Shared services will drive companies to de-emphasize the control that independent business units exercise over IT. "The federated model has won," says John Hill, a former CIO at Praxair who is now CTO of IT service provider Siemens Business Services. "Centralized/decentralized is struggling against extremes, which means the pendulum is constantly swinging. Federated lets you balance things in a more delicate fashion."
It will be up to the CIO to manage this delicate balance, being careful not to permit rogue spending or allow standards to slip at the local level, while also demonstrating to their various local constituencies that some of the more centralized governance mechanisms are not robbing them of speed or flexibility. It is literally a full-time job.
4. CIOs Will Stop Identifying With Technology.
Gaining credibility as a business strategist requires that CIOs shake an old habit: their self-identification with technology. "You have to be allied with the company first and technology second," says Dow Chemical's Kepler. "You have to be viewed by the CEO as someone who defines success not in terms of technology implementations but in terms of success for the company." That means subsuming a passion for technology to a passion for business. "You have to be seen as being dispassionate about technology," says Kepler. "If you're going to take a risk on building an untested enabling technology, you have to have a great understanding of the business. The high failure rates of new technologies come from missing the connection between the success of the technology and the goals of the company."
The attitude change in the IT department will be no less dramatic. In a 2005 SIM survey of skills that CIOs expect to most value in their IT staffs over the next three years, project management led the list (project management skills also rated number one with local CIOs in our State of the CIO 06 survey), followed closely by company, functional and industry knowledge. Other skills in demand included business process re-engineering, user relations management, negotiation, change management, communication and managing expectations. Only two technical skills (systems analysis and systems design) made the top 15 - and both of those skills focus more on architecture and process than on hard-core programming.
CIOs will need all the leadership skills they can muster to manage this shift without driving away their most experienced people.
5. The IT Function Will Fragment, and Then It Will Need to Be Reorganized.
To some extent, the deconstruction of IT has already occurred, especially in big companies where the large scale of IT and the separation of IT functions such as help desk, application maintenance and some programming have made them candidates for outsourcing. More and more jobs in IT will become components in a distributed services supply chain modelled on today's distributed manufacturing supply chains.
IT departments already have undergone a structural shift. The number of programmers employed is down since its peak in 2000. In our State of the CIO 2006 survey, 53 percent of respondents said they outsource application development, while 38 percent outsource application maintenance or support.
In one respect, the distributed services supply chain model is actually creating more work. As pieces of the IT supply chain break off and become more specialized, the need for coordination of the pieces increases. That means the number of internal jobs dependent upon external people is increasing. This shift is reflected by the new emphasis in IT departments on relationship management and project management.
Economists call these kinds of skills tacit work, which requires the ability to analyze information, grapple with ambiguity and solve problems, often based on experience. Tacit interactions are complex and require interaction (such as managing a software development project) rather than being simple and solitary (fielding help desk calls with a script, for instance).
Tacit jobs have been growing three times faster than employment in the entire national economy, according to consultancy McKinsey, and they make up 70 percent of all US jobs created since 1998 and 41 percent of the total labour market in the United States. These roles track pretty closely with the categories where the US Department of Labour says IT employment has made the biggest gains since 2000: application engineers, systems engineers and network analysts.
For CIOs, the challenge will be to design and manage global IT supply chains that link various skill sets (including tacit work) and multiple components of IT work into logical units. "In the future, IT is going to need to be able to work as a global team to tap into different capability pools to serve the business better," says Andy Maier, CIO of Zurich in North America, which is creating a more global IT function in response to a global business reorganization. "The thing is to find expertise - underwriting, for example - around the world and centralize it along the business value chain rather than according to geography. I don't care if an underwriting specialist is in Dayton or Zurich, I just want to be able to access that person's skills from anywhere." The glue that Maier is using to link his IT supply chain is common application development processes and tools, along with globally shared repositories.
As Maier suggests, the growth of this supply chain means that fewer employees will be fixed in a particular project or geography. "You may only have a couple of people assigned to a particular project from beginning to end," predicts Diane Morello, research vice president for Gartner. "The rest will come in and out as they are needed, based on their competencies."
If the supply chain gets gummed up, the CIO and the IT department will be accountable for the entire sticky mess. "You may have a lot of different providers in the model," Rebecca Rhoads, CIO of aerospace and defence contractor Raytheon, says, "but at the end of the day you have to make sure the processes and services are reliable and accessible. If there's a break in the chain, you will be responsible. Where the break is and who caused it isn't going to matter much to the business or the user."
In the Post-modern IT Department, Rhoads says, "what's going to make us successful is our ability to manage end-to-end services".
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