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Addressing the Dual Reality of Digital Transformation in SEE

June 17, 2015

Zoltán Komáromi, Country Manager, IDC Hungary

An IDC Flash

Maintaining and developing your existing 2nd-Platform IT systems, defined by in-house delivered IT functions based on transactional applications owned by the company and running on a classical client/server infrastructure while intelligently investing in and accessing emerging 3rd-Platform technologies built upon mobile, social media, big data, and cloud technologies is a tough nut to crack. CIOs in Southeastern Europe (SEE) appear to have more difficulty bridging this gap than their western counterparts. But, as the business value of 3rd-Platform solutions becomes impossible to ignore, making this transition becomes an inevitability. Digital transformation creates challenges as well as opportunities, and CIOs need to be able to see both. Zoltan Komaromi, an expert on digital transformation with International Data Corporation (IDC), sheds more light on the changing business requirements and suggests ways that IT has to adopt.

Just as in other parts of Europe, business expectations regarding IT are increasing in SEE as well. CIOs and IT heads have to step into new roles. Besides its traditional function of improving business processes and workforce effectiveness, IT is increasingly expected to support organizations’ digital transformation. Among other things, this entails more effectively mining company data for business value and cooperating more closely with lines of business in order to support strategic goals, such as increasing operational agility, improving customer satisfaction, and boosting the top line.

The typical SEE CIO has to address the double imperative of developing the organization’s 2nd-Platform infrastructure while embracing 3rd-Platform solutions and digital transformation.

A recent survey conducted by IDC among CIOs of large companies in SEE revealed that 2nd-Platform solutions such as datacenter consolidation and virtualization, and client infrastructure upgrades are still high on the agenda. Investments in these areas were reduced, delayed or even canceled during the crises years, and many companies are now looking at outdated systems which they need to replace or update to increase IT efficiency and thus business processes. SEE companies also need to catch up with delayed investments in areas such as databases and datawarehousing, ERP, and CRM.

While 2nd-Platform investments are still a must in SEE, CIOs cannot ignore the global trends of the 3rd Platform that are emerging in the Eastern part of Europe as well. Cloud, mobility, the Internet of Things, and advanced analytics/big data solutions have passed the “hype for hype’s sake” phase and now represent a potential competitive advantage not only for global innovators but also for local early adopters in both the public and private spheres. The SEE CIO is therefore confronted with a dual reality: the necessity to continue supporting the existing 2nd-Platform technology, which typically serves to maintain current operations and core processes, side-by-side with the new reality of the competitive advantages made possible by the transformative powers of the 3rd Platform.

The SEE CIO must tackle this double imperative shrewdly and quickly, due to three reasons (at least):

CIOs Must Turn a Challenge into an Opportunity

IDC survey results on the position of the CIO and IT in the organization indicates that, for every second company in CEE, IT is regarded as an expense rather than a strategic business enabler that functions similarly — and just as importantly — as operations, marketing, or sales.

One key thing that needs to change in order to facilitate a digital transformation is the role of the CIO. In 54% of large companies in CEE, the CIO is not part of the board of directors, and, for 41% of companies, IT investment decisions are limited to a few positions, most commonly the CEO and/or the CFO and the CIO. Without board membership and access to large groups of decision makers (such as steering comities), it is very challenging for the CIO to maintain close ties with lines of business. And this is essential in order to educate organizational stake-holders on the business relevancy of technology trends, the benefits of new solutions, and the need for digital innovation. These companies typically focus IT investments on mainstream industry solutions and thus miss opportunities that could arise from early adoption. However, the 3rd Platform offers a unique opportunity for the CIO to elevate his or her position, regardless of the prevalent attitude within an industry or organization toward IT. If non-board-member CIOs are not granted a formal role in which to advise and educate lines of business about the advantages of 3rd-Platform IT solutions, then they should become evangelists via the informal channels that exist in every company.

Limited Financial Resources for Cutting-Edge IT

The second challenge for the SEE CIO in addressing the dual reality of today’s IT dimension comes from the limited financial resources available for modernizing IT and adopting innovative solutions, such as enterprise mobility, or big data. Our survey revealed that 39% of SEE organizations currently have a "keep the lights on" investment approach, with budgets dedicated to only the absolutely necessary, such as compliance-driven areas or refresh cycles and upgrades that can no longer be delayed. Only 21% of respondents claimed they were in a position to initiate long-ranging, strategic IT investments. New investments that might allow adoption of innovative solutions account for only 19% of annual IT budgets – compared with the 58% that are devoted to running existing IT systems. So, how does a CIO cover both 2nd-Platform investment necessities and the need to innovate with the latest technologies of the 3rd Platform, all from a minority portion of the overall budget? There are several practical approaches, such as creating small incubator budgets for experimenting with new technologies and then demonstrating a rapid quick ROI. Another is to incorporate cutting-edge technology modules into larger 2nd-Platform projects, and monitor their contribution to business value separately. Finally, the determined CIO can seek sponsorship from different business lines, which in most cases have additional resources apart from the regulated IT budget.

Adopting New IT Solutions – Timing Is Everything

Despite the increasing adoption of 3rd-Platform solutions on a global (or even Western European) scale, it is very difficult to know the ideal time on a generally late-adopting market like SEE to embrace a new technology. CIOs must be able to weigh a perceived level of technology maturity and business value against length of ROI, limited C-level buy-in, and other “environmental factors”, such as refresh cycles, current market demands, best practices, and existing/relevant use cases. Last but not least, CIOs must keep an eye on adoption trends among the competition, as it is not only important not to be left behind, but also not to be perceived as such by key stakeholders and the market.  IDC research indicates that CIOs are most likely to find acceptance among business and success increasing the status of IT within their organization by pitching the benefits of business intelligence/big data, enterprise mobility, datacenter automation and virtualization, and private or public cloud solutions.


Source: IDC SEE Buyers' Pulse Survey, 2015; N=120

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