A tough economy is likely to clamp budgets and limit resources in 2015 but pressure on CIOs to deliver key business solutions will continue to rise. They will need to draw on an array of skills if they're to come out of the year smiling.
The increasing penetration of digital technology throughout the enterprise continues to put pressure on CIOs to quickly deliver robust, secure and innovative services to both clients and employees. Despite the rising strategic importance of CIOs, many will struggle to secure the budget, resources and staff needed to meet their organisation's objectives. A backdrop of demanding local economic, social and political conditions will further hamper CIOs.
Successful CIOs in 2015 will need to be business visionaries, technology innovators, strong leaders, effective managers and persuasive negotiators.
South Africa's moribund economy, expected to grow at around a meagre two percent this year, will dampen CIO budgets as companies struggle for earnings growth, says Telkom group CIO Len de Villiers.
"Operations' expenditure increases are likely to be in single digits, with big organisations probably budgeting for a two to three percent rise. It's going to be very challenging," he says. The recent ITWeb Brainstorm CIO Survey found that half the IT budgets of the 158 companies canvassed were lagging inflation.
"CIOs will have less money and more to do in 2015," adds Suren Naidoo, CEO at consulting firm CIO Consult. Many of the challenges facing CIOs will remain the same as in previous years, but the budget needed to address them is likely to contract because of the slow economy and increased competition experienced by local businesses, says Naidoo. He adds that South Africa's constrained and often erratic electricity supply will continue to hurt local businesses, especially those competing in global markets. "The CIOs of these organisations are likely to turn increasingly to service providers that can guarantee the delivery of critical services," says Naidoo.
Weak currency
Telkom's De Villiers, who was previously CIO at Nedbank, Absa and Transaction Capital, adds that South Africa's weak currency will put extra strain on CIOs' budgets. "Most of our long-term software licence agreements are priced in US dollars. You have to negotiate extremely hard to get a good deal on an enterprise licence agreement. Forward cover is also essential," he adds.
Rising expectations from fellow senior executives will exert further strain on CIOs. A lot of organisations have been spending heavily on IT for many years and are now putting the squeeze on CIOs to deliver better returns on their investment. "Technology is widely assumed to be getting cheaper and organisations want to see this on their bottom line," notes De Villiers. Some CIOs will have to jostle with senior executives from other divisions in the organisation to secure budget allocations. IT is becoming increasingly important elsewhere in the organisation, especially in sales and marketing departments, and spending previously allocated to CIOs is being earmarked for others. The Gartner research group reckons that by next year, chief marketing officers will be spending more on IT than CIOs.
De Villiers points out that CIOs need to deliver more cost-effective and efficient operational systems and processes while also providing their organisations with vital strategic solutions necessary to grow the business. The fast-rising importance of mobile and social media platforms as well as big data, cloud computing and analytics systems has thrust CIOs to the forefront of future business strategies. "CIOs will need to maintain, improve and sometimes decommission their legacy systems while meeting the demands of the business for new agile and innovative solutions," remarks De Villiers.
Alignment of IT resources and applications with the rapidly changing demands of the organisation continues to be a bugbear for many CIOs. Such is the extent of this challenge that Gartner predicts that many organisations will adopt a 'bimodal' approach to IT management. This will result in some CIOs solely addressing core systems while others focus on applying digital technology to exploit new markets and opportunities. Few South African companies have already split the role of the CIO into two separate functions. Most local CIOs will need to juggle the demands of the two roles.
South Africa's long-lamented IT skills shortage will continue to put a brake on the rapid development and deployment of critical business solutions. The need to meet employment equity targets is a further challenge CIOs must address when looking to hire, retain and promote IT staff. "The transformation agenda places big demands on CIOs. There's a huge shortage of black IT personnel, particularly black women, especially at senior levels. Often CIOs need to identify emerging black talent, give them a chance in senior positions and provide plenty of mentoring and support to help them succeed," says De Villiers.
Staff retention
"A strong retention strategy is also vital. Lock-in measures such as share options and premium salaries are needed because black IT professionals are in strong demand," he adds.
De Villiers points out that Telkom, like many other big South African organisations, runs an extensive recruitment programme for IT graduates. "We lose about 50 percent of the IT graduates we recruit within two years. The situation was the same when I was at Nedbank and Absa," he says.
Lack of IT skills and resources is likely to accelerate the outsourcing of applications, systems and facilities. More CIOs are expected to contract vendors of cloud computing and Software-as-a-Service solutions. This will require greater focus on managing service level agreements with suppliers. Greater standardisation of technology and fierce competition among vendors has reduced the length of many of these agreements and enabled organisations to more easily switch to alternative suppliers. Sourcing products and services, negotiating vendor contracts and managing supplier relations are fast moving up the CIO's agenda. Rising reliance on external consultants and contractors to implement critical systems and provide scarce skills and expertise will place further demands on CIOs.
We want cloud computing that provides us with reliable, variable, consumption-based business process-enabling services.
Toni Serra, Nampak
Naidoo at CIO Consult points out that increasing competition among IT service providers, many of which have recently invested heavily in technology infrastructure, will sharpen the prices charged for such outsourced services. "CIOs will be able to leverage the situation and ensure they get more bang for their buck. The market is maturing and this provides CIOs with an opportunity to conclude SLAs (service level agreements) on attractive terms," he says.
CIOs, however, don't always hold the whip-hand in negotiations with service providers. Nampak CIO Toni Serra bemoans the lack of flexibility and responsiveness among suppliers of cloud computing solutions.
"We want cloud computing that provides us with reliable, variable, consumption- based business process-enabling services," says Serra. Most cloud computing service providers are offering little more than hosted services, he adds. Serra reckons some service providers are able to deliver what he requires, but are reluctant to change their business model. "It is very frustrating," he adds.
Collaboration
Nampak, like many large organisations, often acquires and sells businesses. To support its business strategy, the company wants a service provider that will allow it to scale up and increase the number of users it provides with IT services, and also scale down and drop the volume of users, quickly and economically. Serra is hopeful he will be able to find willing service providers soon.
Collaboration and alliances may provide CIOs with further opportunities and responsibilities. Ashwell Jenneker, CIO at Statistics SA, says his organisation is looking abroad to other statistics authorities to share information and business practices. Jenneker notes that while cooperation between Statistics SA and other State organisations has been modest, there are growing ties with statistics authorities elsewhere in the world. Statistics SA is increasingly looking to IT to improve its business practices and create new opportunities. "We're looking at mobile technologies to improve the collection of data and are investigating ways of delivering statistics that are more exciting and interesting to consumers," says Jenneker. Demands on CIOs during 2015 will be substantial. It's unlikely, however, that the year will be dull.
This article was first published in Brainstorm magazine. Click here to read the complete article at the Brainstorm website.
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