The CIO in Contemporary Business

The CIO in Contemporary Business: The Evolving Role of the CIO Group #1, IS 6800, Spring 2006

Vicky Chuang Bill Keller Nathaniel Laroche Aaron McMurry

1 Executive Summary

The past couple of decades have brought in the paper was performed by Bill forth a shift in the treatment of Keller with Bryan Doerr, the Chief technology by business in general from a Technology Officer for Savvis, Inc. The development used solely to cut cost and second interviewee was Greg Anstead, communicate to an integral part of the CIO for Citi Home Equity. These business strategy. This shift has two case studies played a major role in necessitated a corresponding shaping our view of the contemporary transformation of the head of many IT CIO and determining what the future departments. The term CIO and the job held for the CIO. Both interviewees description that follows vary from were transitioning, or making an attempt company to company. Some CIO's are to transition, into a more strategic role as "simply department managers who opposed to an entirely operational role. ensure that all PC's can be turned on and that the processes work"1. However, as The paper will focus on how the changes more and more businesses rely on in business that have occurred over the technology to be competitive; the role of past few decades because of technology the CIO itself must evolve into position necessitated a change in the role of the with an enterprise wide objective of CIO. The business framework we creating and sustaining an advantage present in the body of the paper will over the competition1. outline the cause and effect of the technological revolution that has IT department heads should be transformed business into the technology especially interested in this paper as we intensive industry it is today. Due to the will not only tell you where the CIO role increased importance of technology, it is has evolved too, but how and why the only natural that the person determining role evolved. The information is the influence of technology on the particularly important for CIO's business is the CIO1. performing managerial tasks that wish to The choice of progressing to a strategic take on a more strategic role within the CIO or regressing to an operational CIO company. The paper will lay out the is not a choice, but an ultimatum. foundation required before the CIO can Broadbent and Katzis report in The New make the leap into a strategic partner of CIO Leader: Setting the Agenda and the firm, and then elaborate on the steps Delivering Results "Standing still is not that will begin the evolution into a an option-every CIO will follow one of strategic CIO. two paths based on these perspectives." The one who transitions into the The paper is largely based on the case strategic CIO will be rewarded with studies presented in the body of the text. respect and admiration from his/her The case studies are composed of two peers (and perhaps a few extra dollars). interviews. The first interview discussed

Demographics of the CIO

2 Some statistics on who the average CIO President”, and “CTO” and “other” is and what their perspective roles are is rounding out the survey2. an excellent way to start out the explo- ration of the CIO. CIO.com performed a Figure 1 Respondents' Titles survey from which we will be able to understand the past, current, and potential trends of CIO's in terms of compensation, responsibilities, and other key fig- Who is the boss? ures. Knowing to whom the CIO reports can The survey is an annual report and is provide some insight into how IT is based on an exclusive survey of more valued within the organization and how than 500 heads of IT departments from the CIO’s role might be structured in across industries. Respondents worked in terms of functional verses strategic. In a broad range of industries, including figure2, the number of CIOs who medical/health care, manufacturing, maintain direct reporting relationship insurance, finance, education, wholesale/ with the CEO has actually fallen from retail distribution, and government. 51% of 2002 to 42% in 20063. The percentage of CIO's who report to the In terms of company size, there are three CFO has raised slightly to 23% this year. categories: companies with annual One important note is that CIOs who revenue less than $100 million are report to a CFO is especially common in classified as small companies, the manufacturing sector, with nearly companies with annual revenue between half reporting to a CFO. This perhaps $ 101 million and $999.9 million are reflects the functional value of IT in a middle size companies, and finally manufacturing environment when companies that have annual revenue compared to an information-based more than $1 billion are considered large business. Also, a few CIOs (less than companies2. 5%) report to their “Corporate CIO.” It means some of the respondents work for Not every respondent was a a “SBU” of a corporation, and they “CIO” might have their own operations mostly. But their heads of IT still need to report 3 All of the survey respondents were re- to their general CIO of the company . sponsible for heading IT departments but there were a variety of titles that went along with this role. In figure1, About half of all respondents had the title “CIO” followed by 33% having the title “Director”, 20% having “Vice-

TITLES

All CIO Director VP CTO Other 3 Figure 2 A CIO’s tenure

CIO's boss In 2002, 17% of all CIOs expect to stay 0.6 at their current jobs more than 10 years but that expectation decrease to 9% in 0.5 2006. Figure 4 0.4

2002 0.3 2004 CIO's tenure 2006 2006 0.2

less than 2 0 y ears 24% CEO CFO COO Corporate Other 2-5 y ears 35% CIO 5-10 y ears The Background of the CIO 31% more than 10 y ears 9% One thing that did not change from the 2002 survey to the 2006 survey is the fact that nearly 66% of all CIOs have a mostly IT based background. This is followed by Operations, Consulting, and Finance as demonstrated in figure 3. In figure4, about one-third of all CIOs have actually spent 2-5 years in their Figure 3 current role. In 2006, the average tenure of a CIO was 4 years and 11 months compare to that of the CFO which Primary Job Experience averaged 2 years and 4 months4. Other Logistics Why would a CIO leave their Manufacture current position? Sales Marketing 2004 The reason for a CIO leaving his or her Admini. 2006 Engineering current position could be indicative of Finance the challenges that face the position. Ta- Consulting ble 1 shows a breakdown of why a CIO Operations left their position according to CIO.- 5 IT com’s 2006 survey .

0 0.2 0.4 0.6 0.8

4 Table 1 Average Compensation 2002 More interesting challenges/ a 45% more challenging work Government$111,455 environment Better financial package 41% Education$145,384

Career advancement 33% Medical/Dental/Healthcare$160,116

Disconnects with CEO/other 19% s e i r

Finance/Bamking/Accounting$174,576a senior executives l

a compensation s

Unfavorable reporting structure 9% e g

Consulting$188,587a r

Other 10% e v a Manfacturing process$213,280 Earning the big bucks? Computer related$228,338 In 2002 the components of a CIO's compensation included: 81% from base Insurance/real estate/legal$255,975 salary, 14% from bonus, and 5 % from stock options. On average compensation 0industries400000 depended up on the reporting structure. Figure 5 – Average Salary in 2002 For an example a CIO who report to a COO typically earns more than other hierarchical structures. When looking at In figure 5, it shows the average industries CIOs who work in insurance, compensation on 2002. Insurance/Real real estate and legal services typically estate/Legal services are the industries earn the largest salaries of all industries that a CIO earns most money. The with an average of $255,975. CIOs who following are Computer related, work for the government earn around Manufacturing process, Consulting, $111,455 per year. It is also interesting Finance/Accounting, and so on. The note that while the average inflation rate CIOs who work for the government since 2002 is 5%, CIO compensation has (include the local, states, and federal) only risen 2%6. receive less money than any others. Table 2 – Average salary by industry in 2006 Insurance/real estate/legal $255,975 Computer related (manufacturer, $228,338 distributor, services, VAR) Manufacturing/process industries $213,280 (noncomputer-related) Business services/consulting $188,587 (noncomputer-related) Finance/banking/accounting $174,576 Medical/dental/healthcare $160,116 Education $145,384

5 Figure 6 – Average Salary in 2004 How CIOs spend their time

How a CIO spends his or her time Average Compensation 2004 provides a glimpse into not only what Education$93,750 they do but the desire of the business for a CIO to strike a balance between Gov ernment$118,359 operational and strategic in their thinking

Medical/Dental/Healthcare$171,032 and activities. Figure 8 shows how the survey’s respondents spent their time in Manuf acturing$190,250 compensation 2006.

Insurance$197,697 Figure 8 Finance$210,547

Wholesale/Retail/Distribution$243,304 Interacting with outside business suppliers,customers20$

Laerning about technologies 24% 0 200000 400000 Budgeting 32%

Putting out fires 40%

Interacting with IT vendors,outsourcers and services producers 45%

In figure6, the CIOs who work for Hiring,developing and managing the IT staff 47% Wholesale/Retail/Distribution become Designing business processes 47% the CIOs who earn the most money. Leading projects 49% Strategic business planning 51% Figure 7 – Average compensation in Making strategic decisions 63% 2006 by company size Interacting with other CXOs 65% 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Average Comepnsation 2006 300000

250000

200000

compensation 150000

100000

0 large midsize small companies$283,553 companies$193,561 companies$130,023

In figure7, the category of three sizes companies also followed the rule that we mention at the beginning. Obviously, CIOs in large size companies can earn much more than in midsize and small size companies.

6 Case Studies developed in an environment of technology creativity and has relied on Inside the Roles of 2 CIOs systems engineering expertise and acquisitions to grow its annual revenues With the statistics of the tables and to over $650mil. graphs above as the foundation of our research, we then took this knowledge to The Executive Team at Savvis is led by two interviews of CIOs in two medium Philip Koen (Chief Executive Officer). to large companies, Savvis Communica- Reporting to Mr. Koen is Jeffrey Von tions and Citigroup’s Citi Home Equity Deylen (Chief Financial Officer), John division. The goal was to further our Finlayson (Chief Operating Officer) and knowledge of the role of the CIO but the Bryan Doerr (Chief Technology / results opened a whole new frame of ref- Information Officer). Mr. Doerr erence for us. accepted the role of CTO/CIO as Savvis in October 2003 as part of a Savvis distinguished career in MIS and Technology Focus? Yes. software/hardware development at Operational or Strategic Focus? Bridge Information Systems (acquired Yes? by Reuters), Boeing, and Applied Physics Laboratory8. Mr. Doerr holds Masters Degrees in Electrical “Figuring out how long you can freeze Engineering from Johns Hopkins something to fix it is a challenging University and Information Management problem”, says Savvis, Inc.’s Chief from Washington University8. On Technology / Chief Information Officer March 29, 2006 Mr. Doerr spent some Bryan Doerr in describing the conflicting time with Bill Keller discussing the role needs of creating a new system of the CIO at Savvis and how he must architecture while still committing juggle both operational and strategic resources to the existing system7. The responsibilities. The following section balance between creating operational summarizes the interview. efficiency and strategic progress is not only a challenge for this global IT utility services provider, but for its CIO. Who’s The Boss?

The evolution of the Chief Information While it was popular to have the CIO Officers has included a shift from a report to the CFO during severe cost primarily operational focus to a mix of cutting years in the early 2000’s, CIOs operational and strategic focus. This is are increasingly reporting to CEO’s and evident at Savvis whose core sitting on executive management competency is providing secure IP committee’s rather than reporting to the networks and hosting applications for its CFO or COO. Mr. Doerr is part of a more than 5000 enterprise clients8. Tier 1 Executive Management Team that Savvis was created in 1995 in St. Louis, includes the roles of CEO, CFO, COO, MO and now employees more than 2000 and several VP or GM roles responsible employees who service clients for sales, human resources, legal worldwide. The company was representation, operations, customer

7 management, product management, and strategic improvement must be balanced regional oversight. The group of more with the reality of creating operational than ten people all have equal access to efficiency and scaling routine processes. the CEO and the ability to influence the In fact, Mr. Doerr estimates that 35%- management of the company. This 40% of how his success is evaluated is group represents the highly centralized based on how well critical systems are structure at Savvis. The CEO position at available (normal IT development and Savvis has historically been heavily care and maintenance). involved in the technology driven part of the business, and as such, has relied A shared operational and strategic focus upon the CIO. is also seen in the CIO’s major initiatives for 2006. Mr. Doerr’s top three The role of CIO is recognized as a priorities are: necessary and important partnership 1. Continued Integration of Systems among the management team. This view – internal facing integration is becoming more common in all largely due to acquisitions. industries as managers realize “Issues 2. Improve systems to satisfy can no longer be ‘tossed over the wall to legislative requirements – IT’, and have IT just operate in a Sarbanes Oxley vacuum. IT really has to communicate 3. Business Process Efficiency – and partner effectively with other parts external facing automation to of the organization to achieve results9.” help users improve their business However, in a relatively large group of metrics. Tier 1 managers, Mr. Doerr must Priority 1 is operational focused, and is appropriately balance the technological common among any medium or large agenda with that of other key business sized company. Priority 2 involves stakeholders. The size of the Tier 1 delivering operational improvement, but Executive Management Team, and the is an outward facing responsibility. multiple functions represented therein, CIOs now have to be involved in more ensure that the role of the CIO at Savvis external facing challenges, not just maintains a split focus on both making sure systems are available to operational and strategic information back office users. Priority 3 is management. completely strategic focused as it deals with the growth of the core business. CIO Needs Bi-Focals CIO – Techie, MBA, or Both Mr. Doerr recognizes the split focus required at Savvis. He estimates that Since the core business of Savvis is 35% of his energy is focused on technology based and focused, it is not operational responsibilities and 65% of surprising the CIO must have a mind for his energy is focused on strategic strategy. However, there has also been a responsibilities. The business is the shift over the years in the perception of main driver of Mr. Doerr’s focus. what skills a CIO requires. The CIO role Savvis is a business that is now maturing now encompasses what used to be the and working on integrating other CTO role (more operationally focused) businesses. Therefore, the drive for with more strategic and business focused

8 responsibilities. “To be accepted as a people are critical to success. Savvis has member of the executive team, the CIO had success in automating and managing must be a full-spectrum contributor to processes by devoting people to the the development and management of lifecycle of project initiatives. The business strategies and directions rather business changes so quickly, that it is than a niche player in the limited band of only through dedicated resources that IT10.” It is commonly viewed that the these projects could be completed modern CIO’s resume should also successfully. Mr. Doerr also warns, the include a background in finance, “user community must want it marketing, and strategy11. However, [technology solution], and if they can’t both technology experts and business draw the process don’t even start it.” people can succeed in the role of CIO. The CIO’s focus on people for input and In fact some research indicates that execution can avoid major pitfalls for the “CIOs with highly technical organization. backgrounds and CIOs with greater general management experience did not Who’s Next? differ in the behaviors they tend to use to influence colleagues12.” What is the future for the role of the CIO? Mr. Doerr thinks people with keen How does the mix of technical, business, IT awareness will continue to be and people skills work for the CIO at promoted to CIO, and that business Savvis? When asked to rank the skills alone will not overshadow the importance (most important to least need for a technical leader. He also important) of these skills to his success believes the CEO must set a tone of as CIO, Mr. Doerr ordered them as partnership with the CIO for the role to follows: be successful. Finally, Mr. Doerr 1. People recognizes the importance of helping 2. Technology other managers understand IT and its 3. Business importance to the success of Savvis; The relatively large and diverse Tier 1 although they are not likely to go as far management structure makes people as GE who merged e-business and skills critical to the success of the CIO at traditional IT and set up a program for Savvis. Technology is the backbone of “e-mentoring”, pairing technology-savvy the company, and Mr. Doerr asserts, “If I managers with experienced top don’t have the vision of what the managers to help educate senior [technology] structure will be, I can’t managers about technology13. lead people7.” There is no question business skills are important to execute Bryan Doerr has managed to balance the on issues such as Sarbanes Oxley and to roles of CTO and CIO, operations and developed partnered strategies with the strategy in a maturing technology management team. However, the company with one eye on internal success of the CIO role still has its roots improvements and one eye on external in the management of technology. opportunities. His technology focus made for a natural fit with the executive Mr. Doerr’s focus on people skills to leadership of Savvis in the past who succeed reflects his recognition that were the pioneers of the Savvis systems.

9 Will the arrival of their new CEO facilitate the same partnership or create 6 0 0 more of a consultative relationship? $480.7 That remains to be seen. Regardless, 5 0 0

s 4 0 0 there is no question, however, that the n o i l l i

role of CIO will continue to be a critical M

$ 3 0 0 need to the success of Savvis. $243.8

2 0 0 The role of the CIO at Savvis may be $103.0 10 0 $65.1 $44.2 facing changes due to a new CEO, but $22.8 0 Citi Home Equity is facing some 2 00 0 200 1 2 002 20 03 200 4 200 5 significant changes that will affect their CIO as well. 5 Key Questions with a CIO in a Fast Growing Company

Citi Home Equity14 First a little back ground on the CIO of Citi Home Equity, Greg Anstead. Greg Citi Home Equity (CHE) is a strategic has an Associate’s degree in Computer business unit (SBU) of Citigroup. Fig- Science, a Bachelors of Sciences in ure 9 shows how the SBU fits into Citi- Computer Science, a Bachelors of Sci- group’s overall corporate structure. If ence in Management, and a Masters in you were to rank CHE in the Fortune Management. He has been CIO of CHE 1000 by net income it would come in for 15 months and prior to this latest po- number 330 with $277 million. What sition he was CTO of a development compounds this fact is that this number group within Citi for two years with an was achieved in six short years as the organization of nearly 400 people. SBU was founded in 2000. This explosive growth, which we’ll find has had in The Role of the CIO? impact on the CIO’s role, is further demonstrated with figure 10. When asked how he defines his role of CIO within CHE Greg said it was “To Figure 9 provide technology solutions for the Citigroup business so it might be competitive, reduce cost, and increase innovation.”

Corporate and Alternative Global Wealth Investment Global Consumer This response is very strategic in its na- Investments Management Group Banking ture and indicative of the type of CIO

Consumer Lending Greg strives to be. While he may strive CitiFinancial Bankcards Group to be strategic the reality of the explosive growth that CHE is experiencing has Auto Loans Student Loans CitiMortgage Citi Home Equity made him devote much of this time, about 80% as he noted, to fighting fires. This means that the growth demands that projects be delivered quickly which in turn can provide some degree of turmoil. This 80% functional aspect is not inline Figure 10 with Greg’s view of the CIO role, which

10 he noted should be 80% strategic and in the paper as we explorer the role of 20% function. This is eventually where the CIO. he wants his role to be. Sleepless Nights It’s All About the Priorities When asked what keeps him up at night Greg’s top three priorities for 2006 are besides noting jokingly that his Black- generally not specifically technology re- berry never seems to stop he did note lated in nature, this once again is indica- that his number one issues is compli- tive of more of a strategic role. His first ance. While also one of his priorities for priority is to help change the business’s 2006 when asked this question Greg not- paradigm from originating loans for ed, “as big as we [Citigroup] are one bad portfolio to originating loans for sale on audit can shut this business down.” That the secondary market. This shift is a de- is Citigroup is under extra scrutiny in cision of the CEO and is the number one terms of security and compliance two priority for all C level officers. What overarching themes when it comes to the does this mean for the CIO? It means role of the CIO. helping to keep that message in all projects started or completed in 2006 Business Skills vs. People Skills and providing priority to those projects vs. Technical Skills which might involve this paradigm shift. When asked to rate business skills, peo- His second priority was to get CHE onto ple skills, and technical skills in terms of common platforms. This priority is importance to his role he noted that first technological in nature and stems from are the people skills, second are the tech- the organic growth that CHE has nical skills, and finally are the business experienced over the last six years. skills. Greg noted that all managers re- During this time the company has had to quire people skills and if one is to lead grow quickly and dynamically and often that leader is only as good as the people at the cost of implementing numerous surrounding them. He noted technical stopgap measures. The goal now is to go skills are key to the CIO’s role as the ex- back and clean all of these systems and pertise and training in the technology processes to make them more robust. pays in dividends. His experience has showed him that those technology man- Greg’s top priority for 2006 is agers who do not have the technical compliance as the CEO’s mantra is background are not as effective in lead- “controlled growth”. Growth in itself is ing their teams. In terms of business his worthless to Citigroup as a corporation feeling is that the business can always be as it has been under intense scrutiny learned but the ability to work with peo- from regulators in the wake of the ple and technical knowledge are always business scandals that rocked the harder to come by. corporate world starting with the fall of Evaluation Time Enron and the implementation of Sarbanes-Oxley. This ideal of Perhaps the most insightful part of the compliance will come around again later interview outside of the compliance and security focus that he has is the way

11 Greg is evaluated by the CEO. As a re- followed in the days after interviewing port to the CEO he is graded in three ar- Greg. eas 1) functionally, 2) strategically, and 3), perhaps the most surprising, political- Out with the Old and in with the ly. New

By functionally and strategically he Not long after interviewing Greg means by what he does in terms of Anstead a reorganization of Citigroup’s accomplishing projects and fighting fires technology teams started. Under the cur- and what he does in terms of looking rent structure, each SBU, as defined in ahead. Functionally is just that, how figure 9, had its own CIO that reported does he get things accomplished and a to the SBU’s CEO. But this did not gen- very basic level. When graded in terms erate the economies of scale that corpo- of strategically the CEO is looking for rate Citigroup thought it could leverage. the ideas, time and money savers that he bringing to the table to move the SBU Under the new structure there will be forward. still be CIOs in each SBU reporting directly to the CEO but that same CIO It is politically that Greg noted is by far will then have a dotted lined to a mostly where he is graded. In the deep corporate CIO who will be more organization that is Citigroup how well technology focused. This is he handles his C-level peers and those demonstrated in figure 10. managers that the SBU’s CEO reports to is key to how well he is graded. His Figure 11 ability to communicate effectively and manage expectations is high on his Citigroup evaluation.

Corporate and Alternative Global Wealth Investment Global Consumer Investments Management Banking Group North The Role in 10 Years… American Information Consumer Lending Technology CitiFinancial Bankcards Group When asked about the future role of the CIO Greg first framed the current role of Auto Loans Student Loans CitiMortgage Citi Home Equity the CIO as one that is centralized, The goals of this reorganization include: reporting to the CEO, and is mostly 1. Better using of human and capital technology oriented, implementing resources. technology that enables the business. 2. Better compliance and security. But in the not too distant future he sees 3. Improved consistency in the the role as splitting into two. The first technology. role will the a technology oriented CIO 4. Present once face to customer that is focused on the hardcore Of course this organization has some technology and it’s implementation. The potentially negative implications as well second role will be a business oriented with the biggest drawback being the CIO that well be a liaison between the matrix structure. There is some question business’s CEO and the technology CIO. as to whether the SBU CIO will be able This definition of the role is actually to maintain that delicate balance between foreshadowed a huge announcement that the SBU CEO’s demands and the

12 Corporate CIO’s struggle of reigning in service, supplier management, human cost. resources, etc. Each of these groups within operations has varying levels of The interviews with CIOs from Savvis interaction with each other and hand-off and Citi Home Equity provides an of information. As technology began interesting look at the CIO of today; how evolving in the 1970’s and 1980’s, some a mix of operational and strategic businesses realized that routine, responsibilities must be balanced and repeatable tasks could be automated meet the state of the business. This using technology. Technology focused balance and the need for strong departments or groups were developed to leadership in the CIO role is a result of keep companies up to date with the growth of technology in the late 20th technology that improved tasks and century and the realization that IT cannot information flow. The business, in this add value in a vacuum. The following case the operations group, could place a framework provides an interesting view request or demand on the Information of how the role of CIO evolved and what Technology (IT) group to automate it means for CIOs today. processes. For example, an inventory database could be created to better Role of the CIO - Original manage manufacturing demand and its affect on supplier orders. IT was Framework demanded by the business to improve specific functions (Figure 11). Tactician to Corporate Strategist (and Back)

The role of the CIO has evolved from a more operational/tactical role of a CTO to a more strategic role within many organizations. The CTO role was born out of necessity and the development of technology. The CIO role carried technology management forward into a key stakeholder in the success of the business. The new CIO role is a hybrid of operational thinking and strategic thinking, of internal focus and external focus. Our interviews with the CIOs of Savvis and Citi Home Equity support this evolution and the framework below.

Demands ‘By’ the Business

In a traditional ‘silo’ type of organization, tasks are performed within a functional area. For example, within Operations will be tasks and processes around manufacturing, sales, customer

13 Figure 11 Demands ‘By’ the Business

HR Customer Service Supplier MGT Operations Manufacturing Sales

Service Delivery Technology

Budgeting

A/P Billing Finance

External A/R Reporting

As IT proved itself useful to automating specific functions, many higher level thinkers demanded that IT enable Demands ‘By’ the Business automating or improvement of HR information flow between functional Custome r Service Supplier groups. For example, the Customer MGT Operations Service group in Operations may want to Manufacturing Sales have visibility to customer information Service that is only available to the Billing group Delivery or Accounts Receivable group in Technology Finance. Customer Service believed it Budgeting could better answer questions from A/P customers and the Sales group if they Billing Finance knew the status of customer accounts. External This would allow more customer A/R Reporting impacting groups to have customer information. Not only would productivity improve, but service to customers would improve. IT met the demand by developing or implementing systems, in some cases enterprise systems, to meet inter-functional demands (Figure 12).

Figure 12

14 As IT built credibility with operational With IT not only becoming part of the and efficiency improvements, the IT business, but also a necessary lens discipline moved closer to the business. through which the company must think Many organizations realized IT enabled strategically, the role of CTO has internal improvements already (or could) transformed into the Chief Information improved some external facing Officer (Figure 13). The CIO must processes. For example, creating a new understand operations, finance, and inventory system could not only cut cost, technology. The CIO should be able to but could reduce lead times for products leverage technology to develop the due to better inventory replenishment capabilities of the organization and look modeling. The sharing of customer for strategic ways to build the business. information could allow the customer In many organizations, a CTO role still service group to reduce errors and exists and can manage the more prevent customer orders from being held operational aspects of IT within the for credit approval incorrectly or delayed company. However, firms differ widely due to actionable issues. It became clear on how these roles interact. What seems that IT should not only meet demands universal, however, is that technology is ‘by’ the business, but demands ‘on’ the capable of adding value to organizations, business as a whole. and it warrants dedicated oversight to seize opportunities whether they lie Demands ‘On’ the Business inside or outside the company walls.

Today, IT is being used to meet demands on the business. External forces pull on an organization placing demands on its resources. These external forces include the organizations industry, new technology, customers, and regulatory bodies. To stay competitive, companies must meet or exceed the demands placed on them from these forces. Industries demand innovative or more cost effective ways of production or providing a service. New technologies demand integration of systems/capabilities and vertical alignment/integration in the supply chain. Customers demand more responsive service, quicker delivery, and a secure environment. Regulatory bodies like Stock Exchanges and governments require information about the company to meet legislative or other conditions like Sarbanes Oxley.

15 Figure 14

Role of CIO with External and Internal Demands

Demands on Demands on Business: Operations Technology Business: Customers Customers (speed, COO CTO (accessibilit reliability, y, accuracy, CIO integration) security) B2B Supply Chain

Finance CFO

Demands on Business: Shareholders (reporting, planning) Regulatory (reporting and compliance) Financial Markets (reporting and compliance)

16 How Valuable is the CIO? and concerns. Some concerns have changed over time and some have not. With the CIO at the intersection of the key parts of the business, he/she will be CIO Top Ten Issues able to do what is most critical to the organization – add value. It is only through adding value that the CIO will How Things Change – have long-term success. How They Stay the Same

One of the key factors influencing the CIO’s face, and have faced, many CIO’s ability to add value is taking different issues to successfully perform advantage of his/her position in the their role. They are responsible for the organization (center of our framework) most mundane to exciting new to build relationships with other technological opportunities. Regardless, executives to set business strategy. there is significant pressure on the CIO Rather than pushing IT projects or to execute both operationally and investments independently to attempt to strategically. Earlier in the evolution of grab value, “the most successful the CIO, companies relied upon these approach [of adding value]…is where officers more for operational expertise there are no IT strategies, only business ensuring existing systems were reliable strategies. Here, the CIO adds value by and internal efficiency was achieved. building informed relationships with key The current CIO is responsible for executives, making sure that IT operational expertise, but also for more requirements become an integral value-added, external facing initiatives. component of business strategy15”. Successful CIOs will add value by doing In 1986, 120 CIOs and IT Executives the following15: were asked to rank their top ten important issues (Figure 16) 15. From the Figure 15 list, you will notice a dominance of more operationally focused issues including The Added Value of the CIO managing end-user computing, educating users, improving efficiency, Obsessive and continuous focus on and managing resources. However, even business imperatives. CIOs in the 1980’s recognized that IT Interpretation of external IT success involvement in some strategic initiatives stories. would prove important to their Establishment and maintenance of IS organizations. executive relationships. Establishment and communication of In 2005, 205 CIOs and IT Executives IS performance record. were asked to rank their top ten 16 Concentration of the IS development important issues (Figure 17) . While effort. the list contains both operational and strategic focused issues, the strategic WhileAchievement adding value of a sharedis the ultimate and goal challenging vision of the role of IT. issues are noticeably externally facing of the CIO, this is much easier said than and reflect a growing reliance on IT for done. Throughout the evolution of the (Earl & Feeny, 1994) areas such as e-business and e- role, CIOs have faced many challenges

17 government. Also evident is the direct security. Data and security are critical to mention of revenue and business growth businesses especially with the showing a direct link to the bottom line proliferation of the Internet and and the enterprise as a whole. Finally, integrated networks and is highlighted noting shareholder pressure in item 6 by this quote from “The Sarbox shows a new awareness of the role of Conspiracy” by Christopher Koch, CIO and the accountability of that role at “When CIOs began installing ERP the most senior and strategic levels. systems in the ‘80s and ‘90s, they unwittingly took something that used to While CIOs continue to face both belong to the CFOs: financial operational and strategic issues, it is controls.”17 Information systems made clear that current CIOs have a more the gathering and reporting of data more broad awareness of the business and efficient and easier but it also but a great pressures on the business. It is no longer burden on CIOs. The public wants data enough for CIOs to gain efficiency in the to be safe, accurate, and accountable in organization and integrate new the wake of corporate accounting technology. CIOs must now look to scandals. Legal requirements like the change the organization’s focus as Sarbanes- Oxley Act have only needed to improve the overall business intensified this need and highlighted the considering all factors, both internal and CIOs role. Therefore, fiscal compliance external. and data transparency have come into focus. One issue that ranked on both lists, emphasizing its importance, is data and

Figure 16

18 TheThe changingchanging rolerole ofof thethe CIOCIO

1986 ranking of top 10 issues16 *Facilitating/managing end-user computing Translating information technology into competitive advantage Having top management understand needs and perspective of IS *Measuring and improving effectiveness/productivity *Keeping current with changes in technology *Managing information resources *Integration of IS technologies *Data security and control Impact of new technology *Training and education *More of an operational focus

Passino, Jacque H., Jr., and Severance, Dennis G., “The Changing Role of the Chief Information Officer” Planning Review, Vol. 16, 5, Sep/Oct 1988, pp. 38-42.

19 Figure 17 TheThe changingchanging rolerole ofof thethe CIOCIO

2005 ranking of top 10 issues*18 Cost containment Data security and integrity Fiscal compliance and data transparency *Revenue and business growth *Innovation of products and services *Stakeholder pressure Risk Management *Major Customer data integration *E-business/E-government strategic Privacy initiatives 20 years later

Guptill, Bruce, and Koenig, Mark, “CIOs Budget for Business” Optimize, Vol. 4, 5, May 2005, pp. 77-80.

20 Evolution of the CIO Role CIO must acknowledge the critical role communication plays in the role of the CIO. In The New CIO Leader: Setting Transition from Manager to the Agenda and Delivering Results by Leader Broadbent and Katzis, the authors report, "The higher the CIO's rise in an The increasing emphasis on utilizing organization, the more time they spend IT as a strategic partner causes a on communicating their vision to proportionate emphasis on the fellow executives," and "the research development of the CIO as a leader. A clearly shows that the more CIO's managing CIO only worries about communicate their vision, the more execution and control employing such effective they are at getting buy-in and capabilities as planning, organization endorsement from the executive and analysis. The evolved CIO will leadership team." Some CIO's spend focus on passion, strategy and more than twenty percent of their day inspiration. The transition into a enlightening colleagues on their vision leader requires far more than for technology in the firm19. inspiration and passion. The foundation of strong leader is It is important to note that in order to composed of credibility, business create a strong reputation a CIO must knowledge (micro and macro) and build on these daily communications vision. and use them to gain "political capital." The CIO must identify key Building Credibility and stakeholders within the firm and gain Communicating Results their confidence. Opponents to the plan must either be converted or As a CIO, you will enter the position mitigated in order to minimize their with initial credibility, because the influence. Advocates must be firm believes you can succeed in a very strengthened and put in a position difficult position (otherwise it would where their opinions can be heard. A not have hired you). It is up to you to careful and thorough analysis of all successfully build upon this initial influential stakeholders is necessary. credibility. The process of building a Stakeholders must be identified by strong reputation within the company, urgency (immediacy of claim), power although not easy, is based on a single and legitimacy (right to make a claim) 19 idea: delivering results that matter to . A successful CIO will dissect fellow executives19. As a CIO, if you stakeholders by all three of these complete projects that do not matter to categories to gain an understanding of the CEO and CFO, it is very possible their influence on the firm. the results will go unnoticed. It is crucial to plan and complete projects Know Your Enterprise centered on creating success for other senior executives (See Figure 17). For our purposes, business knowledge will refer to knowledge about the The next step in solidifying a place in CIO's own particular firm and not the executive board meetings is to business intelligence or business savvy effectively communicate your goals in the general sense. and successes. Unfortunately, some CIO's do not like to play "politics" in the corporate world, but the evolved

21 FIGURE 17 Firms that simply “maintain” are heavily influenced by the economic environment, i.e. if the economy is booming so is the firm, and leading •Initial firms are characterized by aggressive Credibility Credibility approach to competitors and pushing ahead of the competition. The •Credibility macroeconomic environment largely dictates a “maintaining” firm’s initiatives and goals. In times of •Results •Resources economic boom, the firm will push •Lost forward with objectives that increase Credibility its edge over the competition and vice •Outcomes versa during a recession19. This particular business environment forces the CIO to pay attention to economic The evolved CIO will have to dig deep indicators that will allow for within the organization to understand prognostication on the CIO's part. the firm's "basic economic model, the During employment with a leading strategic intent of the firm, and the firm, a CIO will have the opportunity strategic endeavors of the firm and its to show his/her true ability to develop individual business units"19. Without a a vision and craft the tactics and deep understanding of the firm, it will strategies that will lead the company be difficult to take the next step of towards success. outlining a vision for the IT department and the business as a whole. The CIO must have an Develop Business Maxims enterprise wide view of the firm's overall strategy to create a Once the CIO has a solid complimentary vision for the IT understanding of the firm's position, department that adheres to the firm's business model and strategic intent and business objectives and goals. endeavors; the next step is to work with fellow executives to develop Position of the Firm: Lagging, business maxims that state in a Maintaining or Leading complete and concise manner what is important to the firm19. The A crucial step in determining the firm's formulation of business maxims are the position is analyzing the firm's first step in transforming an enterprise competitive environment, as this will wide knowledge of the business into IT affect the CIO's role within the maxims that will serve as a metric for 19 company. Three main categories of IT initiatives . During this process, firms have been identified: lagging, the CIO may find by developing maintaining and leading19. A lagging clearly defined business maxims, the firm is characterized by "cancellation process not only helps the IT of new initiatives, multiple layoffs and department, but the entire enterprise. a continuing search for ways to further Additionally, IT maxims developed reduce business and IT costs"19. The from business maxims serve as the CIO of a lagging firm should focus on precursor to a vision consistent with completing current projects and the firm's business model and searching for ways IT can cut cost. strategies.

22 The Gartner Hype Cycle for Developing a Vision that Aligns Emerging Technologies19 Business and IT

Now that the CIO is armed with well- defined IT maxims grounded in predefined business maxims, it is time to move forward and design a vision Visibility that aligns with the new IT initiatives. Implementing a new vision for the IT department, and for the overall business, will require a strong base of political capital and the ability to Technology Peak of Inflated Trough of Slope of Plateau of communicate and inspire key Trigger Expectations Disillusionment Enlightenment Productivity stakeholders. Perhaps the most exciting phenomena within the technology industry are the new gadgets that pop up almost daily. It is imperative this vision incorporate a system to capture and exploit emerging technologies. A strong CIO will formulate and structure a vision that allows for the selective introduction of Figure 18 demonstrates the typical life these new technologies. cycle of an emerging technology. It spans from the introduction of the Avoid Technological Hype technology to the "plateau of productivity"19. It is important to note The technology boom and subsequent that at the end of the cycle the bust ushered in a new age of maturity technology is deemed useful and very and skepticism with respect to practical from a business perspective, emerging technologies. IT is no longer although it is not a revolutionary believed to be an "unbridled source of product. The bottom line is the CIO competitive advantage" as was once cannot focus on the technology itself, thought before the bubble popped18. but must develop an approach that The CIO must be finicky in the centers the attention on the relevance selection of a new technology and and value to the enterprise19. An ideal demonstrate its relevance to the way to test the future success of a "new business prior to adoption. Prior to or gadget" is through pilot programs and during the adoption phase, it is critical implementing mandatory testing to weave these new gadgets into the phases. business once their usefulness is justified.

Figure 18

23 Final Thoughts and Conclusions

The role of the CIO in contemporary business is at a crossroads due to the increasing reliance on technology as a source of competitive edge. This increasing reliance has made the CIO a center of the modern organization, in many cases making all other c-level officers rely on him or her for access to key information. This is a natural evolution: as the importance of technology grows within business, so must the role of the ones managing it. The future holds a position for a strategic partner, one that requires vision and leadership with an ability to communicate to both internal and external stakeholders. Those CIOs unwilling to change will find themselves at the head of an IT department in a marginalized and operational role instead of occupying an office that sits at the executive table with an input on the strategic vision and direction of the organization.

24 Bibliography

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