The CIO transformation challenge

Big changes are brewing on the CIO horizon, as the days of internal IT cost cutting appear to be numbered. There is only so much an enterprise can save through infrastructure efficiency and commodity panel contracts.The next big wave will centre on productivity, innovation, and a renewed focus on business outcomes. Generational change has created a cohort of technology advocates throughout the enterprise, but they are not necessarily advocates of existing IT structures.

The CIO’s challenge will be to engage and lead, rather than be seen as just another blocker. Many are already taking advantage of the opportunities offered by a broader remit, while others are still caught in a downward spiral of technology-based cost-cutting.

It’s time to rethink some long-held beliefs

The winds of change are blowing again for today’s IT leaders. Tech-savvy staff and external customers are creating new opportunities for IT, but there is a growing realization that IT needs to look beyond its role as an administrative support function. Many CIOs are now members of senior executive teams, and CEOs are looking to them to play their part in driving innovation and corporate productivity. For many organisations, this is a hard mould to break. Some CIOs have invested a number of years in defending a technical remit built around equipment, configurations, and coding standards.

Next year will mark the 10th anniversary of a milestone article in Harvard Business Review written by its then editor-at-large, Nicolas Carr. Declaring “IT doesn’t matter,” Carr shone a bright light on prevailing management sentiment. Carr has since written many books, but his original article impacted IT discussion in such a fundamental way that even today it is still being hotly debated. Now, as we move through the second decade of the 21st century, it is time to ask again whether these views are relevant to enterprises.

In 2003, Carr’s article reflected a view that IT’s transformative ability had run its course. IT, he argued, had become a commodity infrastructure similar to utilities such as electricity, railways, roads, and water. IT therefore needed to be managed as a commodity service, rather than as a source of innovation and change.

“When a resource becomes essential for competition but inconsequential for strategy” he said, “the risks it creates become more important than the advantages it provides… With opportunities for gaining a strategic advantage from Information Technology rapidly disappearing, many companies will want to take a hard look at how they invest in IT and manage their systems.”

Carr’s 2003 article made three recommendations about future IT strategy:

  • spend less on IT
  • follow, don’t lead
  • focus on vulnerabilities, not opportunities.

Budget pressures have reinforced savings-based IT strategies

Over the past ten years, changes in the wider world economy have put IT budgets under significant pressure. This has driven an even stronger focus on cutting IT costs through commodity panel contracts, outsourcing, and standardized commodity purchases. In many of these contracts, price has been a big differentiator in assessing value for money, particularly in areas of common IT infrastructure such as PCs, printers, and storage.

Many CIOs may have found comfort in the “follow, don’t lead” principle by pointing to business managers when it comes to accountability for driving innovation, change, and thought leadership. However, IT can no longer get off so lightly.

Generational change is creating new alliances

Generational change is bringing new attitudes to technology. In the past, CEOs may have dismissed technology, remarking, “I am not an IT person” or “I can’t even figure out my phone these days.” Today, many CEOs and senior executives are leading the charge. They’re looking for iPad connectivity and demanding improved mobile access.

Empowered staff are already armed with an array of leading-edge personal technology and are looking for ways to make use of these tools in the workplace. Staff are turning to internal social networks to solve technology problems rather than waiting for helpdesks to assist them. External social networks are opening up new ways to engage with customers. Some companies see social networking as separate from IT, and are pushing leadership responsibility to sales and marketing managers. Others are already integrating social networking into their customer relationship management plans and thinking about new opportunities for social networking as a service delivery channel.

Traditional ideas about IT service management are going to face some disruptive change. Community attitudes are changing fast, particularly in areas such as mobile computing and social networking. This creates new opportunities for IT to deliver innovative solutions to willing users.

In response to changing market forces, the IT function needs to find ways to be more responsive and flexible in delivering technical solutions. An excessive focus on commodity cost containment will only create an internally directed race to the bottom. Traditional methods of bespoke system development tend to force CIOs to wait for specifications and then embark on long, costly, and risky programs of system development. Meanwhile, cloud services and packaged solutions are able to offer viable alternatives based on proven solutions that can be deployed quickly. However, these can be a hard sell to business managers whose service expectations are built upon unique solutions and non-negotiable business requirements.

Tomorrow’s CIO role is promising to be less restrictive and less internally focused, but it will be no less complex. We live in interesting times!

Kevin Noonan is a Research Director in Ovum's Australian government practice. You can read more of his thoughts here.

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