The document discusses a survey of business executives and CIOs about the changing role of IT. There is a growing gap between board expectations for strategic IT support and CIOs' focus on cost reduction and stability. While boards want innovation, CIOs are dealing with increased outsourcing complexity. To bridge this gap, the survey suggests CIOs focus on setting IT standards, sourcing services, and establishing innovation hubs. It also proposes restructuring IT organizations into smaller embedded units to better support independent business partners and staff.
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Bridging the Growing Gap Between Board Expectations and CIO Capabilities
1. Horizons Survey 2012 – Bridging the
CXO gap
CIO Connect’s annual IT leadership survey highlights a
growing gulf between boardroom expectations and CIO
aspirations
By Roger Camrass
Business executives recognise technology is migrating aggressively from the back to
the front office in almost every organisation. The context for such change is an
explosion in the use of consumer-focused IT, such as cloud computing technologies,
social media tools and mobile devices.
Digital has become a key differentiator in the modern and highly competitive
marketplace, and one of the few levers available for the business to increase revenues.
Business leaders are hungry for new technology-based ideas, and are keen to see the
CIO step up and provide genuine thought leadership.
But CIOs are also experiencing a dramatic shift in the way IT services are sourced from
the vendor community. Sourcing has never been more complex due to the advent of
cloud computing and the rise of a flurry of software as a service specialists. Constant
pressure from the business for further IT efficiencies, and improved service stability,
means the CIO has ever-diminishing bandwidth to support front office transformation.
There appears to be a growing gulf between board expectations for strategic IT support
and the hard-pressed CIO community, who must continue to drive down costs and
2. improve operational efficiency. Such a gulf poses two central questions: how can
modern CIOs cope with an accelerating change of pace in both demand and supply of
IT services; and how does the c-suite community judge IT leadership success?
CIO Connect undertook its annual Horizons survey and polled IT leaders across the
globe to understand their answers to the key questions surrounding the future of the IT
leadership role. For the 2012 survey, CIO Connect worked alongside management
consultancy Blueground Partners to approach board-level executives and CEOs in
twenty leading companies. The aim is to extend conclusions emerging from our survey
with 100 CIOs, and to gain an outside-in view of the IT function.
CIO Connect’s 2012 Horizons research, as will be demonstrated below, shows the time
has come to fundamentally review the role and structure of the IT organisation. The
technology department must make appropriate changes to satisfy key stakeholders
from the board and its associated business executives.
The board’s perspective on IT
CEOs and their c-suite peers recognise the central strategic and operational
significance of IT in the business, but few senior executives have sufficient knowledge
to master the rapidly developing area of digital technology. Executives are eager for
education and guidance from the IT community, but frequently feel let down by current
input.
There is, however, a contradiction. Many senior executives also admit that their number
one priority is an efficient and stable IT platform, rather than a continuous flow of
technology-inspired innovations. The message for many CIOs, therefore, is to stick to
your knitting – the operational day job should remain the IT priority despite calls for
differentiation through IT innovation.
Other CIOs face a more complex arrangement. CEOs in certain sectors, such as
entertainment, finance and information services, recognise that IT is already integral to
the business, and provides the firm’s operating platform and its primary channel to
market. The board has often taken responsibility for all technology-related decisions in
such sectors and relegated the CIO, and the IT organisation, to a purely tactical role.
“We no longer set IT strategy distinct from business strategy, its intrinsic,” said one
member during our research process. Senior executives see stable IT operations as the
overriding priority for the CIO, and feel confident enough to set strategy and direction
without recourse to the traditional IT expert, the CIO. As one CEO of a technology-
enabled business told us: “Half our executive team, and the majority of the management
in the business, are technologists.”
3. Not all companies are the same, however. Several CEOs expressed strong interest in
receiving strategic input from their CIOs and were prepared to spend more time in
dialogue about technology trends. They regard the visionary and educational elements
of the CIO role as increasingly important and are seeking more business leadership in
this critical area.
“I don’t need a CIO as a mechanic doing yesterday’s job, I need a visionary,” said one
senior executive, while another commented: “We baby boomers need some seriously
good IT leadership, to help us understand, navigate and exploit modern IT, especially
when it comes to digital innovation, the impact of social media and the new go-to-
market opportunities. Our problem is we don’t really understand this stuff.”
For the majority of the CEOs interviewed, IT is a service to the business. There is an
expectation the CIO should run the technology organisation as a commercial business,
with appropriate attention to demand-side requirements for new systems and services.
Executives seek a genuine business partner from their IT organisation. However, many
senior leaders also referred to the need for low cost and reliable IT operations, often as
a more important priority than innovation.
Influencing go-to-market strategies
Social media, mobile applications, consumer IT and cloud services are transforming
traditional, outbound marketing techniques and creating an entirely new format that is
fuelled by digital technology. Take the example of one pharmaceutical company, whose
marketing director is planning to substitute thousands of sales people with electronic
channels to market, in an attempt to reduce costs and increase revenues.
The IT organisation, however, is noted by its absence in many of the companies we
spoke to. Marketing executives feel their CIO colleagues have little to offer in the front
office, or take too much time to step up to help with new, digital opportunities. Several of
the interviewed CMOs are purchasing cloud-based services directly from vendors, or
engaging mobile commerce software houses to develop independent solutions.
“Go-to-market is more of a battle ground between the business and IT, rather than a
collaboration,” said one CMO. “IT tends to evolve as a separate shadow organisation, a
cottage industry. IT is too internally focused on enterprise solutions.” Marketing
executives admitted that taking an independent approach, outside the control of IT,
posed serious risks in areas such as security, compliance, regulation and integration.
However, most CMOs also felt they are caught up in a tactical race and have little time
to consider the longer-term, strategic implications of their current actions. “The worst
outcome is that IT doesn’t move with the times, the business then goes and does its
own thing, and we’re left with a mess,” said one CMO.
4. Maximising returns from IT investments
Finance directors, perhaps unsurprisingly, have a very different take on IT priorities from
their marketing colleagues. CFOs often reiterated the expectations and concerns of
their CEOs: IT should maintain an operational focus and the CIO should resist any
opportunity to become distracted by new and costly business innovations. As one CFO
said: “IT departments have enough transformation of their own to do right now in order
to get their own house in order and that’s a big enough ask.”
Two themes dominated our discussions with CFOs. The first was the need to extract
more value from the very large investments made in enterprise resource planning
systems, such as from SAP and Oracle. The second was the increasing challenge of
having to deal with changes in the sourcing of IT services from the external community,
especially in the light of past failures in outsourcing and the current emphasis on cloud.
Many CFOs emphasised how their IT organisations have spent nearly a decade
investing in new ERP systems, with little tangible evidence of financial returns. Take the
CFO of a blue-chip oil company, who explained how more than $10bn had been
invested in a global SAP system at his firm with no proven return on investment. He
believed his IT organisation should now focus on improvements in the supply chain
associated to SAP before moving on to other areas, such as big data or social media.
When it comes to outsourcing, many CFOs readily admitted that traditional contracts
frequently failed to live up to expectations, with up to 70% of deals ending in disputes.
Vendors frequently extol the virtues of partnering at bid stage, but revert to the letter of
the contract post-engagement. In many cases, unforeseen project expenses relating to
day-to-day changes negate potential savings in IT running costs. “Outsourcing has been
a disaster, mainly due to lack of clarity on what we want done,” said one survey
respondent.
Despite such concerns, CEOs and CFOs remain committed to externalising large
chunks of operational IT. Such c-suite executives recognise the demand for new IT
systems and services is accelerating as we enter the digital age. But it is CIOs who
must deal with the everyday reality of creating a cost effective, yet agile, IT platform.
The Horizons survey sheds light on the challenges and opportunities confronting large
IT organisations.
Three quarters of respondents believe the cloud will transform supply-side relationships
within the next 12 to 24 months, and two thirds expect pay-as-you go arrangements to
replace strategic sourcing relationships. An even higher percentage (81%), believe
multi-sourcing will become more popular than single supplier contracts. Such trends
represent a revolution in regards to traditional IT sourcing, which is often based on long-
term and strategic relationships.
The move towards flexibility and multi-sourcing will require a very different sort of
retained IT organisation to handle the associated complexities. “Cloud based services
5. are inevitable,” said one survey respondent. “The challenge we face is how to strike the
right balance between control and liberalisation. Cloud is a huge disruptor to the
traditional IT delivery model.”
Our research shows a number of different factors are conspiring to transform the
supply-side and make the cloud more attractive. Two thirds of respondents see IT
consumerisation as influential, especially in areas such as bring your own device and
the adoption of publicly available software.
The remaining third of c-suite respondents are attracted to the cloud by flexible
commercial terms that substitute capital for operational expenditure, and the ability to
introduce pay-as-you go pricing schemes for the majority of IT services. The attraction
of flexibility reflects the volatility of the modern business environment and the need to
adopt variable costing models.
Focusing on business solutions
CIOs are optimistic that the challenges surrounding outsourcing represent a short-term
issue rather than a long-term preoccupation. CEOs and CFOs also recognise IT
outsourcing is here to stay and will become the primary vehicle for providing IT services
in the future. Attention, then, will shift from an optimisation of current IT spend, through
to smart sourcing and on to a renewed focus on producing timely business solutions.
The large majority (78%) of Horizons survey respondents intend to focus on end-to-end
business solutions during the next five years, preferring to delegate IT operations to
third parties. In the words of one CIO of a utility company: “Today 80% of my staff is
engaged in operations, while only 20% focus on business solutions. In five years time, I
expect entirely the reverse situation, with 80% facing our business partners.”
However, the shift to new business solutions will be problematic given the anticipated
volatility of the business environment during the next five to ten years. Two thirds of
Horizons survey respondents recognise that business requirements for IT services are
becoming harder to predict, and almost 90% believe IT planning horizons need to be
compressed to match shortening business planning cycles. CIOs must also consider the
potential for individuals within an organisation to adopt their own applications and IT
services directly from external parties.
In contrast to the perceptions of some c-suite executives, CIOs believe the IT
department remains the rightful hub for technology-led business innovation. The
Horizons survey indicates that as much as 80% of CIOs regard themselves as the
qualified pathfinders for new applications, tools and techniques. In this respect, the CIO
becomes the enabler for business innovation and the competency centre for new IT-
related techniques.
6. Describing a future role for the CIO
What emerges from the survey work is a complex pattern. C-suite executives continue
to see IT as a traditional service delivery channel, with its main emphasis on cost
reduction and investment optimisation. CIOs also view cost control as priority for the
next 12 months, and recognise the increasing complexity of external sourcing.
But, on the other hand, businesses demand innovative IT solutions and frequently by-
pass the IT organisation as their preferred partner. CIOs believe the by-pass is just a
temporary fix, while they master new sourcing arrangements, and will be removed fully
in the next three to five years. Clearly, then, there is no dampening of CIO aspirations.
The CIO community is keen to expand away from operational roles into the strategic
areas of their parent organisations. When asked what sort of role they would prefer in
the next five years, the following preferences were registered:
Chief information officer (34%), focusing on business solutions and information
management
Business transformation director (31%), responsible for organisational change
and development
Digital business architect (21%), helping the CEO and board to design structures
for the new digital landscape
Enterprise services tsar (14%), focusing on operational excellence across all
back office services, such as procurement and facilities
Bridging the gap between the board and the CIO
Our evidence suggests IT organisations will be busy dealing with strategic sourcing
issues for the next two to three years as cloud and multi-sourcing begin to transform the
vendor landscape. C-suite executives see the resolution of existing sourcing issues as a
top priority for the CIO, and are pressing for a stable, cost efficient and responsive set of
IT services. CFOs, in particular, are keen to see a positive return on recent capital
investments in areas such as ERP, and are unlikely to sanction further substantial IT
spending projects.
At the other end of the management spectrum, business and functional directors, such
as the CMO, are desperate for tactical IT to help respond to the fast evolving markets
where digital technology is transforming every aspect of the front office. CMOs cannot
wait for IT to catch up and are forging their own trail.
Remarkably, the one thing that was absent from every c-suite conversation was any
reference to an IT strategy. The strategy of IT has been consigned to a lost art and little
attempt has been made to communicate the strategic intentions of technology. The
implication of these two diverging points of focus – the c-suite executive eagerly seeking
7. technology-led innovation, and the CIO seeking greater stability within the supply side of
IT services – indicates that there is a clear case for three IT-led imperatives:
1. Strong IT policies to ensure that the myriad of new IT applications and services,
that are being introduced within businesses, work effectively in the future. CIOs
must adopt an IT strategy with teeth; in other words, one sanctioned directly by
the board
2. Smart sourcing of services within the IT organisation to ensure best-in-breed
performance. A strengthening of retained IT skills, and the development of new
capabilities to perform the service integration layer, will be essential. The other
option, here, is to work with a suitable and independent third party, who will help
impose the required standards and disciplines for a digital world
3. IT representation at the boardroom table, to help educate and facilitate
technology driven business innovations. Such representation will require the CIO
to allocate progressively more time to business issues and adopt a genuinely
outside-in view of the IT function, recognising that he or she is running a service
business in its own right
Developing new corporate structure for IT
Despite the many changes in the nature of IT services over the years, the IT
organisation itself has remained relatively intact. The primary components today include
client engagement (through business managers), new service development and service
delivery. In addition, most IT organisations will support a policy section dealing with
enterprise architecture and back office functions, such as human resources and finance.
Given the increasing independence of business partners, and the freedom of individual
members of staff to select their own devices and applications, we suspect that the three
core activities of any future IT organisation will be:
Setting corporate standards to ensure interworking, which will require a powerful
policy unit that could reside at group level
Sourcing and managing IT service delivery, which will require a strong retained
IT unit that is able to purchase and integrate best-in-breed services
Establishing a business innovation hub, which will assist the business as it
evaluates, pilots and integrates new IT services
Such specific activities suggest a move away from a monolithic IT organisation towards
a virtualised activity, with smaller IT units assembled at group, business and functional
levels. For example, each business will have a locally embedded IT function that
consults on new technology options and advises on appropriate tools, techniques and
sources.
The retained IT organisation facing off to the vendor community will exist as a separate
unit, providing service integration skills and processes. The policy unit will sit at group
8. level and work closely with corporate strategy, marketing and finance functions. As with
other functions, we expect 60% to 75% of skills and assets will be sourced from outside
the organisation, leaving a smaller team of highly experienced IT professionals to
manage supply and demand.
Our survey work highlights a widespread dissatisfaction with the results of IT
outsourcing. In many cases, critical skills have been lost to IT, and the CIO’s ability to
source and manage suppliers has come under question. If CIOs are going to succeed at
managing new digital challenges, they must learn the lessons of the past and rebuild
retained IT skills as aggressively as they outsource its delivery.
To find out more about the Horizons research or CIO Connect, please contact:
roger@camrass.com or go to www.rogercamrass.com
The research process behind CIO Connect’s 2012 Horizons survey
CIO Connect polled 2,000 IT leaders for its 2012 Horizons survey and undertook
detailed question and answer surveys with 100 CIOs. Samantha Osman of CIO
Connect managed the survey process. Independent IT experts Roger Camrass and Ben
Shenoy on behalf of CIO Connect interpreted research results.
CIO Connect CEO Nick Kirkland, director Alistair Russell and editor Mark Samuels
undertook further analysis. Richard Bowler and Roderick Roy of management
consultancy Blueground Partners helped provide an additional layer of clarity. CIO
Connect worked alongside Blueground Partners to approach board-level executives and
CEOs in twenty leading companies.
Emerging conclusions were then presented to CIO Connect’s Advisory Board of leading
CIOs in a series of specially-convened scenario planning sessions. Feedback from
these sessions was used to help create the final report.