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Delivering Digital

The Rise of Business-Managed IT

It’s not 'shadow IT' anymore, it’s ‘business-managed IT’ and more winning enterprises are using it to improve customer experience and time-to-market

Decisions about technology spend are gravitating closer to the business leaders who depend on digital capabilities to drive revenue. And new research out in the last week shows that the companies who embrace business-managed IT are reaping competitive benefits as a result. The research challenges traditional CIO and IT assumptions that shadow IT is an inherently negative practice that should be discouraged or eliminated.

For years now, many CIOs and other technology leaders have looked down their noses at technology purchases made by lines of business. Known interchangeably as shadow IT or rogue IT, these buying patterns have been trashed for introducing more risks, added costs, and more complexity to the technology stack.

However, the Harvey Nash/KPMG CIO Survey 2019 released last week says that many organizations of late have undergone a “radical rethink” of their philosophy toward shadow IT. Reframing the practice as “business-managed IT,” the report says that these organizations are using it as a tool to empower lines of business, reduce red tape, and generally serve customers better.

According to the survey results, these business-managed technology purchases are bringing with them some significant upsides.

“The supporting evidence is quite clear–organizations that actively encourage business-managed IT are much more likely to be significantly better than competitors in a whole host of factors, including customer experience and time to market for new products and employee experience,” the report explains.

For example, companies that encourage business-managed IT are 52% more likely to beat competitors in time to market, and 38% more likely to provide positive employee experience than those who don’t.

Today more than two-thirds of organizations either encourage or allow business-managed IT. The report states that looking at the numbers compared to results from previous years, the statistics suggest that business-managed IT spend may be “leveling out” this year. However, the authors suggest that their findings may not provide full optics into the phenomenon of business-managed IT.

“We believe it’s actually increasing,” they write. “What we are probably seeing here is a redefinition of what ‘spend outside IT’ means.”

The report found that digital transformation is driving technology leaders to increasingly collaborate with lines of business. So, many times IT may be managing a technology project that has its budgetary roots elsewhere, and vice versa.

Meantime, even among the remaining third that have policies banning business-managed IT, 62 percent report that it still persists at their organizations. At the end of the day, many business managers frustrated with centrally managed IT projects that aren’t helping them innovate fast enough are using operating budgets to fund SaaS projects that fly under the radar, even when it breaks the rules.

“If you don’t think this is happening in your organization, think again,” write Nathan Furr, Didier Rouillard, and Andrew Shipilov in a piece for Harvard Business Review earlier this month. They offered up an anecdote of a VP at a major retailer who got called to the mat by a CIO for paying for a cloud-based CRM with a personal credit card. In her defense, she informed the CEO that she requested help from the CIO to no avail—the earliest she’d have gotten something similar would be in three years. Meanwhile, since making the purchase she was growing revenue by $1 million a month.

As such, they suggest that CIOs need to rethink their roles as the owners or controllers of technology into being the orchestrators of an ecosystem of suppliers.

“IT becomes a partner and a coach to the line of business, helping them to select vendors, properly design APIs, and ensure an appropriate level of security,” they explain.

It’s this kind of balanced approach that is going to facilitate digital transformation in the enterprise, which depends on embedding technology capabilities deeper than ever into cross-functional teams, while still providing the governance and technical leadership necessary to get the most out of investments.

“Whilst it is vital to minimize the risk that un-vetted solutions may bring from a security perspective,” said Dan Marsh, CIO of UK and Europe for AIG, in his reponse to the survey, “greater alignment and collaboration between IT and business teams can help drive business performance improvements.”

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