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Corporate Executive Board

The Changing Landscape of Corporate IT

The effective use of information technology is increasingly important to business success. However, the same may not be true for the Information Technology function. In fact, within the next five years we will see a fundamental restructuring of corporate IT with business leaders taking a larger role in managing technology themselves.

In interviews with and surveys of more than 200 IT and business executives, The Corporate Executive Board (CEB) identified how current business, economic, and workforce trends will affect how technology creates value for large corporations. CEB discovered that, in the next five years, only 25% of current IT headcount will remain in a traditional central IT role. For the remaining 75%, some will be externalized, and companies will embed the rest in a business shared services group or integrate IT management into business responsibilities.

Two key business trends support a move towards an integrated central business shared service. First, corporate centers (IT, Finance, HR, Supply Chain, Procurement, etc) are reaching their limits of efficiency. Even companies with a sustained track record of cost reduction see limited potential for further reductions in the current structure. Second, continued growth in emerging markets means demand for in-language support and local process variation that can best be provided at scale by a single shared services function rather than replicated across many.

As a result, technology will ultimately be delivered as part of integrated business services, with 49% of IT leaders planning a move within the next three years. Business units will pay for business services, such as new supplier installation or employee relocation, based on outcomes needed. The service will be delivered by a single team, of which IT staff make up just one part, alongside counterparts from Finance, HR and other support services.

This business shared services organization will have within it an "indispensible IT" function with specific responsibilities around managing the external providers to ensure service levels and integration with existing technology. For other traditional IT responsibilities such as business analysis, program management, user support, business relationship management and governance for establishing standards and risk management, the lines between what is "IT" and what isn’t will become so blurred that the activities may be rehoused elsewhere in the business services group.

Greater Business Role in IT

Not all IT will move to the business shared services group. In places where technology differentiation provides a competitive advantage in a specific line of business, unit leaders and end users will obtain and manage technology themselves.

For years, IT executives have said that there are no IT projects, only business projects with IT components. There are two business trends that are pushing this to the logical conclusion of true business unit ownership.

1. CEB discovered from an assessment of 550 business processes that the majority of opportunities to use technology to drive business value are not in process automation. In customer service, marketing, sales, and innovation, the majority of IT enablement opportunities are at the customer interface and involve business intelligence or collaboration. In these areas, end-customer needs may vary across the organization and require deep knowledge of business products, services, and strategy.

2. Non-IT staff is increasingly tech savvy and equipped to take on the business enablement challenges. Over 80 percent of recent college graduates in the US expect to encounter new technologies in their future jobs and 60 percent of recent college graduates expect to need increased technology skills. Where salespeople used to resist technology solutions, they are now demanding them.

Business unit staffs will own technology strategy, establish requirements, and change management. Centrally located IT resources will continue to enforce data integrity and information security standards to safeguard information value.

These shifts are part of a larger investigation into the five-year outlook of corporate IT organization and management. Organizations that do not prepare for the shifts will struggle to exploit technology and will find themselves managing an inefficient IT function and an under-performing corporate center. IT leaders risk a diminished position in a group with little strategic role. However, these shifts will also provide leaders with significant opportunity to lead a larger shared services group with new levels of accountability or to transform business operations that is exploiting technology for competitive advantage.

What the Best Companies Do™

CEB specializes in helping companies drive corporate performance by identifying and building on best practices. The organization offers data analysis, research, and advisory services relevant to business leadership. CEB's client and member network includes 85 percent of the Fortune 500, 50 percent of the Dow Jones Asian Titans, 70 percent of the FTSE 100, and 80 percent of the DAX-30. CEB membership encompasses 50 countries, 5,300 individual organizations, and 225,000 business professionals.

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