Can IT rise to the digital challenge?

 

Here is an excerpt from the results of a survey featured in the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.

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To keep up with core tasks and meet the demands of breakneck digital innovation, the IT function will have to step up and make meaningful changes, especially to its workforce, according to new survey findings.

Rapid advances in digitization are raising expectations for IT, and the results from the latest McKinsey Global Survey on the topic suggest that the function faces a challenging dual mandate. 1 IT organizations are asked to innovate at breakneck speed in support of their companies’ ambitious digital aspirations (85 percent of respondents want their operating models to be mostly or fully digital, which only 18 percent currently have), and simultaneously execute the core IT tasks that keep the organization running—an area where effectiveness has been on the decline.The survey responses confirm that strong performance on core IT tasks (for example, designing, delivering, and managing IT) is not only nice to have but also enables faster progress against a company’s digital goals. At organizations with the best-performing IT functions, respondents say they are further along than their peers in their digitization efforts.
They have leadership teams that are more committed to digitization, and they have embraced more of the technological and operating-model changes needed to support an increasingly digital organization. These changes include adopting agile practices within IT and across the business, expanding the suite of technology leaders, and focusing on talent management—a perennial and growing challenge for IT. Talent issues continue to rise in importance as a reason for IT’s overall performance troubles, and most respondents, including the best IT performers, expect major workforce change ahead. On average, respondents expect 40 percent of their IT workforces will need to be fundamentally retrained or replaced in the coming years to close the skill gap and meet the IT organization’s future needs.

IT’s ongoing challenges

The most recent survey results confirm the persistence of two trends facing IT leaders: increasing demand for IT to support the organization’s digital goals and the function’s persistently ineffective performance on core IT tasks. 2 Ninety-three percent of respondents say their companies have pursued at least one technology-related transformation in the past two years, roughly the same share as said so in the previous survey. Companies’ digital achievements may be nascent, but their aspirations are remarkably high. Among respondents whose organizations have pursued digitization, most report that they are working toward an integrated or fully digital operating model: 85 percent say they want their organizations to be digitally converted (that is, technology is delivered at scale by both digital and core IT teams that work under a single operating model) or fully digital. But only 18 percent say they are there now (Exhibit 1).

With such lofty goals, the pressure is on IT to deliver more effectively than before. But while the results suggest that companies are doing better on many digital activities, such as e-commerce and analytics, they also indicate that IT functions are struggling to keep up with overall demand, particularly in the main areas of IT delivery (Exhibit 2).

For example, just more than half of respondents rate their IT organizations as somewhat or very effective at delivering projects on time and within budget, roughly the same share as said so in the previous survey. And for leading IT delivery and operations—the activity that respondents most often rate as effective—the share of respondents reporting effectiveness declined since the previous survey. Another area of decline is evaluating IT’s performance. Only 44 percent say their IT organizations are effective at evaluating their own performance, down from 55 percent the year before.

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Here is a direct link to the complete article.

The contributors to the development and analysis of this survey include Anusha Dhasarathy, Naufal Khan, Amit Rahul, and Jason Reynolds, McKinsey partner, senior partner, associate partner, and partner, respectively, in McKinsey’s Chicago office.

They wish to thank Christoph Schrey for his contributions to this article.

 

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