Senior IT executives agree that large organizations must not defer the critical update of their systems and capabilities.

Looking at enterprise IT, the 21st century to date has been a lot less digital than the headlines have led us to believe. After the tech bust in 2001, we had nearly five years during which IT investment by companies and public sector organizations in the major industrialized economies had all but dried up and IT spending was largely replacement driven.

Then, over the past 18 months, the leadership of many large organizations realized that the pace of improvement in productivity, product innovation and customer service had fallen away and they had to invest to increase competitiveness. As a result, we have seen a recent upsurge of multi-year programs to implement new customer-facing, supply chain, production and back-office systems. For the most part, these programs have only just begun and will take some time to get to production, change the way the business works and deliver their target outcomes. In some markets and sectors, organizations are still only at the planning stage, pondering whether to invest now or try to get more use out of their existing systems.

It looks like at least the first half of 2008 will be dominated by uncertainty over global economic growth and business leaders will naturally reassess their current investment plans.

However, a new report conducted with senior IT executives at top private and public sector organizations in North America, Europe and Asia argues that large organizations must not defer the critical update of their systems and capabilities, as 2007 was the first time in nearly a decade that IT investing was not simply about replacing broken boxes.

As pure-play consumer Internet companies have raced forward and established a completely new set of expectations around user experience, participation, mobile access and real-time responsiveness, most corporations and public sector organizations are falling behind. According to research, today an average of only 22 percent of customer interactions, only 20 percent of supplier interactions and 34 percent of employee interactions are conducted online and processed automatically.

The reality is that online interactions between the organization, its customers, suppliers and other stakeholders have not only dramatically increased in weight when evaluating overall organization performance, but also the reporting of the level of customer satisfaction has now almost completely moved online and is real-time.

In a time when consumer adoption of advanced converged and mobile information and collaboration technology is at an all-time high, 53 percent of American research participants declare their organizations to be technology followers, the most conservative of their global peers, while only 35 percent of enterprises around the world are committing mobile applications to a major part of their business and only a fraction are looking seriously at collaboration tools such as wikis for their knowledge workers. Most workers today have better technology at home than at their workplace.

Also today, IT teams still spend 39 percent of their total time running and fixing existing systems. The reason? Legacy systems, in many cases having been on life support for more than a decade now, are still not being decommissioned. In fact, on average, more than 60 percent of all enterprises systems in the global benchmark were fully depreciated.

On a positive note, many of the CIOs of large enterprises that participated in the research have understood that most of the new technology available today is, in fact, technically mature, cheaper than the technology it replaces and easier to install. In addition, some organizations are putting in place strategies to leverage the coming maturity of software-as-a-service and service-oriented architecture (SOA) technologies that may see organizations one day only owning the software that they have developed themselves in seeking competitive advantage, and renting everything else.

A Joint Agenda
The reality is that the trade-off CEOs and CIOs must make in 2008 is between reaching the next, much higher plateau of enterprise productivity compared with one-off cosmetic improvements that merely nudge the bottom line. For some, this means a choice between not being able to compete in the future with low-cost emerging-market multinationals that never had any legacy systems, or not having to spend the time understanding what information technology can do for the business.

Universally, the CIOs who provided the IT benchmark via a self-assessment on behalf of their organizations estimated their business could at least double the number of interactions with customers, suppliers and employees that are self-serve and online. They also confirmed there is no innovation problem, but an adoption problem. Enterprises are slow in adopting new technology because leadership is not confident their business will be able to undergo the organization change in relation to processes and people to get value from the investment.

In today’s strategic modeling parlance, the approach is best thought of as risk scenario planning – investing a little to advance knowledge to reassess where to place investment bets. Think of the approach as emblematic of today’s “trial-and-error economy.”

Customers are starting to expect organizations to deliver the same experience, speed, detail of information and flexibility that they get from their personal technology. However, according to research, only 28 percent of IT investments of the large enterprises focused on the customer.  
Clearly, many organizations must take a close look at their core front office systems and associated processes – customer relationship management, sales and marketing, and billing.

Here, the test really should not be about technical and business adequacy. Instead, a good way forward for many will be to base their review on the consumer Internet. Do you provide source-level customer reviews? Do you provide on-demand advice to your customers, and feed that experience back into your product cycle? Do you cross-sell and connect your consumers to a broader community?

Leveraging Substitutes
This year’s research shows that IT innovation leaders and high performers are already leveraging SOA for legacy integration, and are further ahead today in building new SOA-based applications. Moreover, 38 percent of the application portfolios of these companies are comprised of composite applications built using an SOA architecture and 45 percent of new application functionalities of this group was already built based on reuse of existing services.

In fact, the only significant issue that was slowing down SOA adoption of the high-performing IT functions in the research was their ability to recruit and train additional skills. Finally, high performers all aspire to adopt alternatives to traditional enterprise applications for their external-facing applications and are looking to migrate to on-demand applications and SOA-based, home-grown, industry-created applications.

By investing in the right technologies and incorporating those in their efforts to reach out to customers, high performers have successfully captured customer relevance and are changing how their customers interact with them. More than 25 percent of high performers’ interfaces already focus on the customer, as opposed to only 15 percent for all CIOs. High performers also have achieved levels of access to granular and real-time customer information higher than the rest of their peers.

Bob Suh is the chief technology strategist at Accenture. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it