CIO
Hendrik van der Walt

Still building things

Helping to create the ‘Uber of transport logistics’ is the culmination of a career focused on never settling.

The rise of the CIO phoenix

Many would have thought the defining period for the chief information officer (CIO) was in the nineties, when IT budgets were large and corporates were satisfied only with the best applications. They would be wrong. With budgets slashed and scepticism about the power of IT widespread, it may be in the next few years that the CIO makes a truly lasting impression.These days, every major enterprise has a number of executives with the title of chief something-or-other officer. Chief executive officer and chief financial officer have now been joined by chief operating officer, chief risk officer, chief compliance officer, chief security officer and so on.It`s a measure less of personal aggrandisement than a need to define more clearly the challenges organisations face, and then make someone accountable for them.This process may have started in happier times, but it is being driven nowadays by stakeholders who want something to show for years of investment and buy-in. In the past, CIOs were able to command big budgets because companies felt they had to have the best applications to take part in the perceived wave of growth IT could deliver.“In the 1980s, sanctions forced companies to buy the latest and the best in IT, out of fear it might never become available again,” says Hankie Vogel, CIO of Medscheme, speaking at the recent Brainstorm 2003 conference. “In the 1990s, there was the IT hype that encouraged spending, and then came the Y2K phenomenon. Things are more difficult now.”The pendulum has swung right back, and IT is now seen in many organisations as less of a driver of competitiveness than as a good old fashioned cost centre, no different in principle from human resources or accounts.At times like these, the CIO needs to make his or her presence felt. “This is a defining period for the CIO,” says Fred Amoroso, CEO of the META Group. “And I see the CIO getting closer to the business.”“IT is definitely becoming about business, it`s not a technical issue anymore,” concurs Peet van Vuuren of the Wits Business School, who is currently doing a thesis on the role of the CIO in South African business. “The CIO is not a technician, the CIO is an intellectual gold mine. Companies are starting to see how important the CIO is, and developing these people into business people.”The critical point is that CIOs will need to straddle both the technology and business worlds and then earn their stripes, as strategists and executors, says Amoroso.This is especially so against the backdrop of a global slowdown, with companies focusing on restoring the health of balance sheets, especially the heavy investors in technology during the nineties, the telecommunications companies.Thus few see a major turnaround in the IT spending cycle anytime soon. “I expect a plateau to the spending, rather than a pick-up,” says Vogel. “Companies are going to look more at their processes and find an optimal solution. Maybe then the reputation of IT will recover in the sense that we are not going to waste money anymore.” Scanning the landscapeSpecifically, hardware is expected to stay in the doldrums, as companies look at this obvious area for delaying spending, and make their hard assets sweat. This is probably especially so for those who expected the telecommunications wave to sweep all before it. Spending is more likely to come in the form of software, and in making existing assets work better.“We are going to see ongoing spending on application support, while application enhancement will continue at current levels because these projects are so critical to business renewal,” says Bram Meyerson, CEO of Quantimetrics. “Major project software development will come under increased scrutiny, but it will only be those projects that provide the highest return on investment that will be initiated.”Performance of the organisation will be a factor, says Bheki Zungu of the National Ports Authority. “Those who are struggling will continue to squeeze on the IT spend,” he says.This is not all bad news for the CIOs, who are likely to get more out of vendors. “I quite like the point in the cycle we are in at the moment; it means that if I buy stuff I can get quite keen prices on it,” says Henri Slabbert, CIO at Edcon, one of South Africa`s largest retailers. “There`s quite a capacity to do things and there`s an eagerness to work with us and put solutions on the table.“My only concern about the current cycle is the strength of the vendors. If we partner with someone, we want to be sure they will be around in five to ten years. So, when we do a deal, we look first at the standing of the organisation and only then at the box they are selling us.”Much of the battle for the CIO will be in establishing lines of responsibility in the organisation, especially with the concurrent growth of new IT-related roles such as the chief technology officer and chief security officer. Van Vuuren says two basic models have been followed: either the CIO reports to the CFO or directly to the board.“Which one you choose makes the world of difference. If IT is merely a small processing issue, it makes sense to place this role under finance,” he says.“I strongly believe, though, that the CIO should report directly to the board, and even be an executive on the board. This makes it a strategic issue and not simply a cost issue.”Zungu agrees. “The CFO is responsible for the rands and cents of the organisation. The CIO looks at what is best in terms of process improvement,” he argues.“The CIO is the breach between business and technology. It`s always a business initiative, though the CIO is given specific responsibility to ensure effective implementation of that initiative.”Interestingly, that often means pushing some responsibility onto other decision makers in an organisation. Meyerson talks of the concept of a strong business sponsor in each implementation. It`s not getting simpler“Best business practice suggests there should be a strong business sponsor to take on ultimate responsibility for the signing off, delivery and completion of a project. That of course needs to be backed up with strong IT implementation skills. Ultimately though, the business unit that requested the solution, change or improvement, needs to sponsor it,” says MeyersonSays Vogel: “The CIO is the enabler, but the operational responsibility lies with the business unit.”Neither the IT nor the business worlds are getting any simpler. According to a recent survey in The Economist magazine, the next big growth area for IT (following the systems-centric boom of the seventies, the PC boom of the eighties and nineties, and the network-centric one of the late nineties to now) will be a customer-centric one, with the emphasis on information, content and transaction standards.Issues such as web services, XML and computing-on-demand will become important, so an important driver of the process will be the continued acceptance of open standards. The debate over outsourcing, and its sub-debates over which components of a business to outsource, will not go away, and will probably become more complex.It is not as if the old concepts will die off; after all, the mainframe lasted long after the advent of the PC, says Amoroso. Indeed, argues Vogel, organisations ignore the impact of legacy systems at their peril.“Every one of us will say that if I have the ground floor opportunity, I will build a shop that you will die for. Unfortunately that legacy is always there – it differs from one environment to the next, but that is always a challenge for the CIO.”Open source is also an issue, and most CIOs are dealing with it on an experimental basis. “In our organisation we are proposing an experimental approach, but also with an open source centre of excellence to investigate the possible uses,” says Zungu.“Open source is not going to disappear. But because it`s not mature yet, we prefer to use it for the peripheral stuff, not the critical stuff,” says Vogel. “In time though, most business will be open source.”Of course the old chestnut of cost remains high on every CIO`s agenda. “Cost is always going to be there. I think the answer is not to automate everything in one go, but to automate the right things at the right time,” says Vogel.Critically, and in a way perhaps returning to the whole underlying concept of the CIO, a key challenge is building understanding between IT and other parts of the business.“My top IT challenge is the alignment with the business, given the growing complexity. But, crucially, we also want to grow IT employees` capabilities to understand the business. Sure we want it from a management perspective, but we also want to ingrain that culture in our IT staff,” says Melvin McArthur, Telkom CIO. Best yet to comeConsolidation of information and projects is a key challenge area, says Zungu, as is security. “This is a prime area of concern for most organisations, but technically it is also an issue with the growth of thin client, which is partly an issue of consolidation as well.”The overall impression may be that the CIO`s role in an organisation has been downgraded since the tech bubble burst in 2000. But while organisations are more sceptical about spending on IT these days, it may well be that the CIO heydays lie ahead.“Businesses are very serious about their information and I think it`s a big fallacy that businesses are trying to push away IT,” says Van Vuuren. Indeed, companies are investing heavily in the CIO function, he adds.“There may be a perception that IT spending is falling, but good businesses are actually pulling their CIOs up the food chain. A lot of companies are training their CIOs as generalists.”In the past, the CFO`s position has often been the route to the top for the more ambitious. Who knows? In future, it may be the CIO that has the inside track – especially at heavy users of IT such as banks or insurers.

Your Majesty, the CIO

Five years ago, they were the über-geeks who kept Big Business`s computer systems up and running. Now CIOs are emerging from the basement to become business-savvy strategic players with the power to shape the future – of companies, of vendors, of the entire IT industry, for that matter.Some would say this Clark Kent-like transformation is purely a matter of survival, and CIOs who don`t get strategic fairly quickly will find themselves out in the cold. But the fact remains that CIOs have a remarkable vantage point from which to view the workings of their companies – providing a compelling power base from which to be significant strategic players.What`s more, today`s CIOs already hold the destiny of the IT industry in their hands to a greater degree than they may realise. Under pressure from their CEOs and shareholders, they`re demanding more from their existing IT systems, and are turning their rands over before making any major new investments. What this means is that the tech buying cycle will only restart when the CIOs decide it will. And right now they`re not buying.Of course, this blurring of the lines between business and IT has been a long time coming. Some analysts talk of the importance of aligning business and IT, but it goes further than that. The bottom line is that we live in the Information Age – and it`s driven by IT. Extra hatsThe penny has already dropped for some. At petro-chemical giant Sasol, for example, CIO Alex Zwiegelaar is at pains to talk not about technology, but information.“What is information? Why do you have it? What do you do with it? More specifically, how do you use it for your customers? IT`s value should be immediately obvious as an enabler of business processes.”At banking giant Absa, too, IT group executive Leon du Rand has overseen a shift in emphasis away from IT to a more business-focused information services (IS) approach which has seen business confidence in Absa Group IT rise from 54 percent in 2000 to 73 percent last year. Does it make business sense? Without a doubt. But, in the process, the canny CIO is also ensuring his longevity.“A CIO is uniquely positioned in any business today, because there is not a single element of business that does not require information,” concedes Du Rand. “But we also need to be able to see opportunities and go out into the business area.”Microsoft CIO Rick Devenuti encapsulates the new approach when he says he`s working toward a time when “the IT people” are so fully woven into the day-to-day business and culture of the lines of business that they become highly focused business people, but with a special talent for technology.That`s still some way off. For now, though, companies that are looking to make the most of technology, and are using it to improve or transform their businesses, are widening the scope of the CIOs to such areas as marketing, sales, mergers and acquisitions and partnerships.That`s a lot of extra hats, but it comes with the territory. Jenny Retief, who was CIO of Hollard Insurance until last year, certainly believes the CIO of the future will have to be Superman or Superwoman to keep up with the varied roles.“You have to be able to understand the business you`re in and the overall business strategy of the firm. You must understand the challenges facing the business, and be a partner in setting strategy. And then you have to apply the appropriate IT solutions to support, enable, drive and grow the business,” says Retief, who is consulting to Hollard while on sabbatical.Du Rand agrees that today`s CIO is far more of a strategic animal than ever before, but also far more diverse. “There are basically four roles the CIO has to play: that of strategist, business adviser, IT executive and systems architect,” says Du Rand. Splitting the CIO and CTO“It`s important that the CIO helps the organisation understand strategy from the technology side of the fence. Now that we`ve moved into the era of the networked economy, a CIO must understand trends, and must have the ability to leverage what you already have in place.”It`s clear, though, that the modern CIO might spend more than half his time on his organisation`s purchasing, marketing, sales, operations, strategy and product-development decisions, and far less time on the traditional CIO role of managing the systems, says Du Rand.Does this trend herald the advent of a totally new beast in the corporate hierarchy, the chief technology officer (CTO)? It`s not too far off, predicts Du Rand – with the CTO becoming involved in issues like vendor management, technology selection and procurement, while the CIO focuses on the alignment of business IT and finding ways to streamline business processes.Michael Earl, a professor of information management at the London Business School, has long advocated a splitting of the CIO and CTO roles. In Earl`s world, the CIO will be the systems strategist, the business strategist and maybe the information and knowledge custodian, while the CTO will be the service provider and make technology policy. Or, as he puts it: “The CTO will be the guardian of the current business, while the CIO will be the guardian of future business.“The CTO would be more of a pure technologist who has a programming base at heart and delivers the technology tools that make the company more efficient,” says a Pretoria-based IT director in the financial services arena. “The CTO develops new technologies, and the CIO implements them within the framework of what`s best for the business.”An emphasis on execution certainly seems to apply to Hankie Vogel, the CIO at Medscheme, the Bryanston-based medical fund administrator. “I don`t think the CIO should be strategic at all,” he says, gleefully swimming against the stream.“My job is to make certain, from a technology standpoint, that we are focusing on implementing those technologies, those processes, those capabilities that are going to make our shareholders happier and our company more successful,” he says.Indeed, Vogel feels that in virtually any company in any industry the CIO`s primary role is to ensure that technology is being used “in the most effective fashion” and that it is a competitive advantage.“Obviously as CIO you`re not going to be able to align with company strategy unless you understand it. And you`re not going to be able to understand it unless you are fully privy to what is trying to be accomplished, being involved in sales-support efforts and talking with customers to see what some of their needs are,” says Vogel.“But, at the end of the day, I`m there to provide the optimum solution for the company in terms of cost, time and risk.”Despite the ascent from the basement to the boardroom, CIOs still have work to do to make themselves indispensable. Indeed, many fall short of CEO expectations – to the extent that some doomsayers foretell the demise of the CIO as we know it. The dinosaur routeOne view is that, as companies increasingly understand how best to utilise information to enhance business effectiveness, the CIO role will wither and die naturally. They have a point. If IT management becomes little more than telephone systems or electricity management, then it`s sayonara to the CIO. After all, you don`t exactly find a plethora of chief telephone officers or chief electricity officers, do you?And the reputation of CIOs as a species has hardly been enhanced by the fact that companies across the world have lost millions of dollars on failed or unnecessary technology. How much is hard to quantify. Suffice to say that a recent Gartner/Morgan Stanley study of 25 years of tech spending estimates that US companies lost $130 billion on unnecessary software and hardware in the past two years alone.Worldwide, says London-based Gartner research director Andy Kyte, who was in South Africa late last year on a SAP junket, companies waste as much as 20 percent of the $2.7 trillion spent on technology – thanks to project delays and needless purchases.It`s enough to make a CIO shudder – and send the CEO scuttling to outsource as much of his IT operation as he humanly can.Why the appalling track record? Sometimes guided by the CIO, sometimes not, a lot of companies latched onto the wrong technology, bought too much shelfware and didn`t implement new technology properly. They also underestimated the time and levels of change needed to make it all work. And CEOs, especially during the tech-boom years, often drove spending for projects without clear goals.“People viewed technology then as black magic, so why understand it,” says US-based analyst Charles Phillips, an MD at Morgan Stanley Dean Witter & Co, who heads up a monthly round table of 300 CIOs from global companies, in a recent interview with Computerworld magazine. “We became fascinated by technology and stopped thinking.”Judging by the responses from South African CIOs, most brains have been re-engaged. The new mantra, by all accounts, is short and sweet: show me the money. Absa has a powerful committee-driven governance system which nitpicks each and every proposal for IT spend; while at banking rival First National Bank, IT is a profit centre just like every other business unit in the FirstRand Group.“In the heydays of the `90s, IT spending was much more based on gut feel,” says Absa`s Du Rand. “Now, with business driving technology more and more, we`ve got to look at strategic fit, assess the risk and see that the numbers make sense.”Some companies are trying to recover some of their investments and improve technology`s “bang for the buck” by thinking more strategically, installing a business person as CIO, or kicking their CIOs upstairs, making them part of the executive team to more closely align technology goals to business strategy and avoid wasted spending.But there`s also growing evidence that other organisations are moving in the opposite direction, outsourcing what they can and reducing the size of their IT departments. This growing outsourcing trend should send a wake-up call to the middle-of-the-road CIO who`s not getting involved at the highest levels of business strategy, and runs the very real risk of losing control over parts of the technology budget.In a recent interview with CIO Insight magazine, John Parkinson, chief technologist for Cap Gemini Ernst & Young, says CIOs have basically two choices. “There are two viable roles for the CIO going forward: upward as a peer with the executive team contributing directly to executive business strategy, or as a line manager of technology, who will eventually be outsourced.”So how does the average CIO tighten his or her grip on the reins of corporate – and financial – power? It`s not enough that they`re still the key technology buyers. As FNB`s Adolph Kaestner told Brainstorm six months ago, it`s all about negotiating with business units and showing them value. “As specific business departments become more familiar with IT and what it can do for the business, they won`t necessarily turn to a centralised IT department unless they`re convinced the people in IT are working directly for their interests.”The unspoken threat is that CIOs will have to fight increasingly for the business of the in-house business unit, competing against outside vendors.Don`t tell that to Sasol`s Zwiegelaar, though. He has boldly outsourced most of his company`s service provision and technology components, is partnering with outside companies on some projects and is reducing total cost of ownership (the dreaded TCO) across the board by standardising on hardware and software.“It`s all about cost of ownership and effectiveness,” an unconcerned Zwiegelaar told Brainstorm. “We`ve built a business case where you can save a lot of money by standardising.”Amen to that, says Medscheme`s Vogel, who takes a very simple approach to spending money: “If it doesn`t change the business process, then the investment is wasted. It`s all very well automating, but you`ve got to automate the right things. Technology isn`t going to help if the business isn`t right. It simply gets you to the wrong answer faster.” So where is the money?All this talk of spending money is bound to get IT vendors licking their lips. Don`t hold your breath, warns Hollard`s Retief: most CIOs are still looking to squeeze what they can from their existing systems before venturing into the marketplace. And when they do, they`ll be expecting immediate, easily measurable business benefits. Overall, the spending prognosis remains cautious, with the faintest hint of an upturn towards the end of 2003.Medscheme, for one, is making no big ticket purchases this year after a couple of years of heavy investment. “We`re looking to optimise and consolidate in 2003,” says Vogel. “It`s time for us to capitalise on the investments we`ve already made, and to a large extent they`re delivering returns already.”The news is more encouraging at Absa, where the IT budget for the next financial year shows a single figure increase after three successive years of cuts. The investments, says Du Rand, will be mainly in infrastructure as the banking group “e-prepares” its extensive branch network.“We`ve been through a trough of disillusionment, but organisations must still position themselves for the future,” said Du Rand. “The IBMs and Ciscos of this world are doing huge amounts of business on the Internet, and it would be silly to ignore that. As far as trends go, I expect many CIOs to start looking closely at the so-called ‘composite apps` this year, and you just can`t ignore the growing shift towards open source.”So is the South African CIO king of all he surveys, or is he at the crossroads?It all depends on their approach. They would probably do well to heed a fascinating piece of research by the CSC Foundation, which found that high influence CIOs are much more likely to have a personal and social relationship with the CEO.In other words, the successful CIO doesn`t need an MBA. It`s far more effective to have a deep understanding of technology and be able to communicate its challenges and possibilities effectively at the very top of the organisation. Indeed, some CEOs are upgrading the job of the CIO so as to foster greater co-operation between IT and the business.“CEOs want someone who understands the business challenges and how technology can solve them,” says Medscheme`s Vogel. Take the gapAn intriguing circle of influence emerges: a CIO with a close relationship with the CEO is likely to know about and influence new business initiatives early, which increases the chances of the IT organisation responding effectively. An effective IT response, of course, increases the success rate and, possibly, preserves the close link to the CEO. Ah, the magic of corporate politics.Still, best buddies with the CEO or not, there are some IT experts who feel the CIO is here to stay – if for no other reason that IT is not going to go away. Line managers don`t always have the financial or technical background needed to take over IT decision-making. When the economy turns, you want the CIO to be investing in opportunities – and overseeing IT investments – to assure the best impact for the business.What`s more, it`s worth reiterating that the CIO has a bird`s-eye view of the company that few others do. Regardless of outsourcing trends, many CIOs are in a great position to assert themselves as the key technology strategist liaison between third-party outsourcers and the corporate boardroom.The message to CIOs seems clear. Use your position wisely. Embrace technology, but only to advance the business. Get strategic at the highest levels.In short: if you`re ready to take the opportunities, there has never been a better time to be a CIO. Your carriage awaits, Your Majesty.

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