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Two for the Price of One: The CIO Should Lead Digital Transformation and Shared Services

Posted by on August 20, 2019

Digital Transformation

Who should lead a digital transformation initiative?

Most often, it’s the chief information officer. According to a recent Lawless Research survey of cross-functional work process integration practices commissioned by Cherwell Software, CIOs are in charge of the initiatives at 52 percent of companies with active digital transformations—nearly double the frequency of the next-most-common leader.

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Guiding digital transformation initiatives is a natural role for CIOs, says Cherwell’s chief operating officer, Steve Rodda. “CIOs are uniquely positioned not only because they know the systems and tools being used throughout the organization, but also because they have the C-suite status that a transformation leader needs. Another big plus is that they know when to adapt their existing systems and tools to fit the digital services the company wants to build or, if it makes more sense, to adapt the services to fit the systems and tools.”

An analysis by MIT’s Center for Information Systems Research (CISR) further underscores the CIO’s importance to digitally minded companies. CISR found that CIOs at companies that are digital leaders tend to think and act more strategically than their counterparts elsewhere and help create a vision for how their companies can use digital to transform the business and grow.

And CISR identified a crucial bottom-line correlation: Companies with digitally savvy IT units—which are generally led by CIOs—are 26 percent more profitable than their less-digital competitors.

The Problem: Shadow IT

Perhaps the biggest obstacle to successful digital transformation (and to companywide IT interconnectivity more broadly) is the purchase of hardware, software, or other IT tools by functional units without the knowledge or approval of the centralized IT department—a practice better known as shadow IT.

Rodda notes that “If shadow IT exists on a large enough scale, it can threaten the achievement of a company’s strategic objectives. Digital transformation is a great example: It isn’t going to get very far if different company functional units are buying or using different IT that doesn’t work together with what other functional units use. Sometimes functional units even buy the same IT without knowing it or continue to use legacy analog tools that the manufacturer doesn’t support anymore.”

A few eye-catching data points highlight shadow IT’s entrenchment in the business world:

  • In the Cloud Security Alliance’s survey of cloud adoption practices, just 8 percent of companies knew the scope of shadow IT usage at their companies and 72 percent said they didn’t know but wanted to.
  • Nearly all—90 percent—of CIOs participating in the Logicalis Global CIO Survey reported that business-unit managers bypassed them at least occasionally to purchase IT.
  • More than half (56 percent) of respondents to the NetEnrich 2019 Cloud Adoption survey said that 20 to 40 percent of enterprise technology spending at their companies was for shadow IT initiatives.
  • About one-third (31 percent) of employees participating in SailPoint’s 2018 Market Pulse Survey said that they or their colleagues had purchased and/or deployed software without the IT department’s help—an 11 percent increase over the preceding four years.

The pervasiveness of shadow IT means that companies must contend with multiple systems and processes that are often redundant and usually don’t interact with each other. This literal disconnect, in turn, can have a hugely negative impact on employee and end-customer experiences. “Managing IT spending, maintenance, and security under these circumstances,” says Rodda, “can be a nightmare for centralized IT departments—and wreak havoc on even the best-planned digital transformations.”

Unfortunately for CIOs, both anecdotal and empirical evidence suggest that shadow IT isn’t going to disappear anytime soon. On the individual level, for instance, many employees prefer the rapid gratification of using an off-the-shelf, unapproved app to the frustrating, bureaucratic internal approval process. Dislike of IT departments is another widespread phenomenon that can keep such purchases off the radar.

On the unit level, functional units typically believe that they know their IT needs better than anyone. Hence their inclination to purchase systems or tools that focus on functional unit-specific solutions, rather than those that could integrate with other functional units’ systems and thus add more value for the company as a whole.

Scott Gainey, the chief marketing officer at Cherwell, adds that tech specialists at functional units sometimes insist on getting the latest, most innovative IT available that can help them complete their own projects, without even considering whether it would mesh well with other functional units’ IT. Gainey notes that this scenario also reflects functional units’ desire to protect their autonomy and identity within the broader organization.

The Solution: Shared Services

If companies are serious about implementing a digital transformation and, more broadly, integrating their IT systems and processes to work seamlessly across functional units, it’s critical that they wrest control from shadow IT. The Lawless Research survey reveals that the benefits of doing so extend well beyond stronger purchasing discipline and better organizational collaboration:

  • Digital transformation initiatives are much more common at companies with highly integrated cross-functional work processes than at those with low-to-medium integration.
  • Highly integrated companies report significantly higher employee productivity.
  • Employees at highly integrated companies are much more enthusiastic about their jobs and feel a much greater sense of accomplishment.

There are a number of ways to overcome shadow IT, with shared services topping the list. Steve Rodda recommends several key steps that companies should take to establish an effective shared services operation. As with digital transformation, it all starts with the CIO.

Put the CIO in charge. The same factors that make the CIO the best fit for leading the digital charge—C-suite status and a comprehensive understanding of the company’s IT needs across functional units—apply to shared services as well.

Start with a clean slate. Given that the status quo (i.e., shadow IT) needs to change, it’s vital to start fresh by clearing out old processes and musty mindsets. Aim for the ideal result and consider all ways to achieve it.

Establish a cross-functional leadership team. With the CIO at the helm, the shared services leadership team should have senior-level members not only from IT, but also from the human resources, facilities, and finance departments, as well as representatives of internal customer groups such as sales and research & development.

Emphasize internal customers’ needs. Raise the odds of success by discarding the assumption that the functional units’ needs (which helped to create the shadow IT mess in the first place) are the top priority. Focus instead on what internal customers require for seamless interaction among processes.

Determine baseline services. Create a map of the baseline services to be provided (e.g., onboarding new employees) as well as who should provide them and how they can be streamlined.

Keep it quick, easy, and simple. Providing employees with a hassle-free user experience is integral to the success of any shared services effort. As Rodda puts it, “’Quick, easy, and simple’ should be the mantra at all times.”

Build a better service catalog. As the gateway to shared services for most employees, the service catalog should be the embodiment of “quick, easy, and simple.” Build it that way and they will come.

Set metrics, track success, repeat. Measure the progress of your initiative both to track its success versus the status quo and learn as you go.

Strive for continuous improvement. Keep looking for ways to make shared services better and more efficient to improve results—and stay ahead of your competitors.

The Difference Between Success and Failure

Chief information officers are the go-to leaders of digital transformation initiatives. And for good reason: They have C-level visibility and respect, and nobody knows their company’s IT needs and issues better than they do.

These same characteristics also put CIOs in the ideal spot to fight back against shadow IT—the top threat to digital transformation’s success. Their ability to marshal technology strategy and procurement across functional lines makes them the natural choice to head up the organization’s shared services group.

In the words of Cherwell’s Gainey, “Whether you’re talking about a digital transformation or shared services, having a CIO lead the charge can make all the difference between success and failure. It’s not just the best option, it’s the right option.”

Want to learn more about how CIOs are transforming the way we work? Download the study on work process integration.

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