2. Finance Will No Longer Control IT.
In the post-modern IT era, CFO control over IT will wither away. In fact, the trend of CIOs reporting to CFOs, which surged following turn-of-the-century hard times, has reversed. In Forrester's 2005 survey of technology influencers, 40 percent of respondents said their CIO reports to the CEO, up from 29 percent in the 2004 survey. Another 38 percent of CIOs reported to the COO or president, up from 27 percent in 2004.
The State of the CIO 2006 survey showed an even higher pull from the corner office: 35 percent of the 275 IT executives surveyed said they report to CEOs, while the number reporting to CFOs remained steady, and dropped significantly among those execs holding the CIO title where more than 50 percent report to the CEO. "[Finance's control of IT] is over," says Nextel CIO Dick LeFave. "IT is not just a cost exercise any more; it's enabling the business."
For New York Life's Campbell, who reports to her CEO, finance's control of IT is more than a barrier; it's a competing interest. "CFOs are either specifically being compensated on how well their deals are doing or how much expense they're cutting," she says. "IT has to be making investments, and CFOs aren't rewarded for letting them do that. You can't run IT on a one-year return on investment any more."
Lee Jones, a former pharmaceutical research and development executive who became CIO of the global pharmaceutical division of Abbott Laboratories, agrees. "Having the CFO in charge reinforces the concept that IT is a cost to be controlled," says Jones, who is now president and CEO of Essential Group, a pharmaceutical services company. "CFOs will tend to manage IT as a commodity."
In a post-modern world, IT is definitely not a commodity.
3. IT Governance Will Settle on the Federated Model and Shared Services.
After the "dotbomb", companies were rife with recriminations about the quality of governance inside their IT organizations. Ironically, it was uncontrolled demand from the business to build new Internet-enabled infrastructures and business applications that contributed to out-of-control top-line costs, not irresponsible IT governance. But that crisis passed. Most companies have since adopted IT investment and prioritization processes that involve key senior business executives. Most CIOs have implemented governance processes for standardizing infrastructure and applications. SOA offers hope for creating an IT infrastructure based on the work of the business rather than applications and functional silos.
IT has long had a plethora of mechanisms for governing itself and the products it offers. There are widely accepted frameworks to guide CIOs in nearly every aspect of their operations, from IT service management (ITIL) to application development (CMMI) to project management (PMP certification). There are also general best practices that have become staples of most IT governance strategies. For example, a recent Forrester survey found that nearly 70 percent of respondents had a formal IT steering committee inside their companies.
Of course, just having committees and frameworks doesn't necessarily mean that IT will be happily governed. "The concepts are all in place now," says Dow Chemical CIO David Kepler. "There's a road map to follow. But we're still a long way from implementing it all. And while we're doing it, the road map could change."
Yet a general direction for running IT has emerged. CIOs have come to a consensus on the overall organizational model for IT: a mix of centralized and local services known as the federated model, which is governed centrally by a small headquarters staff that gives varying degrees of autonomy to IT groups allied with different business units, functions or geographies. Driven by the mandate to control costs, most IT organizations have begun sharing use - and cost - of infrastructure, business applications and generic processes supported by IT (such as finance and HR) across the enterprise, while allowing unique resources to remain local. In a recent survey, Forrester found that 67 percent of CIOs' IT investments crossed organizational boundaries, with that percentage expected to stay the same or rise over time for 91 percent of those companies surveyed. Indeed, most of IT's emerging best practices have some element of sharing governance and cost at their core - everything from project management offices to IT governance councils to IT investment and SOA.
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