This year\u2019s State of the CIO 2003 survey reveals a very different set of challenges confronting our readers and a new set of priorities for IT leaders. Even as companies continue to struggle with a sputtering economy and weak corporate performance, and CIOs continue to wrestle with budget cuts and scarce resources, the demands the enterprise places on IT have been ratcheted up. Today, CIOs are being asked to cut costs, increase productivity, and find new ways to generate revenue and profits. In this dollar-anxious environment, alignment between business and IT, between the CEO and CIO?always important?is more critical than ever.What\u2019s ChangedLast year, chief information officers told us that the biggest hurdles they needed to overcome were inadequate budgets and a lack of time for strategic thinking (see last year\u2019s State of the CIO issue at www.cio.com\/ state). CIOs reported that their energy went into staffing their departments, retaining employees and implementing new technologies, such as wireless.This year, based on the responses of 539 heads of IT from a broad range of industries including manufacturing, government, health care, technology, education and finance, we can see that both staffing and new technologies have taken a backseat to finding best practices for partnering with business units and delivering the greatest value to the organization. While CIOs will continue to deal with tight budgets in 2003, their greatest challenges for the coming year are prioritizing demands from the various business units and aligning IT with business goals.This year\u2019s study also finds shifts in spending priorities. Security has moved from the bottom half of last year\u2019s spending list to become the fourth highest IT spending priority for CIOs. Systems and process integration remains CIOs\u2019 top spending priority as companies continue to try to squeeze efficiencies out of their operations.In terms of the skills CIOs believe they need to succeed in their jobs, effective communication and understanding business processes and operations remain important. However, strategic thinking and planning, which was listed as a critical skill by less than half (46 percent) of the CIOs surveyed last year, rocketed up this year\u2019s list with 76 percent of IT executives saying they considered that essential. Clearly, the pressure cooker of today\u2019s corporate world has forced CIOs to redefine their roles and their jobs. It\u2019s either that or get cooked. (See "The Importance of Being Strategic," Page 58.)Another skill that more CIOs need to hone is financial-speak. The percentage of CIOs reporting to their CFOs doubled?from 11 percent last year to 22 percent.What\u2019s Stayed the SameIn a time of uncertainty, it\u2019s nice to see that some things haven\u2019t changed. The majority (73 percent) of IT heads are corporate officers with C-level titles, and roughly half of them still report directly to the CEO?a good thing. On average, CIOs manage IT budgets that represent 6 percent of total company revenue, which is also consistent with last year\u2019s findings. That indicates that while IT budgets have been cut, at least they\u2019ve been cut proportionately. CIOs still spend the biggest chunks of their days meeting with senior executives and department heads (26 percent), managing their staffs (24 percent), and developing leadership within their departments (13 percent). They\u2019ve been in their current jobs for four years on average?challenging the widely publicized notion that CIOs hop from job to job.During good times and bad, certain IT best practices endure (see "The Six Best Practices: What Leading CIOs Do," Page 74). Whether the CIO\u2019s objective is to lower costs or drive business opportunities, our survey identifies certain key practices critical to every CIO\u2019s success: Be part of the executive team; involve leaders and users at all stages of IT initiatives; and have an executive or steering committee oversee IT investment decisions to get buy-in early and avoid surprises later.Whether you conceive of your role as being operational or strategic, it\u2019s obvious that IT continues to grow evermore central to the business, and that the CIO\u2019s focus on partnering with the business units and aligning IT strategy with corporate strategy will increase productivity, reduce costs, improve customer satisfaction and drive innovation.So what are you waiting for? Take your vice president of sales to lunch! Who You AreCIO surveyed 539 IT executives to bring you "The State of the CIO 2003" results. Here\u2019s what we found out about you.CHARTNote: Percentages may not add up to 100 because of rounding and because respondents who did not answer are excluded. Slightly fewer than 539 survey respondents answered certain questions; visit our website at www.cio.com\/state to see exact sampling numbers.The Survey: How You Do Your Job\nGovernance\nYou are part of the organization\u2019s executive management team\/committee\nYou set the IT architecture and standards that guide the independent IT decisions of divisions, business units and departments\nA high-level group in the organization governs IT investment decisions\nuser involvement\nYour IT budget is determined in part by the business units or functions\n\n\nYour IT department communicates with the user community at large\n\n\n\nWeekly\n\n\n23%\n\n\n\n\n\n\nMonthly\n\n\n35%\n\n\n\n\n\n\nQuarterly\n\n\n18%\n\n\n\n\n\n\nSemiannually\n\n\n5%\n\n\n\n\n\n\nAnnually\n\n\n2%\n\n\n\n\n\n\nOnly for new employees\/orientation\n\n\n6%\n\n\n\n\n\n\nNever\n\n\n11%\n\n\n\n\n\nYour IT department regularly measures customer satisfaction with IT services\n\n\n\nYes, internally?internal employees\n\n\n42%\n\n\n\n\n\n\nYes, externally?business partners, customers\n\n\n4%\n\n\n\n\n\n\nYes, both internally and externally\n\n\n17%\n\n\n\n\n\n\nNo\n\n\n36%\n\n\n\n\n\n\n\n\nYou assign IT liaisons to each major business unit or function\nSenior business unit leaders or managers from affected departments or functions are involved with an IT initiative in the following stages\n\n\n\n\n\nInitiation\/authorization\n\n\n89%\n\n\n\n\n\n\nPlanning\n\n\n77%\n\n\n\n\n\n\nExecuting\n\n\n56%\n\n\n\n\n\n\nControlling\/monitoring\/measuring progress\n\n\n63%\n\n\n\n\n\n\nPost-completion assessment\n\n\n63%\n\n\n\n\n\nUser representatives from affected departments or functions are involved with an IT initiative in the following stages\n\n\n\nInitiation\/authorization\n\n\n72%\n\n\n\n\n\n\nPlanning\n\n\n85%\n\n\n\n\n\n\nExecuting\n\n\n80%\n\n\n\n\n\n\nControlling\/monitoring\/measuring progress\n\n\n70%\n\n\n\n\n\n\nPost-completion assessment\n\n\n73%\n\n\n\n\n\n\n\n\nSKILLS\nThe personal skills most pivotal for your success as a CIO\n\n\n\n\nAbility to communicate effectively\n\n\n78%\n\n\n\n\n\n\nStrategic thinking and planning\n\n\n76%\n\n\n\n\n\n\nUnderstanding business processes and operations\n\n\n66%\n\n\n\n\n\n\nAbility to influence\/salesmanship\n\n\n35%\n\n\n\n\n\n\nThorough knowledge of technology options\n\n\n26%\n\n\n\n\n\n\nNegotiation skills\n\n\n14%\n\n\n\n\n\n\nTechnical proficiency\n\n\n13%\n\n\n\n\n\n\nOther\n\n\n1%\n\n\n\n\n\n\n\n\nTIME MANAGEMENT\nHow you spend your time\n\n\n\n\n\nCommunicating with business executives and department heads\n\n\n26%\n\n\n\n\n\n\nManaging IT staff, including hiring\n\n\n24%\n\n\n\n\n\n\nDeveloping leadership within your IT department\n\n\n13%\n\n\n\n\n\n\nLearning\/understanding technologies\n\n\n13%\n\n\n\n\n\n\nInteracting with outside business partners\/suppliers (not IT vendors)\/customers\n\n\n12%\n\n\n\n\n\n\nNegotiating\/meeting with IT vendors\n\n\n10%\n\n\n\n\n\n\n\n\nSTRATEGIC FUNCTION\nHow you view the IT department\u2019s role in the organization\n\n\n\n\n\nTo enable business initiatives\n\n\n\n\n\n\nTo envision business possibilities and initiate with technology\n\n\n\n\n\n\nHow the IT function is budgeted\n\n\n\n\n\n\nAs a cost center that generates planned expenses\n\n\n\n\n\n\nAs an investment center that generates new business capabilities\n\n\n\n\n\n\nYour approach to managing IT projects\n\n\n\n\n\n\nAs a portfolio or suite of investments\/interrelated activities\n\n\n\n\n\n\nSeparately, according to each project\u2019s specified budget and schedule\n\n\n\n\nI.T. IMPACT\nYour ranking of IT\u2019s impact on the enterprise\n\n\n\n1\n\n\nIncreased productivity\n\n\n\n\n2\n\n\nReduced costs\n\n\n\n\n3\n\n\nIncreased customer satisfaction\n\n\n\n\n4\n\n\nDrove business innovation\n\n\n\n\n5\n\n\nCreated competitive advantage\n\n\n\n\n6\n\n\nGrew existing revenue streams\n\n\n\n\n7\n\n\nGenerated new revenue streams\n\n\n\n\n\n\n\n\nI.T. VALUE\nThe IT practices you rate as highly effective in adding value to the business\n\n\n\n\n\nThe CIO is part of the executive management team\/committee\n\n\n71%\n\n\n\n\n\n\nUser representatives from the affected departments or functions are involved at all stages of an IT initiative\n\n\n64%\n\n\n\n\n\n\nSenior business unit leaders or managers from the affected departments or functions are involved at all stages of an IT initiative\n\n\n59%\n\n\n\n\n\n\nThe company has a high-level group (executive council or IT steering committee) that governs IT investment decisions\n\n\n44%\n\n\n\n\n\n\nThe CIO assigns IT liaisons for each major business unit\/function\n\n\n41%\n\n\n\n\n\n\nThe IT organization communicates with its user population at large on a regular basis\n\n\n39%\n\n\n\n\n\n\nThe IT organization measures customer satisfaction on a regular basis\n\n\n36%\n\n\n\n\n\n\nThe IT budget is determined in part by the business units\/functions\n\n\n34%\n\n\n\n\n\n\nThe IT function is budgeted as an investment center that generates new business capabilities rather than a cost center that generates planned expenses\n\n\n33%\n\n\n\n\n\n\n\n\nSPENDING\nYour top 14 IT spending priorities for 2003\n\n\n\n1\n\n\nIntegrating systems and processes\n\n\n\n\n2\n\n\nLowering costs\n\n\n\n\n3\n\n\nStrategic planning\/aligning IT and business goals\n\n\n\n\n4\n\n\nImplementing data security and privacy measures\n\n\n\n\n5\n\n\nAutomating\/optimizing the supply chain\n\n\n\n\n6\n\n\nEnabling\/enhancing e-commerce\n\n\n\n\n7\n\n\nExternal business-to-business customer service\/relationship management\n\n\n\n\n8\n\n\nKnowledge management\/leveraging intellectual assets\n\n\n\n\n9\n\n\nProject management improvement\n\n\n\n\n10\n\n\nExternal business-to-consumer customer service\/relationship management\n\n\n\n\n11\n\n\nUser training\/education\/satisfaction\n\n\n\n\n12\n\n\nImplementing new technologies\n\n\n\n\n13\n\n\nStaff development\/retention\n\n\n\n\n14\n\n\nManaging IT globally\n\n\n\n\n\n\n\n\nHURDLES\nYour 15 biggest barriers to effectiveness\n\n\n\n1\n\n\nInadequate budgets and prioritizing\n\n\n\n\n2\n\n\nConflicting business priorities among business units\n\n\n\n\n3\n\n\nAligning IT efforts with business goals\n\n\n\n\n4\n\n\nShortage of time for strategic thinking\/planning\n\n\n\n\n5\n\n\nRisk and uncertainty due to volatile economic conditions\n\n\n\n\n6\n\n\nLack of key skill sets\n\n\n\n\n7\n\n\nDifficulty proving the value of IT\n\n\n\n\n8\n\n\nWeak corporate performance\/ reduced revenue\n\n\n\n\n9\n\n\nIneffective communication with users\/unrealistic customer expectations\n\n\n\n\n10\n\n\nDisconnects with executive peers\n\n\n\n\n11\n\n\nLeadership\/business knowledge within IT department\n\n\n\n\n12\n\n\nOverwhelming pace of technology change\n\n\n\n\n13\n\n\nPoor vendor support and service levels\/product quality\n\n\n\n\n14\n\n\nManaging staff\/building\n\n\n\n\n15\n\n\nInability to wield effective influence with technology vendors\n\n\n\n\nOn Sale at the CIO Store? Focus Guide on Strategic Planning: How to Develop and Align IT Strategy ? Focus Guide on The Elite CIO: Principles and Practices of Top-Tier IT Leadership ? The full results of "The State of the CIO 2003" survey identify the key practices that are critical for every CIO\u2019s success. The complete survey, geared to both operational and strategic IT, presents the numbers you need to know, analyzed by industry. It will be available for purchase in May. For all these items, visit www.theciostore.com.The State of the CIO 2003 Survey MethodologyCIO\u2019s second annual "State of the CIO" survey was administered online from Nov. 18 to Dec. 6, 2002. CIOs, CTOs and vice presidents in charge of IT were randomly selected from our circulation file and invited to take the survey. The survey findings shown are based on the responses of 539 heads of IT from a broad range of industries, with close to half (45 percent) representing companies with greater than $500 million in annual revenue. The results of the study are statistically valid. The margin of error for the survey is plus or minus 4.3 percent.Much like last year, this study asked top IT executives about their career paths, including functional background, tenure, salary and the key skills needed for the role. We surveyed respondents about the job of CIO?reporting structure, greatest challenges, budget and staffing responsibilities and the user environments supported by their IT organizations.This year\u2019s survey went further in examining the CIO role and identified the best practices for effectively managing IT and partnering with the business units.\n-L.C.W.