Editor’s note: The "Innovation Exchange," a regular feature in Local Tech Wire, is written by Noah Garrett, former director of communications for the North Carolina Technology Association, is a creative spirit, from writing music to news stories, who owns and operates NGC Communications. The focus of the Innovation Exchange is just that – creating a Web community through which people can exchange ideas and foster creativity.

Contact Noah at noah@thinkngc.com.

CHARLESTON, S.C. – Corporate leaders and tech executives want IT to better serve business strategy, but current performance still falls short, according to McKinsey’s third annual survey on information technology strategy released earlier this month.

McKinsey’s latest survey asked C-level folks to think broadly about the impact technology has on their bottom line. Specifically, leaders were asked how IT can serve as a tool to help build competitive advantage; what risks arise as competitors use disruptive technology; how companies develop their IT strategies; and what challenges they will face in implementing those strategies?

As you’re probably aware, financial concerns were top of mind with survey respondents; as it probably is with you. This year’s spending expectations are notable within the results, because they are far more conservative than last year, which isn’t really much of a surprise based on our current economic climate.

The global financial downturn complicates matters this year. Respondents cite continuing pressures to deliver on existing IT projects and services at a time when they expect spending to fall. So they are making trade-offs; such as reducing IT operating expenses so they can maintain high-priority new investments that support broader business goals like improving the sales force or supply chain management.

Also notable is that executives in both IT and non-IT roles largely agree on a short list of steps to improve IT performance gaps. More than 40 percent of respondents favor improving the talent of IT staff and increasing the accountability of business units for implementing IT initiatives.

Executives expect to reduce spending on innovation-related projects, with 16 percent saying they will spend more than 20 percent of their budgets on innovation, down from 25 percent in 2008; almost 30 percent indicate that innovation spending will total only 1 to 5 percent of their budget in 2009.

CIOs and other senior executives agree that ideally these capabilities should, for example, promote innovation and better enable companies to seize new opportunities. Still, they continue to see a gulf between these aspirations and the value that IT currently delivers.

Though improvements have occurred since last year, respondents also underline the need for IT executives to apply these capabilities more effectively in developing and executing business strategies.

Looking Ahead…

Though companies appear to be prioritizing IT investments, they plan to reduce spending on innovation. Some of the likely reasons for this, the survey concludes, are a need to refocus spending due to the economic downturn and gaps in IT’s performance to date.

Also, too better serve business goals, IT must develop stronger managers. This will require training and perhaps the seeding of IT management ranks from external hires or rotating highly regarded non-IT managers from other parts of the business.

Lastly, IT executives and senior IT staff must deepen their knowledge of business needs. Improving business accountability for IT also is crucial, as tech executives and others agree. The first step is to improve transparency in the planning and execution of IT projects for business leaders.

Regardless of predictions from McKinsey, fiscal responsibility and the economy as a whole will have the biggest impact on all business decisions well into 2009 and possibly 2010. Only time will tell.