Each year, Gartner conducts a survey of senior business executives, including a high percentage of CEOs, to discover their business concerns and views on IT. This year, the Web-based survey was conducted in October and November. The full analysis and findings will be published in early 2010. The rapid-snapshot analysis of the data revealed here (see Note 1 for survey details) is intended to help CIOs and their teams with planning and budgeting. 
Finding 1: The Majority of Business Leaders Will Return to Revenue Growth as a Prime Focus Through 2010 CEOs' initial 2009 top-priority focus on cost cutting was unusual, and by the middle of the year, many started to declare that they had "seen the bottom." However, analysts reviewing the 3Q09 results of public companies noted that most growth was bottom line (profits), driven by cost-cutting efforts, not top-line revenue growth from winning customers. We asked about the timing of the switch back to the revenue agenda. CEOs' and senior business executives' expected timing of the return to revenue growth as a primary focus:
- We are already focusing more on revenue growth than cost control — 42%
- We expect to see a return to a revenue-growth prime focus in 2010 — 29%
- We expect to see a return to a revenue-growth prime focus in 2011 — 19%
- We do not expect revenue growth to be our primary driver until beyond 2011 — 10%
IT Implications and Advice Our advice to CIOs since May 2009 has been simple: It is time to prepare for a return to growth. This data suggests the window of opportunity for preparation is starting to close. A switch from a cost focus to a revenue focus will reshape business change priorities; in turn, that will impact the IT project portfolio.
- Prepare for midyear reprioritization of some key IT projects during 2010, as this phase change in the business cycle takes hold
Finding 2: Half of Business Leaders Expect Modest Business Activity Volume Increases in 2010, While a Third See Contraction Ahead In our survey, we asked business leaders about expected changes in core production or service activity volumes next year (such as autos manufactured, houses built, passengers flown, pizzas served or mortgages granted). Twenty percent expect no change and 49% expect an increase, but 31% expect a decrease — showing that the recession still has a sting in its tail. Of those who do expect volume growth, half predict it will be less than 5%, and more than three-quarters predict it will be under 10%. This makes the return to a focus on revenue growth intriguing — perhaps some price inflation is anticipated. Anticipated business activity volume change between fiscal years 2009 and 2010:
- Decrease by 30% or more — 5%
- Decrease by 20% to less than 30% — 4%
- Decrease by 10% to less than 20% — 7%
- Decrease by 5% to less than 10% — 7%
- Decrease by less than 5% — 8%
- Stay the same — 20%
- Increase by less than 5% — 23%
- Increase by 5% to less than 10% — 17%
- Increase by 10% to less than 20% — 6%
- Increase by 20% to less than 30% — 2%
- Increase by 30% or more — 1%
IT Implications and Advice Many companies have seen sales volume reductions, production activity cuts, destocking and layoffs over the past 18 months. With staff numbers and transaction volumes reduced, growth pressures on IT infrastructure have slackened. This early finding suggests that business volumes will not recover quickly. The obvious implication is that transactional demand on IT infrastructure stemming from new staff and new organic business growth will not be strong.
- Carefully probe and confirm the quality of business activity forecasts with their business leadership colleagues before setting infrastructure-scaling plans accordingly
Finding 3: Business Leaders Do See a "New Normal" Set of Business Conditions Arising After the Global Recession, and IT Will Have a Key Role in Their Strategies In recent months, press editorials have suggested that little has changed in business leaders' view of the world, with Goldman Sachs' 2009 executive bonuses being the prime example of "business as usual." However, we also noticed clear public pronouncements this year from leaders such as Jeffrey Immelt, CEO of GE, and Mike Duke, CEO of Wal-Mart, that there has been a "reset" in the way the economy works and that customers are not going to behave the same way they did before the recession. We asked respondents to rate their agreement or disagreement with some "new normal" model hypotheses, on a seven-point scale. Here are the eight statements that received the highest mean agreement scores from the survey respondents. 2010 business and economic model statements receiving the highest agreement scores from CEOs and senior business executives:
- Advanced-economy consumers have been living beyond their means for many years, fueled by borrowing; the correction will impact consumer spending for several years to come — 5.34
- IT-enabled changes will be a key element in our post-recession strategy — 5.13
- Emerging economies are poised for a multiyear period of rapid growth and a rising standard of living for consumers — 4.99
- In the 15 years or so prior to 2008, business conditions were relatively smooth and predictable; however, the next decade will be far more volatile and unpredictable — 4.96
- There will be a major wave of merger-and-acquisition (M&A) activity in 2010/2011, as the weak are taken over by the strong — 4.95
- The changes arising from this recession are so deep and persistent that many companies and industries will have to redesign their business models — 4.90
- Taking action to restore trust and confidence in our industry will be a high priority for CEOs in 2010 — 4.89
- The tax changes required to recoup some government stimulus packages will lead to a major wave of corporate relocations — 4.83
IT Implications and Advice This suggests CEOs do not anticipate a return to the way things worked in 2007. IT leaders should expect a long, drawn-out reshaping of their firms and perhaps industry structures, in terms of customer proposition (to meet fundamental changes in customer needs) and the international locations of operations — hunting the globe for pockets of consumer-driven growth and reoptimizing tax efficiencies. Some companies may be at the start of a serial acquisition phase. These changes are running ahead of other anticipated IT demand causal factors such as regulation.
- Ensure IT management staff, business relationship managers and business analysts are flexibly allocated in 2010 — key resources should not be trapped on projects they cannot be diverted from as post-recession priorities emerge
- Review the highest-level enterprise architecture integration and coupling policy, anticipating the possibility of a sea change in M&A activity
- Make time for exploratory conversations with the CFO on the consequences of tax changes for the operating structures and processes of the firm
Finding 4: Business Leaders Are Changing Their Order of Priorities The top three priorities reflect an outlook in line with our "grinding growth" economic scenario. Retaining customers and maintaining competitive position are the main themes, with the cost-cutting focus reduced. However, we note that customer retention is ahead of acquisition — suggesting a cautious approach to growth. Attracting and retaining talent has risen significantly as a priority (we interpret this to mean top talent, not general volume staffing). Damage to morale raises concerns about flight risk, but some organizations have also been opportunistically hunting fresh talent. 2010 top five CEO and senior business executive priorities:
- Retaining customers and enhancing existing relationships
- Maintaining competitive advantage
- Attracting new customers
- Attracting and retaining skilled workers/talent
- Reducing costs via better efficiency
2009 top five CEO and senior business executive priorities:
- Reducing costs via better efficiency
- Retaining customers and enhancing existing relationships
- Attracting new customers
- Maintaining competitive advantage
- Building a responsive, flexible organization
IT Implications and Advice CIOs should expect business leadership teams to progressively shift time and attention away from the introspection of restructuring back toward customer value propositions and service in 2010. IT leaders should propose new ways technology can support and enable better value to customers, particularly existing customers. However, most organizations will not innovate aggressively yet — instead, low-risk, moderate improvements are likely to be favored.
- Make time to discuss talent management issues with their business leaders
- Consider protecting a special provisioning budget and fast-path process exceptions for equipping small numbers of new high-caliber staff or key talent groups considered a flight risk
- Ask the head of HR whether there is any technology capability support that might assist with true talent search (for example, in the social Internet)
Finding 5: Business Leaders' Attitude Toward IT Investment Is Moderately Positive The good news for IT professionals is that most business leaders say they intend to maintain or increase IT investment. This reinforces Gartner's expectation of flat or slightly increased IT budgets in 2010. However, these senior business respondents are one step removed from final IT spending decisions. 2010 CEO and senior business executive IT investment intentions:
- Decrease the IT investment level — 12%
- Keep the same IT investment level — 45%
- Increase the IT investment level — 43%
IT Implications and Advice Our previous (December 2008) survey predicted IT investment would be protected during 2009, in comparison to other areas such as marketing and staffing, and we think this has been born out. However, early indications are that IT priority will fall back in line with these other areas during 2010.
- Take advantage of this mood to press their advantage gently but firmly during budget negotiations — standing their ground if peers attempt to gain investment share at IT's expense
Finding 6: Cost Analysis, Flexible Work, Mobility and Legal Support Head Up CEOs' Tactical Priorities for IT Exploitation In the full survey, we asked a series of multilevel questions about strategic and tactical value contributions that a number of IT-enabled capabilities might bring. Here, we highlight the responses only for tactical value to business operations. We think the top five from the list (multiple choices allowed) provide good insight into what CEOs will need from IT in an economic recovery year. IT-enabled capabilities selected by CEOs and business executives for their tactical value to business operations from 2010 to 2013:
- More-accurate and detailed data collection and analysis of your product or service costs — 26%
- Further enablement of workforce mobility and remote or home teleworking — 25%
- Use of electronic information storage and search and retrieval systems to enable faster and more-complete legal discovery for prosecuting or defending commercial claims — 23%
- Cell phone or smartphone-based electronic commerce and electronic customer service methods (m-commerce) — 22%
- More data-driven management decision making and performance management using commercial metrics, dashboards and analysis — 21%
IT Implications and Advice Economic volatility will require many leadership teams to continue spending a large share of their energies on tactics and current operations through 2010. Though no single use of IT is given overwhelming endorsement here, most will be useful to the majority of companies. The unusual prominence of IT support for legal purposes is probably a consequence of the recession's damage to business trust. The rising visibility of mobile commerce is also notable.
- Review this shortlist to see if there is an area of focus being underplayed or missed
Finding 7: Most Business Leaders Continue to Expect IT's Strategic Value Contribution to Increase We asked, "How do you expect IT's strategic contribution to your organization's business to be different in the next 10 years than it has been in the past 10 years?" In some ways, the response was unsurprising; yet, we believe it required confirmation. After all, it could be argued that the complex management science at the epicenter of mortgage derivative financial products such as collateralized debt obligations (CDOs) was made possible only by IT-enabled algorithmic advances. CEOs' and senior business executives' view of IT's strategic business contribution during the next 10 years:
- I expect IT's strategic contribution to increase — 88%
- I expect no change — 10%
- I expect IT's strategic contribution to decrease — 2%
This finding is reinforced by results of the three-level self-categorization question we ask about technology risk profile. The percentages in each category are within the usual ranges and indicate that healthy numbers remain prepared to go first or be fast followers with technology-enabled change. CEOs' and senior business executives' categorization of their organizations' technology risk profile category:
- Aggressive (we are willing to adopt technologies while relatively new and risky) — 21%
- Mainstream (we prefer to adopt maturing technologies with manageable risk) — 60%
- Conservative (we will adopt only proven technologies) — 19%
IT Implications and Advice A "back to business basics" mood could have yielded some antipathy toward the complexities IT brings, but this does not appear to be the way CEOs see things. The previous U.S. recession (in 2001) brought with it a corporate backlash against IT and a substantial cut in investment, but this finding confirms we are not seeing that effect repeated.
- Start to confidently explore post-recession ideas concerning new ways in which technology can help produce strategic business value
|
