The Shadow IT Phenomenon

The Shadow IT
Phenomenon
CIOs respond with internal service
provider transformation
IT DEPT
A research paper from Logicalis based on a
global study of CIO pressures and priorities
In summary
This report details key findings from the
third annual Logicalis Global CIO Survey,
which seeks to assess the changing role
of CIOs and IT departments as businesses
worldwide increasingly view technology
as a business enabler, rather than an
essential cost centre.
Over the last two years the study has answered a series of questions, including:
• How is the role of the CIO changing?
• Are CIOs’ priorities yet aligned with a reality in which IT decisions must reflect and
directly support business imperatives?
• Are CIOs spending as much time on strategic priorities as they would like to?
This year, we draw on a survey of over 420 CIOs worldwide to revisit these questions.
We assess:
• What progress has been made as CIOs seek to redefine their roles in the face of
pressure from line of business colleagues and Shadow IT (the tendency for line of
business executives to by-pass CIOs and IT departments in procuring their own
IT resources).
• To what extent CIOs have been able to transform IT departments - by moving
away from the traditional cost centre model to establish themselves as ‘internal
service providers’ – engaging with line of business and scoping and provisioning
new IT services.
2
Interestingly, we find that IT leaders worldwide are making progress, with the balance
between technology and services continuing to shift. CIOs are more focused than
ever on strategy, and spending more time on activities that are characteristic of a CIO
at the head of an internal service provider.
Finally, we look at the CIO’s perceptions, and the rate of adoption, of a series of
technologies that can play a vital role in enabling IT departments to operate as service
providers – social, mobile, analytics and cloud (SMAC), Business Intelligence (BI) and
software defined technologies (SDx).
Read on to find out what CIOs from Europe, North America, Latin America and Asia
Pacific have to say.
Key findings: IT balance of
power and the CIO
How have CIO pressures evolved
over the last 12 months and how
are CIOs responding?
3
Shadow IT is now a fact of life for CIOs…
Shadow IT, when line of business
executives by-pass the IT department
and CIO in making IT investments,
remains a growing challenge.
Shifting Balance of IT Power
Q
What is the balance of IT decision-making in your
organisation?
2014
100%
80%
2015
92%
80%
68%
66%
70%
72%
72%
64%
66%
54%
60%
40%
Indeed, the likelihood that CIOs will be left out of the IT purchasing
loop has grown every year since 2013, according to Logicalis Global
CIO Surveys.
For instance, in 2014, 72% of CIOs worldwide held the balance of power
over IT decision making (controlling more than 50% of decisions), but
this year, that figure has fallen by 6%.
Today, only two thirds (66%) of CIOs hold the balance of power over
spending (Fig. 1). This is in line with CIOs’ expectations – in 2014, 62%
expected line of business colleagues to gain more power in the future.
At the extreme end of the scale, almost one third (31%) of CIOs globally
find themselves by-passed ‘often’, ‘very often’ or ‘most of the time’ – a
figure that rises to 51% in Latin American markets, but falls to 19% in
Europe (Fig. 2).
20%
0%
Europe
APAC
LATAM
Global
Fig. 1: Chart shows percentage of CIOs indicating they influence more than 50% of IT decisions – 2014
versus 2015.
Shadow IT - Repeat Offenders
Q
How often do you experience Line of Business
managers going outside the IT department to secure
technology based applications or business solutions?
60%
51%
50%
40%
32%
30%
Overall, Shadow IT is now a fact of life for the vast majorty of CIOs –
90% of those questioned reported that they are now by-passed by line
of business colleagues at least occasionally.
USA
20%
19%
31%
24%
10%
0%
Europe
USA
APAC
LATAM
Global
Fig. 2: Chart shows percentage of CIOs selecting ‘often’, ‘very often’ or ‘most of the time’.
4
…and the internal service provider is taking shape
Last year’s Global CIO Survey
(2014) found that CIOs and IT
directors were starting to respond
to the challenges posed by
Shadow IT.
Desire versus Reality
Q
2013: In an ideal world, how would your time
be split between day-to-day management of
technology and strategic planning? / 2015: What
is the actual split now?
2013: Desire
2015: Reality
100%
84%
80%
60%
40%
It identified a desire to reshape IT functions to more closely reflect
the business needs that are driving line of business procurement –
by providing a broad portfolio of internal and externally sourced IT
and business services.
Two years later (2015), some progress has been made, but the
transformation remains understandably slow given the scale of the
task. Today just 38% of CIOs spend at least 50% of their time on
strategic activities (Fig. 3).
In a more telling sign of progress, CIOs are spending almost half
of their time (42%) on activities consistent with developing and
delivering the internal service provider model – ‘engaging with line
of business’ and ‘scoping and provisioning new IT services’ (Fig. 4).
5
76%
71%
64%
This built on a clear desire to take on a more strategic role, as first
identified in the 2013 survey. Two years ago, nearly three quarters
of CIOs (73%) expressed a desire to take on a more strategic role.
Fig. 3: Chart
shows
percentage of
CIOs indicating
they would like
to (2013) or do
(2015) spend
at least 50%
of their time on
strategy.
73%
47%
38%
35%
38%
32%
20%
0%
Europe
USA
APAC
LATAM
Global
Fig. 4: Chart excludes
activities like administration,
staff training, and
meetings etc.
CIO’s Working Day
Q
What percentage of your time do you
spend…?
18%
16%
Managing supplier contracts/
relationships
Dealing with legacy/ historical IT
support issues
Engaging with line of business
managers
21%
21%
IT strategy and planning
Scoping & provisioning new IT services
24%
Shift to services gathers pace
In line with this changing role for the CIO, the focus of IT departments is also shifting –
suggesting that a move towards an ‘internal service provider’ model is taking shape.
This year’s survey sought to establish IT departments’ progress along this transformation journey.
Accordingly, it looked at the balance between technology management and service portfolio
delivery, as well as their reliance on external service providers.
Responses overall suggest a circa 50:50 balance between technology management and the
delivery of a portfolio of services (Fig. 5), around half of CIOs (47%) report that at least 30% of their
IT is provided by external service providers, including cloud (Fig. 6).
Overall, these findings tend to indicate that we are approaching a tipping point in the transformation
of IT departments worldwide.
Fig. 5: Chart
shows global
responses
What is IT?
Q
Looking Outside?
Q
25%
To what extent does your organisation spend its
time managing technology versus delivering a
service portfolio?
Approximately what percentage of your
IT is provided or managed by external
service providers, including cloud?
25%
% of CIOs
20%
16%
15%
25%
15%
13%
9%
10%
20%
15%
2%
5%
0%
100:0
90:10
< 100% Technology
6
5%
5%
10%
80:20
70:30
60:40
50:50
40:60
30:70
20:80
10:90
0:100
100% Services >
Fig. 6: Chart
shows global
responses
0%
2%
6%
5%
2%
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 10%
% Managed by External Provider
Key findings: The service-enabling
technologies
Views and adoption of technologies that can
underpin service focus – SMAC, BI and SDx.
7
Social, Mobile, Analytics and Cloud
Social, mobile, analytics and cloud
technologies, collectively known as SMAC,
have garnered a great deal of media attention
over the last 12 months. But is this hype
reflected in CIO views?
Rate the importance of social, mobile,
analytics and cloud technologies in
driving business innovation in your
organisation.
Q
80%
70%
60%
50%
40%
30%
20%
10%
0%
63%
62%
47%
37%
Social
Mobile
Analytics
To assess the real world, relative importance
of SMAC technologies, this year’s survey
asked CIOs to rate the role of each in driving
business innovation.
Cloud
Global
80%
70%
60%
50%
40%
30%
20%
10%
0%
67%
58%
37%
28%
Social
Mobile Analytics Cloud
80%
70%
60%
50%
40%
30%
20%
10%
0%
73%
48%
58%
Social
45%
Social Mobile Analytics Cloud
APAC
Mobile Analytics Cloud
USA
60%
40%
45%
28%
Europe
80%
70%
60%
50%
40%
30%
20%
10%
0%
Globally (Fig. 7), mobile and analytics were
clear winners – with 62% and 63% respectively
citing them as ‘very important’ or ‘critical’ to
business innovation – reflecting an ongoing
trend towards real time business in which
anywhere, any time access to applications and
insight is ever more important.
80%
70%
60%
50%
40%
30%
20%
10%
0%
77%
65%
Social, meanwhile, lags well behind, with only
one third (37%) viewing technologies and
services like collaboration software, social
internet and community hubs as having
high importance. As a new generation of
‘digital natives’ enters the workforce, it will
be interesting to see how this view changes.
Will organisations provide familiar tools for an
67%
49%
Social Mobile Analytics Cloud
LATAM
Fig. 7
8
increasingly social-enabled workforce, or will
they expect new recruits to adapt?
Cloud technologies also lag behind (47%), but
this is more likely to reflect the overall maturity
of the cloud model, which is increasingly seen
as ‘business as usual’ technology.
Away from the global picture, a number of
regional variations emerge:
• Analytics are most important in the US
and LATAM.
• Mobile leads the way in Europe and LATAM.
• APAC and LATAM value social more than
other regions.
• Cloud remains a significant priority for two
thirds (67%) of CIOs in LATAM.
Business Intelligence
Overall, the CIOs responding to the 2015 Logicalis Global CIO Survey do not believe
that their organisations are making the most of investments in business intelligence
technologies, and believe they have invested in technologies that do not fully support
business needs (Fig. 8). Globally:
Fig. 8
BI Benefits
• Nearly half (48%) get real time information from BI.
• The same proportion (48%) get information on welldefined business metrics.
• Only 29% derive actionable business insight from BI.
• Fewer than one third (28%) can make insight available to
decision makers anywhere.
• 28% of solutions can be quickly adapted to changing
need.
• 42% get insight in visual format.
• Almost a third (30%) are able to deliver predictive
analysis.
These limitations ultimately prevent BI solutions from
delivering the tangible business benefits and measurable
ROI that are vital in an internal service provider model. Only
a quarter of organisations (27%) realise increased sales as
a result of insight from BI and less than half (47%) benefit
from operational efficiencies.
9
Q
50%
Which of the following benefits of effective business
analytics/business intelligence does your organisation
currently realise?
48%
48%
47%
42%
40%
30%
29%
28%
Actionable
insight
Accessible
to decision
makers
anywhere
28%
30%
27%
20%
10%
0%
Real time
information
Information
on welldefined
business
metrics
Can be
Deliver
quickly
information in
adapted to visual format
changing
need
Predictive
analysis
Increased
sales
Operational
efficiency
Business Intelligence
However, responses around why CIOs have been unable to remedy these issues
are telling (Fig. 9). Lack of budget (47%), lack of time (40%), complexity (37%),
lack of expertise (35%) and lack of clarity around business requirements (34%), all
feature prominently.
On the other hand, C-level buy-in is strong, with 84% of CIOs pointing to C-level
support for BI. In a business environment where the consumerisation of IT has driven
expectations of rapid deployment, this buy-in is crucial.
Fig. 9
BI Barriers
Q
Thinking about your own organisation, please indicate the most significant barriers to implementing
highly effective business analytics/business intelligence solutions?
50%
47%
40%
40%
35%
37%
34%
30%
25%
25%
20%
16%
10%
0%
Lack of
budget
10
Lack of time
Lack of
expertise
Complexity
Fragmented
data storage/
formats
Lack of clarity
as to business
requiremnets
Lack of
C-level buy in
Lack of
information
sharing
culture
Software Defined Technologies (SDx)
Global SDx Adoption
Attitudes to SDx have hardened and
polarised over the last 12 months.
No plans to adopt
32%
The 2014 Logicalis Global CIO Survey found that 83% of CIOs planned to
implement SDx in one form or another, sooner or later.
Have adopted or will adopt
68%
A year later, the number of CIOs with no plans to adopt has doubled – more
than one third (32%) now say they have no plans to adopt SDx (Fig. 10).
Fig. 10
That polarisation does not, however, tell the whole story.
That is, while more CIOs have turned their backs on SDx, the pace of
adoption amongst the rest has picked up (Fig. 10a):
• The number of organisations that have already adopted SDx has doubled
in one year – from 9% in 2014 to 18% today.
• 82% of those who plan to adopt SDx have either already adopted, or will
do so within three years.
• Less than one fifth of all respondents (18%) have longer-term
adoption plans.
This suggests that a significant majority of CIOs see SDx as a key service
enabling technology.
However, the pace of planned adoption may create its own challenges, with
demand for SDx skills significantly outstripping supply.
Many organisations are doing work around SDx
(Software Defined Network, Software Defined Data
Centre etc.) Which timeframe is your organisation
working to?
Q
30%
26%
25%
20%
18%
15%
23%
18%
15%
10%
5%
0%
Already using
6-12m
12-24m
24-36m
Fig. 10a
SDx Adoption Timeline
11
36m+
Delivering business value?
When asked to rate the performance
of IT in delivering business outcomes,
CIOs were generally bullish - awarding
themselves and their teams an average
score of eight out of ten.
How Are We Doing?
Q
How do you rate the value of IT in delivering
business outcomes?
35%
In fact, 66% rated performance at eight out of ten or more. On the other
hand, only 10% of CIOs globally scored the performance of IT at five out of
10 or less.
At a basic level, this is unsurprising, given business reliance on technologies
such as email, and infrastructure such as networking and storage.
It remains open to question, however, whether line of business colleagues
would take the same view, given that these technologies are largely taken
for granted rather than seen as delivering business outcomes.
Indeed, the continued rise of Shadow IT suggests that line of business
colleagues have a rather different view of business value from technology.
12
8/10
35%
30%
25%
20%
16%
15%
15%
15%
10%
9%
5%
5%
2%
0%
1%
1%
1/10
2/10
1%
3/10
4/10
5/10
6/10
7/10
8/10
9/10
Fig. 11: Chart shows CIOs’ responses in marking the performance of IT out of ten.
10/10
Conclusions
This report once again paints a vivid picture of a world in which
line-of-business is assuming more and more control of IT spending
and direction; and this is a trend that CIOs are clearly responding
to. Indeed the transformation of the IT department we identified 12
months ago continues apace, with CIOs increasingly focused on
delivering service portfolios that directly respond to the needs of
line-of-business executives.
We call this emerging, services-defined IT department the ‘internal
service provider’. Its role is to offer the choice of services their
organisation needs – whether those services are built and operated
internally, come from managed service partners, or are consumed
from the cloud.
At Logicalis, our response to these trends is simple. Our role is
to be the strategic partner to our customers, because we are a
relevant and compelling partner to the CIO, and to the line-ofbusiness executive.
Mark Rogers, CEO, Logicalis
13
About the research
All figures drawn from a survey of 424 CIOs and IT Directors from
mid-market organisations in 24 countries spanning Europe, North
America, Latin America and Asia-Pacific.
About Logicalis
Logicalis is an international IT solutions and managed services provider with a breadth of knowledge and expertise in communications
and collaboration; data centre and cloud services; and managed services.
Logicalis employs over 4,000 people worldwide, including highly trained service specialists who design, deploy and manage complex
IT infrastructures to meet the needs of over 6,500 corporate and public sector customers. To achieve this, Logicalis maintains strong
partnerships with technology leaders such as Cisco, HP, IBM, CA Technologies, NetApp, Microsoft, Oracle, VMware and ServiceNow
on an international basis. It has specialised solutions for enterprise and medium-sized companies in vertical markets covering
financial services, TMT (telecommunications, media and technology), education, healthcare, retail, government, manufacturing and
professional services, helping customers benefit from cutting-edge technologies in a cost-effective way.
The Logicalis Group has annualised revenues of over $1.5 billion, from operations in Europe, North America, Latin America
and Asia Pacific, and is one of the leading IT and communications solution integrators, specialising in the areas of advanced
technologies and services.
The Logicalis Group is a division of Datatec Limited, listed on the AIM market of the LSE and the Johannesburg Stock Exchange, with
revenues of over $6 billion.
For more information, visit www.logicalis.com.