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IT Leadership // IT Strategy
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10/13/2014
04:46 PM
Chris Murphy
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The Amazon Test: Companies Pay Up To Pass

Is your technology up to consumer web standards? New CEB data shows companies investing more in customer-facing tech projects.

For years, IT organizations have faced the "Amazon Test," the idea that people -- employees, partners, customers -- compare your company's IT systems to the very best consumer apps and websites they use, not just to other business-oriented systems.

Most IT organizations have fallen short.

What's changing today is that companies are starting to really care if they fail the Amazon Test, rather than just giving the idea lip service.

[How can consumers be won over to the Internet of Things? Read Survey: Consumers Don't Get IoT, But They Will.]

The reason: Customers are using a company's technology -- an e-commerce site, a customer service page, or tech embedded in the product itself -- in so many new ways, and in such high volumes, that bad performance has clear profit-and-loss fallout. Customer-facing systems face a much higher standard than employee-facing systems.

CEB, a consulting and research firm, just came out with its 2015 budget forecast, and it sheds some light on this change in thinking. Broadly, CEB finds that IT organizations are more bullish than they have been in years, expecting IT spending overall to rise 3.3% in 2015, compared with as low as 1.8% growth just two years ago. The forecast is based on data from more than 200 companies.

One area on the rise is IT spending on the end-customer experience. Among spending on all IT projects, 17% will be on end-customer experience, up from 15% last year. (See this article for examples of consumer-facing technology from esurance, La Quinta Inns, and Insurance Auto Auctions.)

IT is hiring differently to meet the customer-facing demands. Forty-five percent of IT shops expect to have a dedicated user-experience role in their organization by next year. IT used to contract for that kind of design talent as needed, rather than having permanent staff, says CEB managing director Andrew Horne.

Horne offers three reasons for increased investment in customer-facing technology:

  1. "More and more, industries are realizing the channel or the product itself is going digital," he says.
  2. "As that happens, there's a sense that if technology faces the customer, it has to be better."
  3. With so much at stake, business unit leaders "are paying a lot more attention to that technology, and even spending their own budgets on it."

Because of that third point, 17% of the IT project budget probably underestimates the full amount companies are spending on end-customer experience, Horne says. If the marketing department develops a simple mobile app, or the customer service group hones its self-service website, the IT organization might never learn about that spending. (CEB finds that the finance, HR, and marketing departments each spend, on average, 4% or more of their own budgets on technology.)

The importance of consumer-facing tech no doubt helps fuel that bullish forecast of a 3.3% increase in IT spending next year. It's easier to spend on data center improvements when you think of it as directly driving customer sales and satisfaction. Movements such as DevOps are driven by the need to meet tech-powered customer needs sooner.

Is your company serious about the Amazon Test? And will your 2015 IT budgets prove it?

If the world wasn't changing, we might continue to view IT purely as a service organization, and ITSM might be the most important focus for IT leaders. But it's not, it isn't and it won't be -- at least not in its present form. Get the Research: Beyond IT Service Management report today (free registration required).

Chris Murphy is editor of InformationWeek and co-chair of the InformationWeek Conference. He has been covering technology leadership and CIO strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in ... View Full Bio
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BruceHarpham
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BruceHarpham,
User Rank: Apprentice
11/5/2014 | 12:01:38 PM
Corporate area spending on tech
I found this part of the article interesting:

"CEB finds that the finance, HR, and marketing departments each spend, on average, 4% or more of their own budgets on technology."

It is easy to forget that internal users are also customers.
SaneIT
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SaneIT,
User Rank: Ninja
10/17/2014 | 7:37:40 AM
Re: Companies Pay Up To Pass
@SachinEE, you mentioned 3D printing.  I don't think we're to the point yet where everyone is going to have a 3D printer in their home but we are getting near the point that hobby groups will spring up around the technology.  Right now it is still less expensive to go buy ready made plastic pieces than it is to design and print them.  I do believe that it will change some manufacturing processes but we've got some time before it becomes a household product.  There are examples of enterprise applications that are pushing into the consumer market.  Cloud based storage is one that is coming up quickly.  I can't even take a picture with my phone anymore without Google automatically storing a copy on one of their servers.  This type of seamless implementation will be the way many applications work their way into our lives.
SachinEE
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SachinEE,
User Rank: Ninja
10/16/2014 | 10:15:25 PM
Re: Companies Pay Up To Pass
@zaious: I don't understand why? Smartphones were very special around 2007 when anybody owning such a piece was considered a travelling businessman or something but right now the scenario has changed. Most people including me has switched to a smartphone. Yes, what is troubling is the amount of apps available that becomes difficult to handle at times. Most people do not understand about app management and therefore this makes it difficult for the companies to have huge growth in sales of the smartphone.
SachinEE
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SachinEE,
User Rank: Ninja
10/16/2014 | 10:12:29 PM
Re: Companies Pay Up To Pass
"Yes this frontier has been around for a very long time but it wasn't until somewhat recently that the gap between consumer devices and enterprise solutions really started to widen.  When smartphones first cropped up they were a business tool and only people who really needed to be reading email away from their desk carried them."

@SaneIT:
Same is with the newer smart technologies that are coming into play in the IT industry, for example 3D printers and sensor networks. People are right now getting ready for another revolution in the IT industry and therefore they must be taken care of. People must be educated in the new kinds of technology that will make their life better.
However this education to the masses would have to be done with a friendly approach and not force because then that would be counter-productive.
SaneIT
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SaneIT,
User Rank: Ninja
10/16/2014 | 8:20:03 AM
Re: Companies Pay Up To Pass
Yes this frontier has been around for a very long time but it wasn't until somewhat recently that the gap between consumer devices and enterprise solutions really started to widen.  When smartphones first cropped up they were a business tool and only people who really needed to be reading email away from their desk carried them.  Then the features started to bleed over into everyday life and the consumer side started picking up.  The less technically savvy crowd came to depend on technology and solutions were built to simply the experience.  The enterprise side kept plugging away throwing everything but the kitchen sink solutions out and insisting that people just needed more training.  That gap is narrowing now that more time is being spend on the user side and the more technical folks are seeing that simple doesn't mean less effective.  Sometimes just getting people to use your solution is the biggest step.
zaious
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zaious,
User Rank: Ninja
10/14/2014 | 11:56:08 PM
Re: Companies Pay Up To Pass
@jastro: the smartphone is a a tough frontier. Many companies, unfortunately, have not judged it properly. its role is important yet tricky to handle from enterprise side.. 
jastroff
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jastroff,
User Rank: Ninja
10/14/2014 | 9:46:30 AM
Re: Companies Pay Up To Pass
This frontier has been here for a long time -- it deserves all the attention it gets, if people think about it in the right ways -- from a customer point of view. IT usually isn't veyr good at that, but they are learning. 

The next frontier is the smartphone, which can be pretty awful when it comes to running some apps and removing them, or just understanding what they are doing.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
10/14/2014 | 8:54:22 AM
Re: Companies Pay Up To Pass
Andrew Horne of CEB had an excellent point about business units spending more on technology, and 'shadow IT': that IT should embrace it, for the most part, because it's more resources to solve technology problems. CIOs for years have argued there is more opportunity to use technology to solve problems. CIOs now need to figure out how to have an influence over that spending directed by business units -- as broker, consultant, project manager, etc.
zerox203
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zerox203,
User Rank: Ninja
10/14/2014 | 3:52:26 AM
Re: Companies Pay Up To Pass
Thanks for this, Chris. What one might call 'consumerization' has certainly had some interesting effects on this whole equation (more on that in a minute). On the one end, we have a generally more technology-conscience public. We've gone from being in awe of what a smartphone can do to getting frustrated when it doesn't work 100% of the time pretty quickly - and now these same consumers expect everything to work that well and that consistently. 

As for consumerization, this bleeds into the workplace as well - even if you're a B2B company, you now have to deal with a situation where even non-technology focused customers (or, say, end users if we're talking about internal projects) know exactly what they want from technology and exactly when you're not delivering. It's precisely because the alternative (your competitor, or internally, a free service like dropbox) is just one click away that a single mis-step in this area can cost you a whole lot of business, and fast.
Charlie Babcock
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Charlie Babcock,
User Rank: Author
10/13/2014 | 10:14:58 PM
IT spend on 'customer experience' testifies to room for improvement
IT spending will go up on improving the customer experience because it's such a competitive factor nowadays. And there's so much room for improvement. 
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