The CIO in Contemporary Business:



The CIO in Contemporary Business:

The Evolving Role of the CIO

Group #1, IS 6800, Spring 2006

Vicky Chuang

Bill Keller

Nathaniel Laroche

Aaron McMurry

Executive Summary

The past couple of decades have brought forth a shift in the treatment of technology by business in general from a development used solely to cut cost and communicate to an integral part of business strategy. This shift has necessitated a corresponding transformation of the head of many IT departments. The term CIO and the job description that follows vary from company to company. Some CIO's are "simply department managers who ensure that all PC's can be turned on and that the processes work"1. However, as more and more businesses rely on technology to be competitive; the role of the CIO itself must evolve into position with an enterprise wide objective of creating and sustaining an advantage over the competition1.

IT department heads should be especially interested in this paper as we will not only tell you where the CIO role has evolved too, but how and why the role evolved. The information is particularly important for CIO's performing managerial tasks that wish to take on a more strategic role within the company. The paper will lay out the foundation required before the CIO can make the leap into a strategic partner of the firm, and then elaborate on the steps that will begin the evolution into a strategic CIO.

The paper is largely based on the case studies presented in the body of the text. The case studies are composed of two interviews. The first interview discussed in the paper was performed by Bill Keller with Bryan Doerr, the Chief Technology Officer for Savvis, Inc. The second interviewee was Greg Anstead, the CIO for Citi Home Equity. These two case studies played a major role in shaping our view of the contemporary CIO and determining what the future held for the CIO. Both interviewees were transitioning, or making an attempt to transition, into a more strategic role as opposed to an entirely operational role.

The paper will focus on how the changes in business that have occurred over the past few decades because of technology necessitated a change in the role of the CIO. The business framework we present in the body of the paper will outline the cause and effect of the technological revolution that has transformed business into the technology intensive industry it is today. Due to the increased importance of technology, it is only natural that the person determining the influence of technology on the business is the CIO1.

The choice of progressing to a strategic CIO or regressing to an operational CIO is not a choice, but an ultimatum. Broadbent and Katzis report in The New CIO Leader: Setting the Agenda and Delivering Results "Standing still is not an option-every CIO will follow one of two paths based on these perspectives." The one who transitions into the strategic CIO will be rewarded with respect and admiration from his/her peers (and perhaps a few extra dollars).

Demographics of the CIO

Some statistics on who the average CIO is and what their perspective roles are is an excellent way to start out the exploration of the CIO. performed a survey from which we will be able to understand the past, current, and potential trends of CIO's in terms of compensation, responsibilities, and other key figures.

The survey is an annual report and is based on an exclusive survey of more than 500 heads of IT departments from across industries. Respondents worked in a broad range of industries, including medical/health care, manufacturing, insurance, finance, education, wholesale/ retail distribution, and government.

In terms of company size, there are three categories: companies with annual revenue less than $100 million are classified as small companies, companies with annual revenue between $ 101 million and $999.9 million are middle size companies, and finally companies that have annual revenue more than $1 billion are considered large companies2.

Not every respondent was a “CIO”

All of the survey respondents were responsible for heading IT departments but there were a variety of titles that went along with this role. In figure1, About half of all respondents had the title “CIO” followed by 33% having the title “Director”, 20% having “Vice-President”, and “CTO” and “other” rounding out the survey2.

Figure 1 Respondents' Titles

Who is the boss?

Knowing to whom the CIO reports can provide some insight into how IT is valued within the organization and how the CIO’s role might be structured in terms of functional verses strategic. In figure2, the number of CIOs who maintain direct reporting relationship with the CEO has actually fallen from 51% of 2002 to 42% in 20063. The percentage of CIO's who report to the CFO has raised slightly to 23% this year. One important note is that CIOs who report to a CFO is especially common in the manufacturing sector, with nearly half reporting to a CFO. This perhaps reflects the functional value of IT in a manufacturing environment when compared to an information-based business. Also, a few CIOs (less than 5%) report to their “Corporate CIO.” It means some of the respondents work for a “SBU” of a corporation, and they might have their own operations mostly. But their heads of IT still need to report to their general CIO of the company3.

Figure 2

The Background of the CIO

One thing that did not change from the 2002 survey to the 2006 survey is the fact that nearly 66% of all CIOs have a mostly IT based background. This is followed by Operations, Consulting, and Finance as demonstrated in figure 3.

Figure 3

A CIO’s tenure

In 2002, 17% of all CIOs expect to stay at their current jobs more than 10 years but that expectation decrease to 9% in

2006.

Figure 4

In figure4, about one-third of all CIOs have actually spent 2-5 years in their current role. In 2006, the average tenure of a CIO was 4 years and 11 months compare to that of the CFO which averaged 2 years and 4 months4.

Why would a CIO leave their current position?

The reason for a CIO leaving his or her current position could be indicative of the challenges that face the position. Table 1 shows a breakdown of why a CIO left their position according to ’s 2006 survey5.

Table 1

|More interesting challenges/ a more challenging |45% |

|work environment | |

|Better financial package |41% |

|Career advancement |33% |

|Disconnects with CEO/other senior executives |19% |

|Unfavorable reporting structure |9% |

|Other |10% |

Earning the big bucks?

In 2002 the components of a CIO's compensation included: 81% from base salary, 14% from bonus, and 5 % from stock options. On average compensation depended up on the reporting structure. For an example a CIO who report to a COO typically earns more than other hierarchical structures. When looking at industries CIOs who work in insurance, real estate and legal services typically earn the largest salaries of all industries with an average of $255,975. CIOs who work for the government earn around $111,455 per year. It is also interesting note that while the average inflation rate since 2002 is 5%, CIO compensation has only risen 2%6.

Table 2 – Average salary by industry in 2006

|Insurance/real estate/legal |$255,975 |

|Computer related (manufacturer, distributor, |$228,338 |

|services, VAR) | |

|Manufacturing/process industries |$213,280 |

|(noncomputer-related) | |

|Business services/consulting |$188,587 |

|(noncomputer-related) | |

|Finance/banking/accounting |$174,576 |

|Medical/dental/healthcare |$160,116 |

|Education |$145,384 |

Figure 5 – Average Salary in 2002

In figure 5, it shows the average compensation on 2002. Insurance/Real estate/Legal services are the industries that a CIO earns most money. The following are Computer related, Manufacturing process, Consulting, Finance/Accounting, and so on. The CIOs who work for the government (include the local, states, and federal) receive less money than any others.

Figure 6 – Average Salary in 2004

In figure6, the CIOs who work for Wholesale/Retail/Distribution become the CIOs who earn the most money.

Figure 7 – Average compensation in 2006 by company size

In figure7, the category of three sizes companies also followed the rule that we mention at the beginning. Obviously, CIOs in large size companies can earn much more than in midsize and small size companies.

How CIOs spend their time

How a CIO spends his or her time provides a glimpse into not only what they do but the desire of the business for a CIO to strike a balance between operational and strategic in their thinking and activities. Figure 8 shows how the survey’s respondents spent their time in 2006.

Figure 8

Case Studies

Inside the Roles of 2 CIOs

With the statistics of the tables and graphs above as the foundation of our research, we then took this knowledge to two interviews of CIOs in two medium to large companies, Savvis Communications and Citigroup’s Citi Home Equity division. The goal was to further our knowledge of the role of the CIO but the results opened a whole new frame of reference for us.

Savvis

Technology Focus? Yes.

Operational or Strategic Focus? Yes?

“Figuring out how long you can freeze something to fix it is a challenging problem”, says Savvis, Inc.’s Chief Technology / Chief Information Officer Bryan Doerr in describing the conflicting needs of creating a new system architecture while still committing resources to the existing system7. The balance between creating operational efficiency and strategic progress is not only a challenge for this global IT utility services provider, but for its CIO.

The evolution of the Chief Information Officers has included a shift from a primarily operational focus to a mix of operational and strategic focus. This is evident at Savvis whose core competency is providing secure IP networks and hosting applications for its more than 5000 enterprise clients8. Savvis was created in 1995 in St. Louis, MO and now employees more than 2000 employees who service clients worldwide. The company was developed in an environment of technology creativity and has relied on systems engineering expertise and acquisitions to grow its annual revenues to over $650mil.

The Executive Team at Savvis is led by Philip Koen (Chief Executive Officer). Reporting to Mr. Koen is Jeffrey Von Deylen (Chief Financial Officer), John Finlayson (Chief Operating Officer) and Bryan Doerr (Chief Technology / Information Officer). Mr. Doerr accepted the role of CTO/CIO as Savvis in October 2003 as part of a distinguished career in MIS and software/hardware development at Bridge Information Systems (acquired by Reuters), Boeing, and Applied Physics Laboratory8. Mr. Doerr holds Masters Degrees in Electrical Engineering from Johns Hopkins University and Information Management from Washington University8. On March 29, 2006 Mr. Doerr spent some time with Bill Keller discussing the role of the CIO at Savvis and how he must juggle both operational and strategic responsibilities. The following section summarizes the interview.

Who’s The Boss?

While it was popular to have the CIO report to the CFO during severe cost cutting years in the early 2000’s, CIOs are increasingly reporting to CEO’s and sitting on executive management committee’s rather than reporting to the CFO or COO. Mr. Doerr is part of a Tier 1 Executive Management Team that includes the roles of CEO, CFO, COO, and several VP or GM roles responsible for sales, human resources, legal representation, operations, customer management, product management, and regional oversight. The group of more than ten people all have equal access to the CEO and the ability to influence the management of the company. This group represents the highly centralized structure at Savvis. The CEO position at Savvis has historically been heavily involved in the technology driven part of the business, and as such, has relied upon the CIO.

The role of CIO is recognized as a necessary and important partnership among the management team. This view is becoming more common in all industries as managers realize “Issues can no longer be ‘tossed over the wall to IT’, and have IT just operate in a vacuum. IT really has to communicate and partner effectively with other parts of the organization to achieve results9.” However, in a relatively large group of Tier 1 managers, Mr. Doerr must appropriately balance the technological agenda with that of other key business stakeholders. The size of the Tier 1 Executive Management Team, and the multiple functions represented therein, ensure that the role of the CIO at Savvis maintains a split focus on both operational and strategic information management.

CIO Needs Bi-Focals

Mr. Doerr recognizes the split focus required at Savvis. He estimates that 35% of his energy is focused on operational responsibilities and 65% of his energy is focused on strategic responsibilities. The business is the main driver of Mr. Doerr’s focus. Savvis is a business that is now maturing and working on integrating other businesses. Therefore, the drive for strategic improvement must be balanced with the reality of creating operational efficiency and scaling routine processes. In fact, Mr. Doerr estimates that 35%-40% of how his success is evaluated is based on how well critical systems are available (normal IT development and care and maintenance).

A shared operational and strategic focus is also seen in the CIO’s major initiatives for 2006. Mr. Doerr’s top three priorities are:

1. Continued Integration of Systems – internal facing integration largely due to acquisitions.

2. Improve systems to satisfy legislative requirements – Sarbanes Oxley

3. Business Process Efficiency – external facing automation to help users improve their business metrics.

Priority 1 is operational focused, and is common among any medium or large sized company. Priority 2 involves delivering operational improvement, but is an outward facing responsibility. CIOs now have to be involved in more external facing challenges, not just making sure systems are available to back office users. Priority 3 is completely strategic focused as it deals with the growth of the core business.

CIO – Techie, MBA, or Both

Since the core business of Savvis is technology based and focused, it is not surprising the CIO must have a mind for strategy. However, there has also been a shift over the years in the perception of what skills a CIO requires. The CIO role now encompasses what used to be the CTO role (more operationally focused) with more strategic and business focused responsibilities. “To be accepted as a member of the executive team, the CIO must be a full-spectrum contributor to the development and management of business strategies and directions rather than a niche player in the limited band of IT10.” It is commonly viewed that the modern CIO’s resume should also include a background in finance, marketing, and strategy11. However, both technology experts and business people can succeed in the role of CIO. In fact some research indicates that “CIOs with highly technical backgrounds and CIOs with greater general management experience did not differ in the behaviors they tend to use to influence colleagues12.”

How does the mix of technical, business, and people skills work for the CIO at Savvis? When asked to rank the importance (most important to least important) of these skills to his success as CIO, Mr. Doerr ordered them as follows:

1. People

2. Technology

3. Business

The relatively large and diverse Tier 1 management structure makes people skills critical to the success of the CIO at Savvis. Technology is the backbone of the company, and Mr. Doerr asserts, “If I don’t have the vision of what the [technology] structure will be, I can’t lead people7.” There is no question business skills are important to execute on issues such as Sarbanes Oxley and to developed partnered strategies with the management team. However, the success of the CIO role still has its roots in the management of technology.

Mr. Doerr’s focus on people skills to succeed reflects his recognition that people are critical to success. Savvis has had success in automating and managing processes by devoting people to the lifecycle of project initiatives. The business changes so quickly, that it is only through dedicated resources that these projects could be completed successfully. Mr. Doerr also warns, the “user community must want it [technology solution], and if they can’t draw the process don’t even start it.” The CIO’s focus on people for input and execution can avoid major pitfalls for the organization.

Who’s Next?

What is the future for the role of the CIO? Mr. Doerr thinks people with keen IT awareness will continue to be promoted to CIO, and that business skills alone will not overshadow the need for a technical leader. He also believes the CEO must set a tone of partnership with the CIO for the role to be successful. Finally, Mr. Doerr recognizes the importance of helping other managers understand IT and its importance to the success of Savvis; although they are not likely to go as far as GE who merged e-business and traditional IT and set up a program for “e-mentoring”, pairing technology-savvy managers with experienced top managers to help educate senior managers about technology13.

Bryan Doerr has managed to balance the roles of CTO and CIO, operations and strategy in a maturing technology company with one eye on internal improvements and one eye on external opportunities. His technology focus made for a natural fit with the executive leadership of Savvis in the past who were the pioneers of the Savvis systems. Will the arrival of their new CEO facilitate the same partnership or create more of a consultative relationship? That remains to be seen. Regardless, there is no question, however, that the role of CIO will continue to be a critical need to the success of Savvis.

The role of the CIO at Savvis may be facing changes due to a new CEO, but Citi Home Equity is facing some significant changes that will affect their CIO as well.

Citi Home Equity14

Citi Home Equity (CHE) is a strategic business unit (SBU) of Citigroup. Figure 9 shows how the SBU fits into Citigroup’s overall corporate structure. If you were to rank CHE in the Fortune 1000 by net income it would come in number 330 with $277 million. What compounds this fact is that this number was achieved in six short years as the SBU was founded in 2000. This explosive growth, which we’ll find has had in impact on the CIO’s role, is further demonstrated with figure 10.

Figure 9

[pic]

Figure 10

5 Key Questions with a CIO in a Fast Growing Company

First a little back ground on the CIO of Citi Home Equity, Greg Anstead. Greg has an Associate’s degree in Computer Science, a Bachelors of Sciences in Computer Science, a Bachelors of Science in Management, and a Masters in Management. He has been CIO of CHE for 15 months and prior to this latest position he was CTO of a development group within Citi for two years with an organization of nearly 400 people.

The Role of the CIO?

When asked how he defines his role of CIO within CHE Greg said it was “To provide technology solutions for the business so it might be competitive, reduce cost, and increase innovation.” This response is very strategic in its nature and indicative of the type of CIO Greg strives to be. While he may strive to be strategic the reality of the explosive growth that CHE is experiencing has made him devote much of this time, about 80% as he noted, to fighting fires. This means that the growth demands that projects be delivered quickly which in turn can provide some degree of turmoil. This 80% functional aspect is not inline with Greg’s view of the CIO role, which he noted should be 80% strategic and 20% function. This is eventually where he wants his role to be.

It’s All About the Priorities

Greg’s top three priorities for 2006 are generally not specifically technology related in nature, this once again is indicative of more of a strategic role. His first priority is to help change the business’s paradigm from originating loans for portfolio to originating loans for sale on the secondary market. This shift is a decision of the CEO and is the number one priority for all C level officers. What does this mean for the CIO? It means helping to keep that message in all projects started or completed in 2006 and providing priority to those projects which might involve this paradigm shift.

His second priority was to get CHE onto common platforms. This priority is technological in nature and stems from the organic growth that CHE has experienced over the last six years. During this time the company has had to grow quickly and dynamically and often at the cost of implementing numerous stopgap measures. The goal now is to go back and clean all of these systems and processes to make them more robust.

Greg’s top priority for 2006 is compliance as the CEO’s mantra is “controlled growth”. Growth in itself is worthless to Citigroup as a corporation as it has been under intense scrutiny from regulators in the wake of the business scandals that rocked the corporate world starting with the fall of Enron and the implementation of Sarbanes-Oxley. This ideal of compliance will come around again later in the paper as we explorer the role of the CIO.

Sleepless Nights

When asked what keeps him up at night besides noting jokingly that his Blackberry never seems to stop he did note that his number one issues is compliance. While also one of his priorities for 2006 when asked this question Greg noted, “as big as we [Citigroup] are one bad audit can shut this business down.” That is Citigroup is under extra scrutiny in terms of security and compliance two overarching themes when it comes to the role of the CIO.

Business Skills vs. People Skills vs. Technical Skills

When asked to rate business skills, people skills, and technical skills in terms of importance to his role he noted that first are the people skills, second are the technical skills, and finally are the business skills. Greg noted that all managers require people skills and if one is to lead that leader is only as good as the people surrounding them. He noted technical skills are key to the CIO’s role as the expertise and training in the technology pays in dividends. His experience has showed him that those technology managers who do not have the technical background are not as effective in leading their teams. In terms of business his feeling is that the business can always be learned but the ability to work with people and technical knowledge are always harder to come by.

Evaluation Time

Perhaps the most insightful part of the interview outside of the compliance and security focus that he has is the way Greg is evaluated by the CEO. As a report to the CEO he is graded in three areas 1) functionally, 2) strategically, and 3), perhaps the most surprising, politically.

By functionally and strategically he means by what he does in terms of accomplishing projects and fighting fires and what he does in terms of looking ahead. Functionally is just that, how does he get things accomplished and a very basic level. When graded in terms of strategically the CEO is looking for the ideas, time and money savers that he bringing to the table to move the SBU forward.

It is politically that Greg noted is by far mostly where he is graded. In the deep organization that is Citigroup how well he handles his C-level peers and those managers that the SBU’s CEO reports to is key to how well he is graded. His ability to communicate effectively and manage expectations is high on his evaluation.

The Role in 10 Years…

When asked about the future role of the CIO Greg first framed the current role of the CIO as one that is centralized, reporting to the CEO, and is mostly technology oriented, implementing technology that enables the business. But in the not too distant future he sees the role as splitting into two. The first role will the a technology oriented CIO that is focused on the hardcore technology and it’s implementation. The second role will be a business oriented CIO that well be a liaison between the business’s CEO and the technology CIO. This definition of the role is actually foreshadowed a huge announcement that followed in the days after interviewing Greg.

Out with the Old and in with the New

Not long after interviewing Greg Anstead a reorganization of Citigroup’s technology teams started. Under the current structure, each SBU, as defined in figure 9, had its own CIO that reported to the SBU’s CEO. But this did not generate the economies of scale that corporate Citigroup thought it could leverage.

Under the new structure there will be still be CIOs in each SBU reporting directly to the CEO but that same CIO will then have a dotted lined to a corporate CIO who will be more technology focused. This is demonstrated in figure 10.

Figure 11

[pic]

The goals of this reorganization include:

1. Better using of human and capital resources.

2. Better compliance and security.

3. Improved consistency in the technology.

4. Present once face to customer

Of course this organization has some potentially negative implications as well with the biggest drawback being the matrix structure. There is some question as to whether the SBU CIO will be able to maintain that delicate balance between the SBU CEO’s demands and the Corporate CIO’s struggle of reigning in cost.

The interviews with CIOs from Savvis and Citi Home Equity provides an interesting look at the CIO of today; how a mix of operational and strategic responsibilities must be balanced and meet the state of the business. This balance and the need for strong leadership in the CIO role is a result of the growth of technology in the late 20th century and the realization that IT cannot add value in a vacuum. The following framework provides an interesting view of how the role of CIO evolved and what it means for CIOs today.

Role of the CIO - Original Framework

Tactician to Corporate Strategist (and Back)

The role of the CIO has evolved from a more operational/tactical role of a CTO to a more strategic role within many organizations. The CTO role was born out of necessity and the development of technology. The CIO role carried technology management forward into a key stakeholder in the success of the business. The new CIO role is a hybrid of operational thinking and strategic thinking, of internal focus and external focus. Our interviews with the CIOs of Savvis and Citi Home Equity support this evolution and the framework below.

Demands ‘By’ the Business

In a traditional ‘silo’ type of organization, tasks are performed within a functional area. For example, within Operations will be tasks and processes around manufacturing, sales, customer service, supplier management, human resources, etc. Each of these groups within operations has varying levels of interaction with each other and hand-off of information. As technology began evolving in the 1970’s and 1980’s, some businesses realized that routine, repeatable tasks could be automated using technology. Technology focused departments or groups were developed to keep companies up to date with technology that improved tasks and information flow. The business, in this case the operations group, could place a request or demand on the Information Technology (IT) group to automate processes. For example, an inventory database could be created to better manage manufacturing demand and its affect on supplier orders. IT was demanded by the business to improve specific functions (Figure 11).

Figure 11

[pic]

As IT proved itself useful to automating specific functions, many higher level thinkers demanded that IT enable automating or improvement of information flow between functional groups. For example, the Customer Service group in Operations may want to have visibility to customer information that is only available to the Billing group or Accounts Receivable group in Finance. Customer Service believed it could better answer questions from customers and the Sales group if they knew the status of customer accounts. This would allow more customer impacting groups to have customer information. Not only would productivity improve, but service to customers would improve. IT met the demand by developing or implementing systems, in some cases enterprise systems, to meet inter-functional demands (Figure 12).

Figure 12

[pic]

As IT built credibility with operational and efficiency improvements, the IT discipline moved closer to the business. Many organizations realized IT enabled internal improvements already (or could) improved some external facing processes. For example, creating a new inventory system could not only cut cost, but could reduce lead times for products due to better inventory replenishment modeling. The sharing of customer information could allow the customer service group to reduce errors and prevent customer orders from being held for credit approval incorrectly or delayed due to actionable issues. It became clear that IT should not only meet demands ‘by’ the business, but demands ‘on’ the business as a whole.

Demands ‘On’ the Business

Today, IT is being used to meet demands on the business. External forces pull on an organization placing demands on its resources. These external forces include the organizations industry, new technology, customers, and regulatory bodies. To stay competitive, companies must meet or exceed the demands placed on them from these forces. Industries demand innovative or more cost effective ways of production or providing a service. New technologies demand integration of systems/capabilities and vertical alignment/integration in the supply chain. Customers demand more responsive service, quicker delivery, and a secure environment. Regulatory bodies like Stock Exchanges and governments require information about the company to meet legislative or other conditions like Sarbanes Oxley.

With IT not only becoming part of the business, but also a necessary lens through which the company must think strategically, the role of CTO has transformed into the Chief Information Officer (Figure 13). The CIO must understand operations, finance, and technology. The CIO should be able to leverage technology to develop the capabilities of the organization and look for strategic ways to build the business. In many organizations, a CTO role still exists and can manage the more operational aspects of IT within the company. However, firms differ widely on how these roles interact. What seems universal, however, is that technology is capable of adding value to organizations, and it warrants dedicated oversight to seize opportunities whether they lie inside or outside the company walls.

Figure 14

[pic]

How Valuable is the CIO?

With the CIO at the intersection of the key parts of the business, he/she will be able to do what is most critical to the organization – add value. It is only through adding value that the CIO will have long-term success.

One of the key factors influencing the CIO’s ability to add value is taking advantage of his/her position in the organization (center of our framework) to build relationships with other executives to set business strategy. Rather than pushing IT projects or investments independently to attempt to grab value, “the most successful approach [of adding value]…is where there are no IT strategies, only business strategies. Here, the CIO adds value by building informed relationships with key executives, making sure that IT requirements become an integral component of business strategy15”. Successful CIOs will add value by doing the following15:

Figure 15

[pic]

While adding value is the ultimate goal of the CIO, this is much easier said than done. Throughout the evolution of the role, CIOs have faced many challenges and concerns. Some concerns have changed over time and some have not.

CIO Top Ten Issues

How Things Change –

How They Stay the Same

CIO’s face, and have faced, many different issues to successfully perform their role. They are responsible for the most mundane to exciting new technological opportunities. Regardless, there is significant pressure on the CIO to execute both operationally and strategically. Earlier in the evolution of the CIO, companies relied upon these officers more for operational expertise ensuring existing systems were reliable and internal efficiency was achieved. The current CIO is responsible for operational expertise, but also for more value-added, external facing initiatives.

In 1986, 120 CIOs and IT Executives were asked to rank their top ten important issues (Figure 16) 15. From the list, you will notice a dominance of more operationally focused issues including managing end-user computing, educating users, improving efficiency, and managing resources. However, even CIOs in the 1980’s recognized that IT involvement in some strategic initiatives would prove important to their organizations.

In 2005, 205 CIOs and IT Executives were asked to rank their top ten important issues (Figure 17) 16. While the list contains both operational and strategic focused issues, the strategic issues are noticeably externally facing and reflect a growing reliance on IT for areas such as e-business and e-government. Also evident is the direct mention of revenue and business growth showing a direct link to the bottom line and the enterprise as a whole. Finally, noting shareholder pressure in item 6 shows a new awareness of the role of CIO and the accountability of that role at the most senior and strategic levels.

While CIOs continue to face both operational and strategic issues, it is clear that current CIOs have a more broad awareness of the business and pressures on the business. It is no longer enough for CIOs to gain efficiency in the organization and integrate new technology. CIOs must now look to change the organization’s focus as needed to improve the overall business considering all factors, both internal and external.

One issue that ranked on both lists, emphasizing its importance, is data and security. Data and security are critical to businesses especially with the proliferation of the Internet and integrated networks and is highlighted by this quote from “The Sarbox Conspiracy” by Christopher Koch, “When CIOs began installing ERP systems in the ‘80s and ‘90s, they unwittingly took something that used to belong to the CFOs: financial controls.”17 Information systems made the gathering and reporting of data more efficient and easier but it also but a great burden on CIOs. The public wants data to be safe, accurate, and accountable in the wake of corporate accounting scandals. Legal requirements like the Sarbanes- Oxley Act have only intensified this need and highlighted the CIOs role. Therefore, fiscal compliance and data transparency have come into focus.

Figure 16

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Figure 17

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Evolution of the CIO Role

Transition from Manager to Leader

The increasing emphasis on utilizing IT as a strategic partner causes a proportionate emphasis on the development of the CIO as a leader. A managing CIO only worries about execution and control employing such capabilities as planning, organization and analysis. The evolved CIO will focus on passion, strategy and inspiration. The transition into a leader requires far more than inspiration and passion. The foundation of strong leader is composed of credibility, business knowledge (micro and macro) and vision.

Building Credibility and Communicating Results

As a CIO, you will enter the position with initial credibility, because the firm believes you can succeed in a very difficult position (otherwise it would not have hired you). It is up to you to successfully build upon this initial credibility. The process of building a strong reputation within the company, although not easy, is based on a single idea: delivering results that matter to fellow executives19. As a CIO, if you complete projects that do not matter to the CEO and CFO, it is very possible the results will go unnoticed. It is crucial to plan and complete projects centered on creating success for other senior executives (See Figure 17).

The next step in solidifying a place in the executive board meetings is to effectively communicate your goals and successes. Unfortunately, some CIO's do not like to play "politics" in the corporate world, but the evolved CIO must acknowledge the critical role communication plays in the role of the CIO. In The New CIO Leader: Setting the Agenda and Delivering Results by Broadbent and Katzis, the authors report, "The higher the CIO's rise in an organization, the more time they spend on communicating their vision to fellow executives," and "the research clearly shows that the more CIO's communicate their vision, the more effective they are at getting buy-in and endorsement from the executive leadership team." Some CIO's spend more than twenty percent of their day enlightening colleagues on their vision for technology in the firm19.

It is important to note that in order to create a strong reputation a CIO must build on these daily communications and use them to gain "political capital." The CIO must identify key stakeholders within the firm and gain their confidence. Opponents to the plan must either be converted or mitigated in order to minimize their influence. Advocates must be strengthened and put in a position where their opinions can be heard. A careful and thorough analysis of all influential stakeholders is necessary. Stakeholders must be identified by urgency (immediacy of claim), power and legitimacy (right to make a claim) 19. A successful CIO will dissect stakeholders by all three of these categories to gain an understanding of their influence on the firm.

Know Your Enterprise

For our purposes, business knowledge will refer to knowledge about the CIO's own particular firm and not business intelligence or business savvy in the general sense.

FIGURE 17

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The evolved CIO will have to dig deep within the organization to understand the firm's "basic economic model, the strategic intent of the firm, and the strategic endeavors of the firm and its individual business units"19. Without a deep understanding of the firm, it will be difficult to take the next step of outlining a vision for the IT department and the business as a whole. The CIO must have an enterprise wide view of the firm's overall strategy to create a complimentary vision for the IT department that adheres to the firm's business objectives and goals.

Position of the Firm: Lagging, Maintaining or Leading

A crucial step in determining the firm's position is analyzing the firm's competitive environment, as this will affect the CIO's role within the company. Three main categories of firms have been identified: lagging, maintaining and leading19. A lagging firm is characterized by "cancellation of new initiatives, multiple layoffs and a continuing search for ways to further reduce business and IT costs"19. The CIO of a lagging firm should focus on completing current projects and searching for ways IT can cut cost. Firms that simply “maintain” are heavily influenced by the economic environment, i.e. if the economy is booming so is the firm, and leading firms are characterized by aggressive approach to competitors and pushing ahead of the competition. The macroeconomic environment largely dictates a “maintaining” firm’s initiatives and goals. In times of economic boom, the firm will push forward with objectives that increase its edge over the competition and vice versa during a recession19. This particular business environment forces the CIO to pay attention to economic indicators that will allow for prognostication on the CIO's part. During employment with a leading firm, a CIO will have the opportunity to show his/her true ability to develop a vision and craft the tactics and strategies that will lead the company towards success.

Develop Business Maxims

Once the CIO has a solid understanding of the firm's position, business model and strategic intent and endeavors; the next step is to work with fellow executives to develop business maxims that state in a complete and concise manner what is important to the firm19. The formulation of business maxims are the first step in transforming an enterprise wide knowledge of the business into IT maxims that will serve as a metric for IT initiatives19. During this process, the CIO may find by developing clearly defined business maxims, the process not only helps the IT department, but the entire enterprise. Additionally, IT maxims developed from business maxims serve as the precursor to a vision consistent with the firm's business model and strategies.

Developing a Vision that Aligns Business and IT

Now that the CIO is armed with well-defined IT maxims grounded in predefined business maxims, it is time to move forward and design a vision that aligns with the new IT initiatives. Implementing a new vision for the IT department, and for the overall business, will require a strong base of political capital and the ability to communicate and inspire key stakeholders. Perhaps the most exciting phenomena within the technology industry are the new gadgets that pop up almost daily. It is imperative this vision incorporate a system to capture and exploit emerging technologies. A strong CIO will formulate and structure a vision that allows for the selective introduction of these new technologies.

Avoid Technological Hype

The technology boom and subsequent bust ushered in a new age of maturity and skepticism with respect to emerging technologies. IT is no longer believed to be an "unbridled source of competitive advantage" as was once thought before the bubble popped18. The CIO must be finicky in the selection of a new technology and demonstrate its relevance to the business prior to adoption. Prior to or during the adoption phase, it is critical to weave these new gadgets into the business once their usefulness is justified.

Figure 18

The Gartner Hype Cycle for Emerging Technologies19

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Figure 18 demonstrates the typical life cycle of an emerging technology. It spans from the introduction of the technology to the "plateau of productivity"19. It is important to note that at the end of the cycle the technology is deemed useful and very practical from a business perspective, although it is not a revolutionary product. The bottom line is the CIO cannot focus on the technology itself, but must develop an approach that centers the attention on the relevance and value to the enterprise19. An ideal way to test the future success of a "new gadget" is through pilot programs and implementing mandatory testing phases.

Final Thoughts and Conclusions

The role of the CIO in contemporary business is at a crossroads due to the increasing reliance on technology as a source of competitive edge. This increasing reliance has made the CIO a center of the modern organization, in many cases making all other c-level officers rely on him or her for access to key information. This is a natural evolution: as the importance of technology grows within business, so must the role of the ones managing it. The future holds a position for a strategic partner, one that requires vision and leadership with an ability to communicate to both internal and external stakeholders. Those CIOs unwilling to change will find themselves at the head of an IT department in a marginalized and operational role instead of occupying an office that sits at the executive table with an input on the strategic vision and direction of the organization.

Bibliography

1. Earl, Elton, et. al, “Are CIO’s Obsolete?” Harvard Business Review, R00212, pgs. 18

2.

3. Levinson, M., CIO and CEO: How to Work with Your Boss¨, CIO Magazine, Oct 1, 2004.

4. Marjamaa, L: CFOs struggle with high turnover rates in the wake of Sarbanes-Oxley, AFP Exchange, Mar/Apr 2005, p22, 2p

5.

6. Nash, Kim S. : It pays to be a CIO , Baseline, Jun2003 Issue 19,p16, 2p, 1 chart

7. Bryan Doerr, CIO of Savvis, interviewed in person by Bill Keller, March 29, 2006.

8.

9. Hagland, Mark., "The Many Hats of a CIO" Healthcare Informatics, May 2000, pg. 3.

10. Zastrocky, Michael., and Schlier, Frank., "The Higher Education CIO in the 21st Century" Educause Quarterly, November 1, 2000, pp. 53, 59.

11.

12. Kwak, Mary., "Technical Skills, People Skills: It’s Not Either/Or" Sloan Management Review, Vol. 42, 3, 2001, pg. 7.

13. Byrnes, Jonathan., "New CIO Role: Change Warrior" Harvard Business School, special to , June 14, 2005, pg. 3.

14. Greg Anstead, CIO of Citi Home Equity, interviewed in person by Nathaniel Laroche, March 27, 2006.

15. Earl, M., and Feeny, D., "Is Your CIO Adding Value" Sloan Management Review, Vol. 35, 3, 1994, pp. 13-14.

16. Passino, Jacque H., Jr., and Severance, Dennis G., “The Changing Role of the Chief Information Officer” Planning Review, Vol. 16, 5, Sep/Oct 1988, pp. 38-42.

17. Koch, Christopher, “The Sarbox Consipiracy” viewed 3/8/2006.

18. Guptill, Bruce, and Koenig, Mark, “CIOs Budget for Business” Optimize, Vol. 4, 5, May 2005, pp. 77-80.

19. Broadbent, Marianne, and Kitzis, Ellen, The New CIO Leader, Harvard Business School Press, Boston, MA, 2005.

20. Morgan, Nick and Loren Gary, “Should You Fire Your CIO?” Harvard Management Update, July 2002, pgs. 1-4.

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Demands ‘By’ the Business

Operations

HR

Sales

Manufacturing

Service Delivery

Customer Service

Finance

Billing

A/R

A/P

Budgeting

External Reporting

Supplier MGT

Technology

Demands ‘By’ the Business

Finance

Billing

A/R

A/P

Budgeting

External Reporting

HR

Operations

Sales

Manufacturing

Service Delivery

Customer Service

Supplier MGT

Technology

Role of CIO with External and Internal Demands

Technology

Finance

Operations

CIO

Demands on Business:

* Customers (speed, reliability, accuracy, security)

* Supply Chain

Demands on Business:

* Customers (accessibility, integration)

* B2B

Demands on Business:

* Shareholders (reporting, planning)

* Regulatory (reporting and compliance)

* Financial Markets (reporting and compliance)

COO

CTO

CFO

The Added Value of the CIO

1. Obsessive and continuous focus on business imperatives.

2. Interpretation of external IT success stories.

3. Establishment and maintenance of IS executive relationships.

4. Establishment and communication of IS performance record.

5. Concentration of the IS development effort.

6. Achievement of a shared and challenging vision of the role of IT.

(Earl & Feeny, 1994)

The changing role of the CIO

1986 ranking of top 10 issues16

1. *Facilitating/managing end-user computing

2. Translating information technology into competitive advantage

3. Having top management understand needs and perspective of IS

4. *Measuring and improving effectiveness/productivity

5. *Keeping current with changes in technology

6. *Managing information resources

7. *Integration of IS technologies

8. *Data security and control

9. Impact of new technology

10. *Training and education

*More of an operational focus

Passino, Jacque H., Jr., and Severance, Dennis G., “The Changing Role of the Chief Information Officer” Planning Review, Vol. 16, 5, Sep/Oct 1988, pp. 38-42.

The changing role of the CIO

2005 ranking of top 10 issues*18

1. Cost containment

2. Data security and integrity

3. Fiscal compliance and data transparency

4. *Revenue and business growth

5. *Innovation of products and services

6. *Stakeholder pressure

7. Risk Management

8. Customer data integration

9. *E-business/E-government

10. Privacy

*Major strategic initiatives 20 years later

Guptill, Bruce, and Koenig, Mark, “CIOs Budget for Business” Optimize, Vol. 4, 5, May 2005, pp. 77-80.

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