Looking Back: The Growth of the CIO Role and IT Value

From green screens to flat screens; from a desk in the basement to a seat in the boardroom. Twenty years in review.

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The Business of IT Is Business

In the last couple of years, a new CIO prototype has emerged—a stronger, more versatile, innovative and business-focused IT leader who delivers what CEOs have been yearning for from their IT function: proven value. To many CIOs and industry watchers, it’s about time. “Now there are methodologies and standards, and it’s possible to run IT as a business,” Orlov says. “Obviously, there ought to be financial metrics [to measure IT’s success]. It ought to be a given that CIOs can deliver a 100 percent stable infrastructure. Change ought to be managed; benefits need to be quantifiable.”

Fiscal discipline has become an imperative for CIOs. But that doesn’t mean simply slashing costs at budget time. It means demonstrating how IT affects revenues, profits, costs, customer service, sales, manufacturing and everything else under the business’s umbrella. “You’re talking about IT entirely in business terms, which was not the way it was discussed 20 years ago,” Orlov says.

According to a recently completed five-year study of Global 2000 companies by the nonprofit think tank BTM Institute, companies that have what the institute calls “converged business technology management” have markedly increased financial performance and exhibit superior revenue growth and net margins than others in their respective industries.

“This is not about a project or ROI, but it’s about the overall performance of the company,” says Faisal Hoque, founder and chair of the BTM Institute. For example, those companies with converged business technology management had 12 percent average annual revenue growth, compared with 4 percent for their industry groups. They also achieved 36 percent average annual earnings per share growth versus 7 percent for the industry groups. In addition, the converged business technology companies grew at a faster pace and had greater returns than did their peers. “If you cannot link the things you are doing back to the overall corporate performance,” Hoque says, “then what’s the point of having not only the CIO role, but even the function itself?”

Doucette, who’s been able to demonstrate what IT costs as a percentage of UTC’s overall revenues and how IT propels revenue growth, concurs. “If you can’t show what you’re driving for the business,” he says, “then what good are you doing?”

In 2005, CIO profiled Cooper’s courageous and ambitious turnaround of Toyota Motor Sales’ IT department that, among other strategies, employed four key IT metrics: for new investments, operational performance, financial performance and workforce management. She called her mission a “value quest” for IT. But, she realized after starting, “you can’t do that until you rise to the notion of the economics of IT.”

Eventually, she tied each of those metrics to the processes of the business units IT worked with and continually interpreted them to her colleagues in business terms, not IT terms. Cooper was also able to show her business peers a metric they could relate to easily: how much IT cost per vehicle. “It always struck me that we, as managers, were never really good at getting [the financial value of IT]. We always worked off one dimension—the annual budget plan,” Cooper says. “But that’s just a tool. You had to get beyond that to drive transparency.”

She says it was a combination of her years of experience and elements of Toyota’s culture (cost-consciousness and persistence) that allowed her to change the value of IT. “No detail is too small, and no aspect is overlooked in how you look at cost per vehicle,” she says.

Cooper pulled it off—without layoffs. Toyota’s market dominance speaks, in part, to the success of her turnaround.

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