201306 CIO NET Key IT Management issues and trends for 2013Document Transcript
What’s next.European key IT andManagement Issues &Trends for 2013Results of an International StudyJerry Luftman Ph.D., Global Institute for IT Managementdr.lec. Barry Derksen MMC CISA CGEIT, Business & IT Trends Institute
The four areas focusedon in the report are:1. Top IT ManagementConcerns2. Top Application andTechnology Investments3. IT Budget Allocation4. IT OrganizationalConsiderationsTable ofContents_Top ten IT ManagementConcerns...................................... 4Top Five Applications andTechnology Investments .......... 10IT Budget Allocation .......................... 14IT Organization Considerations ...... 16CIO Trends ........................................... 18IT Outsourcing .................................... 22Concluding Remarks ......................... 232Public sector / Non profitBusiness Professional ServicesFinancial services / Real estate / InsuranceHardware / Software / NetworkingWholesale / Retail / TradingAuto / Industrial / ManufacturingPharmaceutical / Biotechnology / Life sciencesConstructionChemicals / Energy / UtilitiesFood / Beverages / Consumer packaged goodsOtherMedia / Entertainment / Travel and LeisureAerospace / defenseTelecommunicationTransportation / WarehousingEducationHealthcare14,8% 298=12,8% 256=11,5% 230=10,5% 210=3,9% 80=9,2% 184=5,6% 112=5,6% 115=7,2% 144=2,6% 52=2,6% 52=4,3% 86=0,7% 14=0,3% 6=3,0% 60=2,0% 40=2,0% 40=144=7,2%348=17,4%300=14,9%102=5,1%72=3,6%200=9,7%92=4,6%42=2,1%52=2,6%102=5,1%00%124=6,2%20=1,0%30=1,5%20=1,0%144=7,2%144=7,2%Percentage of Respondents by IndustryEU USA
Since 1980, the Society for InformationManagement (SIM), in a joint effortwith different academic leaders, hasconducted an annual survey of the keyissues facing IT executives in the UnitedStates. In 2010 the results of the Societyfor Information Management and theDutch survey results on Business & ITTrends (since 1994) were combinedproviding a global benchmark (othergroups were engaged to collect datafrom Asia, and Latin America). In ad-dition to providing a snapshot of theimportant IT technical and managerialissues of the day and a benchmark ofthe different geographies, this annualreport facilitates the identification ofsignificant trends by comparing surveydata based on a similar sample fromprevious years. The 2012 survey, con-ducted in the summer of 2012, focusedon three important areas:-- Management concerns-- Application and technology invest-ments (IT Trends)-- Organizational issues (IT budgets, ITstaff salaries, CIO roles, IT organiza-tion structure)Participants were asked to rate the im-portance of 39 managerial concerns, 51application and technology opportuni-ties, and 18 organizational issues.The recognition of the global reach ofIT, especially in light of the impact ofboth the European and global eco-nomic crisis, has amplified the necessityto obtain responses from organizationsaround the globe to understand similar-ities and difference across geographies.Hence, this year the same survey wasconducted in five major geographies,namely, U.S., Europe, Asia, Australiaand Latin America. The detailed resultsfrom the U.S. appeared in MISQE inDecember 2012; while the completeglobal analysis will be in JIT by the 2ndQuarter of 2013.This paper focuses on the major in-sights gained from this survey in Europe2012-2013, and compares the resultsto the results from the U.S. It is basedon IT executives that are membersof CIONET Europe and Business & ITTrends Institute. This paper is basedon the responses from IT executivesrepresenting 306 Western European or-ganizations contributing to the StrategicInformation Management survey (Seefigure and table below for participantdemographics). The important man-agement concerns are shown in Table2. Figure 1 provides a breakdown ofrespondents based on their geographyand Table 1 provides a breakdown ofthe respondents by industry. We hopethat you recognize the significance ofthis research and participate in nextyear’s survey.3IntroductionPercentage of Respondents by Geography14+6+4+11+1+1+43+2+10+7+1+tBelgium14%France6%Germany4%Italy11%Ireland0,3%Luxembourg0,3%Netherlands45%Norway2%Spain10%UK7%Poland0,3%
4The top 10 management concerns tendto evolve slowly albeit the severe reces-sion begun in 2007 continues to impactsome of the management priorities of2012 and those projected for 2013. TwoEuropean and U.S. concerns that havetraditionally remained on the top tenlist are: IT and business alignment, andbusiness productivity and cost reduction(Luftman and Ben-Zvi, 2010b). This yearthe two most important European man-agement concerns are: business pro-ductivity and cost reduction as well asIT and business alignment. InterestinglyIT cost reduction is increasing in im-portance within Europe and the U.S.This is a result of the current Europeanbased economic discussions withregards to the European nation, andthe current strong negative economi-cal impact of countries such as Greece,Spain, and Italy. When compared withother management concerns (businessproductivity & cost reduction, businessprocess management/reengineering,and revenue generating IT innovations(11thin Europe and 4thin U.S.)). Europetends to be more cost oriented in com-parison with the U.S. IT cost reduction isranked 4thin Europe, as opposed to theU.S. (ranked 5th) and revenue generatingIT innovations is ranked 4thin US andranked 11th in Europe. The discussionbelow elaborates on this finding.1. Top tenIT Management ConcernsBusiness productivity and cost reductionIT and business alignmentBusiness agility & speed to marketIT cost reductionIT reliability and efficiencyBusiness process management/reengineeringIT strategic planningChange managementSecurity and privacyEnterprise architecture/infrastructure capabilityEU2012EU2011EU2010US2012US2011US2010Top IT management concerns111645798101 11210635128712 23510761298332833612913344386275151045678910
5From a country perspective theEuropean management concerns var-ies. This is partly because of the limitedresponses for some countries (Norwayand Germany). Interestingly IT and busi-ness alignment is of lesser importancein the U.K. (ranked 6th) which is morefocused on societal implications of IT(ranked 4th) to market as well as changemanagement (ranked 5th). France rankedIT cost reduction as priority 1, whichranked second for both the Netherlandsand Norway. Although this is related tothe economic crisis, the northern coun-tries seem to use cost reduction as ahigher priority than countries which areaffected stronger by the economic crisis(Spain, Italy). In Norway the number 1 ITmanagement concern is Outsourcing/Vendor management which implies thatNorway wants to leverage IT possibili-ties in order to reduce costs and focus-ing on core business. Both Italy andGermany have IT and business align-ment ranked 1stsupporting the view thata mature level of IT and business align-ment is important to realize revenuegenerating IT innovations. Examplesof these are TomTom and Nokia whereboth are facing difficulties due to thefast rising completion from Apple andGoogle.Top IT management concerns (Countries)Business productivity and cost reductionIT and business alignmentBusiness agility & speed to marketIT cost reductionIT reliability and efficiencyEuropeBelgiumFranceItalyGermanyNetherlandsNorwaySpainUK1 1 2 3 2 1 4 1 12 3 3 1 1 4 5 2 63 2 6 2 6 9 6 3 24 5 1 4 11 2 2 4 35 6 4 6 8 3 3 7 10
61. Business productivityand cost reductionBusiness productivity and cost reduc-tion also appears as a top concern in allgeographies (ranked 1stwithin Europe).It has recently gained momentum witha number 1 position universally in 2010,It ranked 4thin the top managementconcerns globally last year and is cur-rently ranked 1stwithin the U.S.The IT cost reduction, and the impor-tance of improving business productiv-ity is in line with the findings of Luftmanand Ben-Zvi that the current trendseems to be unique in this recession(Luftman and Ben-Zvi, 2010b); insteadof simply cutting IT budgets, IT leadersseem to be responding to this recessionby focusing on IT as an enabler/driverof business productivity for the restof the business. Even though data forindividual countries are not reported inthis paper, it is interesting to note thatthis trend is present in all geographies.Within Europe business productivityand cost reduction are ranked first butIT cost reduction is also among the top5 management concerns. Having bothIT cost reduction and business produc-tivity & cost reduction within the top5 management concern might createconflicts in managing both concerns ifnot managed effectively.2. IT and businessalignmentAlignment of IT and business continuesto be elusive, and in all of the geogra-phies it ranks in the top ten manage-ment concerns; ranking 2ndin both theU.S. and Europe. The importance of ITand business alignment is often seenin return on investment. IT businessalignment maturity can be measured(Luftman, 2003) and higher maturityin this measurement model results inbetter return on IT investment (Luftman2012, Derksen, 2013, Poels, 2006).Demonstrating a significant positivecorrelation between alignment andcompany performance both Europeanand U.S. organizations are proceed-ing to work at higher alignment levels.Despite this effort, IT and businessalignment remains a top 10 IT manage-ment concern for 30 years. Looking atthe ranking of IT and business align-ment management concern there is noexcuse for not reaching to higher levelsof alignment and supporting the per-ception that IT and business alignmentis a constant process.IT leaders in most demographics seeIT as an integral driver/enabler of ef-ficiency/effectiveness in other parts ofthe business and therefore focus oninitiatives that enhance the maturityof alignment between IT and busi-ness. While IT business alignment hasbeen recognized for over 30 years as apersistent problem, it is clear that it ispervasive and persistent.3. Business agility andspeed to marketBusiness agility and speed to marketis ranked 3rdin Europe and is 3rdin theU.S (IT business alignment is also No.2ranked in U.S.). Business agility andspeed to market is essential for busi-ness survival in an uncertain and volatileeconomy, and the improved rankingof business agility and speed to marketis testimony to that. Known examplesof business agility and speed to marketare of course Apple (iPad) and Google(Chrome). Regional business agility andspeed to market is fundamental. Boththe European and U.S. results demon-strate this well because the past coupleof years business agility and speedto market have moved up from themid-teens to the number 1 Europeanmanagement concern. It is noted thatbusiness agility and speed to marketalong with business productivity andcost reduction are the foundation forlong term competitive advantage, andtherefore it is anticipated that theseconcerns will continue their top fiveranking. This result suggests that thedownturn in the Europe economy hasdriven organizations to focus on re-sponsive IT approaches that can deliverimmediate value. Speed to market hasbecome essential for business survivalin today’s economy.
74. IT cost reductionIn the top 5 IT management concernsIT cost reduction ranked 4thfrom theEuropean perspective and was 5thin2011. IT cost reduction remains a topIT management concern within Europefocusing on reducing the costs of ITwhereas this management concern isnow also increasingly important as ITmanagement concern ranking withinthe U.S (5ththis year and 10thlast year).The current European based eco-nomic discussion with regards to theEuropean nation is expected to be thecause, which is also correct for the U.S.During economic downturns, businessexecutives usually expect all organiza-tional functions, including IT, to greatlyreduce their expenses and budgets. Inprevious recessions IT was typically thefirst organization to have their budgetsreduced; in this economic period, IT costreduction has only recently risen as ahigh priority, likely because of the lengthof time and economic uncertainty. Whenthe economy gets better, those pressuresusually ease.IT cost reduction refers to the costs ofrealizing, implementing and managingIT. One of the most used comparisonmethods is the usage of Total Cost ofOwnership methods starting with meas-uring the percentage of revenues spendon IT shown in Table 3 (blanks indicatethat there is not enough valid responses).We will elaborate on the top five.5. IT reliability andefficiencyThe growing complexities of IT sys-tems, along with the need to considercosts, have brought IT reliability, avail-ability and efficiency to the forefront. ITreliability and efficiency is ranked 5thinEurope and 10thin the U.S. This man-agement concern has been a top fivemanagement concern in Europe since2009. In the U.S. IT reliability and effi-ciency was 3rdin 2010 but traded placeswith the European ranking last year andis now 10th in the U.S.IT reliability and efficiency refers to theaccuracy, timeliness, and reliability ofdata and information services deliveredby IT (Luftman and Ben-Zvi, 2010b). Therelatively higher ranking of IT reliabilityand efficiency in Europe is based ontwo distinct explanations. To have areliable and efficient IT, stored data andinformation need to be pristine, andEuropean IT leaders are often con-cerned about the quality and accuracyof data/information in their organiza-tions. Secondly European organizationsare preparing for the fast IT changesdue to the rise of tablets and strate-gies such as Bring Your Own Device(BYOD). Based on the current platformsand implemented integrated applica-tions the IT reliability and efficiencyis often not ready to support a stableenvironment for developments basedon BYOD and others. A second reasonfor the displayed ranking and also basedon the technology developments is theincreasing usage of IT reliability and ef-ficiency statements such as SAS70 andISEA3402 (cloud security alliance, 2009).6. Business processmanagement andreengineeringBusiness process management (BPM)and business process reengineer-ing (BPR) are ranked in the list of topten concerns in all of the geographies(ranked 6thin Europe and 7thin theU.S.). Since the ‘90s large corporationsleveraged the BPR tools that analyze,design, and automate workflows andprocesses within an organization, andas a result, BPM and BPR have appearedevery year in the list of top concerns inEurope. In global perspective BPM/BPRslowly moved to the 18thplace in 2008and returned to the top 5 managementconcerns in 2009.BPR by definition is ‘process-centric’.More recently BPM has emerged as amore holistic approach focusing onintegrating all aspects of the organiza-tion. It has become an important tool totake advantage of BPR initiatives. BPMis utilized to streamline end-to-endmanagement of the whole enterprise(enterprise-centric). During the eco-nomic downturn as organizations focuson leveraging IT to reduce expenses byenhancing business processes and asthe recovery from the recession getsunderway, corporations large and smallneed to compete in a globally-linkedmarket place, it is expected that busi-ness process management and reengi-neering will remain a top managementconcern globally. The high ranking ofERP as an important application andtechnology (discussed later in thispaper) provides further support for thisimportant consideration.
8 Both the European based information technology (13.86%) and finance/banking/insurance industry (14.27%) have a higher IT budget as percent ofrevenue in comparison with the U.S. (13.33 and 10.63%), which was alsotrue for last year. The majority of the responses came from EU based or-ganizations which did invest heavily in integration across country borders.It is likely that the IT budget as percent of revenue by industry classifica-tion will be “corrected” in the next few years to become closer to the U.S.percentages. This statement is already partly visible when looking at the2011 figures (14.75% for information technology and 14.25% for Finance/Banking).14+13+6+5+5+4+3+3+2+1+1+vFinance/Banking14,27%Computer/NetworkConsulting13,86%Education6,38%External ServicesProvider (DP)5,5%Business Services 5,1%Government 4,31%Pharmaceutical/Healthcare3,19%Aerospace3,5%R&D/VAR/VAD1,75%Manufacturing1,63%Transportation2,94%Europe 2012IT budget as percentof revenue by industryclassification
910+13+5+8+10+2+4+2+2+2+10+vFinance/Banking10,63%Computer/NetworkConsulting13,33%Education5,25%Business Services8,29%Government 9,90%Pharmaceutical/Healthcare 2,33%Aerospace4%Manufacturing2,38%Wholesale/Retail2,25%Real Estate/Legal Services10,63%Transportation2%US 2012IT budget as percentof revenue by industryclassification
10The top five applications and technologies does not differ much between Europeand U.S. The big differences are the higher European ranking for Apps andNetworking. The top five applications and technologies for 2012 are discussed (andillustrated in the Tables) below with comparisons across the surveyed geographies.Looking from a country perspective the ranking of customer relationship manage-ment (CRM) in the U.K. is remarkable (27th). An explanation can be found in a moreinternal organizational focus instead of looking beyond the organizational boarders.For Norway the ranking of apps development (13th) is interesting. Norway is histori-cally a country which is highly digitally cooperative with other countries2. Top Five Applications andTechnology InvestmentsBusiness Intelligence (incl. Big Data)Cloud ComputingApps Development*Enterprise resource planning (ERP) systemsCustomer Relationship Management (CRM)Network CommunicationsBusiness Process Management (BPM) systemsBring Your Own Device (BYOD)*Continuity planning / disaster recoveryCustomer Corporate portals / External Community Platforms*EU2012EU2011EU2010US2012US2011US2010Top Application and TechnologyDevelopment (Europe and U.S.)* New to 20121 1 1823510 171 12 2351412 2111311 1235971316335161644 26556 978910
121. Business IntelligenceBusiness intelligence (BI) remained thetop application/technology (a clearstandout), having been in the top 3since 2003. BI includes big data anddata mining to identify valuable busi-ness trends. Global research conductedby Oxford Economics identified busi-ness intelligence as the 2ndtop tech-nology for the next five years.1Thatresearch also revealed how companiesvalue the ability to analyze informationto rapidly inform decision-makers. AnIBM MIT Sloan Management report re-vealed that companies that harness thepower of big data and analytics outper-form those that do not by 220%.2 An IDC study on the financial impact ofbusiness intelligence identified a 5-yearReturn on Investment of 112%.3European companies ranked businessintelligence as their top applicationand technology development, like theU.S. where it has also been ranked 1stin2009 and 2010, and 2ndin 2006, 2007,and 2008 (Luftman and Ben-Zvi, 2010b,Luftman and Ben-Zvi, 2010a). Sincebusiness intelligence leverages datamining to identify valuable insight, thishigh ranking across these geographiessuggests that IT leaders believe theirorganizations are data rich and insightpoor (Luftman and Ben-Zvi, 2010b).Another reason for the business intel-ligence number 1 ranking is the increas-ing role of best practices such as COBIT(Control OBjectives IT). Having businessintelligence supporting reports withregards to the best practices supportsmanagement control objectives as wellas discovering and correcting errors inthe business.2. Cloud ComputingCloud computing was new to the list ofkey technologies in 2009, when it wasranked No. 17. In 2010 it jumped to No.5 and in 2012 it ranked 2ndin Europe. Atfirst glance this jump in ranking mightsuggest that cloud computing is nowbetter understood and the solutionshave become more mature. Additionally,the Gartner 2011 CIO Survey reveals thatalmost half of all CIOs surveyed expectto operate their applications and infra-structures via cloud technologies withinthe next five years.4Bain & Companypredicts that over the next three yearsnearly 65% of the growth in cloudspending will come from companiesthat make little or no use of the cloudtoday. And industries like retail, transpor-tation, industrials and financial serviceswill demand more private and hybridcloud offerings.5However, the 2012 SIM survey also askedparticipants what percentage of their ITbudgets was allocated to internal andexternal cloud services. On average forall respondents, 5% of IT budgets wereallocated to internal cloud (with 12% ofthe companies allocating 10% or moreof their budgets to the cloud, and 37%allocating less than 1%) and on average4% are allocated to external cloud (with16% of the companies allocating 10% ormore, and 41% allocating less than 1%).While cloud computing is likely to re-main one of the top technologies in thenear future, companies are proceedingits deployment cautiously. Last year wesaw organizations trying to understandCloud and how it can be deployed. Thisyear organizations have initiated pilotsand experiments to gain experience. It isanticipated that next year Cloud invest-ments will continue to rise. The longterm implications of Cloud computingremain unclear; it is analogous to theunderstanding of the long term impactof PCs in the late 1980s.3. Apps developmentAt 3rdplace in the ranking of IT applica-tion and technology is Apps develop-ment. This is a trend which is new tothis year’s survey. In the past year it isrelatively easy to say that Apple hasmade a huge impact in the Europeanmarket with its introduction of theiPhone and iPad and introducing theApps market and later on followedby Google (Android) and (much) laterby Microsoft/Nokia. Results from thisrevolution is that European organiza-tions started to introduce a ‘Bring-Your-Own-Device’ policy and placing majorapplications behind an Apple-iOS and/or Google-Android App (Derksen, 2011).With this development other trendssuch as security started a new phaseas well.Interestingly is that Apple is mostpopular (ChangeWave research, 2011)impacting the mobile & wireless ap-plications because of the platform used(iOS). This change to the platforms ofApple (iOS) and Google (Android) is ex-pected to impact business architectureas well as the applications and technol-ogy used within organizations. Anotheraspect is the implication towards thepreviously discussed application andtechnology investments for whichinterfaces to mobile & wireless applica-tions will be key to support the employ-ees as well keeping a competitive levelof doing business.
134. Enterprise resourceplanning (ERP) systemsEnterprise Resource Planning (ERP)systems is ranked 4rdin Europe and 3rdinU.S. The thought of having an integratedsystem has existed for a long time andremains high on the IT application &technology list. Despite the high level ofimplementation within Europe, ERP isstill one of the top ranked applications &technology trends. This is based largelybecause of upgrades and realizingless demonstrable value from the ERPimplementations within organizationswhereas having more instances of ERPwithin a company is significantly moreexpensive than having one instance.The ERP trend in light of the anticipatedgrowth of cloud computing systems(currently ranked 2ndin Europe and 2ndin U.S.) will be interesting to observe.Cloud computing solutions are typicallyless client based and are currently more‘best of breed’ focused.5. Customer RelationshipManagement (CRM)Customer relationship management(CRM) was 6thin Europe in 2010, 3rdin2011 but 5thin 2012. The increased rank-ing in 2011 might be a response from or-ganizations on the economic downturninvesting more in customer relations/intimacy (Treacy, 1992) but seems to bequickly realized. Related to this responseare the IT management concerns busi-ness agility & speed to market as well asbusiness productivity & cost reduction.The CRM application investment is oftenrelated to ERP both as module of ERP orinterfaced with ERP. Another related top5 ranked IT application & technology isbusiness process management systemsmanaging the workflow between thesystems such as CRM, ERP and busi-ness intelligence. According to GartnerInc., the worldwide social CRM market(which is subsumed in social network-ing) is forecast to reach over $1 billionin revenue by year-end 2012, up fromapproximately $625 million in 20106;this market is projected to total $820million in 2011. It should be noted thatSaaS applications ranked No. 2, and thecurrent leading application is Salesforce.com. The return on investment of CRM isapproximately 3 years7with the averageincreased revenues at 16.3%8.1Oxford Economics, 2011, “The newdigital economy: How it will trans-form business”. http://www.citibank.com/transactionservices/home/docs/the_new_digital_economy.pdf22011 IBM MIT BI report is: http://sloanreview.mit.edu/feature/achiev-ing-competitive-advantage-through-analytics/3Morris, H., 2003, “The FinancialImpact of Business Analytics: Build vs.Buy” , DM Review, (13)1, pp.40-414McDonald, M., Aron, D., op. cit., 2011.5Heric, M., Kermisch, R., and Bertrand,S. 2011, “The five faces of the cloud”.Bain & Company.6Gartner Press Release, “GartnerSays the Market for Social CRM Is onPace to Surpass $1 Billion in Revenueby Year-End 2012”, August 30, 2011,http://www.gartner.com/it/page.jsp?id=17779387Derksen, B., (2011), ‘ Trends inBusiness & IT 2012-2013’, November2011, p.p. 143.8CSO Insights’ 2010 SalesPerformance Optimization Study andhttp://www.destinationcrm.com/Articles/Columns-Departments/Reality-Check/Has-CRM-Lost-Its-Revenue-Mojo-66859.aspx
143. IT BudgetAllocation1. Overall BudgetAllocationConsiderationsThe next wave of the recession mightbe underway, albeit at different rates indifferent geographies. European CIOsreported increased IT budgets in 2012compared to 2011 with 28% of thecompanies in Europe and 48% in theU.S. indicating increases. Over 30% ofEurope and 21.8% of U.S. respondentsindicated that their IT budgets woulddecrease in 2013. 39% of the Europeancompanies will keep the same IT budg-et in 2013 as used in 2012 whereas thisis just 32% for the U.S. organizations.The IT budget forecasts are better forU.S. companies in comparison with theEuropean organizations for the secondyear in a row.2. Percentage of2012/2013 budgetallocated to internaland external CloudcomputingOne of the current application andtechnology trends is cloud computing.We evaluated the budget allocated tointernal and external cloud computing.On average 3.71% of the IT budget wasallocated to internal cloud comput-ing (using cloud technology within theorganization) and 2.74% to externalcloud computing. 21.6% of the compa-nies researched allocated over 10% ofthe IT budget to internal cloud. Usageof external cloud computing is relativelylow with 41% (57% previous year) ofthe European companies spending lessthan 1% of their IT budget on externalcloud usage. 20% of the Europeancompanies have allocated IT budget toexternal cloud with of 20% of higher.34.4% of the organizations investbetween 1 and 5% of the IT budget onexternal cloud. While just about every-one is discussing Cloud, organizationsare just beginning to invest in small/pi-lot initiatives. This is anticipated to growover time.3. IT Budget as aPercent of RevenuesWhile the often-benchmarked averageIT budget as a percentage of revenuefor the U.S. was 3.87 in 2010 (relativelythe same as in the previous SIM sur-veys), it was 3.31 in Europe. In 2011the European IT budget as percent ofrevenues increased to 6.36 whereasU.S. decreased to 3.55. This year’ssurvey showed a decreased figure of6.11% for Europe and increased figurefor U.S. with 4.94%. An examination byindustry reveals that some sectors, suchas Information Technology businessservices, banking/finance, and educa-tion/publishing, have IT budgets ofmore than 5% of their revenue. On theother hand, sectors with IT budgetswhich are less than 5 % of their rev-enue are manufacturing, Government,Transportation and Pharmaceutical/healthcare. Finance/Banking/Insuranceand Information Technology industriesinvest over 10% of revenue on IT. Theindustry breakdown is comparativelyconsistent across geographies impli-cating that the IT support is mostlyindustry based instead of geographic ororganization specific. This also impliesthat usage of benchmark for IT budgetas percent of revenues is globally validbut industry specific (table 3).This section discusses the survey findings relatedto the overall allocation of IT budgets with a furtherdiscussion on staffing and compensation matters.
154. IT Staffing andCompensationConsiderationsIt is clear that staffing (internal and ex-ternal) remains the largest componentof IT budgets (57% in Europe and 56%in the U.S.).The domestic sourcing budgets for in-ternal staff are 21% in Europe comparedwith 33% in the U.S. Offshore internalstaff accounts for around 6% of the ITbudget in the U.S., and 13% in Europe.Europe has a relatively high percent oftheir staff outsourced domestically (11%)when compared with the U.S. (8%). TheEuropean outsourced staff domestic isprojected to stay at 11% in 2013 and theEuropean outsourced staff offshore toincrease to 6% (currently 4%).When it comes to the allocated per-centage of the IT budget for training/education growth is anticipated for2013. The percentage of budget al-located for training/education declinedin 2011 from 2.8 in 2010 to 2.65 in 2011and 2.34% in 2012, but is now expectedto be 2.57 in 2013. Despite this growthe European continent spends less ontraining and education than U.S. spend-ing 3.48 in 2010, 3.23 in 2011, 2.87 in2012 and expected to be 2.99 in 2013.Regarding IT staff salaries, 38% of theEuropean IT employees earned morein 2012 in comparison with 2011, 12%earned less. The increase in IT staffsalaries is less than the U.S. where 60%earned more in 2012 in comparison to2011. But still 2011 was a better yearwith regards to actual IT staff salariesin comparison with 2010, where 62%of the European IT staff salaries wereeither fixed or less. 2013 is projected tobe a better year in which 34% of the ITstaff can expect to have an increase insalary and 51% can expect no change.Lastly, with regards to the rate of IT staffturnover there is surprisingly good staffretention rates across the globe duringthe economic downturn. In Europe staffturnover in 2012 was 4.66%; in 2011 itwas 5.56% in comparison with 5.82%in 2010. In the U.S. staff turnover was5.5% in both 2011 and 2010; this year’sturnover rate was 5.23. This staff reten-tion rate is likely due to the recessionmaking it difficult for staff to find morelucrative positions elsewhere, as wellas the difficulty boomers are having inretiring.
164. IT OrganizationConsiderations1. IT OrganizationStructureThe organization structure of IT canhave a major impact on the perfor-mance of the company. IT organizationstructure is the degree to which it iscentralized, decentralized, or federated.65.6% (see figurer below) of Europeanand 61% of the U.S. respondentsindicated centralized in 2012. IT organi-zation structure, where all IT reportsto a single IT executive (the CIO).Centralized IT organization structurecan better attain more IT standardiza-tion across the organization; for exam-ple, a centralized email system ensuresthe same email features across theenterprise (same look and feel, samecapabilities, centralized archive andback up policies, etc.). Often costs are amajor reason to centralize IT aiming forscale of economics.This section discusses the survey findings related toIT organizational structure and CIOs.260=248=264=12=0=36=100=156=92=16=8=0=12=0=8=CentralizedDecentralizedFederated /HybridMatrixedNetworked65%64%66%3%0%9%25%34%23%4%2%03%0%0%IT organization structureEurope201020112012
17On the other end of the spectrum,there are decentralized organizationalstructures where each business unithas its own IT organization withoutmuch coordination across businessunits (for example, each unit havingtheir own email system, or their ownstandards for database administra-tion). There is not much economyof scale in the decentralized struc-ture, but each business unit has thefull flexibility to focus on the unit’sparticular IT needs (applications andinfrastructure). This can be of mostvalue in large organizations whereIT needs across some business unitsvary greatly. Some universities, forexample, can benefit from decen-tralized IT structure, as each schoolor department might have vastlydifferent IT requirements. 9% of theinvestigated European companiesindicated a decentralized IT structure.3% of U.S. respondents indicated adecentralized IT structure. , a bigdrop from 9.5% in 2009 (Luftman andBen-Zvi, 2010a). This drop could bethe result of a radical response to therecession, in which many of the U.S.CIOs have opted for economies ofscale over flexibility of business unitsin order to rein in their IT expendi-tures. European companies seem tofavor decentralized IT organizationsin order to gain flexibility.A federated (or hybrid) structurecan realize the benefits from bothcentralized and decentralized struc-tures. Corporate-wide standards areenforced in an effort to maximizethe benefits of economies of scale,while providing flexibility to businessunits to maximize unique applicationopportunities at the business unitlevel. 23% of the European compa-nies and 33% of the U.S. companieswere reported as federated in 2012.Organizations with a federatedstructure tend to have a higher align-ment maturity assessment than thosethat are centralized or decentralized(Luftman et al., 2010). With both theeconomic crisis as well as the oppor-tunity to gain a higher level of align-ment it should not come as a surpriseto see these numbers increase over inthe last few years.The IT organizational structures cur-rently used per country are displayedas well. Interesting is that NL, UK,Germany and Spain have a high levelof centralization. In Norway a feder-ated IT organization is dominant,which, possibly, makes IT and busi-ness alignment a lower ranked ITmanagement concern (ranked 5th);U.K. ranked IT and business align-ment 6th. All other countries placedIT and business alignment in the top5 management concerns. Looking atthe increasing centralized and decen-tralized organizational structures itis to be expected that alignment willbe a top 5 management concern fora number of years. The choices fordifferent organizational structures arepossibly a result of cost cutting.730+20+180+30+40=620+90+260+30=600+340+30+30=710+230+70=690+60+180+70=550+370+80=680+220+100=360+640=NetworkedMatrixedFederated / HybridDecentralizedCentralizedNetherlandsBelgiumItalySpainU.K.FranceGermanyNorwayIT organization structureEurope (country perspective)
185. CIO Trends1. CIO ReportingStructure and Role ofCIOAs the majority of time of CIOs is spentin dealing with non-technical issues,the roles of CIOs vary between thegeographies surveyed.Figure: CIO reporting structure Europe(left = 2010, middle and right is 2012)The figure above presents where CIOs(or senior IT executives) report. Previousresearch has shown that, on average,organizations in which CIOs report toCEOs have higher alignment maturitythan those reporting to non-CEO ex-ecutives (Luftman and Ben-Zvi, 2010b,Luftman et al., 2010). CIOs reportingto the CEO is the highest in Asia (68%-2010). Europe is currently decreasingthe direct reporting to CEOs (51% incomparison with 57% in 2011) whichimplies the CEO focuses on other pri-orities for the organization and trustingthe COO and board of directors for theIT part. Historically IT was seen as a costcenter and more often the CIO report-ed to the CFO. This reporting structuredecreased as well which indicates thatIT organizations are less and less seenas a cost center.360=456=408=216=216=168=88=64=80=40=40=40=96=64=104=CEOCFOCOOBUEBoard ofDirectors45%57%51%27%27%21%11%8%10%5%5%5%12%8%13%EuropeCIO reporting structure201020112012
192. CIO TenureThe average CIO tenure is on the rise inEurope as well as abroad. This trend hasbeen clearly illustrated in previous SIMsurveys with the average CIO tenure of4.6 years in 2009, 4.3 years in 2008, 4.1years in 2007, and 3.6 years in 2006.In 2012, the respondents reported inEurope that CIOs held their positionson average 5.99 years in comparisonwith 4.3 years in 2010 and 5.04 in 2011.Even though it is believed that highCIO turnover (short tenure) makes itdifficult for CIOs to address any long-term changes to the business or ITorganization (Luftman and Ben-Zvi,2010b), other research shows execu-tive performance peaks between fourand five years of tenure, after whichthe performance is likely to dip beforeanother performance increase for ex-ecutives with tenure of more than eightyears (O’Shannassy, 2011). The sameresearch shows the optimum executivetenure to be either between four to sixyears, or tenures longer than eight years(O’Shannassy, 2011). It is noted that thisrecent study was for CEOs and boardof directors, with an average tenure of8 years, and not specifically for CIOs. Asimilar study focusing on IT executiveswould be an interesting and welcomeaddition to the body of literature in thisarea.The survey also asked respondents toindicate where CIOs were hired from.The figure above shows a significantchange in hiring the CIO from withinthe companies IT organization to hiringfrom an external IT organization. Thischange might be a consequence of theeconomic downturn as well. For 2011this was likely because an externallyhired CIO is more willingly to imple-ment more dramatic changes duringthe economic downturn. In 2012 an-other change can be seen using morepeople within the organization.380=310=350=540=610=470=40=40=100=40=30=90=within yourcompany’s ITorganizationoutside yourcompany froman external ITorganizationwithin yourcompany butoutside of IToutside yourcompany from anorganization outsideof IT38%31%35%54%61%47%4%4%10%4%3%9%EuropeCIO hired from ...201020112012
203. CIO Time onActivitiesPredictably CIOs spend most of theirtime dealing with non-technical is-sues; 78% in 2012 in comparison to83% in 2011. Interestingly, CIO timespent on software development issuesis around 3%-6% across all the geog-raphies. Relationship management ismost time consuming for the EuropeanCIO’s and is 30% of the CIO time ofwhich 17% towards business and 13%towards IT staff. But despite 30% adrastic reduction of the CIO’s time canbe seen compared to 2011 where 37%of the time was spend in relationshipmanagement. This might be a directresult with the reduced IT budgets andthe well known assignment: less withmore. Within the European area HumanResource Management & Strategy theneeded CIO time is consistent in 2012in comparison to 2011 and 2010.U.S. CIOs spend 18% of their timeon operations and architecture; theEuropean CIOs spend even less time,only 17% in 2012. The time spend issignificantly lower in both Europe andU.S. in comparison with other regions.The time spend on operations andarchitecture might be a good indica-tor of the maturity of this area where itis expected that U.S. and Europe havea high level of maturity as a result ofimplementing ITIL / ISO 20,000.Also interesting is the increase of CIOtime spent in both IT governance andvendor relationship management. Thismight indicate a first shift to other ITgovernance structures using cloudcomputing.
226. IT OutsourcingIT outsourcing has been defined as“handing over the management of someor all of an organization’s IT assets,resources and related services to a thirdparty” (Willcocks et al., 1995). Over thelast two decades, IT outsourcing has notonly been an attractive option for manycorporations, but also subject of signifi-cant academic research (Derksen, 2013).IT leaders globally have long been look-ing to outsourcing as a means to reducecosts as well as to fill skills gaps. The re-cent recession has fueled this even fur-ther; the overall increase in outsourcingin all of the areas is a testimony to that,when considering total outsourcing,which includes offshoring, near-shoring,and consulting of non-internal staff.The No-onshore outsourcing in Europeis expected to decrease to 40%. For allinvestigated activities except helpdesk(e.g., running existing systems applica-tions, building new systems applica-tions and running infrastructure) theIT offshore outsourcing allocation isexpected to be lower in 2013 than in2012. This indicates that building andrunning systems applications as well asrunning infrastructure are activities thata growing number of organizations arelooking to source domestically.2012 European outsourcing is largelynearshore with 64% of the outsourcingbudget allocated within Europe. Indiais the most popular offshore countryreceiving 27% of the European offshoreoutsourcing budget. The other offshorecountries are far less (China, Brazil andMexico 1%). The differences with theU.S. are mainly determined looking atthe European Nearshore activities. U.S.offshore outsourcing budget allocatedby geography for Europe is only 12% incomparison with the 64% realized byEuropean organizations.40+18+19+15+6+2+A35+24+20+12+5+4+PNo offshore outsourcing41%US 35%Maintaining existingsystems applications18%US 24%Building newapplications/services19%US 20%Running infrastructure /Data Center15%US 12%Helpdesk6%US 5%Management consulting2%US 4%IT offshore outsourcing allocation2012 (actual)
23The rather slow recovery from the relatively persistent recession poses new chal-lenges to IT executives around the globe. The relatively consistent top manage-rial concerns cannot simply be addressed through identical responses in differentgeographies; each area has its own set of characteristics, and appropriate responseto management concerns. In other words, unique characteristics of the local mar-kets influence management responses of enterprises operating in a globally-linkedenvironment. While the expected recovery from the recession presents new chal-lenges and opportunities for IT executives in 2013 and 2014, IT executives are setto leverage both global and local IT opportunities (such as increased spending andhiring, business intelligence, virtualization, and outsourcing) to overcome not onlyglobal challenges but also local IT and business challenges.By comparing and contrasting Europe and the U.S., this research has identified themany similarities and dissimilarities that confront managers. Clearly there are re-gional influences that are powerful enough to reduce the influence of global trendssuch as nearshore versus offshore and the investments in applications & technolo-gies with regards to IT reliability and efficiency.In closing, it is important to point out that IT managers are working in a highly inter-connected world, and therefore certain patterns in different geographic locationsare evident. However, this research found while there are many similarities there arealso important local trends that managers must be sensitive to.ReferencesDerksen, B. (2011). Trends in Business & IT 2012/2013: Richten, inrichten & ver-richten met Business & IT., 17nd edition, Business & IT Trends Institute, South-Holland, Leiden.Derksen, B (2013). Impact of IT Outsourcing on Business & IT Alignment, Business &IT Trends Institute, South Holland, Leiden.Luftman, J. and Ben-Zvi, T. 2011. “Strategic Alignment Maturity and CompanyPerformance: A Structural Equation Model Validation,” Unpublished working paper,Stevens Institute of Technology.Luftman, J.N. ( 2003): Competing in the information age: align in the sand, 2ndedi-tion, Oxford University Press.Luftman, J.N., Ben-Zvi, T., (2011): Key Issues for IT executives 2011: Cautious op-timism in uncertain economic times. MIS Quarterly Executive Vol. 10. No. 4 / Dec2011.Poels, R. ( 2006): Beïnvloeden en meten van Business & IT alignment, PhD disserta-tion. University Amsterdam (VU), North-Holland, Amsterdam.Treacy, M., Wiersema, F. (1992): Customer Intimicay and Other Value Disciplines,Harvard Business Review, reprint 93107.Concludingremarks
AuthorsAbout CIONETWe are CIONET, the biggest commu-nity of IT executives in Europe. Bringingtogether over 3500 CIOs, CTO’s and IT directors from wideranging sectors, cultures, academic backgrounds and genera-tions, CIONET’s membership represents an impressive bodyof expertise in IT management. CIONET’s mission is to feedand develop that expertise by providing top-level IT executiveswith the resources they need to realise their full potential.CIONET develops, manages and moderates an integrated arrayof tools and services from the online CIONET platform – theworld’s first social network for CIOs – to a range of offlinenetworking events, conferences, workshops and executiveeducation programmes all tailored to top-level manage-ment. CIONET also provides exclusive access to the latestresearch through regular online and offline publications anda number of value adding partnerships with key players fromthe academic and corporate worlds.Faced with the rapidly changing role of today’s IT execu-tive, CIONET not only helps its members keep up with thepace of change but empowers them to take an active rolein shaping the future of their field, always challenging themwith “What’s next.”What’s next.The importance of the impact of IT on organizations around the world,especially in light of the global economic crisis, has amplified the need toprovide a better understanding of the specific geographic similarities anddifferences of important IT managerial and technical trends. The econom-ic conundrum is especially harsh in Europe, and like in the U.S. it is havinga profound impact on decisions pertaining to IT. Going beyond identifyingthese economic implications is the need to understand the considerationsfor leveraging the impact of transformational new technologies, especiallyas the world becomes more globally-linked. By comparing Europe to theUnited States (U.S.), this paper presents the important information man-agement and technology trends (e.g., management concerns, emergingtechnologies, budgets/spending, organizational considerations) necessaryto prepare IT leaders for the challenges that await them.While the research initiative collected data from four geographic regions(United States, Europe, Asia, and Latin America), this paper focuses on theanalysis comparing Europe and the U.S. The same questionnaire (albeittranslated for the respective respondents), based on the lead authors well-respected and long-running Society for Information Management (SIM) ITTrends survey, was applied across geographies.This paper presents the major findings based on survey responses from 501organizations (195 U.S. and 306 European (mainly West Europe)) in mid toend 2012. Including the other continents 758 organizations were involved.The top five IT managementconcerns within Europe-- Business productivity and cost reduction-- Business & IT alignment-- Business agility and speed to market-- IT cost reduction-- IT reliability and efficiencyThe five most influentialtechnologies for Europe-- Business Intelligence-- Cloud Computing-- Apps developments-- Enterprise Resource Planning-- Customer Relation ManagementProf.dr. Barry DerksenMMC CISA CGEIT-- Head of Architecture, BI &Processes department (Stedin)-- professor at NOVI University ofApplied Sciences-- Research director (Business & ITTrends Institute)-- email@example.comJerry Luftman Ph.D.-- SIM VP Chapter Relations &Academic Affairs & NJ ChapterPresident Emeritus-- Professor & Executive Director-- Global Institute for ITManagement-- firstname.lastname@example.org