Podcast: IT Transformation…What’s the ROI?

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Learn how to develop a strategic approach to IT transformation that can catapult your organization ahead of the competition. Adam DeMattia and John McKnight, of the Enterprise Strategy Group, share what they’ve learned from a worldwide survey of 4,000 businesses.

What You’ll Hear In This Episode

  • The current level of strategic IT transformation across industries
  • The competitive advantages of IT transformation
  • The ROI of strategic IT investment
  • The IT characteristics of top-performing organizations
  • The philosophy of IT transformation that leads to success

Spend Less, Do More, Move Ahead with IT Transformation

It’s easy to assume that investing in new technology will help your business get ahead of the competition. But there’s more to IT transformation than chasing the latest shiny object. According to Adam DeMattia and John McKnight of the Enterprise Strategy Group (ESG), IT transformation is a philosophy of ongoing adoption, evaluation, and adjustment. When businesses adopt the right philosophy, they tend to increase efficiency, lower costs, and innovate faster than the competition.

ESG set out to quantify just how much of an advantage IT transformation gives businesses. They surveyed 4,000 organizations around the world to get hard data on how fast businesses are transforming, where challenges lie, and what should be your business’ next move. On this Luminaries episode, John and Adam present their often-surprising findings.

To hear more about ESG’s IT Transformation survey, download the inaugural episode of Luminaries where John and Adam talk about what IT transformation means, and how IT transformation maturity can be quantified to help your business grow.

Links Mentioned in the Podcast

Enterprise Strategy Group Report 
IT Transformation Assessment Tool 

Featured Luminaries

Enterprise Strategy Group is a leading IT industry analyst firm. Recently, ESG completed a major research project on the topic of IT transformation. Specifically, they focused on creating a maturity model that would enable businesses to understand how transforming their IT would position them for success in the digital transformation race.

John McKnight

John McKnight is the vice president of Research and Analyst Services at leading IT industry analyst firm Enterprise Strategy Group (ESG). John has led ESG to become an established, respected, and trusted provider of research and advisory services, strategic consulting, and custom content solutions for the global IT community.

Adam DeMattia

Adam DeMattia is director of Custom Research at leading IT industry analyst firm Enterprise Strategy Group (ESG). Adam regularly contributes to primary quantitative and qualitative research efforts across the broad spectrum of ESG coverage areas in the information technology sector.

“For a truly transformed, high-performing organization, IT can actually be the engine of the organization that drives innovation.”

— Adam DeMattia, Director of Custom Research at Enterprise Strategy Group

The Luminaries Hosts

Mark Schaefer (left) is a digital storyteller, podcaster, blogger, author of six books, international speaker and college educator. Douglas Karr (right) is a digital story teller, podcaster, blogger, author and technologist. Together they shine a light on their guests’ technology vision, human side and motivation to build a better future. Mark and Doug have a unique ability to illuminate highly complex technology topics from fresh and very human angles by focusing on technology’s purpose as an enabler of human progress. Take a listen to Luminaries to learn, laugh and be wowed by human potential.

       

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ANNOUNCER: Luminaries, talking to the brightest minds in tech.

[MICHAEL DELL] And my hope is that we come together to share the technology, and expertise, and products, but that we share a vision of a future that is better than today. A vision of technology as the driver of human progress.

ANNOUNCER: Your hosts are Mark Schaefer and Douglas Karr.

MARK SCHAEFER: Ladies and gentlemen, this is Mark Schaefer. I’d like to welcome you to another episode of Luminaries, where we talk to the brightest minds in tech. And Doug Karr.

[LAUGHING]

DOUGLAS KARR: Love it.

MARK SCHAEFER: See, Doug? This is why I go first. So I can zing you.

DOUGLAS KARR: Well, that’s true, but don’t forget I go last with post-production of the podcast.

MARK SCHAEFER: Ah, noted, my friend, noted. Well, this is a serious show for serious people, so let’s get with it. We have a very special show today because we have our first repeat guests. We have John McKnight and Adam DeMattia from the enterprise strategy group. They were our first guests on our very first show. And they’re gonna talk today with us about some new IT transformation research that they’ve done. So welcome, fellas.

JOHN MCKNIGHT: Thanks, Mark. We’re excited and honored to be back.

MARK SCHAEFER: Our first return guest. So why don’t you tell us a little bit about Enterprise Strategy Group and what you do?

JOHN MCKNIGHT: Absolutely. So, although I’m not sure we meet your definition of serious people, Mark, but I’ll do my best.

MARK SCHAEFER: All right. Well, just, you know, stay within the boundaries, we’ll be OK.

[LAUGHING]

JOHN MCKNIGHT: So when we’re– when we are being serious, ESG is an IT research and analyst firm. And our role, really, is to provide market insight and intelligence to both buyers and suppliers of Enterprise technology. So I run our analyst and research team, responsible for all the different markets that ESG covers. And with that, I’ll hand it over to Adam.

ADAM DEMATTIA: Sure, thanks John. I’m on John’s team as director of customer research. So any time we’re doing quantitative or qualitative research, primary-based research, I’m involved in those projects, kind of soup to nuts.

MARK SCHAEFER: Oh, cool. So when we talked to you– wow, it’s been over a year ago, now– we really learned so much about the state of the nation, as it were, state of the world, in IT transformation. And one of the things I noticed this year is that the scope is significantly changed. I think you went from about 1,000 IT Leaders to 4,000. And you’ve included, now, 16 countries. So what was the reason that you expanded the scope? And were there any surprises with this new, larger data set?

JOHN MCKNIGHT: Yeah, great question, Mark. So, as you know, we talked about this time a year ago. And with the initial project from last year, which in and of itself was a sizable project– about 1,000 organizations across eight countries. We learned some really great and interesting stuff.

And we wanted to expand and further test that hypothesis this year across other regions, other countries around the world. It was really that simple. So we really blew it out, if you will, and went from, again, 1,000 respondents to 4,000, as you mentioned. From eight countries to 16 countries, with representation from sort of all major regions of the world– North America, Latin America, Asia-Pac, Europe, of course.

And, I think, what we found that was most interesting and encouraging to us was really that with that expanded scope, the core findings and conclusions that we had seen and patterns that we had seen in the prior year’s study were very, very consistent. So not only year over year in those countries where we surveyed, you know, in consecutive years, but also once we expanded into these other areas we saw that the same benefits and outcomes of IT transformation really held true.

MARK SCHAEFER: Well, we’ll get into some of those findings and some of those benefits. So what you’re saying is that, really, you know you were– you know, you were going into South America, and Europe, and Asia. So the findings and digital transformation were pretty much uniform around the world or were there some, you know, outliers?

ADAM DEMATTIA: It’s a great distinction, Mark. So there’s a couple of things there. So the truism of IT transformation leading to increased benefit and better outcomes holds true across the globe. Where we did see some interesting variances was kind of the shape of that transformation curve region to region, country to country. But those changes or those variances were actually pretty logical when took a step back.

So when we looked at the most developed economies, places like US, Canada, Western Europe, we saw a lot of consistency comparing those countries to each other. So we saw generally about 90% of organizations clustered somewhere in the middle of that spectrum, and kind of the second stage or third stage of IT transformation maturity. And very few outliers on the poles of being truly transformed and also stuck in kind of legacy mode.

But when we got into some of the really rapidly-developing nations, places like India, China, Brazil, you’d see more bifurcated maturity levels. So you still get a sizable portion in the middle. So maybe like 80%, in stages two or three, but you get much more organizations clustered around the transform status and the legacy statues. So what we’re thinking there is in those really rapidly-developing nations there are some organizations, or more organizations, making great strides towards transforming their operations. But we also see more organizations stuck mired in the quagmire of legacy IT. So it’s an interesting phenomena.

DOUGLAS KARR: It really is. I was blown away by the findings this year, as well. And I loved how it reinforced your original findings with the reporting that you did last year with us. Some of the things that I noticed, businesses on the leading edge of IT transformation in this analysis, 18 times more likely to make better, faster, data-driven decisions than their peers. 22 times more likely to launch new products and services ahead of their peers and get products to market faster. Of course, there’s a ton more in the report, but I’d love to ask you guys, as all these numbers came in, which of the discoveries really made you guys just go, wow?

JOHN MCKNIGHT: Yeah, so I’ll take that one first, Doug. I think at the highest level what was most striking to me, and I know a lot of my peers and colleagues agree, is simply that the idea, this concept of IT transformation really has a lot of legs. It’s actually viewed– was viewed as more important this year to the global organizations we surveyed than it was last year.

So, for example, we put forth to our survey respondents last year this question of, “Do you believe that your organization will not be competitive if you don’t embrace IT transformation?” And last year we had a pretty staggering number of 71% of organizations, or respondents, agreeing with that statement. Just 12 months later, that number had gone up to 81%. So you now have eight out of 10 more, than 8 out of 10, IT decision makers agreeing this is really critical to our competitiveness.

DOUGLAS KARR: Hm.

ADAM DEMATTIA: Yeah, and for me, Doug, I’ll just pile on with my favorite “wow” data point. And you actually brought it up. It was the fact that transformed organizations are so much more successful getting their products and services to market ahead of their competition. And I think that’s pretty amazing and it highlights how for a truly transformed, high-performing organization, IT can actually be the engine of the organization that drives innovation. And I think anyone, just logically, that’s important. No company wants to be behind their competitors.

But just to put a number to it, we asked respondents, hey, are you under pressure to develop services and products at an accelerating pace? And nine out of 10 of the organizations responded– told us the affirmative, yeah, we’re under that pressure. So I think, obviously, seeing IT transformation as the bridge to solve for that problem is pretty important to call out. I think– it was, for me, one of those “wow” data points.

DOUGLAS KARR: Yeah.

MARK SCHAEFER: One of the things that we discussed last year that was– maybe it was my oh, wow data point was the impressive cost savings story associated with IT transformation and really undeniable ROI that’s associated with these investments. What did you what did you find out about that this year?

ADAM DEMATTIA: Sure, yeah, it’s a great question. And like so many of the data points we did repeat year to year, we saw a lot of the same phenomenon showing up, so the story was pretty similar. Organizations that had made the most progress on IT transformation, absolutely gain a significant edge on spending efficiency. We looked at a bunch of normalized metrics, but just pull one out, IT spend per mission critical application. The most advanced organizations, kind of the stage fours or transformed organizations, they spend 16% less than the next tier down, stage three, 34% less than the next stage down, stage two, and actually 62% less than the stage one or legacy companies. What that means to us is IT transformation is absolutely helping organizations stretch their IT budget dollars further, allowing them to shift some of that budget from maintenance and OpEx towards new projects and innovation.

DOUGLAS KARR: Basically more evidence that there’s an inverse relationship between the investment that these companies are making and the results that they’re getting. How is it that a company can invest less in technology, but actually become more transformative?

JOHN MCKNIGHT: Yeah, that’s a really interesting question, Doug. And I think it’s a good point of clarification. These more transformed companies are not necessarily spending less or investing less in technology, whether in an absolute sense or in a relative sense, say as a percentage of revenue. In fact, in many cases, some of these more transformed companies are investing more than their peers.

The key point, however, is that they’re getting a lot more for that investment. So whether we look at any kind of per unit measurement, in terms of the number of applications they can support, numbers of servers or VMs, IT Spending per administrator, per terabyte of storage, all of those kinds of relative per unit measurements, the more transformed you are– and this was true across stage one through stage four, the higher the return, if you will, on those investment dollars, the more you are able to support for the same level of spending. So they’re more efficient, but they are spending and investing in tech.

DOUGLAS KARR: Got it.

MARK SCHAEFER: One of the interesting things that I liked about the report is you spent a lot of time devoted to the ideas of leadership and culture. And one of the comments in your report is that IT organizations are still largely evaluated as places to reduce costs. And I work in the marketing feel and I just see how technology is absolutely just transforming what we do. And not only what we do, but it’s transforming consumer behavior. It’s hard to believe that companies still aren’t looking at this strategically. Are there certain segments or industries that seem to be specifically lagging in this regard?

ADAM DEMATTIA: I’ll start with the core organizing principle of the report is around the idea of transformation. So one of the ways we segmented the market was in how transformed those IT organizations were. And if you look at those organizations that were the highest performers, the truly transformed ones, 2/3 of those organizations say that they’re including IT right at the outset of their business strategy discussions. So they’re right there on the ground floor before those strategies are taking shape. And that was six times the frequency we saw looking at legacy organizations, for example. So that’s one way we segmented and looked at those behaviors.

Looking at from a vertical perspective, so from specific industries where IT’s getting a bigger voice or a larger voice at the table, we saw that the verticals like retail, securities firms, so financial securities, and tech companies actually were the most progressive in terms of including that IT voice in the strategy discussion. And that was kind of irrespective of what transformations score those organizations within those verticals scored. Where we saw that viewpoint lagging a little bit, where IT was a little bit excluded from those. Those were verticals, like consumer packaged goods, discrete manufacturing, and a public sector. So that’s education, state and local, federal government.

MARK SCHAEFER: Was automotive one of your segments? I’m just curious.

ADAM DEMATTIA: Yeah, so automotive would have been included in the manufacturing verticals that we included. So we did definite representation, although we didn’t break them out as a sub-vertical.

MARK SCHAEFER: OK, OK.

DOUGLAS KARR: But as I looked over the report– and we keep using the report, obviously we’re going to let everybody know where to get it– a section at the end caught my attention. It was titled “The Bigger Truth.” Can you explain to our listeners what “The Bigger Truth” is?

ADAM DEMATTIA: Absolutely. Yeah, so the bigger truth really is kind of ESG as an organization, it’s our guiding principle. In fact, it’s our tag line. And it means what we do is take two complex sets of information, whether it’s a data set, primary research like this, or a complex market landscape and we try to connect the dots and uncover and communicate the underlying actionable meaning of what’s going on in the market. So that’s kind of the perspective on the bigger truth.

And this research, there’s a set of behaviors and actions, collectively, that encaps where the information is. And very few organizations today are adhering to all of those behaviors. and all of the actions. But the few that are, are achieving [AUDIO OUT] in IT performance and have rapidly advanced complex and innovative digital transformation initiatives. And at the end of the day, they show up is financially outperforming their competitors. So, to us, the bigger truth is if you’re not moving the ball forward on IT transformation today, you should be.

MARK SCHAEFER: Well, this brings up kind of a weird question. But what is IT transformation? Is it a project? One of the things I see is that people kind of refer to IT transformation as though there’s an end. Is IT transformation a project? Do you need a project manager? Is it a philosophy? Is it a culture? If somebody is just incrementally improving year to year to year, is that IT transformation or does it imply some sort of quantum leap?

JOHN MCKNIGHT: Well, that’s a great question, Mark. That’s a big question. I may have to put my serious person hat on to think about that one.

[LAUGHING]

So let me just reach under the table, here, and pull that out. So, no, actually, I think you hit the nail on the head with one of the words you used, which I’m going to steal from you. It really is a philosophy. It’s a state of mind. It’s a strategic goal to modernize IT systems in order to be more agile, be more cost effective, and, ultimately, really meet the needs of a modern digital business. It’s not a one-time project, it’s an ongoing iterative process that really never ends.

Incremental improvements will always be possible. So you mentioned quantum leaps and step functions. Certainly the way we’ve presented the research to the world, here, is breaking companies up into these four stages, but there are lots of little gradients along the way there. Where just because you might move– when we have a 100-point scale– you can move from 27 points to 32 points. And you might not go up into the next stage, that next quadrant, but you will see incremental improvements along the way. And we did see that in this year’s research.

It’s ultimately going to constantly evolve over time. We’ve kept a consistent definition of IT transformation, year over year, to be able to benchmark companies over that time period. But we’re under no illusions that what’s modern or quote unquote “transformed” or transformative today, that won’t be the same two years from now, five years from now, 10 years from now. So I think it really is taking that journey, adopting, embracing that philosophy, as you mentioned, of how can we always make sure our IT infrastructure is meeting the demands of the business as every business really undergoes this rapid digital transformation metamorphosis?

MARK SCHAEFER: It almost seems like the core competency today is evaluate, adjust, evaluate, adjust. That’s got to be part of the journey. I remember in the early days of IT where your software– you had these discrete functions. You had a little software program that you had on disks for this, for that. And–

JOHN MCKNIGHT: Sure.

MARK SCHAEFER: I was in the company when we– [INAUDIBLE] had our first ERP installation. And I remember it was a huge, huge multimillion dollar, multi-year kind of project. And I can remember one of the leaders of the company asking, what is this thing going to be over?

[LAUGHING]

And the answer was never. It’s a new way to think. It’s a new way to think. This is era of just constant and rapid change, being part of leadership, being part of culture, is really a different way to think, isn’t it?

JOHN MCKNIGHT: Yeah, absolutely. You can see that reflected in new attitudes and methodologies around software development. So not new now, but for years now, that world has moved to this idea of agile development and continuous development and constant, small but and meaningful and ongoing iterations. And that really will be true not just of IT in general, but really of modern business.

MARK SCHAEFER: Do you see most CTOs today– are they taking this responsibility on themselves? How do they work with outside partners, like someone like Dell to know what’s going on, to know where they need to be heading next? How do you stay current, how do you stay on top of that? What are some of the strategies you see out there?

JOHN MCKNIGHT: Yeah, sure. So it’s really– there are a number of, certainly, information sources and inputs that we see CIOs and CTOs relying on. Whether it’s the technology suppliers and vendors themselves, whether it’s trusted third parties, more in the sense of global integrators and trusted value added resellers and channel partners. Certainly not to sound self-serving, but the world that we live in of being independent technology analysts. We’re industry observers and we watch and measure all these trends and hopefully provide some perspective and advice on, hey, this is where we see the world going and this is where we see some of your peers going and where they’re having success, maybe where they’re running into some pitfalls. Certainly, engaging with professional services teams to understand, to do more in-depth assessments and benchmarking, is always a time-tested strategy. So I think all those things come into play in terms of how you can assess where you are and where you need to go. And, ultimately, that, in fact, was one of the key objectives of this research– was can we give the market a sense of what this journey looks like and where the different milestones are and where you might be on that path?

DOUGLAS KARR: Well, and I love that you actually– one of the most useful and interesting aspects of your effort to do that is that you quantified the different stages of transformation and can characterize a company by maturity stage– legacy, emerging, evolving, or transformed. So for listeners of the podcast, John, how can they determine where their business is on the curve?

JOHN MCKNIGHT: Sure. So, luckily, fortuitously, we have a, developed in partnership with our colleagues at Dell EMC what we hope is a handy and useful online assessment tool that’s very quick, easy tool to use. It’s very consistent with the research questions and methodology that we used in the report and that we’ve been talking about today. It takes a subset of those questions and allows a user just to simply answer about 10 or 12 questions at a high level across different technology, organizational, cultural dimensions. And it will give you a score of where you stand, relative to all the other organizations that we’ve assessed in this process. And it will provide some recommendations around here the areas where we think you’re probably doing pretty well, here are some areas where you might want to take further action, further step, further investigation. So that web assessment calculator is available on DellEMC.com on the IT Transformation landing page.

DOUGLAS KARR: Fantastic

MARK SCHAEFER: Yeah, that’s awesome. And I’ve checked out that tool and it’s so very interesting. I was unable to record a score, unfortunately, because I had a negative score. I don’t really know what that means. But [LAUGHING] we will definitely have– I think Doug must have changed my score in post editing or something.

[LAUGHING]

But I think what we’ll do, of course, is we’ll have links to all of these resources. And if you haven’t checked out the Dell Luminaries podcast page, you should do it, because they’re doing an amazing job with every episode. Adding links, adding additional information based on the topics that were covering each show. So be sure to check that out. We’ll post links to the report we discussed today. We’ll post a link to the calculator that John just discussed.

And John and Adam, thank you so much for joining us again. Maybe we’ll have to make this an annual thing.

ADAM DEMATTIA: Absolutely.

JOHN MCKNIGHT: It’s been a pleasure, gentlemen. Really enjoyed it. Yeah, it’s like the midsummer classic.

MARK SCHAEFER: There we go.

JOHN MCKNIGHT: It’s all-star game and do the podcast with Mark and Doug.

MARK SCHAEFER: Well, good, I’ll take it. I think I’ll use that as a testimony on my site.

[LAUGHING]

So thank you so much for joining us today. And thanks to all of you for listening. We never take you for granted. Thank you for spending your time with us and listening to Luminaries, where we talk to the brightest minds in tech.

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ANNOUNCER: Luminaries, talking to the brightest minds in tech. A podcast series from Dell Technologies.