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.
02 February 2003
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.
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.
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