March 13, 2018

The Hackett Group: Lack of IT Capabilities Preventing Organizations From Unlocking Full Value of Digital Business

MIAMI & LONDON–(BUSINESS WIRE)–Support for enterprise analytics and development of IT talent are two
top priority areas for CIOs in 2018, as companies seek to unlock the
value of digital business, according to new key issues research from The
Hackett Group
, Inc. (NASDAQ: HCKT). But companies’ efforts to deploy
and derive value from digital tools are likely to be handicapped by low
capability maturity in these two key areas and a lack of initiative to
improve over the coming year.

The research also found that IT budgets are expected to rise by 1.8
percent in 2018. In addition, IT work and FTE resources are expected to
shift in 2018, growing most in business units and centers of excellence,
largely in support of digital transformation efforts. Meanwhile,
outsourced FTEs are expected to contract. At the same time, IT
organizations are shifting allocation of their operating budgets away
from running operations and towards planning and building new systems.

A complimentary version of the research is available for download,
following registration, at this link:

Strategic Disconnects in Analytics & Talent

At the heart of the challenge of unlocking the value of digital business
is a strategic disconnect between expectations and capabilities, the
research found. Nearly three out of four study participants in The
Hackett Group’s 2018 Key Issues research agreed that digital
transformation will fundamentally disrupt their industry and the
competitive landscape in which they operate, while 82 percent expect it
to fundamentally change the operating model of their business. But the
majority (60 percent) lack confidence in the resources and competencies
of their businesses to execute their transformation strategy. Even more
concerning to IT leaders, 64 percent of respondents express a lack of
confidence in their IT organization’s ability to support transformation

Enabling the enterprise-wide use of analytics for decision support is a
top enterprise priority and business support objective for IT in 2018.
Study participants predict a mainstream (widespread) adoption rate of
advanced analytics technology over the next 2-3 years that is 11x the
current adoption rate – the highest growth rate of any digital tool.
Data visualization tools, and adjunct of analytics, had the
second-highest growth rate. However, enterprise analytics capability
improvement is not among IT’s most common planned improvement
initiatives for 2018 – only 29 percent report ongoing or planned
analytics capability improvement efforts in the coming year.

The Hackett Group’s research recommends that IT organizations focus on
improving enterprise analytics capabilities in 2018, including stronger
governance around data management and architecture practices as well as
supporting the foundational tools that help enable analytics in the
business. IT leaders need to field more resources, build more analytics
platforms, and manage the data to feed machine learning algorithms, to
help companies unlock the value hidden in enterprise data.

The Hackett Group’s research also found that in IT and across the
enterprise access to talent will rival cybersecurity as the greatest
business threat within the next two years. Aligning talent with future
business needs is a top three priority for IT. However, the research
again found that efforts to improve talent are not getting commensurate
attention in 2018. Only 45 percent of study respondents across the
enterprise have talent improvement initiatives underway or planned, and
only 21 percent of IT leaders report plans to align IT skills and talent
with changing needs of the business.

It’s critical that IT organizations improve their ability to develop and
acquire talent, particularly in data management, advanced analytics and
customer-centric design, the research found. Many companies are seeking
to design services, products and delivery channels to enable digital
customer experiences, requiring IT to have more customer-oriented design
experience, including customer journey mapping and design thinking.

“These two areas are fundamental to digital transformation, and the wide
chasm between their perceived importance and the ability to implement is
very disconcerting. But it’s not hard to understand,” said Richard
Pastore, The Hackett Group senior IT research advisor. “Implementing
analytics is taking a back seat to more fundamental IT infrastructure
efforts, like business platform modernization. And the challenges in
implementing analytics effectively, including data architecture and
management, are deeply embedded in enterprise infrastructure.”

According to Scott Holland, The Hackett Group principal and Global IT
Executive Advisory Practice leader, “The impact of digital
transformation on talent is also a critical factor. IT roles are being
transformed by digital – more than one in four IT roles are already
affected. Current staff are aging out and millennials show little
interest in employers that have not fully embraced digital, and in
working for companies located outside of technology innovation centers
such as the U.S. West Coast. Data savviness, agility/ability to change,
and creativity are increasingly critical skill sets that are lacking in
most IT organizations. Companies that don’t address staffing challenges
more aggressively will suffer, as they fall behind competitors in
leveraging new tools, processes and business models.”

Shifts in IT Spending

IT organizations will be getting funds in 2018 to fuel transformation.
Study respondents expect operating budget increases of 1.8 percent in
2018. This is a significant contrast with other business services areas
covered by The Hackett Group. Finance, procurement, and HR are all
expected to see flat or declining budgets in 2018, despite projected
revenue growth of 3.6 percent.

The Hackett Group’s research predicts a significant shift in IT spending
allocation, away from operational or “run” processes such as application
and infrastructure maintenance, and towards processes associated with
planning and building systems. Spending on plan and build processes is
expected to rise by just over 5 percent, while run process spending is
down 0.6 percent, a significant reduction given that is currently the
largest spend category, representing 76 percent of IT’s annual operating
budget. This shift should be an ongoing process, The Hackett Group
recommends that IT organizations constantly strive to improve the
efficiency of “run” processes, to self-fund their own transformation

The research shows a shift in the location of IT resources as well. The
largest 2018 increase in IT staff and workload will occur in the
business units, not in corporate IT. IT leaders anticipate a reduction
in staff that are outsourced, with the outsourced workload remaining
relatively flat.

The Hackett Group’s 2018 IT Key Issues research, “Driving Value from
Transformation,” is based on results gathered from more than 160
executives in the US and abroad, most at large companies with annual
revenue of $1 billion or greater. A complimentary version of the
research is available for download, following registration, at this link:

About The Hackett Group

Hackett Group
 (NASDAQ: HCKT) is an intellectual property-based
strategic consultancy and leading enterprise benchmarking and best
practices digital transformation firm to global companies, offering
digital transformation including robotic process automation and
enterprise cloud application implementation. Services include business
transformation, enterprise analytics, working
capital management
 and global
business services
. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information technology,
including its award-winning Oracle and SAP practices.

The Hackett Group has completed more than 15,000 benchmarking studies
with major corporations and government agencies, including 97% of the
Dow Jones Industrials, 89% of the Fortune 100, 87% of the DAX 30 and 59%
of the FTSE 100. These studies drive its Best Practice Intelligence
Center which includes the firm’s benchmarking metrics, best
practices repository and best practice configuration guides and process
flows, which enable

The Hackett Group’s clients and partners to achieve world-class

More information on The Hackett Group is available at:,
or by calling (770) 225-3600.

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