Deloitte: Technology investments a strategic priority; yet CIO innovation budgets remain insignificant

8 February, 2015 - Organisations across the globe are setting their sights on stronger growth and, for many, technology investment is a strategic priority. Digital, analytics and big data are taking precedence as technology is changing the way businesses operate and companies are adapting their operating models to reflect the digital economy.

However, while more than half of Chief Information Officers (CIOs) (52%) consider innovation an important priority, they receive little funding for this within their IT function. Almost half have less than 10% of their budgets aligned to innovation-related activities.

Deloitte’s second global CIO Survey reveals a disparity between the excitement over, and proposed investment in, technology – and the role the CIO is playing in this transformation.  Over 900 CIOs across 49 countries provided insight into the perceptions, priorities, opportunities and challenges of CIOs around the world and in the Middle East.

Conferences were held in 4 countries across the Middle East during the first week of February to share the CIO survey results. The events held in Dubai, Abu Dhabi, Riyadh and Doha featured overviews on IT budgets, IT priorities, CIO business partnering, and adoption and implementation of CIO analytics.

Rajeev Lalwani, partner, head of Deloitte’s technology consulting practice in the Middle East, says: “This year’s survey points to a real shift in board members’ attitudes towards IT investment and the importance of digital technologies for business transformation. However, the ongoing lack of innovation budget is very surprising given positive current market conditions and a general acknowledgement that technology is essential for organisations to deliver stronger customer engagement. Either there is still limited budget for innovation – or, and perhaps more likely, it has been given to someone else in the organisation.”

Business leaders’ attitudes to risk are an even bigger constraint than inadequate budgets in making riskier IT investments for innovation and growth, according to CIOs. While the survey results suggest CIOs are willing to take intelligent risks with IT investments (71% class themselves as risk tolerant, not risk averse), this appetite for investment does not seem to be reflected in their current portfolios of projects.

“CIOs are still most often associated with maintaining core IT systems and ‘keeping the lights on’,” says Lalwani. “However, a key question in this year’s survey is whether CIOs should take more responsibility for technology innovation to help their organisations grow. The challenge will be to convince company leadership that they are capable of delivering these new technologies and managing the IT Portfolio Risks better than other functions.”

Despite some challenges, there have been significant improvements in business relationships as our findings reveal CIOs are becoming more effective business partners (10% increase on last year, with half rating themselves ‘strong and effective’).

However, there are still gaps when looking at individual leadership relationships. Four out of five CIOs (79%) consider their relationship with the CEO ‘very important’, yet only 42% believe this relationship is currently ‘very good’. New generation business leadership roles such as chief digital and data officers are gaining prominence. “It is becoming essential for CIOs to nurture stronger and trusted relationships with emerging business leaders who champion disruptive trends, or indeed, CIO themselves must ensure their functions encompass these roles,” says Lalwani.

“The next 12 months will be critical for CIOs as their relationship with the business, and in particular the CEO, takes centre stage. Stronger business relationships will open more opportunities and allow them more ownership and responsibility of the innovation function. Now is the time for CIOs to choose whether to remain custodians of core IT systems or become drivers of growth through technological innovation,” concludes Lalwani.

Overview of key findings:

• IT budgets. 77% of IT budgets are the same or up from 2013, 23% down. Over half of budgets (55%) are allocated to business as usual activities, with the rest split between supporting business change (23%) and supporting business growth (22%). When asked where CIOs would invest more money if they had it, the majority (30%) said analytics and big data. Mobile apps (17%) and private cloud (15%) were second and third.
• IT priorities. Supporting new business needs (71%) and driving digital strategy (47%) are top of the priority list for the next 12-18 months. Reducing IT cost as a priority has dropped more than 20% from 2013 (in 2014, 35% consider it a priority vs. 56% in 2013).
• Business partnering. CIOs are becoming more effective business partners with half of CIOs rating themselves “strong and effective” in that regard – a 10% increase on last year. However, while 79% consider their relationship with the CEO a “very important” one, only 42% believe this relationship is currently “very good”. Similar disparities exist in the CFO and COO relationships.
• Innovation. Most CIOs have limited budgets for innovation-related activities. Almost half of CIOs put less than 10% of their budgets aside for that purpose. However, the number one barrier to riskier IT investments is the business leadership’s attitude to risk; budget is second. 
• Analytics. Half of CIOs are piloting, implementing and adopting analytics – a change from last year when many respondents said they remained to be convinced of the benefits. Main barriers to adoption are lack of correct talent to use data (26%) and no centralized approach to capturing and analyzing data (22%).

To view the whole report, go to: http://deloi.tt/1ziWYJJ

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Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with more than 3,000 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has received numerous awards in the last few years which include Best Employer in the Middle East, best consulting firm, and the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).