Keeping Afloat on a Sea of Change

As the CIO role evolves beyond technology and computing support to strategy creation and business transformation, CIOs are likely to find themselves prey to a confluence of factors that will shape their role over the next few years. Those who can’t adapt had better start looking for something else to do.

For a sign of what’s coming, consider the critical attributes executive recruiter and former Gartner senior vice president Marianne Broadbent was given recently by a company looking to hire a CIO at a more senior level than the company had had before. Naturally, those attributes included either proven experience in business processes and information technology or in a business leadership executive role in a large, complex multi-divisional organisation — that’s pretty standard for many senior CIO roles these days and for CIOs in organisations where technology is pivotal to business outcomes.

But the organisation also wanted someone who could prove themselves able to provide independent and collaborative thought leadership as a member of the organisation’s most senior executive decision-making/advisory body.

At the same time, another organisation, looking to fill a C-level position reporting directly to the CEO, demanded someone able to innovate through continuous improvement and maximised technology enablement.

In fact, Broadbent says a focus on and understanding of the enabling power of technology has become a typical selection criterion for just about all C-level executives. That means that what used to make the CIO unique — an unrivalled understanding of technology and the way it can transform the organisation — is becoming commonplace. CIOs of the future will need to find other ways to entrench themselves as an essential part of the organisational furniture.

“In most senior executive positions now, there is a requirement and an expectation that the executive will understand and have a good appreciation of how to make technology work for the organisation,” Broadbent says.

“When you look at positions in the retail area now, there are many more supply chain positions, and all those are technology dependent. What that means to the CIO is that there are increasing numbers of executive accountabilities in enabling the development processes that are technology dependent, which puts much greater pressure on the CIOs to have fantastic stakeholder and relationship management responsibilities, but also to have that deep understanding of where the business is going.

“I would say we are seeing the integration of CIOs into executive teams in certain groups of organisations — those where technology is absolutely critical to what the organisation does.”

No-one can predict the future, but that’s never stopped anyone trying before. CIOs, CEOs, ex-CIOs, analysts and other C-level executives have a range of views about how the CIO role will evolve over the next few years, and the things CIOs must do to position themselves for that change. While the trends themselves are fairly apparent — greater complexity, more outsourcing, extensive integration, a closer relationship with the CEO, never-ending demands from the business — no one can be certain how these converging trends will transform the IT department over time.

So we spoke to some switched on and visionary CIOs, other execs and analysts — some from other points on the globe — to get a sense of where they think the role is heading over the next five or so years.

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Seeing Things

It is already apparent that in the long-term CIOs will need to become innovation leaders and transform themselves into company visionaries if they want to thrive in the future. They’re likely to spend increasing amounts of time devising strategy and figuring out new ways to use information and emerging technologies. Technological acumen is likely to be far less valuable to them than business acumen and vision as they switch their focus to the big picture.

As US CIO magazine writer Christopher Koch noted in an article called The Post-Modern Manifesto in 2007, to prepare themselves for the future CIOs must eschew the role of infrastructure steward and transform themselves into innovation leaders — and then remake their departments in that image.

Koch says the service-fulfilment model for IT is dying and a new philosophy of innovation and productivity is being born.

“The post-modern IT department will be smaller, more distributed and dependent on a tightly integrated supply chain of vendors,” Koch writes. “It will be in desperate need of multitalented specialists who have in-depth technology knowledge but who can also create new products and capabilities that businesspeople might never have envisioned.

“CIOs will need to transform themselves into innovation leaders, not merely infrastructure stewards, and they will have to remake their departments in that image. IT will need to be a full partner, if not a leader, in business process innovation.”

CIO for AMP Banking Lee Barnett says that’s a journey that she — and hence her IT organisation — has been on for a while. And she also thinks CIOs are set to increasingly be viewed as “the project carriage experts and process experts across the organisation”.

“Work is going global, we are in the Information Age, and the global economy is shifting more and more towards services and knowledge work,” notes Director ICT investment and governance at SA Government Shayne Phillips.

For all these reasons, the CIO of the future will be running things very differently than they do today.

Phillips says IT is becoming a stimulus for and enabler of business innovation, making its seat at the big desk more critical. “The future CIO is the key collaborator in a process that develops both the corporation’s business and IT strategies in concert, especially as the various operational business models of the corporations catch up with the global economic and technology changes currently in play,” he says.

Phillips believes in the future CIOs will have an extended organisation made up of at least three main streams:

• Strategy and vision • Portfolio corporate governance and investment • Portfolio (traditional) service delivery

Under each of these will be a variety of full-time, contract and outsourced personnel, all streamlined and collaborating to make the entire value ecosystem operate as per the business expectations in real-time. The augmentation of the resource pool into “as needed collaborative teams” will be mandatory as the global skill shortage takes full effect and the baby boomers retire.

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Phillips thinks that in the future the CIO’s organisation will act as a quick change artist, operating as a business in its own right, adding measurable intrinsic and client value, and accepting sole accountability for the outcomes and results of the various business systems within the corporation. The CIO will also control the spending mix to better enable future-oriented strategic innovation whilst providing world class IT support to the current business requirements. Their organisation will adopt a projectised product management approach in order to enhance or divest the various service offerings made available to the business.

“The future CIO will need to fully understand and be able to work with the CEO and CFO in a leadership triangle, with the CEO focused on growing the top-line and making the corporation more agile to the clients’ demands whilst the CFO is confronted with various global regulatory pressures, as well as traditional tight cost controls,” Phillips says.

“It will be the CIO and IT teams who enable the top-line growth and control the cost of services delivered, thus the future CIO will also need the interpersonal skills to work collaboratively within the various operational cultures and generational work ethics to empower the teams to make these various mature and immature service offerings add the measurable value required of the corporation’s strategic agenda.”

In IBM’s global CEO study, “Expanding the Innovation Horizon” (2006), CEOs identified three ways to accelerate innovation: through substantive business-model change, through collaboration with external partners, and through tighter orchestration and team-like behaviour among business and technology decision makers. Many business and IT leaders continue to behave as if they are on opposing teams, competing against each other, rather than competing against new and established external competitors, the research group says.

Not for much longer. Gartner’s February 2008 report, “The Hyperconnected Enterprise: Anticipating the Next Wave of Business” describes the emerging “hyperconnected enterprise” as one in which numerous people and parties have the power to influence and make decisions, often quite randomly. Gartner says in such enterprises the bulk of business and technology strategies will be inextricably linked, with optimal decisions made by blending and balancing insights, implications and context, and by erasing territorial lines between organisational units and stakeholders.

“Two related predictions will have substantial decision-making implications for IT, business and functional leaders,” Gartner says.

“Behaviours that reinforce the separation of strategic business and IT decision making will disappear by 2009. Forget alignment. This is about assimilation, with business and IT leaders working integrally, openly and collaboratively to leverage their insights and knowledge. Projects once considered IT-only, and strategic initiatives once considered business-only, become intertwined as they exploit IT to deliver greater business value.

“By 2009, 40 per cent of strategic decisions will be made by people with blended business and IT expertise; by 2012, the percentage will rise to 60 per cent. Decision making is moving clearly and inexorably toward people who have knowledge and experience in business. And why not? Mission-critical business processes are inextricably linked to IT in a symbiotic relationship. In the long term, the new decision makers will need both business and IT knowledge, balancing opportunities and strategies with operational practicality that enhances execution. Meanwhile, they become catalysts for business, IT and functional leaders to understand one another’s points of view.”

Danny Davis, executive director of the CIO Institute, predicts that as the number of senior executives shrinks over the next five to 10 years CIOs will be among the few senior executives left in typical organisations.

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Davis says the elevation of the role is being helped by a paradoxical effect where the issues that IT needs to tackle in order to improve its own outcomes are increasingly reflected in the issues of the business at large. “The way [a business] finances capital intensive projects, the way it develops staff, the way it interacts between different divisions — things like that are actually fundamental business issues [that] show up in IT much more strongly than they do in other areas,” he says.

“What I’m seeing is the very beginning of a group of CIOs who are actually capable of providing the leadership it takes to change the organisation to make that difference.” The business — which gets far less practice than IT — typically runs capital-intensive business projects very badly, Davis says, evidenced by flawed decision-making processes, bad business cases that are poorly tracked and nonexistent accountability. Sponsorship from within the business is often hard to find.

The CIO who can draw on his much broader experience of such projects to show the company the way to manage these investments has a real shot at reaching the corporate Hall of Fame. But it’s a perilous path, and one that needs to be managed well if the CIO role is to avoid falling by the wayside.

“I have seen an instance where the CIO has ended up chairman of the Capital Referral Committee,” Davis says. “He took leadership and the organisation went: ‘what a good idea, let’s do all our projects on the sensible and well-managed governance lines that you are recommending. Why don’t you do it?’”

“I’ve seen another organisation where somebody put in some of those guidelines for its IT projects and the organisation said: ‘Gee, what a good idea, let’s do it across the organisation — hold on a minute, you are an IT guy, what are you running this for?’ So they gave it to somebody else, and left the CIO going: ‘what do I do now?’”

In some ways, Gartner EXP research director Andy Rowsell-Jones expects the CIO role of the future to be similar to the role as currently fulfilled, although he says IT shops are likely to shrink dramatically.

Rowsell-Jones says there will clearly be a bigger business deliverables/business value dimension, as the “rate limiting step of legacy infrastructure finally gets unknotted”. As those roadblocks vanish, the traditional role and the traditional justification of having a large in-house staff will erode.

“The traditional role being fulfilled by the in-house IS organisation is moving from being a role of provider of technical services to something else, and the question is what is that something else?” Rowsell-Jones says.

In his mind, the IT component of that something else — except in relatively few organisations like Capital One and Google where “fiendishly clever software” has made a strategic difference — will be much diminished, with most CIOs heading far smaller IT shops.

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The trend to utility computing and package solutions is also incontrovertible, Rowsell-Jones says. For instance, one turnaround CIO he knows, whose organisation’s rapid growth was pinned on innovative proprietary software, is now moving to outsourced commodity technology and a dramatic reduction in numbers of people in the IT shop. “I think the point about him and his ilk is that he represents the future in the sense that he is deliberately going out to the business to commoditise what has hitherto been proprietary technology with a view to being able to expand the reach of [the organisation] so that he has scale flexibility,” Rowsell-Jones says.

“He can run operations in cities around the world without the constraints of having to go out in a complex process of hiring new staff to do it. So he’s using commoditised, standard issue vanilla boxes, and as much vanilla software as possible, because he can find the skills on the open market which give him that scale flexibility, and ultimately his cost reduction. I think that is the way of the future. The rate limiting step is that legacy assets continue to trip up many IT organisations.

“Rubbing the crystal ball at one level, the IT role is not likely to be very different in five years,” Rowsell-Jones says. “If you look at the way the trend is taking you, increasingly IT is an integrator of other people’s services. There are all sorts of geographical and historical technological curiosities that prevent you from going to this model, but all they are going to do is slow you down; they’re not going to stop the inexorable move towards something other than basic pro-vision of IT services.”

Strategic Differentiator

And those trends are global. Dawn Lim, client manager, executive education, for Graduate Business School INSEAD/The Business School for the World, recently ran a small CIO forum which gathered some 25 to 30 cross-industry CIOs from across Singapore. Many of the CIOs present knew that being included in the strategic conversation with the other C-level execs was crucial if they were to add real value and ensure the durability of their roles into the future.

“That said, not many can say with certainty they are included from the outset. However, many more are included in the strategic conversation now compared to previous years,” Lim says.

“In discussing how they lobby for IT to be seen as a strategic differentiator, several CIOs remarked that by wearing multiple different hats (marketing, HR etc.), they start to demonstrate their value-add to the business, and thus, gain acceptance into the C-suite more easily. This is seen as a potential way for CIOs to get included in the strategic conversation.”

Andrew Baker, vice president of IT operations at US database marketing and Web services solution supplier ARGI, says there’s little doubt the CIO role will change to reflect the changes that many businesses will face during the next five years. CIOs will need to field an increasingly flexible team that can balance both the tactical and strategic needs of the business.

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Many CIOs, Baker predicts, will find their teams more distributed across the organisation. Rather than leading a single, centralised team, more organisations will employ some level of outsourcing, and some IT-only functions might be more dispersed across the business units.

CIOs will also face challenges related to staffing, ROI, increased government and industry regulation, and global competition for skills and services. They will need to have better business acumen and will more than likely need credentials which give them better credibility with their business leader peers, Baker says.

On the other hand Gregory Smith, vice president and CIO of the Washington-based World Wildlife Fund, believes the likely prognosis to be rather more nuanced. Those who say business executives will fill the CIO role and outsourcing will play into the mix are both right and wrong, he says. Smith agrees outsourcing is here to stay and CIOs will continue to look for functions to outsource in order to keep costs down. “That still requires IT oversight and expertise that a business executive can’t provide,” he says “I’ve personally witnessed business staff who have negotiated IT contracts and services outside of the core IT glass house and many of them have been taken advantage of,” Smith says. “In short, they simply don’t know what to expect, what the capabilities are, what the costs should be, and many don’t have the time to vet these comparisons out. Thus — IT outsourcing still needs an IT pro with a business sense to properly manage.”

Splintering

Technisource Management Services president John Baschab, who has recently completed co-authoring the second edition of a book examining the symptoms and causes of waste, inefficiency and underperformance in typical IT departments, called The Executive’s Guide to Information Technology, says he and co-writer Jon Pilot have spent considerable time contemplating the evolving CIO role.

In their view there is no doubt the role is set to become more business oriented, but he also believes there is starting to be some “splintering of pieces of the role”. Where traditionally the CIO has been the very top technical executive in a company, now some large organisations are dividing the function in two, with a chief technology officer charged with carriage of the technical vision, and the CIO in charge of execution, or with the CIO sharing once traditional aspects of the job with a CSO or a chief architecture or chief standards officer, Baschab says.

“I think that can work well and there actually is a pretty logical split between things that a CTO would do versus functions of the CIO,” he says, “but I also think that there will be the expected arm wrestling over the places where there is overlap — or even gaps.”

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Taking Care of Business

According to the 2007 Harvey Nash CIO Strategic Leadership Survey, 76 per cent of surveyed CIOs believe their role has become more strategic and 66 per cent have already expanded their job scope. The survey reveals most IT heads are eager to gain more responsibility and widen their remit beyond just the IT department. It also suggests bosses think IT departments need to improve their performance, and CIOs lack faith in their IT teams.

Other surveys confirm that CIOs must be business and IT experts, and they must build teams to support them in both. The relationship between business and technology management is set to be transformed over the next few years, leading to fundamental changes in the role of IT director and CIO. Gartner says the IT department as we know it could be dead within five years. IT directors will begin to take on more management-focused roles in different areas of the organisation, as IT becomes more embedded in the business.

An increased concentration on business processes and outsourcing means that at least 60 per cent of IT departments halved their in-house workforce by the end of last year, compared with the average department size in 2000. Gartner forecasts that at least one-third of IT director roles will change or disappear by the end of 2009. And the remaining CIOs will need to spend more than 50 per cent of their time on external relationships to ensure they deliver expected results.

“IT leaders must work with business and functional leaders to measure the effects of intangible assets and advance methods that will improve the quality and integration of strategic decisions,” Gartner says.

“The challenge has broad implications: The lexicon of modern business needs new nouns and verbs to capture the value of the intangible assets of the Information Age, assets such as brand, knowledge management, intellectual capital and unique business processes. Without auditable ways of measuring the effects of intangible assets on future cash flow, IT and business leaders are left guessing.”

One reason for shrinking IT departments and growing use of outsourcing is that most companies can’t afford to compete with the software firms and the BPOs (business process outsourcers) for IT talent, points out Krishna Kumar, senior vice president and CIO at CyberMedia, South Asia’s largest speciality media house based in India.

The CIO then becomes someone who can work out the best deals with the outsourcing agencies and the bridge between the core business and outsourced IT — someone who is able to speak and understand both languages simultaneously.

“With applications also moving out of the ambit of the corporate data centre to the SaaS model, the trend is only accelerating,” Kumar says.

“Users meanwhile continue to be technology un-savvy (not to be confused with gadget savviness), but the availability of information around means that much like patients reaching a diagnosis about their symptoms even before they consult a doctor, they reach a technology conclusion even before they understand the problem. And the CIO is often given a technology prescription instead of a problem statement. I personally find that having come from the mainline business of the organisation and knowing and speaking that language helps tremendously, at least in understanding the intention behind the prescription.

“My feeling is that in similar organisations, more and more CIOs will come from the ranks of front line business,” Kumar says.