IT Powerhouses: key reasons why “digital intensity” is good for business

They are faster, generate higher revenues, are more profitable, and achieve higher market valuations. For leading businesses, investment in new IT and Digital tech has a direct impact on the bottom line.

 

 

You can sum up the modern business environment in two words: on demand. Customers expect more than ever before. More data. More insight. More detailed reports. More flexibility. More personalisation. And they want it now.

That’s a great opportunity and a huge challenge. The businesses that embrace the new normal, that anticipate their customers’ needs and exceed them, will thrive – but to be able to do that requires a very different approach to the business models of old.

Traditional businesses are cautious and careful. But they’re being eclipsed by businesses that move quickly and take risks. Sometimes they fail. But when they do fail, they fail fast.

The benefits are measurable. McKinsey's annual survey of B2B firms’ digital strategies and infrastructure show that “digital leaders” – that is, organisations that prioritise IT investment, deliver consistent customer experiences online and offline, use data to empower the sales force, and provide valuable insights – outperform their rivals. Digital leaders generate 3.5% more revenue, are 15% more profitable, grow five times faster, and deliver 8% more shareholder returns than the rest of the B2B field.

CapGemini found similar patterns in its studies of companies’ digital strategies, finding that companies in all kinds of sectors with “stronger digital intensity” derive up to 9% more revenue from their physical assets, are up to 26% more profitable, and achieve 12% higher market valuations than their peers.

Lights, camera... inaction
Claranet’s annual survey of senior IT and Digital decision makers found a familiar scenario: a great deal of time and money is spent just keeping the lights on. Respondents spent more IT resources on IT operations projects (16% of the IT department’s time) or general maintenance (14%) than on innovation (12%), with a further 12% devoted to responding to user problems.

It’s a historical problem – IT was traditionally a back-office department, not the engine of business that it is now – and ComputerWorld reported IT managers’ frustrations back in 2013, noting that some companies spent as much as 90% of their entire IT budget on maintenance. Of course, maintaining day-to-day operations is important, but it doesn’t help drive the business forward. So it’s no surprise that the IT decision makers’ key priorities for the future include improving application performance and reliability (34%), reducing expenditure (30%), and enabling business agility (29%).

Many of them will do that via cloud computing. The benefits of having applications and capacity available on-demand, and of not having to worry about keeping software up to date or maintaining legacy hardware, are already widely accepted. But there are other benefits too, and they’re the kind of benefits that can persuade even the most conservative, risk-averse board to embrace elastic computing.

“An all-seeing, all-knowing IT department can become the engine that pushes the entire business forward.”

Ahead in the cloud
For the wider business, the main benefits of cloud-based systems and services are big data and the ability to fail fast. The first eradicates that bane of so many IT managers’ lives, the dreaded data silos where incompatible legacy systems keep their secrets and refuse to share them.

By migrating data to a platform that can share it across departments, businesses can deliver a seamless customer experience while analysing that data to discover unique insights, such as marketing effectiveness and ROI. Data can help identify the most important customers, the underlying customer trends, and the most effective marketing strategies; it can reduce waste and better target resources of all kinds across the business.

An all-seeing, all-knowing IT department – a department that isn’t focused on managing the status quo, but on deriving real benefits from the mountain of data the business generates every single day – can become the engine that pushes the entire business forward.

And that’s where failing fast comes in. When you’re paying the bills for hardware and support then of course you’re going to be risk averse: getting it wrong often means ending up with redundant hardware or, even worse, redundant people. But with elastic computing resources can come and go in much the same way as turning a tap: it’s there when you need it and gone when you don’t.

With that flexibility comes scalability, and that’s where fail-fast businesses can outwit their conventional rivals. There’s no danger of falling victim to your own success, of seeing systems and servers overwhelmed by sudden, unexpected demand. When you need more capacity you just turn on the tap.

The vision thing
Many IT managers are clearly frustrated with the status quo: just one in ten EU businesses state that their applications and infrastructure meet their requirements for stability, reliability, and responsiveness. That’s hardly a surprise, because while some 80% of businesses outsource at least some of their IT infrastructure, the actual spend on such outsourcing has barely changed at all. IT departments are largely tasked with keeping the lights on.

In too many businesses it seems that IT is a reactive cost centre charged with mundane tasks. That’s such a waste. When IT is given the importance and attention it deserves it becomes proactive. No longer a money pit, it becomes a value-adding, insight-gathering, performance-improving powerhouse.

 

Key takeaways:

  • Responding to increasing customer demand is key to maintaining competitive advantage.
  • More IT budget is spent on general maintenance than on innovation, which holds companies back.
  • Cloud computing gives on-tap resources whenever they’re needed.
  • This means businesses can afford to take risks, safe in the knowledge that they can learn quickly and fail fast.
  • By treating IT as a proactive value centre, businesses can meet customer expectations and improve performance.

 

This article reflects the views of 750 IT and Digital leaders in the most recent annual survey.

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