IT Organizations Can Achieve Breakthrough Improvements by Embracing Digital Technology

By fully embracing digital transformation, IT organizations can achieve superior levels of efficiency and effectiveness, including 19% lower cost, 3x more projects delivering targeted ROI, improved agility, and enhanced customer experience, according to new Digital World Class^™ IT research from The Hackett Group, Inc.

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“The results are impressive. But the bottom line is straightforward. Our research provides empirical evidence of the impact that digital transformation is having”

“For decades The Hackett Group’s benchmarks have been the gold standard by which most global companies measure world-class performance in IT and other business services. Now, with the growing impact of digital transformation, The Hackett Group is raising the bar further with its shift to a Digital World Class measurement standard. Our new research details how highly technology-enabled organizations are achieving new levels of peak performance,” said The Hackett Group Vice President, Research Erik Dorr.

“The results are impressive. But the bottom line is straightforward. Our research provides empirical evidence of the impact that digital transformation is having,” said Dorr. “For years, companies have been making incremental improvements, optimizing processes, cutting costs and reducing transactional labor to reach world-class performance. But new technologies allow many companies to fast-forward to Digital World Class levels of operational excellence and business value. And they can get much of this benefit by overlaying digital technology on their existing systems, rather than embarking on large-scale infrastructure changes.”

A public version of the research, “Digital World Class IT: Reaching New Heights in Peak Performance” is available free, with registration, at http://go.poweredbyhackett.com/itdigwc2106sm. It contains more than 30 metrics detailing the performance of Digital World Class IT organizations. But here is a summary of the key research findings:

Greater Efficiency – 2021 Digital World Class technology organizations operate at a 19% lower cost per end user than peers, which represents a cost savings of $35.7 million for a $10 billion company. They are also more productive, operating with 26% fewer full-time IT staff, see 33% lower labor costs per end-user, and have 41% lower outsourcing costs. They achieve these savings while spending 3% more on technology than peers, including investing 36% more on software-as-a-service, which improves agility, responsiveness, and business resilience. They see emerging technologies as a path to innovation and improved business value, investing less on mature or declining technologies and 63% more than peers in areas such as machine learning, natural language processing, and blockchain. Savings in labor, outsourcing, and overhead driven by digital transformation offset the higher technology cost.

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Improved Effectiveness – Digital World Class IT organizations deliver more than just lower cost. They also achieve higher levels of service. They are more agile, in part because of reduced complexity, and are seen by stakeholders as more accessible and proactive. They are more effective, with 3x more projects delivering targeted ROI, 51% more business transactions automated, and 32% more IT service desk calls resolved on first contact.

Better Customer Experience – Digital World Class IT organizations deliver improved customer experience. They are 63% more likely to be perceived as a valued business partner by their stakeholders, receive 32% higher net promoter scores, and see 2.1x greater levels of self-service through process automation.

Enterprise Benefit – Digital World Class IT organizations are in part absorbing additional technology investment in their quest to be a true strategic partner to the business, and the rest of the enterprise reaps significant rewards. Across all general and administrative (G&A) functions, including finance, procurement, and HR, costs associated with technology, labor, outsourcing and overhead drop by an average of 29% among companies with Digital World Class IT functions.

Six Areas of Excellence – Technology enablement is at the heart of the Digital World Class performance advantage. However, to fully unlock the potential of technology, leading IT organizations also transform five other key areas: data and analytics; cloud-based modern architecture; operating model evolution; innovation; and talent. The research provides details about Digital World Class performance in each of these areas. For example, in data and analytics, the pandemic has led to new urgency in improving forecasting and analysis, and Digital World Class IT organizations have a significant head start. They are twice as likely to have formal enterprise data and analytics roadmaps. Companies with Digital World Class IT organizations are also at the forefront of architecture modernization and cloud migration. They are 36% more invested in cloud-hosted software per end-user, and have a 31% higher allocation of technology spend to cloud. Technology organizations with large-scale cloud deployments are 32% more likely than peers to meet enterprise business objectives. Finally, to focus on talent, leading technology organizations are rebalancing their workforce with more customer-facing, partner-ready, change-oriented talent. The largest skill gaps in IT are associated with emerging technologies such as artificial intelligence. However, the skill CIOs say they need most among staff is change leadership – the third widest of all the skill gaps predicted for 2021. Besides staff who can lead and sustain change, success going forward will also depend on having more information technology (IT) managers who can think strategically and design customer-centric solutions.

Action Plan for Digital World Class – The Hackett Group’s research offers an outline of how companies can do an assessment of their current performance, maturity, and capabilities, identify design future capabilities to advance the digital agenda, and create a journey map to progress towards Digital World Class performance levels.

Digital World Class IT organizations are those that achieve top quartile performance in operational excellence and business value across an array of weighted metrics in The Hackett Group’s comprehensive IT benchmark. It is also designed to quantify the performance improvement opportunity achievable by maximizing technology enablement of IT work and optimizing the technology landscape. The Hackett Group’s Digital World Class IT research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.