Line of Business Leaders

Published: March 25th, 2015

It’s not every day that you are told you no longer matter.

For Ted Maulucci, this is exactly what happened when, at a CIO summit, a sponsoring vendor walked in the room.

“We don’t care what you’ve got to say because we’re going to sell to the line of business and they’re going to make you put us in,” Maulucci paraphrased. The CIO of Tridel, one of Toronto’s largest condo developers, had a look of disbelief as though he was hearing it for the first time.

The vendor, whom Maulucci declined to identify, was talking about selling technology to departments in a company such as marketing, finance and HR instead of the IT department, which has been the go-to place for solutions.

“It was arrogance,” Maulucci said.

While not all vendors are so bold as to pursue a new opportunity with such abandon, the market conditions favour the trend.

Employees are doing work on their personal devices.

Business departments are increasingly going around IT to purchase solutions to their business-driven problems.

Companies such as Cisco Systems, without discussing the potential implications, are certifying partners in selling to line of business (LoB) leaders.

There are whispers that CIOs are losing relevance.

In this regard, the numbers paint a clear picture.

According to IDC research from 2014, business now funds 61 per cent of technology projects. A detailed breakdown places funds into five categories: business-funded shadow IT, business-funded sanctioned IT, business-funded joint LoB-IT projects, and IT-funded joint LoB-IT projects, each hovering at around the 20 per cent mark.

It comes as no surprise then that the fifth category, IT-funded projects purely for the IT department accounts for only 19 per cent of all tech spending.

Meanwhile, disparity in new technology spending between the IT department and the line of business is also at an all-time high. After infrastructure and essential software maintenance costs, IT has only 21 per cent of its budget left over for new projects compared to LoB’s 38 per cent.

While IT spending (with the exception of healthcare IT) is flatlining at a compound annual growth rate (CAGR) of 1.8 per cent, departments such as marketing are driving tech expenditures with a 5-year CAGR of 9.5 per cent, according to IDC projections.

It’s easy to see why.

When asked about their pain points and imperatives, CMOs, CFOs and HR executives all point to the pressures of greater efficiency. However, they also identify needs that IT being currently deployed in their company is not able to accomplish, namely the ability to analyze big data and take advantage of mobility.

“It’s not just about data input, it’s about analyzing and understanding what the numbers mean so that we can use the information to make better and faster business decisions going forward. That’s one of the reasons why we are looking for a new ERP system,” said Winnie Leung, CFO at Moneris Solutions Inc., at a CDN-hosted workshop addressing line of business concerns in October.

These pressures, perhaps, come at a bad time for IT, as it grapples with the transition from on-premise solutions to the adoption of cloud and other emergent technologies, a phase that consulting firm Avanade calls “two-speed IT.”

“Time spent managing the old legacy systems continues to distract IT staff – 34 per cent of Canadian IT staff’s time (36 per cent globally) is spent managing and maintaining legacy systems … IT staff must balance the support of legacy systems with the need to continuously innovate in order
to stay ahead of the competition,”said an April 2014 report commissioned by Avanade.

Furthermore, in terms of sentiment, among the 1,003 C-level executives the company surveyed, a vast majority – 67 per cent in Canada and 79 per cent globally – believe “they can make technology decisions for their department better and faster without the involvement of IT.”

While selling to these new eager buyers may sound like a great new bandwagon for IT providers, Maulucci is quick to put on the brakes.

“Ultimately it’s going to fail,” he said, referring to the aforementioned vendor. “For something to propagate, it has to have validity to it, in this case there’s no validity. If anything it’s going to pull a company apart instead of strategically align them.”

Jeff Gilchrist, Canada general manager of Avanade Canada, echoed this sentiment. He said that for an IT provider, selling to the line of business is not a recipe for long-term success.

“If you have a software as a service solution, you may satisfy an immediate itch, but that whole issue of how it integrates with the rest of the company could become quite complex,” he said. “If you do not have a relationship with the IT department as a systems integrator, you may win a battle, but you’re never going to with the war.”

Rather than pick sides, the channel opportunity may lie in bridging the gap.

According to Greg Myers, senior vice president of sales and marketing at Tech Data Canada, channel partners should act as an intermediary between IT, with whom they traditionally have a relationship and other departments whose business needs may not be directly supported by the IT department.

“IT is responsible for a lot of things, but they’re not really responsible for improving the performance management process or improving the expense management cycle. Those requirements are being born within the actual operating departments within companies,” said Myers. “One of the big opportunities for the channel is to help educate the IT organizations about these emerging business requirements that they face as an organization.”

In order to do this, he said, channel partners should expand their sphere of influence by reaching out beyond the IT department by developing those conversations with the CMO and CFO, understand their challenges, be a resource, and work with their existing framework.

“If you can do that your value to that customer grows exponentially,” he said.