The State of the CIO 2002: The Changing CIO Role

The definition of the cio role in the next few years is up for grabs. Depending on whom you ask, the position will become a stepping-stone to CEO-dom or remain an end to itself. Some contend business-IT alignment will be a no-brainer, while others believe understanding business will be the skill that makes or breaks careers. CIOs will focus more on strategy?or they’ll stay attuned to operations. While reading CIO tea leaves isn’t an exact science, one thing is clear: The job won’t be boring.

Ellen Kitzis

Group Vice President for Executive Programs

Gartner

Stamford, Conn.

In the next five years, there will be a bifurcation in the CIO role?one part will be focused on strategy and the other on execution. Some people are better at one or the other. Those focused on execution will move toward the CTO slot and will focus more on topics like operations, vendor management, technology selection and procurement. The strategist will focus on issues such as business and IT alignment, uncovering IT-enabled business opportunities in the enterprise and finding ways for IT to streamline the business processes in the value or supply chain.

There will be less delegation of IT responsibilities to dedicated IT staff. Instead, CIOs will be infusing IT functions into the lines of business and other operational organizations, so IT will be ingrained in all the business operations.

Some CIOs who want to be CEOs are using the CIO position as a tour of duty inside the business. The CIO position didn’t used to be regarded as a stepping-stone. It used to be the career pinnacle, as far as people wanted to go. In the next few years, however, the CIO role will become more of a stop for talented executives moving around the company before landing in the CEO position.

The way people become CIOs has started to diversify. More and more CIOs are coming to IT through other business functions in an organization. Some will still come from IT, but most of them will have a broader view of the business and will have the acumen necessary to understand more than technology. Sometimes people who come up from IT get a bad rap, but they’re being trained inside the IT organization to understand the business.

The biggest change in CIOs’ responsibilities will be the way they take ownership and oversee execution of major projects. Before, the IT organization was judged only on the success of technology projects. In the next five years, it will be measured more by how well projects and the organization itself help the business. That has started already and will become more prevalent. Do IT projects increase the number of customers? Do they increase revenue? Do they add value to the business?

This change in how CIOs are judged will create a major challenge for them to control costs strategically for the entire company, rather than simply responding to cost pressures by reducing the IS organization’s costs. Two skills will be vital within the next few years to meet this challenge: portfolio management and collaboration. The CIO will be managing a project portfolio for business results instead of whether projects stay within an arbitrary time line or within a certain budget. Also, CIOs will have to work very closely with other business units to carefully select projects that will bring value to the company.

-Simone Kaplan

Chuck Lybrook

Executive Director The Information Management Forum, Atlanta

Former CIO Third National Corp.

The nature of the job is changing. Many CIOs will have non-IT backgrounds, though that depends a great deal on the size of the company, the industry and the markets they serve. The larger the company, the more involved CIOs will be at a higher level of strategy and governance. The smaller the company and industry, the more the job will have operational and technical responsibility. We’re seeing more CIOs coming from non-IT backgrounds right now.

It’s becoming increasingly important for CIOs or anyone at that level to understand the business and talk in business terms, not just technology terms. A big challenge for CIOs is that they have to be adept at both?they have to be able to understand technology and talk to their staffs about technical subjects. But when you’re talking to the board or the CEO, you don’t want the conversation crowded with tech talk. Consulting skills will certainly be required more than they are now because effective communication is such an important part of the job. You won’t see many propeller-head CIOs in a few years. They won’t survive except at smaller companies because they can’t communicate. Alignment is a major challenge and will continue to be so.

In the high-tech industry, it’s conceivable for CIOs to move up to CEO, but it’s much more difficult in other industries, such as the financial or retail industries. In high-tech, the skills required to be CEO are well suited to people who have come up through IT ranks because within a high-tech company the roles of CIO and CEO are so similar. The CIO understands what the business is about. But executive boards look for CEO candidates with experience in their particular industry sectors, and that is not going to change in five years.

I do believe the change we’ll see in the CIO position is evolutionary, not radical. The role of the CIO is going to change from managing large numbers of people with operational responsibilities, to managing highly dispersed and networked resources. Many of these resources will be decentralized and run by contractors and through partnerships independent of the company. I think the CIO will be in charge of information resources, and it will be a governance kind of position. There will be a lot of responsibility for overseeing the entire enterprise but potentially not a lot of people who report directly to this person.

Deere & Co. has a model like that now where there’s a corporate CIO and divisional CIOs who are responsible to the head of division. Divisional CIOs handle all the details of daily life within their business unit, while the corporate CIO keeps an eye on the big picture and is the voice of IT at the executive level. But the financial accountability will belong to the corporate CIO, who will be in a much smaller office. Companies may have multiple interconnected infrastructures that are managed by a divisional head of IT, though the corporate CIO might not get involved in that.

-S.K.

Chuck Lybrook

Thornton May

Corporate Futurist Guardent Corp. Waltham, Mass.

Show me a CIO who is not business-focused and I will show you someone who is going to be turned over immediately. The concept of alignment as a problem is dated. It’s a myth that CIOs don’t understand business. In fact, they know the business at a more procedural, tactical level than anyone else. That’s why they will eventually move up to the CEO role, and they’ll be more suited for that switch than someone like the COO because the major driver of shareholder value is effective deployment of technology.

Right now, CIOs are spending their time focusing on the fact that their infrastructure is broken. There’s a lot of personal angst in CIOs’ careers because they’re spending so much time fixing crap that’s been broken under someone else’s watch or because of someone else’s incompetence. In a few years, when fewer organizations have to worry about screwed up infrastructure, CIOs will have a chance to focus on change.

When CIOs do start focusing more on technologies that improve shareholder value, their salaries will be based 70 percent on the ability of technology to provide that value. At Fortune 100 companies, the base salary will be about $200,000. Million-dollar salaries will be more commonplace if CIOs are able to deliver high-performance systems that help the business. CIOs will be judged on their ability to deploy technology to manage customer relationships. If they can generate and retain customers, their salaries will go up.

To be successful in this role, CIOs need to develop the ability to create and manage external and internal relationships. CIOs tend to hunker down in their offices, and they don’t network with other CIOs, with people in academia, with others in their industry. When you’re constantly fixing stuff, it’s like you’re lying under a car. You can’t see anything except what’s right in front of you, and you have grease all over you. Developing peripheral vision is important because to be effective, you must have an awareness of everything that’s going on around you. It’s not just about how you manage your department, it’s about how you can help the company to maneuver successfully in the market. You develop that vision by talking to people outside your organization.

-S.K.

Peter Weill

Director Center for Information Systems Research (CISR)

Sloan School of Management, MIT

Cambridge, Mass.

I’ve come to the conclusion that IT is so pervasive?IT spending as a percentage of revenues keeps going up?that it’s no longer manageable by one person. So firms are moving toward governance of IT rather than management.

One of the things we at CISR are seeing very strongly from our research is that the CIO is becoming the person accountable for IT governance. You don’t write every check if you’re the CFO; you control who is able to spend money. Likewise, CIOs will control who has “decision rights” for setting the architecture and infrastructure capabilities, and who has input only. The people who have decision rights are just those who have the right to make the final decisions about IT standards.

The CIO is going to be responsible for determining and measuring the impact of IT. We see that as a major shift for many CIOs. But at large companies, particularly financial services companies such as State Street, Citibank and Vanguard, that’s what CIOs are already doing. Financial services is the industry in which IT spending as a percentage of revenues is highest. Yet even in financial services, you can still find companies that see the role of IT as reducing costs rather than as a source of competitive advantage.

You need a different kind of CIO for each view. A very simplistic definition is that there are two fundamentally different CIOs. One is the role in a firm that sees IT as a source of competitive advantage. That person sits at the strategy table, has credibility in the business side as well as the technology side, and obviously has to have a tight IT shop but typically delegates the operations to the staff.

But IT operations is not the CIO’s expertise. That expertise is in communicating to business colleagues the importance of IT?and more important, in getting the IT governance right. It’s a strategic mentality.

The second type is that CIO whose fundamental role is to run an efficient IT shop. IT operations are run as a service-level agreement. These CIOs have a service or utility mentality. This is a person who understands the economics of technology. He or she tends to be a wonderful negotiator with vendors.

Five years from now, we believe, that second sort of CIO?along with the utility mentality?will disappear. That is because IT operations can be run as efficiently by an ASP. I would argue that service-oriented CIOs will move from being consumers of IT to providers?they’ll join IBM, HP or AT&T services.

-Edward Prewitt