provide easier and faster integration with newly developed omni-channel initiatives.

Bet 4: Internet of services

The Internet of Things (IoT) is well underway, with over 50 billion connected devices expected by 2020 according to Cisco. Building services based on capturing, organising, integrating, and analysing the huge volume of data it produces will be key to creating opportunities to drive value and monetise the IoT. One of the most exciting of these opportunities is transforming products into services to create consistent, long-term revenue streams. Benefits of this 'anything as a service' (XaaS) include new business models, improved customer experience, increased efficiency, and reduced costs.

The bottom line is that almost every industry can leverage the IoT to provide bundled value-added services to existing products, but CIOs will need to ensure that they have access to data and analytics skills, as well as networking and security.

Bet 5: Continuous delivery

The fifth big bet is aimed at providing organisations with the capability to deliver technology-enabled business value on a continuous basis. Rather than 'big bang' releases of new applications or major upgrades to existing applications, continuous delivery is designed to get changes of all types into production quickly with high quality and reduced risks.

To keep up with the pace of change, the IT function must radically change the way it creates and delivers value to its stakeholders. Continuous delivery builds on lean IT, agile methodologies and DevOps, integrating people and processes through automation that is focused on increasing collaboration across business, development and operations so as to enable faster, reliable and more frequent deployments to market.

For CIOs, continuous delivery is both a good news and bad news story. The bad news is that it requires a complete cultural change across all of IT and the business participating in the development process. The good news is that it doesn’t have to happen all at once.

Bet 6: Next gen IT operating model

Putting infrastructure in the cloud, delivering multiple new releases daily, deploying digital labour, creating an omni-enterprise and building product as a service business models all require vast amounts of technology enablement. The IT function’s typical operating model -plan, build, run - is obsolete in this context. It cannot adapt quickly enough to meet emerging needs.

With IT value now coming directly from providing services and capabilities in order to enable business outcomes, this requires IT to meet demands for innovation, flexibility, and faster delivery cycles. It also puts the emphasis on leveraging emerging technologies and sourcing alternatives, and integrating them with existing legacy applications and data.

For the CIO, getting to this next gen operating model requires a massive but necessary change initiative to develop a new culture, new roles, and new skills. It will take years to become fully realised.

Next steps to make these bets

To achieve these bets requires significant focus and commitment as well as a solid core foundation within IT. Each of these bets needs to be evaluated in terms of their relevancy and potential benefits – which include the streamlining and rationalisation of legacy systems, adopting agile processes within the business, building digital skills and behaviours, and conveying a need for urgency and pace. Finally, it is vital to align the board and C-suite around a common digital vision.

We recommend prioritising these next steps based on a combination of anticipated level of effort, size, and timing of the benefits, and the overall likelihood of success given your organisation’s skills and capabilities.

Lisa Heneghan, head of UK CIO Advisory at KPMG

Image source: Shutterstock/Sergey Dudyrev

Lisa Heneghan
Lisa Heneghan is Global Head of Technology, Management Consulting at KPMG. The 2017 Harvey Nash/KPMG CIO Survey, the world’s largest survey of IT leadership, was launched on 23rd May 2017.