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IT priorities study finds CIOs kowtow to Wall Street, not users

A global study of Fortune 1,000 CIOs finds that companies are hobbled by legacy systems and a focus on short-term gains.

Fortune 1,000 CIOs are enthralled by Wall Street at the expense of users. That's the conclusion of a scolding survey on IT priorities from Accenture Ltd., the world's largest management consulting and technology services firm.

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Under pressure from investment analysts and other Wall Street observers, Accenture posits, "CIOs are undertaking superficial improvements rather than making fundamental changes to meet the growing demands of users."

The tendency among CIOs to make small adjustments rather than sweeping changes comes at a time when consumers, business users and citizens are both more technologically savvy and demanding more from IT leadership -- a trend Accenture calls user-determined computing. New York-based Accenture said the strategy has the potential to create a dilemma in 2008 for CEOs and CIOs evaluating IT investments.

"CEOs and CIOs must decide between offering technology-literate customers new products and services that are truly unique, versus receiving a short round of applause from investment fund managers for holding the line on spending," said Bob Suh, Accenture's chief technology strategist.

The IT priorities study, released Jan. 15, is based on online responses from the most senior IT executives at nearly 300 Fortune 1,000 companies in North America, Europe, Asia Pacific and South America. The combined annual revenue of the companies is $5.3 trillion.

Given the panic in the U.S. and global markets in the week since the study came out -- and the looming threat of an economic recession -- CIOs and CEOs probably deserve a round of applause for holding the line on spending from more than just those investment fund managers.

Unwilling to pull the plug

But the Accenture study suggests that companies cannot afford to ignore customer demands, even in a rough economy. The inclination by CEOs and CIOs to please Wall Street by holding the line on IT spending comes at the same time that low-cost, emerging market multinationals are setting the bar higher, Accenture states. As consumer technologies outpace technology deployed at the office, employees are circumventing IT policy and bringing their personal technology products into the workplace.

One reason many IT departments do a mediocre to poor job of serving the business or their users is because they are hobbled by legacy systems.

According to the IT priorities study, IT teams still spend 40% of their total time running and fixing existing systems. Many legacy systems at large companies have been on life support for more than a decade because CIOs are unwilling "to pull the plug on outdated systems," the study found. Indeed, on average 60% of all enterprise systems in the study were fully depreciated.

High performers do better
The Accenture study found that companies that consistently perform higher than their peers in revenue, profit growth and shareholder return also have IT organizations that surpass the norm.

• "High-performer" CIOs spend 19% less time on running and fixing operations than other CIOs.

• More than 25% of application interfaces focus on the customer in high-performer organizations, compared with 15% in low- and average-performing companies.

• High performers are ahead on service-oriented architecture (SOA): 35% of the application portfolio in high-performing organizations is dedicated to composite applications built using SOA; 45% of new application functions are built based on the use and reuse of existing services.
Phil Murphy, an analyst at Forrester Research Inc. in Cambridge, Mass., said there is no question that legacy applications have become an albatross for many IT departments, and more recently for the CIO.

"I've seen the issue elevated to the CIO, because a big chunk of the IT spending goes to the chunk of what the company already has," said Murphy, a member of Forrester's CIO group.

The big focus for IT organizations just a few years ago was finding a solution that could extend an application out to the Web, Murphy said.

"Now it's more, 'Oh my God, I thought I was going to replace all this stuff. I'm not now. What do I do with it? How do I make sense of it?'" Murphy said. "We've lost the knowledge about how they were built, and now we are afraid to fix them, and oh, yes, it runs the business."

Moreover, given the pace of change, legacy applications now include things written 24 to 28 months ago.

As long as IT spends a majority of the IT budget on "lights-on" operations and maintenance of existing applications, CIOs will be criticized by business executives and users for not responding fast enough to business needs, Murphy said.

Failing on customer service

Indeed, the Accenture study reveals that while IT department are busy with maintenance, customers are getting short shrift. Among the findings that should give CIOs and their bosses pause are the following:

  • Twenty-two percent of customer interactions, 19% of supplier interactions and 33% of employee interactions are conducted online and processed automatically.
  • Only 11% of information system interfaces focus on the customer.
  • Eighty percent of organizations are failing to gather detailed customer information, and 84% are failing to make the information accessible to decision makers and line staff.
  • Only 35% of enterprises around the world are committing mobile applications to a major part of their business, and only a fraction look seriously at collaborative tools such as wikis.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer.

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