CIOs putting the foundations in for digital leadership

CIOs and CTOs are putting in place a new technological infrastructure. In a post-pandemic economy that is fraught with risks, the annual Nash Squared Digital Leadership Report reveals that budgets remain healthy, but the focus has become broader and deeper as organizations deal with uncertain times and realize that to be digital requires a new architecture. In order to test out the numbers in this year's Digital Leadership Report, diginomica spoke to CIOs in construction, financial services, retail and professional services. 

The global and well-respected survey finds that 52% of digital leaders expect their technology budget to increase in the coming year, and 58% expect the digital headcount to increase. Nash Squared say this is the third-highest expectation for a budget increase in the survey's history (it was formerly known as the Harvey Nash CIO Survey). However, the budget confidence is sector specific. Boots UK CIO Rich Corbridge is surprised by the number of CIOs expecting a budget increase. He says: 

Perhaps in retail, we are being hit earlier. We don't have that, and we are trying to be lean and as creative as possible. 

It would be easy to see these numbers with a degree of hubris, but Rorie Devine, Interim CTO at Moneyfarm financial services, says the economic impact that Corbridge is feeling is also driving this. He explains: 

Given the rise in consumer inflation, there is an expectation that costs will go up, and we have been through a lot of talent costs.

Although retail is more circumspect about technology budgets than some other sectors, Corbridge says the recent past has benefited CIOs and digital programmes, if not financially. He adds: 

There is a lot more understanding of what we spend the money on now.

Digital infrastructure

Nash Squared found that investment in artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA) has declined in the last 12 months. However, operational efficiency remains a top priority for digital leaders as organizations look for efficiencies and productivity improvements. The report states: 

Relentless business change and advancements in technology all mean that what works one year might not be so effective the following year. Many tell us that efficiency is a moving target.

And according to the CIOs that diginomica spoke to, this possibly explains the focus on a deeper, more architectural approach to technology in the 2022 survey findings over previous years. The reason digital leaders have reached the point where the only way to deliver operational efficiency and productivity improvements is to put new technology foundations in place. As Corbridge reveals: 

The organization realizes that IT is too expensive and too slow, and the reason is that they have asked us to deliver new services on top of an old infrastructure.

Corbridge says some organizations are now at what he calls a cliff-edge moment with technologies such as enterprise resource planning (ERP), point of sale (POS) and data tools. CIO for Aggregate Industries Mike Gibbons agrees and is coming out of the other side of a deep infrastructure refresh to meet new expectations. He says: 

We have done the fundamental technologies - networks, ERP - and we now have what we call an ecosystem.

Gibbons says this is vital for organizations to go through. He adds:

Younger and digital savvy managing directors are demanding digital transformation right now and really accelerating the investments. So for us, it was a sharp increase in investment.

The 2022 report finds that cloud computing investment remains strong, with 63% (up from 60%) of the survey community now having large-scale cloud usage. 

Half of our respondents expect the cloud to deliver them competitive advantage over the coming 12 months.

Whilst there are many organizations just beginning the move to the cloud, Anna Barsby, founder of Tessiant and former CTO of supermarket chain Morrisons, says many organizations are now entering the second phase of the cloud. She adds:

There are early adopters going back over their investments as they didn't understand the full value of cloud and the skills required. Therefore their cloud costs are spiralling on the Opex lines, so there is a lot of pressure to use the cloud more sensibly.

As with the cloud, many organizations are also beginning to realize the value of their data. Two-thirds of the report's respondents state that data is now seen as a competitive advantage to their organizations, but they are struggling to realize value from the data. For Gibbons at Aggregate Industries, that competitive advantage also had a major governance element to it, he says: 

We are the first in the market to do carbon reporting, and that brings a real pressure on the data as it comes down to reputational damage if you get it wrong.

The report finds that 22% of CIOs are using data to measure the carbon footprint of their organization. 

Not only are organizations struggling to realize value from their data, but the Digital Leadership Report also finds that 53% are being asked to lead programmes that release new business potential. Inevitably some of that potential is supporting new ways of working (an essential element in the skills shortage). 

A third (32%) of organizations expect staff to work in the office one day a week or less, and just 8% expect their staff to be in every day of the week. Work/life improvements have increased for 65% of survey respondents' technology teams, a 5% increase on the 2021 survey, but productivity has declined according to four in ten. 

Uncertainty #1 - Macroeconomics

Since the last Digital Leadership Report, war has broken out in Europe, inflation has reached levels not seen for generations, some countries are beset with political turmoil which has damaged their economic standing and the supply chain issues remain intractable. Despite the healthy budgets, digital leaders are worried about the macroeconomic situation, with 33% expecting an economic downturn, with European CIOs twice as likely to fear a downturn and political disruption than their peers across the Atlantic. Over a quarter are rethinking their technology strategy as a result of the invasion of Ukraine by Russia. Over half (58%) are concerned about the supply of IT hardware. 

Just under half (43%) of respondents believe technology will play a big part in helping organizations become more sustainable. Bev White, CEO of Nash Squared, says: 

We really need to move on this, and as digital leaders, we must look at our cloud providers, for example, and make sure they are being sustainable.

Uncertainty #2 - Skills and diversity

In the past, a report from a recruitment organization that said there is a skills shortage justified some scepticism; however, access to skills has become a key concern for CIOs, CEOs and every vertical market. 

Some 70% of digital leaders state that a skills shortage prevents them from keeping up with the pace of change and 74% say that their government should be doing more to tackle the digital skills crisis. White at Nash Squared says she is speaking to the UK government, which has its fifth leader in 12 years of power. However, do digital leaders need to do more? Recent disruptions have exacerbated the problem, which Barsby says has removed old short-term answers. She says: 

Skills is hard, as it is a long game. The short-term answer 10 years ago was to send the work to India, but now they are struggling with a skills shortage too. Apprenticeships and helping women return to work are also long-term plays.

As the report highlights, digital leaders, therefore, have to be creative in recruitment, retention and retraining. Corbridge at Boots says: 

We are coming up with ways to retain, and we are putting in an inclusivity programme into IT, which is central to recruitment and retention. We need lots of different views of doing digital in-store and online as the diversity of why people go into a Boots is huge, whether it is for a can of Coke, through to a make-over and everything in between.

Barsby agrees on retention, especially when it comes to retraining employees as the organisation digitizes. She explains: 

Retraining really has got to be an important option; redundancy is no longer the option.

White at Nash Squared adds: 

Getting the proposition right is key.

In the past, technology leaders had a maxim,' change the people, or change the people' - it always sat uncomfortably and was clearly born from a time of plentiful choice. Now, an employee's market means technology leaders must offer much more than a salary but also progression and a skills development pathway. 

This year's study shows a slight improvement in diversity, with 14% of leaders being wemen and 23% of respondents' technology teams now being women. White says of this: 

The diversity from a gender perspective is improving, and that is great. But it will take until 2060 to get to an equal balance. So we have got to focus more on this.

Uncertainty #3: Cybersecurity

Since the pandemic struck, the cybersecurity threat has been heightened. Over half (52%) of large organizations have reported a major cyber-attack in the last two years. Interestingly over a third (40%) are worried about being on the receiving end of an attack from foreign powers. CIO Gibbons says this is also tied in with the skills shortage, which the report concurs, cybersecurity, data analytics and architecture being the most in-demand skills. Barsby agrees and adds: 

Coupled with the political tensions and the lack of skills, it is a perfect storm, so CIOs are looking to their providers.

At Boots, Corbridge identifies a change in the cybercriminal's behaviour. He says: 

The threat now is your reputation rather than an outcome such as getting something from you. As Walgreens Boots Alliance, we are iconic US and UK brands, and it feels like they want to damage the reputation of the West.

Devine at Moneyfarm adds: 

The threat activity level is going up, but not the sophistication. However, the tools that the criminals have available to them have increased too, which is driving the increased volumes.

My take

A couple of years back, I coined the term 'a forklift year' following an observation that, at various times CIOs and CTOs just have to do a lot of heavy lifting. The Digital Leadership Report shows that around the world, technology leaders are climbing into the cab for the next year, heavy lifting into place new skills, increased cybersecurity and a new digital architecture that can support the organisation as it jettisons old ways of working. 

If this is the case, then there is nothing to fear in the report's findings that 65% of its respondents are board members, a drop from 71% five years ago. Board access is more important than membership, and it is clear that there are lots for CIOs and CTOs to be shifting and lifting. 

The Digital Leadership Report remains a useful barometer for the business technology leadership community, and digital can only be delivered with a digital architecture.