Government CIOs can be digital leaders | KPMG | AU

In tough times, government CIOs can be digital leaders

Government CIOs can be digital leaders

CIOs who are not able to step up risk having their roles diminished.

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The role of the state and local government chief information officer (SLG CIO) in the United States is at an inflection point. While there is continued emphasis on delivering a stable and secure IT environment, there is an increasing push to reduce operational and maintenance costs through IT transformation to fund the modernisation of aging systems and introduce new digital capabilities that improve engagement with citizens.

In short, SLG CIOs are evolving. The best are working as service integrators and brokers who bring together capabilities from industry and internal assets to address business priorities.

I work with and talk to SLG CIOs regularly. Based on trends I see developing and the detailed results from the Harvey Nash/KPMG CIO Survey, the largest IT leadership study in the world which includes responses from 118 local government organisations, it is clear that SLG CIOs are becoming digital leaders and influencers, involved in solving business challenges and leading innovation.

CIOs who are not able to make the leap to becoming a digital leader and innovator risk having their roles diminished. As spending shifts from traditional IT departments to programs and cloud services, some organisations are creating new roles such as chief data officer and chief innovation officer to take over the strategic and visionary aspects of the CIO role.

But the best SLG CIOs are extending their influence to new areas. Technology is becoming embedded across their organisations, requiring them to engage in new ways with business strategy and operations. In fact, the CIO Survey suggests that SLG CIOs are more likely than others to be leading innovation across their business, with 35 percent doing so compared with 26 percent in all sectors.

A few US states, such as Colorado1, are looking at CIOs as a source of innovation and an enabler of economic development, with influence on the whole organisation. Utah’s Department of Technology Services has developed a reputation for innovation, recently winning a prize from Amazon for a driver’s license practice app that works through the online retailer’s Echo’s Alexa voice service2.

IT transformation and intelligent automation

Many SLG CIOs are trapped by expensive legacy software applications and IT infrastructures that are difficult and expensive to maintain. As these systems consume more of the IT budget, less money is available for new projects and innovation, with nearly two-thirds of SLG CIOs dealing with flat or decreasing budgets. Only 38 percent of SLG CIOs expect increases in their IT budgets over the next 12 months, compared with 46 percent across all sectors.

In response, some CIOs are working to transform their IT service delivery model with aims including a lower cost structure, and more agility and responsiveness. They are doing so with techniques like agile and modular development, moving future applications to the cloud, and using ‘digital labour’ – which may be better described as intelligent automation, as it often involves helping staff to do their jobs better rather than replacing them with robots.

Intelligent automation, which can include robotic process automation, machine learning, cognitive computing, and artificial intelligence, is moving from discussion topic to something being implemented by several US states. KPMG’s CIO Survey find that just 11 percent of SLG CIOs are making significant or moderate investment in ‘digital labour’ compared with 23 percent across all industries, but this looks set to increase: KPMG in the US has met with several CIOs regarding the topic and I am aware of at least four pilot programs being launched.

There are several reasons for this shift. Many states have hiring freezes and those with tax revenues linked to the prices of oil and natural gas are seeing budgets slashed, but demands on IT increase regardless. At the same time, both software and staff are aging. Many states use applications that are in dire need of modernisation, while many others have 30 percent to 40 percent of their workforce eligible to retire in the next 3–5 years3.

States are also having a hard time attracting younger workers; several capitols are located in low unemployment cities where they compete with high-tech firms for talent, including Austin, Texas.

There are several areas with strong potential for applying intelligent automation:

  • Application testing automation allows IT organisations to provide program areas with more enhancements by shifting resources from integration testing to development. 
  • Security operations, where automation can help detect anomalies and ‘smart’ algorithms can dynamically analyse attacks of the past in order to present similar events in the future
  • Call centres where intelligent automation can improve efficiency by automating repetitive lower-level functions. This can mean agents are less likely to quit their jobs, helping the states that either do not have the budget or cannot hire enough staff. 
  • Internal functions, including IT service management where it can improve efficiency; finance, where it can transform what at present are often manual and inefficient processes such as payment, billing and reconciliation; and program integrity work to tackle fraud and waste, where it can help select which cases to pursue.

Data and security

Government organisations are drowning in data but many do not have effective data governance or know how to use data effectively, with just 12 percent of SLG CIOs in the survey seeing their organisations as very effective in facilitating the use of data and analytics.

Data sharing across government agencies, such as public safety sharing with education and health and human services, is still very challenging – the process of making agreements on who can have access to what data and how to share it remains an obstacle. However, the use of data analytics and business intelligence continues to increase at the agency level.

Cyber security is still an area of significant focus, with many states increasing funding, legislative mandates or both. The CIO Survey finds that 48 percent of local and state governments see improving cyber security as a key business issue, compared with 40 percent of all organisations surveyed. Many states and larger state agencies have a chief information security officer who is independent from the CIO.

There is a large shift in focus from protecting an organisation’s IT perimeter defences to developing effective cyber security policies, increasing internal controls on who has access to particular data, controls at the application level and identity access management (IAM). With my colleague Prasad Jayaraman, KPMG in the US, I have examined the particular importance of IAM to higher education providers4.

Hard times let the best shine

SLG CIOs have to work at least as hard as their counterparts in other industries. They are more likely than other CIOs to have flat or declining budgets, and are having to cope with aging software and retiring staff. They currently see their organisations as less effective at using data and analytics, while cyber security is more likely to be a key business issue than in other industries.

Those who are unable to become digital innovation leaders who fully enable the business may find their roles diminish. But the best SLG CIOs are working to change their organisations through redesigned processes, IT transformation and, intelligent automation to support staff and even working to boost economic development.

They are working in tough conditions – but for some, this is allowing their leadership qualities to emerge.

 

Charles Collier is a Principal at KPMG in the US, working in the CIO Advisory Group. He has over 25 years of transformation, change management, shared services, benchmarking, in-sourcing, and governance expertise.

Footnotes

  1. Colorado Names a New CIO. Retrieved 1 August 2017, from www.govtech.com/state/Colorado-Names-a-New-CIO.html
  2. Nyczepir, D. (2017, April 03). Utah's Cloud Flexibility Welcomes Innovative IoT and AI Solutions. Retrieved August 1, 2017, from www.routefifty.com/tech-data/2017/04/utah-state-cio-mike-hussey/136690/
  3. Beating the Brain Drain: States Focus on Retaining Older Workers. Retrieved 2 August 2017, from www.pewtrusts.org/en/research-and-analysis/blogs/stateline/201
  4. Getting schooled: Identity and access management, Charles Collier and Prasad Jayaraman, April 2017 www.kpmg-institutes.com/institutes/government-institute/articles/2017/04/getting-schooled--identity-and-access-management1.html

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