Business departments have increasingly taken responsibility for technology buys, often circumventing traditional IT department involvement altogether. And they have now reached a “tipping point”, according to new research from Technology One.
The study, conducted by IBRS, revealed most Australian IT groups are no longer the primary decision makers nor do they hold the budget for enterprise solution buys.
According to the research, the rise of software as a service and cloud technologies has driven this trend, with several business lines following marketing’s trail to eschew the IT department for enterprise solutions.
The attraction, according to Technology One executives who spoke with Which-50 ahead of the research release, is a near frictionless implementation and cost savings of SaaS, with vendors able to provide much of the technical support that was typically left to IT.
However, that opinion is not universal. A Which-50 deep dive on SaaS revealed many customers still experience problems with hidden costs, implementation challenges and security.
Technology One CEO, Edward Chung, says the shift to SaaS has rapidly accelerated over the last 18 months in Australia and now even conservative verticals like government and education are deploying SaaS solutions for their core business functions.
“The lines of business are dominating the IT budget. They’re doing it to do business faster. They can roll out new functionality to deliver their services or do their job faster. It allows them to focus on the business and not on tech,” Chung said.
Chung is not alone. Gartner is tipping Australian businesses to spend around $4 billion on SaaS products this year.
SaaS is not perfect and creates new risks
In avoiding the traditionally adversarial IT relationship, lines of business are creating new technology risks, particularly around integration and the full utilisation of shiny new tech buys.
These problems typically manifest another 12 to 18 months down the track, according to Dr Joe Sweeney, advisor at Intelligent Business Research Services, which conducted the Technology One research.
Over that same period, Sweeney says, the number of organisations implementing SaaS solutions will also grow considerably which is why he advises organisations to rethink the role of their IT departments.
While IT may be being left out of the initial purchase conversation, it will prove critical in its integration and subsequent challenges.
“You need to get your IT group involved in the discussions. Not for the technical reasons but for reasons of governance,” Sweeney says.
Without IT acting in its new role as a “technical consulting group”, one that “shows organisations how to stitch all this stuff out together”, SaaS creates a risk of creating even more technology and data silos, according to Sweeney.
And for the CIOs remaining steadfast in their typical role, their days may be numbered, according to Sweeney. He said the changing dynamic between business and IT is forcing CIOs into the governance role and those who aren’t providing feedback to the business “aren’t remaining CIOs for much longer”.
Sweeney says his latest research showed most CIOs were adjusting, now ranking governance as their top priority outside of security.
Latest research on enterprise software
In December last year, IBRS analysed Australian and New Zealand senior executives’ attitudes on enterprise software as part of a study commissioned by Technology One. There was a 60-40 split of business and IT executives.
The researchers found the business lines of finance, human resources, service delivery, and field operations had all surpassed the IT group in terms of who makes investment decisions.
The report says a “tidal wave” of new SaaS and cloud spend is coming but currently, nearly a third of enterprise solutions remain on-premise while 24 per cent of organisations rely on managed services.
Much of the new buys will come from the education and local government sectors, which have been laggards in the past, according to the report.
Despite the hype, satisfaction rates with enterprise software are low to passive, which the report attributes to cultural challenges around adoption and poor integration.