Tech Decentralizes Out of IT

At a tipping point for IT organizations and CIOs, more technology workers are being employed by business units than are being hired by IT departments, according to new Gartner research.

This shift will have major ramifications for IT budgets, the influence of CEOs, and the roles of IT leaders as future-oriented organizations where technology underpins the business infrastructure itself, and many workers in every department reach their first jobs with great technical skills.

“CIOs can no longer afford to fully own organizational technology,” says Darren Topham, senior analyst at Gartner. “Actually, it’s dangerous.”

Topham says these skills in a rising workforce are a major reason behind this change, joining another major force that has already been in the works for some time – the availability of apps for purchase, licensing and use by individual business departments – in what was more commonly known as Shadow IT. Tech savvy for entry-level workers is a new trend driving change.

“This is not just in computer science and STEM subjects,” Topham says. “These are the arts and humanities, too.”

Topham presented the research findings and some recommendations for CIOs in a recent webinar.

Between March and May 2020, Gartner looked at total jobs posted in the top 12 countries ranked by GDP and found that in the fields of data science and data analytics, 306,783 professionals were hired by IT departments while 697,140 were hired by other business units. Gartner found similar discrepancies in employment numbers for AI and RPA professionals—business units hired more of these professionals than their IT departments.

Why do business units do this? Do they have a problem with how the IT organization works? Not according to Gartner’s conversations with stakeholders.

Business units feel empowered

“It’s not because they hate IT or think IT is too slow or they have a bad relationship,” Topham says. “Simply because they can. They feel empowered. They feel close to their customers and closer to their needs.”

The two main reasons these business unit leaders stated that they obtained or developed a solution without support from the IT department are as follows: “We have a better understanding of our requirements than the IT department does”; and “We have the capabilities and resources to do this ourselves.”

When Topham asked CEOs last year how much shadow IT costs their organizations, their guesses tended to be high, ranging from 5% to 6% of total technology spending. He also asked business units what they were spending. The real number of technology spending outside of the IT organization and IT budgets is more like 36%, or six times what CIOs think.

But the fact that the number was so high was only part of the problem for CIOs. Another piece that might irritate IT leaders is that 36% of the technology budget is for discretionary projects.

“Almost all of it is spent on growth projects,” Topham tells InformationWeek. “While the majority of CIO budgets are non-discretionary. CIOs do not have much wiggle room.”

On average, about 70% of the official IT budget goes to the normal activities and investments of running a business, most of which are nondiscretionary in the short term, according to Gartner.

Another frustrating possibility is that IT organizations will be required to take charge of formal management of these shadow IT projects once every eight weeks, according to Gartner research.

However, Gartner does not envision a diminished CIO or IT role. Instead, Topham says, the CIO will be called in as the coordinator for spending this technology across the business. In order to evolve into this emerging role, these IT leaders need to change their approach to the changes already underway in their organizations.

The first steps of transformation management

Gartner recommends four initial steps for managing this transition and building a coordination approach:

  • Bridging the digital talent gap for the entire organization, not just IT
  • Reduce digital friction and improve employee productivity
  • Adopting dynamic governance that balances autonomy and control
  • Redistribution of leadership responsibility for technology creation and ownership

“The first step is to start the conversation,” Topham says. “CIOs need to start having this conversation across their organizations because if they don’t, they are setting themselves up for failure.”

If they try to control everything, they will find themselves helpless. Instead, CIOs need to help the rest of the C-suite understand how to manage their technology portfolios. Topham says there will be a range of provisions as organizations consider the operational impacts, legal compliance and risk profiles of the organization of ownership of different technologies.

who is in Charge?

It’s not just CIOs who need to evolve. Topham notes that CEOs and boards of directors have always wanted a “one chokehold” when it comes to technology and the inevitable problems that arise.

“But that is no longer the case now,” he says, noting the benefits of the new approach from more efficient use of underutilized resources to better coordination to greater effectiveness of technology across the enterprise.

“But if it’s not managed and scaled in the right way, CIOs are setting themselves up for failure, because all of a sudden they’re going to be responsible, accountable and maybe even penalized for things they have absolutely no power and no room for.”

But just as when there is a problem with an employee, the manager may ask HR to step in, and the approach will likely be the same with the CIO and the IT organization.

“Yes, things will go wrong. You will commit compliance breaches or things will fall apart,” Topham says. “You will communicate with the IT department to facilitate and assist in the rectification process. The nature of the partnership changes somewhat. No matter what’s to blame, you help fix it. That’s what you are there for.”

This will be a constant adjustment for IT leaders and organizations as the transformation continues in the coming months and years. Topham has one last piece of advice for CIOs as they head into this new era.

“Doing nothing is not an option,” Topham says. “Neither are taking some sort of ‘this is mine’ command-and-control approach. Doing nothing or doing what we’ve always done is no longer a safe place to retreat.”

What to read next:

How the roles of CIOs will change: the future of work

Where IT leaders are most likely to spend the budget in 2022

The role of the CIO in innovation


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