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Hackett: IT Struggling to Enable Digital Transformation Of Both the Enterprise and the IT Organization

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IT organizations are currently struggling with the challenge of enabling
their company's digital transformation while at the same time
transforming the IT function itself into a more customer-centric,
innovative and agile operation, according to new research from The
Hackett Group
, Inc. (NASDAQ:HCKT). While these two missions are
interdependent, given the finite resources of time, talent and capital,
most IT organizations are finding it difficult to strike a balance, the
research found.

A public version of the research, "Envisioning World-Class Digital IT,"
is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/wcit1806sm

World-class IT organizations now spend 22 percent less on IT per
employee than typical companies, while also achieving higher levels of
effectiveness, the research found. For a typical company with $10
billion in revenue, attaining world-class performance can bring as much
as $41 million in potential savings annually which can be reallocated to
fund digital transformation and innovation initiatives.

One key to achieving these cost savings is that world-class IT
organizations spend dramatically less on running their operations,
including spending 51 percent less on infrastructure management, 43
percent less on end-user support and 25 percent less on application
maintenance per employee. World-class IT organizations reduce run costs
by managing complexity much more effectively than peers, operating with
half the ERP systems and customer databases, for example. Demand
management is a critical strategy for top performing IT organizations,
which approve 44 percent fewer IT projects than typical companies but
deliver high-value projects at least 4x faster and on average complete
significantly more IT projects on time, on budget and to spec.

Reducing run costs enables world-class IT organizations to dedicate more
funding to building new capabilities, including infrastructure,
applications and updates, and access to big data sources. It also
enables world-class IT organizations to focus more on innovation,
investing twice as much on emerging technologies, the research found.

"In today's world IT must transform itself into a true valued business
partner and demonstrate the ability to enable business value creation,"
explained Scott Holland, principal and Global IT Executive Advisory
Practice leader, The Hackett Group. "At the same time, it's critical
that they maintain a focus on being good corporate stewards, optimizing
the overall performance of the IT function. It can be hard to maintain
the right balance as they do this, and stay lined up on both targets.
But it can be accomplished."

Fully implementing digital tools to automate IT's service delivery
lifecycle has the potential to reduce operating costs further for both
world-class and typical companies, largely by reducing run costs, the
research found. Digital transformation driven by IT also has the
potential to reduce process costs by an average of 25 percent in other
corporate G&A functions, including corporate finance, procurement, and
HR.

Four out of the top five areas where IT has been focusing its internal
digital transformation are related to run processes. Three run processes
see the largest percentage of both pilots and completed transformation
projects: end-user support (including IT service desk); IT operations
(network and data center); and risk and security management.

Cloud-based applications are also becoming increasingly popular, in IT
as well as in the other G&A areas where The Hackett Group focuses. The
number of G&A organizations with broad adoption of cloud-based
applications is expected to double or triple in the next two to three
years, the research found. While cloud-based applications are not
necessarily cheaper than traditional on-site deployments, the cloud
generates significant benefits by eliminating customization, applying
upgrades systemically and effectively outsourcing the optimization of
technical infrastructure.

In addition to operating at lower cost, world-class IT organizations are
significantly more effective than peers. They deliver core functionality
of high-profile, high-value applications in 90 days or less, while
typical IT organizations take at least 4x longer. World-class IT
organizations are also much more likely to deliver projects on time, on
budget and to spec. They are 3x more likely to use rapid development and
iterative methodologies. Demand management emerges as a key approach
that world-class IT organizations use to achieve successful project
delivery. They green-light 44 percent fewer IT project requests than
peers.

"Demand management is a key issue that IT organizations struggle with,
and an Achilles heel for many," said Richard Pastore, senior research
advisor, IT Executive Advisory Program, The Hackett Group. "IT leaders
are being pressured to keep costs down, but demand for their resources
is exploding due to digital transformation, which now accounts for
nearly 30 percent of the total projects in the pipeline. Plus, there's a
significant risk of business units developing their own shadow IT
efforts in digital transformation, going directly to consultants or
vendors to get what they want done."

"World-class IT organizations address these issues head-on," said
Pastore. "They carefully manage demand and approve far fewer projects
than typical IT organizations. As a result, they are much more likely to
succeed at the projects that they do execute, and drive far greater
value to the enterprise."

The Hackett Group's research found that IT must help the business
transform its processes, products, delivery channels, and
decision-making insights. For this, IT must apply its five core
enterprise transformation capabilities: technology innovation; modern
digital architecture design; advanced cybersecurity; accelerated service
delivery; and advanced data and analytics. While none of these
capabilities are particularly new or foreign to IT, The Hackett Group's
Digital Readiness Assessment shows that in most cases, there is
significant need for improvement in IT's capability maturity if IT
organizations are to be an enabler rather than a bottleneck to achieving
the full benefits case of digital transformation.

World-class IT organizations are those that achieve top-quartile
performance in both efficiency and effectiveness across an array of
weighted metrics in The Hackett Group's comprehensive IT benchmark. The
Hackett Group's world-class IT research is based on an analysis of
results from recent benchmarks, performance studies, and advisory and
transformation engagements at hundreds of large global companies. A
public version of this research, is available on a complimentary basis,
with registration, at this link: http://go.poweredbyhackett.com/wcit1806sm

About The Hackett Group

The
Hackett Group
 (NASDAQ:HCKT) is an intellectual property-based
strategic consultancy and leading enterprise benchmarking and best
practices digital transformation firm to global companies, offering
digital transformation including robotic process automation and
enterprise cloud application implementation. Services include business
transformation, enterprise analytics, working
capital management
 and global
business services
. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information technology,
including its award-winning Oracle and SAP practices.

The Hackett Group has completed more than 15,000 benchmarking studies
with major corporations and government agencies, including 97% of the
Dow Jones Industrials, 89% of the Fortune 100, 87% of the DAX 30 and 59%
of the FTSE 100. These studies drive its Best Practice Intelligence
Center which includes the firm's benchmarking metrics, best
practices repository and best practice configuration guides and process
flows, which enable

The Hackett Group's clients and partners to achieve world-class
performance.

More information on The Hackett Group is available at: www.thehackettgroup.cominfo@thehackettgroup.com,
or by calling (770) 225-3600.

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