The state of the CIO in 2003 is strategic. Our second-annual survey of more than 500 CIOs reveals that (no surprise) your budgets are still tight and that (not coincidentally) you have to prove the value of each and every IT system and project deployed or planned. Yet despite the pressure to cut and the charge to do more with less, you are looking ahead rather than hunkering down.More than three-fourths of you say that strategic thinking and planning is pivotal to your success in this business climate. That\u2019s a remarkable increase from last year\u2019s inaugural "State of the CIO" survey, when only 46 percent of you listed strategic thinking and planning among your three most important skill sets.What does it mean to be strategic today? It means taking an enterprisewide view rather than simply focusing on your department. It means welcoming the business heads into your planning process rather than assuming that they will turn up providentially when it\u2019s time to make critical IT decisions. It means devising budgets based on what can benefit the company as a whole rather than responding serially to the requests of individual business chiefs. Above all, strategy for CIOs means being aware of the powerful effect IT has on organizational competitiveness.Adrian Danescu, senior vice president and CIO of Manufacturers Bank in Los Angeles, looks at each new IT system and asks himself, "How does it fit in with strategy? How does it fit with the competition? How will it make us look better moving forward?"Asking (and answering) those strategic, forward-looking questions is important because IT is increasingly the difference-maker in how well an organization competes in the marketplace. It is the difference between a successful company and one that\u2019s treading water. "IT is the key organization within the financial industry," says Danescu. "It\u2019s charged not only with maintaining the infrastructure but also to look for new lines of revenue."As the linchpin to organizational success, IT must work more closely than ever with the business side to align strategy. It must also work harder than ever because alignment is not a destination you reach, it\u2019s a road you travel. Liza Lowery became CIO of the city of Los Angeles one year ago and was pleased to find open lines of communication between the IT group and other departments in the city government. Each department, such as police and fire, had someone assigned as a contact for the IT group. But that wasn\u2019t good enough.In June, Lowery\u2019s proposing to the mayor a new IT governance model in which her "customers" (Lowery has banned user from her staff\u2019s vocabulary) will in effect become IT planners. "Customers will determine our priorities, focus and strategy so that IT is aligned with business needs," she says. Lowery has already begun holding planning sessions with department executives, and she wants to form a "customer council" to give her continuous feedback on the IT group\u2019s performance.Other indicators from "The State of the CIO 2003" survey highlight how important it is for you to work closely with your peers from the business side of the organization. Just under three-fourths of you are members of the corporate executive team?an organizational configuration that most of you consider critically important to your success (see "The Six Best Practices: What Leading CIOs Do," Page 74).What\u2019s more, you told us that you spend 26 percent of your time communicating and working with business executives and department heads?the largest chunk of your workday. Roger Jones, senior vice president and CIO of Fortis Health in Milwaukee, has a gating process for IT projects that involves different business leaders at multiple levels. When first envisioning projects, he brings in business heads, typically vice presidents, to lend depth to the discussion of purpose and cost. Jones also has an IT leadership council, comprising company directors, that checks in at regular intervals on projects that have been funded.The final step in Jones\u2019s IT governance structure is a monthly meeting of all the operating heads of the company (senior vice presidents) to review spending, project performance and other key metrics for the IT organization. This is no group of yes-men; the senior vice presidents "can and do ask whatever they want," Jones says. But their involvement ensures that IT is being used well. And after all, the IT budget is the users\u2019 budget. Jones charges it all back.Investing in systems and processes that enable strategic planning and the alignment of IS and business goals was the number-two spending priority listed in this year\u2019s "State of the CIO" survey?57 percent of you say it\u2019s among your chief spending priorities, with 14 percent of you calling it your top priority.Tim Wright, CIO and CTO at Markham, Ontario-based Geac Computer, believes that strategic planning for information technology spending is how his company will grow out of the current economic malaise. "The issue that Geac faces is where do we prioritize our development to get the best ROI and therefore growth," says Wright, former senior vice president, CIO and CTO at Terra Lycos."If I have to make choices with limited IT budgets, I explain my decisions [to business executives]," he says. "I engage with them and say, Here\u2019s the $10 million I have to spend, here\u2019s how I\u2019m allocating it and here\u2019s why. Is there any reason why I should do it differently?"Sitting down and strategizing with his business-side colleagues, says Wright, is the key to determining which IT projects and systems will create revenue. "I need the ability to accurately forecast what the company\u2019s business centers are going to do and accurately predict what technologies will determine our successful investment," he says. "I can tell them what we in IT can build and what it will cost. But if the business partners say, \u2019I can get more money from this [project],\u2019 that\u2019s where I\u2019m going to be investing resources."Finally, the strategic view is important for self-protection. Those of you who lack the 30,000-foot perspective simply can\u2019t properly direct IT."I would caution CIOs in maintenance mode," says Los Angeles\u2019s Lowery. "You can always improve. If you\u2019re not surveying your customers, you might be fooling yourself, and you will be replaced. I can\u2019t imagine anyone staying in maintenance mode today?the economy is changing so rapidly."