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.
02 July 2003
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.
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.
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