Business and Technology Leaders Come to Terms with The New Economic Rules for Ongoing Digital Transformation

By Lane F. Cooper, Editorial Director, BizTechReports and Contributing Editor, CIO.com

As organizations evaluate their technology modernization options, business technology leaders are wrestling with how to reconcile the economic and operational complexities associated with on-prem modernization, cloud migration and effective long-term digital transformation strategies. Among members of the CIO community, however, a consensus is likely emerging to recast – yet again – the role of information technology (IT) departments in organizations. 

IT has steadily evolved over the past few decades from being a critical (but tactical) overhead activity to a driver of strategic business value and competitive differentiation. That said, looking ahead, organizations expecting to stake a long-term claim on market leadership in their respective sectors may need to look at enterprise technology investments as precisely that; a portfolio of assets that work together to generate cumulative value, simultaneously safeguarding current market positions while blazing new trails through intentful investments in innovation initiatives. 

These were among the conclusions of an executive dinner roundtable hosted by PwC during the 2023 CIO-100 conference, which yielded insights and perspectives on the new strategic imperatives that should be effectively addressed to help extract sustained value from increasingly complex and heterogeneous enterprise technology investments. 

In an interview after the Chatham House Rule event, Kumar Krishnamurthy, Principal and Practice Lead for Technology Strategy, Cloud & Digital at PwC US and Tony Morgan, Principal and Digital Platform Leader for Managed Services at PwC US, shared their perspective on the key take-home points yielded by the executive conversation.

Enterprise Tech 3.0 is About Long-term Return on IT Assets

Despite the tremendous amount of innovation that has taken place in enterprises over the past 15 years, Krishnamurthy points out that many foundational elements of business and technology have remained tenaciously static. 

"For instance, the organizational structures of companies – including IT departments – have not fundamentally changed since the late 80s. They remain largely hierarchical and have contributed to decades of silo creation and fragmentation that has hampered efforts to create agile and responsive enterprises that should operate in increasingly dynamic and constantly disrupted business environments," he says.

It is a situation that has relegated a significant portion of IT time and energy to be focused on simply connecting the dots between the discrete performance of specific enterprise infrastructure elements.

"You end up with a situation in which 70 percent of IT activities simply maintain operations, with 20 percent of efforts focused on advancing the modernization of existing applications,” says Morgan. “At most, only 10 percent of resources remain available to address the innovation and transformation agenda. We should figure out how to start flipping that equation," he says.

Changing Executive and Boardroom Perspectives

Addressing this challenge would require a fundamental shift in how C-level executives and boardrooms view the relationship between IT, innovation and strategic transformation. 

"We should rethink the role of enterprise technology from being a set of tools that accomplish discrete outcomes – creating effectiveness or generating new revenue streams – to understanding the technology estate as a portfolio of assets that should perform over the long-term while addressing the dynamics of the day," explains Krishnamurthy.

"Organizations that take an asset management-based approach place themselves in a position to see IT investment through a strategic profit and loss (P&L) lens. They can better understand their portfolio and determine how to invest by asking: How can I generate a return on assets? Should I put more into the assets? Should I sweat the assets?" he says.

It is a mindset change that requires a holistic executive consensus because it fundamentally alters the value proposition and expectations that are often set, monitored and measured for enterprise technology. However, executed properly, it can help provide an accountable perspective on organizational investments in innovation.

"Innovation now becomes something that the organization can assign sustainable value to," says Morgan. "By becoming part of an enterprise investment portfolio, we can move beyond discussions about the cost of running IT – which is still an important conversation. But on top of it, we can perform asset-based valuations based on how innovation contributes to the bottom line of organizations over time," he concludes.

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EDITOR’s NOTE: Click here to learn more about what tech leaders are prioritizing in PwC's August 2023 Pulse Survey.