Level Up With Gen AI – Insights From Top Technology Performers

Generative artificial intelligence (Gen AI) is fundamentally reshaping the technology landscape, compelling organizations to rethink their strategies and operations. For those ready to seize this moment, the potential is immense, ranging from unveiling unprecedented opportunities to accelerating transformation and better predicting future trends, such as AI for business. Digital World Class^® technology organizations – already ahead of the curve – are positioned to thrive even further. They operate at 18% lower information technology (IT) costs and with 36% fewer full-time equivalent (FTE) staff, yet they deliver exceptional service and lead the charge in leveraging emerging technologies for competitive advantage.

This early adoption has not only elevated their status as valued business partners by 53% but also uniquely equips them to capitalize on Gen AI’s transformative power. As Gen AI continues to advance, it will amplify these organizations’ performance gaps, setting a higher benchmark for excellence and intensifying the urgency for others to act swiftly or risk falling behind.

Digital World Class^® technology organizations

Our annual Digital World Class^® analysis reveals the characteristics of top performers, what differentiates them and how they achieve their advantage. Specifically, these organizations invest in value creation – leveraging technology and talent to deliver superior IT capabilities and enterprise support. Several traits stand out:

• They are perceived to be a good place to work. Digital World Class^® technology organizations have higher retention, competitive compensation, more self-service that eliminates mundane work, and an appropriate balance of shared services and outsourcing. They purposefully shift work from contractors to FTEs. And while they employ fewer people, they pay staff more.
• They deliver a better customer and employee experience through superior application management. Organizations with Digital World Class^® technology functions have reduced complexity in the application landscape, with 60% fewer applications per end-user equivalent (EUE). They also have higher rates of definition and adherence to standards in application development, software acquisition, and master data management. 
• They have the courage and ability to embrace innovation for competitive advantage. Organizations with Digital World Class^® technology functions allocate 63% more technology spend to emerging technologies such as AI, Gen AI, chatbots and immersive experiences that enable greater self-service. This has broad implications for achieving the competitive, financial and other benefits of being digital.
• They provide superior support to business functions, contributing directly to greater enterprise agility and resilience. Digital World Class^® technology organizations deliver 2.9 times more projects that meet return on investment (ROI) targets. They are more likely to have proactive involvement with stakeholders, projects that meet ROI expectations and formal benefits tracking. Their perception as a valued business partner increased 7%.

The Digital World Class^® advantage

Digital World Class^® technology organizations operate at an 18% lower cost than peer group organizations – an advantage that has held steady. Yet, they deliver more value than the peer group, extending their outperformance well beyond cost.

Managing the portfolios of applications and services in the IT environment has traditionally enabled top-performing technology organizations to continue to modernize the technology landscape. But they also invest in technology architecture modernization and emerging technologies – such as intelligent automation, architecture modernization and collaboration tools – that enable greater automation and efficiency, further reducing labor cost. This explains why their technology cost is only 3% lower than the peer group. It is important to note that not all technology investments are associated with labor-eliminating automation. As the business services portfolio shifts toward higher-value managed services, leaders also invest to equip knowledge workers with modern digital tools.

Further analysis shows that Digital World Class^® technology organizations spend differently than the peer group – more in some areas and less in others. As a percentage of total technology cost, they spend 63% more on cloud-based technology – reflecting their focus on modernization. They also spend 27% less per EUE on hardware but 19% more on software. Finally, they are consolidating offices and data centers faster than the peer group, creating additional cost savings.

Digital World Class^® technology organizations have traditionally run with far fewer FTE staff than the peer group. In 2024, that gap stood at 26%. Both Digital World Class^® and peer group technology organizations are flattening their structures to cut costs, eliminate redundancies, and improve efficiency. This is reflected in an 8% increase in span of control for both groups from 2023 to 2024.

A shift of resources into the mid life-cycle roles reflects the growing importance of application development and management. But numbers aren’t the only story. While they employ fewer managers, they pay them better – the fully loaded labor rate for IT planning and management is 8% higher. Their training costs are 33% higher than the peer group. And through automation, they have reduced mundane work for IT staff – for example, they have enabled 78% more user processes for self-service.

Finally, Digital World Class^® technology organizations rely less on external workers. They use 50% fewer contractors, and their outsourcing cost per EUE is 45% lower.

Gen AI will increase the Digital World Class^® advantage. According to our analysis, Gen AI will reduce technology costs by 40% and boost IT staff productivity by 44% over the next seven years – if organizations know how best to deploy it. However, no one can adequately measure the exponential value of innovation driven by the most ambitious applications of Gen AI and the new possibilities it brings.

Superior business value

Digital World Class^® technology organizations deliver greater business value by outperforming the peer group in effectiveness, experience and enablement. Our analysis highlights areas of significant advantage. It is important to recognize that Gen AI will have a profound impact in these areas – quickly extending the performance advantage.

Operational excellence

Digital World Class^® technology organizations also outpace the peer group in key dimensions, including efficiency and automation. Our analysis found relevant examples in both areas – again, points of advantage that are likely to grow along with adoption of Gen AI.

Leading organizations are better prepared to capitalize on Gen AI

Capitalizing on Gen AI’s potential requires modern architecture, a robust data foundation and clear value orientation. Our analysis shows that Digital World Class^® technology organizations are well ahead of the peer group in establishing these capabilities and providing leadership for the enterprise.

They are accelerating technology architecture modernization, particularly by driving cloud services. For example, their cloud costs as a percentage of software and hardware expenditures are higher for software-as-a-service (33%), infrastructure-as-a-service (18%) and platform-as-a-service (50%) solutions.

Digital World Class^® technology organizations are more likely to have a data standard and quality compliance and auditing process in place. They also have a 28% higher rate of definition and adherence to master data management standards. Organizations with Digital World Class^® technology functions also have significantly less system and data complexity – a major inhibitor of digital transformation and the ability to benefit from Gen AI and other intelligent technologies. For example, these organizations have 63% fewer enterprise resource planning applications per 1,000 EUEs.

Finally, the combination of technology enablement and relevant skills fuels value creation – as evidenced by their proactive involvement, greater knowledge sharing and investment in emerging technologies. This is where Gen AI is really poised to enhance IT operations and create value for the enterprise.

These organizations don’t just have the foundation in place. We see leaders starting to use Gen AI aggressively to improve technology service delivery. In our 2024 Key Issues Study, 80% of technology executives surveyed are actively involved with Gen AI – from initial exploration to full deployment. Nearly three-quarters have a strong focus on the service or help desk where the technology can be integrated with chatbots and existing knowledge bases for improved customer service.

Accelerate your transformation

Technology leaders are at a pivotal point. Those who wait for a Gen AI mandate from above will see their performance fall further behind. On the other hand, those who act assertively and with speed to capitalize on the breakthrough potential of Gen AI can close the gap – and even leapfrog today’s top performers. Following these essential transformation principles can accelerate transformation to Digital World Class^® performance.

Take the lead – don’t follow. Technology leaders often struggle to be viewed as a strategic partner to the business. The emergence of Gen AI provides a unique opportunity to change that and become a guiding light for the enterprise – educating, evaluating, assessing, communicating, collaborating, recruiting and leading.

Your approach matters. To realize meaningful Gen AI-driven productivity gains, technology leaders must take a top-down enterprise approach to identify and prioritize use cases that will have the most significant impact on the business versus a bottoms-up approach that, at best, will yield incremental improvements.

Know where you stand. Successful transformation requires a strong understanding of your organization’s strengths and weaknesses. To realize the full potential of Gen AI, your organization must know where you have gaps in strategy, technology, skills, data management and governance practices.

Create the capacity to focus on breakthrough performance. Dedicate resources responsible for driving change, and make sure they have the time to focus on it and the mandate to reimagine work that can lead to breakthrough performance. If you depend on people with other day jobs or the same resources that are supporting other key initiatives, you will struggle to build or maintain momentum. It is essential, but also incredibly difficult, to educate and mobilize the entire enterprise. At the same time, employ Gen AI to free other resources from the mundane to focus on more strategic, value-added business initiatives.

Architect your Gen AI future with confidence

The Hackett Group helps you explore, understand and implement Gen AI as part of a comprehensive, intelligent digital operations strategy. Learn about:

AI XPLR^™: Our groundbreaking AI XPLR^™ platform provides critical guidance for executives. Based on findings from hundreds of Gen AI assessments and deployments, AI XPLR^™ quantifies your Gen AI potential and produces a comprehensive readiness assessment and detailed road map.

Gen AI transformation services: Our consultants use leading-edge data and analytics, insights, and metrics from AI XPLR^™ to architect your Gen AI journey. From ideation to implementation, we develop comprehensive plans to capture, deploy and mobilize your organization to capitalize on your best opportunities.

Executive Advisory programs: Our advisors counsel executives through their most critical and impactful decisions – exploring Gen AI opportunities, selecting providers, piloting solutions and more. Members have access to the collective knowledge of the world’s best businesses and vendors through personalized, advisor-led guidance and cutting-edge Gen AI research in our member center, Hackett Connect^™.

Download the report to learn more about how Digital World Class^® technology organizations deliver greater business value and are better prepared to maximize the benefits of Gen AI.