Major Products of the company sells:

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IMPROVING CIO IMAGE IN THE NEW ECONOMY:

THE ROLE OF THE CIO

Group #1, IS 6800, Fall 2005

Farwah Gardezi

Debbie Jaeger

Yakun Liu

Ray Phariss

Executive Summary

The term CIO was first used in information technology (IT) 26 years ago by William Synott, a senior vice-president of the First National Bank of Boston, at the 1980 Information Management Exposition and Conference. He stated that the CIO was no longer equal in rank to the Chief Executive Officer (CEO) or Chief Financial Officer (CFO), but that the CIO would be responsible for obtaining and analyzing information, set corporate policy, and affect all office technological systems (Alter 65).

Many years later, the role of the CIO becomes an extremely important topic to managers. A CIO’s responsibilities have evolved from being solely in charge of data processing for all information services of an organization to a position that also completely understands a company’s strategy and business plans. The position of the CIO has become one of the most challenging and active leadership roles in business.

In many American companies and institutions today, a CIO must be a manager first, then a technician. He or she should be more interested in what works (managerial role) than how it works (technician’s role). In fact, some companies formally separate the technical role by creating a Chief Technology Officer (CTO) position to clarify the responsibilities. The CIO may know technology, but he must also know how to manage in order to add value to his company and get the most from his IT staff. Indeed, as the size of many companies’ IT departments grows in order to keep up with emerging requirements driven by new technologies and complex information systems, CIOs who become too focused on specific technologies may find that they are unable to provide the effective leadership that their highly skilled employees require. Further, they may also risk losing the respect of the company’s business leaders because of a failure to maintain the proper focus on business needs driving technology investments rather than the opposite. Brian Hawkins, president of EDUCAUSE, states, “The CIO’s role is not to focus attention on the technology, but to emphasize the opportunities that are possible through the effective use of technology” (Hawkins 102). To be most effective, CIOs must continually function with just the right balance of technical proficiency and adherence to sound business principles.

This paper will discuss the role of the Chief Information Officer (CIO) based on both research and case studies developed from personal interviews with the CIOs of three diverse organizations: Smurfit-Stone Container Corporation, FACRI (a Chinese company specializing in flight control and navigation systems), and the University of Missouri – St. Louis (UMSL). Two of these sources were suggested by our professor and the other (FACRI) was chosen based on the existence of a personal relationship that made the interview possible, and also because we believed it would add a relevant and unique perspective to our analysis.

We will explore the demographics of the typical CIO, identify similarities in the challenges they face, compare their goals and functions within their respective organizations, and examine their educational and professional backgrounds.

Finally, we will present our conclusions about the continuously evolving roles that CIOs are performing, along with some possible explanations for this trend and for the differences among the three CIOs in our case studies.

WHAT IS A CIO?

According to Patricia Brown, “Strategic CIOs have focused on keeping their company economically solvent by using technology to enable more efficient business operations that cut costs without compromising performance” (Brown 29). In other words, they emphasize bottom-line results and strive to maximize profit margins by helping the company to work smarter, not harder. By making business processes more efficient through the use of information technology, companies can get the same results with fewer resources or do more work with the same resources. Either way, the result is a cost reduction and this can make a company more profitable.

Both our research and case studies point out that CIOs have similar priorities. The priorities of top CIOs include improving business processes, advancing IT infrastructure, improving security, cutting costs, and aligning IT plans with company business plans (Broadbent 5). While there are elements of technical considerations in these priorities, technological knowledge alone will not necessarily generate the best solutions. Rather, the CIO must leverage his knowledge of the capabilities offered by various technologies and his insight into the goals and processes of his company in order to identify and implement the best solutions to meet his company’s needs. Under the right conditions, an effective CIO can move beyond a reactive mode of problem solving and into a more proactive mode where he becomes part of the company’s strategic planning team. Ideally, CIOs provide thought leadership to other top executives to make them aware of the possibility for IT to support and improve the strategy of the firm (Enns 156).

Through our study, we learned that CIOs face similar issues in security, budget, and attracting, retaining, and training IT staffs. All of our three interviewees mentioned them. We also learned that from 1997 to 2005, reporting structure has improved: 5% reported to the CEO in 1997, whereas 55% report to the CEO in 2005. This trend is an indication that the status of CIOs is improving.

As the cost, strategic importance and complexity of information systems and information technology in business have continued to rise, the CIO position has received more attention and, in many cases, become more powerful and influential. In fact, some companies will even rely on a CIO to reinvigorate their business by implementing the right mix of technologies and systems to get the company back on track. These CIOs are classified as “turnaround CIOs.”

Turnaround CIOs are brought into an organization when “something big” has, is, or will occur at the company, such as financial problems, consistently bad performance in IT, a merger, or a major shift in operations. Charlie Feld, former CEO of the Feld Group, states, “I think the need for these kinds of CIOs is becoming more immediate now. In every industry now, there is a Wal-Mart or a Dell that is changing the game. The older companies need to transform their legacy systems to enable, not inhibit, the speed and agility of business” (Holmes). This type of CIO must make rapid decisions to have a significant impact on the business in order to produce an effective turnaround.

While not all CIOs have what it takes to be a turnaround CIO, there is reason for all of them to be optimistic about their profession. According to Graham Waller, senior vice president with Meta’s Executive Advisory Services, “Leading CIOs are now entering an era filled with great promise, whereby there is a growing opportunity to partner closely with the business and drive transformational capabilities” (Bernard).

While some CIOs differ in the type and scope of their responsibilities, there are some functions that seem to be rather uniformly assigned to the CIO. These would include managerial oversight of the company IT organization, policy and funding authority for IT-related programs, and technical strategy formulation for the company. Aside from these core functions, many other ideas exist and they are continually evolving over time to meet new and growing demands or to accommodate new trends. For example, in 1997 it was thought that a CIO should oversee the records management, office systems, data processing, telecommunications, corporate libraries, and others (Romanczuk 14). While some of these functions remain relatively unchanged, other functions have emerged such as web-based applications, enterprise resource planning (ERP) systems, and much more complex security concerns. Indeed, the number of cyber security professionals is projected to increase at a yearly compound rate of about 14% from now until 2008 (Gross). Further, today’s CIOs are increasingly taking on more strategic roles within their organizations rather than just being asked to keep the computers and telephones working.

The following are responsibilities are commonly assigned to the CIO:

• Maintain all IT systems operating with a focus on continuous improvements

• Plan to influence business with technology

• Develop applications.

• Design IT infrastructure and architecture, including computers, networks, and the Internet.

• Outsource for special projects

• Establish strategic partnerships

• Enhance customer satisfaction, both internally and externally

• Train users and IT staff

• Attract and retain qualified IT staff

• Prepare backups and disaster recovery

• Purchase hardware and software

• Keep strong relationships with executives in organization

As CIOs continue to become more involved in business decisions, companies are becoming more aware of the need to have a CIO who is suited to the task. According to Matt Ebaugh, senior Vice-President and CIO of Commonwealth Healthcare Corporation, “CIOs are promoted within the business…(A) CIO needs to know both business and information technology…Would you appoint someone as CFO if he couldn’t read and explain a balance sheet?” (Blair 58). This hybrid requirement has evolved over the last few years as CIOs have been successfully added to strategic committees within their organizations. As early as 2001, fifty-five percent of CIOs stated that contributing to corporate strategy was one of their three top

responsibilities (Onan 90). According to Bill Johnston, president of Alinean, “A general understanding of business dynamics would be helpful. CIOs should have a holistic perspective and have an understanding of the functional needs of other departments” (Palmer).

The following are desirable CIO skills sought after by successful companies:

• Strong business direction for the industry.

• Express ability to maximize benefits of IT in solving business problems.

• Identify and evaluate new technological development

• Communicate with non-technical customers and management

• Strong organizational skills

• Balance and execute multiple IT projects on time and within budget

• Ability to get along well with existing management team

• Outstanding interpersonal skills

• Think strategically and practically

• Be flexible

• Work long hours in a stressful situation

• Leadership (Onan 91).

WHO IS A CIO?

- DEMOGRAPHICS

GENDER AND AGE

Of the 405 CIOs polled in a survey by CIO Insight, 91% were male, whereas 9% were female. In addition, the average age was 47 years old (Alter 65).

IT BACKGROUND

Of the 405 CIOs polled in the survey, 65% had a background in IT only, 9% had a background in business only, and 26% had a background in both IT and business (Franz). Most successful CIOs come from sales and marketing, plus have a technology background. It is easier to teach managers the technical side rather than teach management skills to those technically strong (Alter 65). Most IT executives elected to the position of CIO were executives with many years of experience in various fields (Kern).

CAREER

Of the 405 CIOs polled, 26% spent half of their career in IT and the other half outside of IT. Thirty-four percent of CIOs manage another corporate function while running IT. Sixteen percent of CIOs spend most of their time dealing with emergencies. In addition, 55% of CIOs report to the CEO or the president of their company (Alter 65).

SALARY

The following is a chart displaying the salaries and bonuses earned by CIOs in 2003 and 2004 from the 405 CIOs surveyed (Alter 65).

TURNOVER STATISTICS

Of the 405 CIOs polled, the average number of years a CIO stays at the current company is 5.4 years. The average number of years a CIO maintains the title at any company is 9.7 years. In addition, the number of hours worked per week by a CIO is 53 (Alter 65).

WHAT IS SUCCESS?

Of the 700 CIOs polled by Optimize, 71% of CIOs say that their success is measured by increased customer satisfaction, whereas, 64% state that performance is measured by innovation and new developments. Also, 58% say that their success is measured by increasing worker productivity (Brown 29). For a CIO to succeed, it is crucial that they actively manage business expectations because it leads to better IT governance, alignment to business technology, and more sophisticated project management (Wailgum).

IT BUDGETS

Two dilemmas CIOs encounter are: 1) often, the money CIOs save the company is from cost avoidance measures, which are a one-time savings, and 2) they are sometimes inexperienced and thus, ineffective in explaining the value of information management to those who do not give it much thought. “CIOs do not bring in capital, instead they spend it” is the thought of many CEOs. The CIO is often in the middle of many of the most unstable and costly changes in the organization. It is estimated that companies, globally, are spending $52 billion a year on reengineering, of which $40 billion goes yearly into IT (Onan 90).

To fulfill CIO priorities, the 2005 IT budgets have increased 5% since 2004, which has increased business flexibility. Executives want quick returns on their IT investments; therefore, they must be efficient as they grow, yet remain profitable. June Drewry, a SIM executive board member and former CIO of AON Corporation, states, “With lousy architecture, security is very expensive. With good architecture, you can beef up your security at a much more reasonable price” (Alter 65). CIOs spend 63% of their budget on maintenance and 37% for new technology plans. For 2006, 55% of CIOs say they need to improve security and risk management, however 48% say they need to improve internal control processes and procedures (Brown 29).

EXECUTIVE RELATIONSHIPS

A CIO’s primary guarantee of staying power is support from the CEO. CIOs cannot succeed without support from top management and their peers in other areas because they cannot thrive in the important role of keeping the customer contacts informed without their support. However, the communication gap between the IT department and the business managers can damage the company even more than the CIO’s lack of peer support. IT sometimes does not get equal management attention as the company’s finance, human resource, and operations departments if management does not understand what IT does or believes that anyone can figure out an IT problem. Two main barriers for consideration of a CIO to be on the same level as a CFO are: the fear one person controlling the information, and resistance from all departments about creating another level of management (Romanczuk 17). Of the 500 heads of IT surveyed, 72% of CIOs claimed to have a healthy relationship with the CEO, whereas only 55% of the CEOs agreed (Prewitt).

CIOs also bring a lower degree of tolerance for uncertainty than CEOs because CIOs are completely conscious of the need for technical standards. CIOs tend to be more analytical than others. Lastly, CIOs resort to open and adaptive problem solving styles (Rubenstrunk 51).

The amount of CEO involvement with IT work varies with each project. It is also dependent upon the CIO’s track record. According to one CIO, “IT has become a strategic enabler and the CIO a strategic contributor. Many IT-based projects have greater external focus, and require more CEO involvement. Internally focused projects require less CEO involvement” (Potter 78). Jose Ruggero, vice president of Gartner EXP, states, “Today and tomorrow’s CIO must lead like a CEO, analyze like a CFO, and execute like a COO” (Lobban).

HOW TO SECURE YOUR RELATIONSHIP WITH YOUR CEO

To succeed as a CIO, you must have a strong relationship with your CEO. Here are some suggestions for securing that relationship:

1. Hold your tongue. CIOs tend to overcommunicate and lose the audience in the process. Therefore, the CIO must stay with the most critical facts, yet be prepared to expand on a topic that may be questioned.

2. Market. The CIO should meet face to face with the CEO regularly.

3. Bring Toys. The CIO should introduce new technology to support the CEO’s working style by demonstrating the value of technology and showing enthusiasm in using technology to improve business processes.

4. Deliver. The CIO should never make a promise he or she cannot keep.

5. Share. The CIO needs to prepare a persuasive vision that inspires others to move in the correct direction.

6. Have Fun. Show authenticity in building relationships (Rubenstrunk 51).

SMRUFIT-STONE: THINKING ABOUT THE BOX

The subject of our first case study is James E. Burdiss, the Chief Information Officer for Smurfit-Stone Container Corporation. Formed by the combination of Jefferson Smurfit Corporation and Stone Container Corporation, Smurfit-Stone is a leading producer of paper-based packaging products and containers with around 25 thousand customers. Among some of their most recognizable customers is White Castle, for which they produce food packaging products, and Sony, for which they produce corrugated cardboard box containers for television sets. The company recorded sales of $8.3 billion in 2004 and is traded on the NASDAQ under the symbol SSCC. Collectively, the Containerboard Mill & Forest Resources and Corrugated Containers categories accounted for 74% of total sales, while Consumer Packaging brought in 22% and the remaining 4% was generated by Recycling and Other Activities (see Figure 1).

[pic] Figure 1 (taken from Lacity slides)

Jim Burdiss’ promotion to Senior Vice President in February of 2005, as well as the fact that he reports to the CEO of the company, reflect the high degree of credibility and influence he enjoys as an executive member of the company’s leadership team. According to our research, this reporting structure is the most desirable for a CIO because it provides him a high degree of positional power and recognizes the position’s importance to the overall success of the company. As a male in his mid-50’s, Mr. Burdiss also fits the typical demographic profile of a company CIO in terms of gender and age.

Strategy for Success in Challenging Conditions

Since taking the CIO position at Smufit-Stone in January 2002, Mr. Burdiss has focused on aligning information technology (IT) closer to the business, reducing IT costs, and enhancing the skills of his IT staff. He also revealed that he is concerned about security, although he described this as more of a tactical issue rather than a component of his strategic plan for success. According to our research, Mr. Burdiss shares the same goals and concerns as many

other CIOs. In particular, aligning IT with the business, cutting costs, and being vigilant regarding security are the most commonly stated objectives of CIOs. In order to provide a context to illustrate some of the ways Mr. Burdiss has implemented his strategy, it is helpful to understand the conditions in which he operates.

In what he describes as a commodity business, Mr. Burdiss has faced many challenges as CIO due to changing market conditions such as extreme price fluctuations, weak demand in the North American market due to offshoring, and the effects of a changing regional business focus. For example, he explained that in the four years from 2001 to 2005, the price of paper rolls dropped from $465 per ton to $325 per ton, a 30 percent decrease.

Further, as many American companies take their manufacturing activities offshore in search of cost savings, some are also finding offshore packaging and container suppliers. The effect on Smurfit-Stone has been a loss in opportunity of approximately 2.5 million tons of paper products and a loss in revenue for the business they have maintained.

Another factor posing a challenge to Smurfit-Stone’s bottom line is the regional nature of its production infrastructure. The majority of its over 145 box plants have historically operated with a high degree of autonomy. They have focused on customers in their region and set prices and production levels to best serve those customers’ unique needs as well as to maximize revenues and profitability. However, the company is now being forced to adjust to more of a national focus as it has won business from larger companies operating at a national level and as other customers have consolidated their sourcing at the national level.

According to Mr. Burdiss, the ratio of regional to national business has gone from 80/20 in 2001 to 60/40 in 2005. This trend has further reduced margins and forced Smurfit-Stone to adapt its production capabilities so it can respond to its customers in a more consolidated manner rather than as a team of separate, independent production units.

How Does He Do IT?

In order to become part of the solution to these market-related challenges, Mr. Burdiss has taken some rather bold and revealing actions. His boldness is evident in the way he is able to leverage his positional power and credibility to partner with the business leaders and help the company face adversity. When asked by the CEO to help cut costs by reducing his IT budget by $4 million, his response was “Give me an extra $4 million and I will save you $40 million.” Such a statement reveals that he understands the big picture, which is that an investment in the right technologies associated with the right changes in business processes can yield a significant return on investment (ROI) – it also reveals his confidence that he can pull it off. On the contrary, he also said that there have been occasions when he has had to explain to other business leaders in the company that a project doesn’t make sense because it would cost more money than it would save. Both of these examples support his statement that “Technology investments are decided on an ROI basis.” This philosophy might help explain Smurfit-Stone’s relatively small IT budget of roughly 1.1% of revenue, whereas – as we learned in class - the typical company spends closer to 5% of revenue. Undoubtedly, Mr. Burdiss’ tight budget is also the result of another of his strategic goals, which is to reduce the total cost of ownership (TCO) of IT in the company.

As a result of the company’s legacy of regionally-based, decentralized operations, many of the production mills have unique software applications that often are not compatible with other mills’ applications. As Mr. Burdiss visited many of these mills and made this observation, he soon realized that there was a potential for cost savings simply by reducing the number of applications he had to support. In his presentation, he stated that he intends to scale down from approximately 80 applications to 30 over the next few years. Not only will this effort save money by lowering his TCO, but it will also enable the company to have a more consolidated view of its production capacity and scheduling information. Mr. Burdiss used a simple illustration to explain this point (see Figure 2).

[pic]

Figure 2

In this illustration, the infrastructure refers to the physical equipment (wiring, servers, PCs, sensors, etc.) that make up a company’s IT networks. The applications are the software programs that run on the infrastructure. These may be operational applications in a production mill that control the functions of machinery, or more administrative in nature such as financial systems, reporting tools, email, web sites, etc. These applications produce data, which – when analyzed, summarized, and translated properly – yields information that is used to run the business. As you move up the pyramid, it becomes more strategic in nature; as you move down, it becomes more tactical. This concept is consistent with an idea we learned in class, which is that a CIO can never expect to be included in strategic decisions if he cannot even keep

the network (infrastructure and applications) running smoothly and reliably, which is more of a tactical function. Clearly, Mr. Burdiss understands this concept well and is indeed operating at the strategic level in his company. One of the reasons he is able to do so is because of

his third priority, which is to enhance the technical and business acumen of his IT professionals through continuous training, coaching, and mentoring.

Spreading the Word

Mr. Burdiss understands not only the value of developing his IT staff, but also of communicating their value and significant accomplishments to the rest of the company. On an annual basis under his leadership and direction, his IT department produces a ‘Customer Report’ that contains pictures of some of his key IT employees, explains how the IT department is organized, discusses how each group contributes to the company’s goals, includes interesting facts and figures, and – most importantly – conveys the idea that the IT department is an integral partner in the business and shares a common goal with the other business units of serving the customers (see Figure 3).

Figure 3

There is also a section in which Mr. Burdiss expresses his personal vision for the IT department. This annual publication has the dual benefit of educating the rest of the company about the IT department and improving the morale of the department by making them feel important and valuable. It is also well received by the rest of the company as evidenced by the fact that “Out of 37,000 total Smufit-Stone employees, nearly 19,200 (over half) chose to download a PDF version of last year’s report from the Web.” (Smurfit-Stone web site). As we learned in class, the culture of a company can have a large impact on the effectiveness of the CIO. Through this publication, Mr. Burdiss is able to mold the IT culture of Smurfit-Stone to one where the IT department is seen as a valuable partner and dedicated member of the team.

As we examine two other case studies, we will see how other CIOs are dealing with some of the same challenges that Mr. Burdiss described in his presentation, and take note of some of the similarities and differences we found along the way.

CIO ROLES IN OTHER COUNTRIES - FACRI CORPORATION (China)

In the book “The World is Flat”, Thomas Friedman mentions that the fall of Berlin Wall is a symbol of globalization. The speed of globalization increased rapidly in the past two decades. What’s the impact of it on the role of CIOs in other countries? To answer this question, we interviewed a Chinese CIO: Mr. Hao Jun, of the FACRI Corporation, which is one of the largest flight control corporations in China. It has 4,000 employees and earned $1,900 million in annual revenue. Its major products are flight control systems and inertial navigation systems. Its major customers are the Chinese Army, Air Force, Navy, Police, and the Aerospace industry.

Security Is A Top Concern

Based on its products and customers, we can understand why security is a serious issue for the FACRI Corporation. To maintain adequate security, FACRI’s internal network is absolutely separate from its external network. Employees can transfer their documents and designs through only the internal network, but no one can copy something out of the system. Security specialists take charge of the network. FACRI spends a lot of money in security according to the demand. Every employee has a security clearance level. If he/she wants to go to abroad to work or study, this person must stay in China for several years, depending on his/her security clearance level, which is a requirement to have a job at FACRI.

In America, according to the formal survey of the Society for Information Management, security ranks among the top three concerns. In Chinese companies, security is also a major concern for IT.

CIO Status Improving In Today’s China

Hao Jun is the CIO of the information center, or IT department. He received his bachelor’s degree of Electrical and Computer Engineering in 1984 at Nanjing University in China and his master’s degree of Computer Software in 1991 at Northwest Polytechnic University in China. His background is IT, without any business experience. He has worked twenty years at the FACRI Corporation, including four years as FACRI’s first CIO. According to our research, most CEOs prefer a CIO who has an IT background. The result of this preference is that most CIOs in China have only an IT background. But in America, CEOs prefer that a CIO also has some business experience. Approximately 9% of American CIOs have a business background and 26% have both business and IT backgrounds.

The organization chart of FACRI is shown in figure 4. FACRI has six departments, which are led by 4 vice presidents and one CIO. In Product development, there are three departments: R&D, Manufacturing, and Experiments & Testing, led by three vice presidents. Another three departments are Financial, which is led by one vice president, Administration, and Information Center, which is led by Hao Jun, the CIO we interviewed. We can see that in this organization, the CIO is important.

How did the CIO of FACRI obtain this high status in his organization? It is because of a change in business culture. Before the year 2000, there was no centralized IT department at all. Computers were managed by the different departments who used them. The previous CEO held the traditional Chinese thought: he never counted IT as an important part in his organization. By the year 1998, a new CEO took his position. In the same year, the company began a program to organize the management information systems, network, and design environment. FACRI started this program for two reasons. First, the new CEO thought that IT was very critical. He changed the business culture and made IT more important. Second, the whole IT environment in China changed because of globalization: some big companies have become aware of the importance of IT. Hao Jun’s case illustrates that the status of a CIO depends on the culture of the organization and also the concept of the importance of IT in the whole country.

In 2000, the IT department was established. In 2001, there were 60 IT employees and the capital investment in IT was $50 million. In 2002, the IT employees increased to 80, and the capital investment in IT increased to $75 million. From 2003-2005: there were 100 IT employees and $200 million capital investment in IT. FACRI is an early adaptor of an information center. The development of the IT department in FACRI is a very typical case in China. With the development of globalization, the new generation of Chinese managers is aware of the importance of IT. More and more companies develop their IT department following FACRI’s path.

[pic]

Figure 4: FACRI Organization Chart

In the interview, we asked Hao Jun to describe the experience that best prepared him for the CIO position. He said before he got the CIO position, the education and work experience on CAD/CAE (Computer Aided Engineering) in the analysis of structural strength and electrical magnetic fields was important. After he got the CIO position, the management philosophy included large information systems, such as PDM (Product Data Management), and the importance of new knowledge acquisition through networks. We can tell that before he got the CIO position, his attention focused on technical issues. After he started the CIO position, his consideration focused on leadership. First, he was an outstanding IT staff member; then he got the CIO position - this career path is similar for all CIOs in China. But in America, the path is slightly different because of the emphasis on a business background.

Hao Jun said that in FACRI, normally there are 80% major projects and 20% minor projects. For major projects, the CIO reports to the CEO; for minor projects, the CIO reports to the CFO. What does this mean? It means in FACRI, IT is more like a partner.

“I do bring value to my company!”

In today’s China, although the CIO status is more important than it was before, separate IT departments are still much less common than in America. CIOs’ roles are not well defined in China. Hao Jun tries his best to develop himself into an effective CIO by studying the network and carefully considering his work every day. He defines his roles and responsibilities in four aspects: improve and apply IT Strategy, align IT strategy with business strategy, organize the IT staff, and develop software or customize the available software to meet the company’s needs. His perception of the CIO’s roles and responsibilities are similar with those in American companies.

There are many aspects that need to be improved in the young IT department in FACRI. Some issues do keep Hao Jun up at night. He defined his three priorities for the upcoming years. First, he needs to improve product development processes. It mainly includes two components. One is to improve the management environment. Another is to develop processes for design and manufacturing. Second, Hao Jun needs to develop within R&D the management systems, such as PDM. The third priority for him is to improve digitized product manufacturing systems, such as computer aided manufacturing programming. All of his priorities aim at alignment with business strategies.

Hao Jun feels that he adds much value to his organization. With the help of IT, the efficiency of information exchange is dramatically improved. FACRI also benefits from the standardized flow of manufacturing processes and improved monitoring. IT expands the R&D alternatives, and enables sharing of information that can assist the decision-making process. These are also methods that American CIOs also employ to add value to their companies.

Although FACRI never studied or knew the best practice patterns that were taught in our class, we were surprised in the interview to discover that the IT governance in FACRI falls into one of the 3 best practices: the CEO decides both IT principles and IT investment. The CEO and CIO decide IT architecture and infrastructure. The CEO, CIO and business units decide business application needs. This governance pattern is called federal. Although in different countries people have different cultures environments, and practices, people everywhere can learn best practices through trial and error.

We also examined IT budgets. In FACRI, major investment funds come from special fund or technical upgrade funds. Minor improvement funds come from the departments that will use the new capabilities. It is essentially a charge back system. These processes facilitate cost control within the company. Generally speaking, Chinese CEOs like to spend a lot of money in IT because the IT department is relatively new in China and CEO’s hope it will bring them a competitive advantage that will generate an increase in profits.

Retaining and attracting IT professionals is a top concern among CIOs in America. It is also a major concern for Chinese CIOs. Hao Jun attracts his IT professionals by improving employees’ work satisfaction and by offering financial incentives. To improve employees’ work satisfaction, Hao Jun provides enough opportunities for individual success, assigns work according to personnel specialties, strengthens responsibility and pride in work, provides a harmonious working environment and relationships, and provides job stability. Through offering much higher salaries, pensions, and bonuses than other companies, the CIO provides attractive financial incentives for his IT professionals.

CIO Needs A Good Relationship With The CEO

For a CIO, the relationship with the CEO is very important. Hao Jun meets his CEO formally every three months, which is four times per year. He also has many informal meetings with his CEO. For instance, they may occasionally meet at the dining room and eat together. Sometimes, the CEO calls Hao Jun to his office when he has some new ideas associated with IT. For instance, a recent incident that prompted the CEO to contact Hao Jun was about the topic of enhancing the understanding and visualization for non-IT people, including the CEO, to help them more easily understand MIS concepts. Many of the MIS systems include large amounts of data and flow charts, which are too complex to be readily understood by non-IT people.

Hao Jun feels the CEO supports his job very well. The administration of management information systems within this context is facilitated by cooperation with related departments under the coordination of the CEO or Vice President.

Catch Up With The World Trends!

China is a developing country; Chinese companies need to catch up with the world trends in many aspects. Hao Jun has two primary challenges. One is to customize management information systems to different departments. Another is to leverage information systems to improve management functions.

As a top company, FACRI tries to catch up to the world trends. The technology of the IT departments, such as product R&D platform, has already caught up with the world trends. IT standards are gradually catching up to the trends. IT governance, such as strengthening data accumulation, is systematically catching up to the trends. Hao Jun is trying to introduce new management ideas into MIS.

The CIO Situation In China

Is the CIO in FACRI a typical CIO in China? We were interested in the overall CIO situation in China. Hao Jun said: “Most CEOs (in China) don’t realize the importance of IT in improving efficiency and production procedures. IT in these companies is merely a support part, only doing some maintenance job, not important.” It means that most companies just view IT as a support function, not a partner. Our research supports Hao Jun’s viewpoint: in China, the IT department is not well developed in most companies. Only a few companies view IT as an equal partner or believe that IT rules. Fortunately, very few companies see IT as a necessary evil. Most Chinese people treat IT as a rapidly improving and advanced technology and respect IT employees. They believe only smart people are able to be good IT workers and keep up with the trends in IT. They also believe that IT can bring a competitive advantage to an organization.

The most common situation in Chinese companies is that there is no IT department or only a very simple IT department. Employers value employees who understand and are able to use IT. Consequently, many of the IT functions are done by employees within the business units rather than an information center. In our course, we learned that this is the pattern of “business can do it better”. These are symbols of an early level of the role of CIO.

In summary, the role of CIOs in China is similar with that in America. The difference is essentially that America is at a more mature level; China is at an early level. More and more Chinese companies are aware of the importance of IT due to globalization. Chinese companies are catching up with America’s and the world’s IT trends quickly.

UMSL CIO

The CIO who was the focus of our third case study is Dr. Jim Tom. His exact title is Associate Vice Chancellor for IT of the University of Missouri St. Louis (UMSL). Dr. Tom has been at the university since the start of the year 2005 and has been a valuable asset. He is a very carefree, informal person who seems to fit right in with his new staff. Dr. Tom reports to Dr. Krueger (VC for Managerial and Technological Services) and Dr. Glen H. Cope (Provost/ VC for Academic Affairs). These two people in turn report to the Chancellor of the University, Dr. Thomas George.

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What Is He Responsible For?

Being a CIO at a university is quite different than being a CIO in the corporate sector. He started out with an overall view of the CIO in education and how it differs from the corporate side. Dr. Tom has had the opportunity of working in the government, corporate, and now education sector. According to the interview we conducted, Dr. Tom explained that in education what ends up happening (particularly in public universities such as UMSL) is that there are several constituencies. On the general side there are three constituencies to consider: “customers”, internal staff, and the institution. The customers are the students that are a top priority for the CIO on a regular basis.

Secondly, the people that Dr. Tom deals with more often than the students are his internal staff. In addition, he has to answer

to the wider mission of the university and the general public at large. Dr. Tom felt that

being in education gives him a relatively stable, structured mission, but that he also

experiences constraints and challenges along the way.

Corporate Vs. Education

Dr. Tom has worked for the corporate sector in the past so he was a great source in order to compare his responsibilities (as CIO) among the corporate and education environment. In education, there is a wider set of responsibilities. For example, in the corporate world a CIO typically focuses on the kinds of activities and technology to bring in the business. Fundamentally, in terms of infrastructure, it tends to be financial systems, HR systems etc. On the university level, many CIO’s believe that in addition to all the above-mentioned administrative issues, they also end up being responsible for technology. Dr. Tom divided the set of responsibilities into two parts: external and internal.

External problems to him are the ones dealing with people outside his department. According to the school’s website there are three areas of the organization concerning the external responsibilities. Starting from “Teaching and Learning”, where the IT department provides the computers in the computer lab, along with special features such as MyGateway, Samba, etc., to its patrons. There is also the “Research” department, i.e. providing adequate help and information to the professors, as well as the research department striving to come up with new breakthroughs for the university and its partners. Then there is the “Administrative” department, which deals with the finance and accounting side of the institution. Internal problems, on the other hand, are what Dr. Tom has to deal with regarding people within his own organization, namely the IT department. He started out with ideas and steps taken in order to develop the organization itself. Once that was established and running, Dr. Tom focused on developing customer service to help the organization and deal with the patrons.

From Government To Corporate To Education Sector

When asked about his experiences and the reason he possesses such vast knowledge concerning the title CIO and the responsibilities that come along with it, according to Dr. Tom he had been “around the block a few times”. The past experiences that best prepared him for the job here at the university were varied. Dr. Tom, as mentioned before, has worked for the government sector, as well as the corporate sector. His most recent job, which had the most effect, was in higher education as the Director of Education in the IT department. According to Dr. Tom, he prefers working for the education sector more than any other sector he has worked for in the past. When asked why, his reply was that there is more of a sense of satisfaction in serving the community. At the end of the day, Dr. Tom enjoys supporting an institution of higher education that not only produces educated people, but these people end up being a great part of the community itself.

Challenges: Budget

There are definitely challenges to Dr. Tom’s position, a tight budget being the top one. The top three problems being faced by our CIO stem from budgetary challenges. There is a high expectation from the IT department, but the budget is an obstacle. The department has to allocate wisely and shrewdly how much goes where, particularly regarding salary and compensation. When asked how his department has been affected, Dr. Tom mentioned that he has lost many of his good employees because of such a small budget and hence lower salaries and compensation. The same employees are being offered better salaries and benefits elsewhere, making it harder to attract and retain employees in the first place.

The department's main funding is from the school's Student Technology Fees. Also the school is funded by the State and Tuition Fees, bringing UMSL's total IT budget to a mere $ 8.5 million. Some people end up coming back mainly for ethical issues. Also, there is more progress in the IT department of a university because this is where much of the research and development is done. Compared to the corporate world where the only IT decision is to buy better technology, Education is 3-5 years faster in learning about new and better technological breakthroughs.

How Is It Different From The Corporate Sector?

What Dr. Tom wants to do is to try and leverage more technology in research. Also, he believes there is a need to get better integrated computer systems. Right now our school has second generation cluster computers. What is different than corporate is the need to make the people aware of different types of technological ways to go forward. There is work being done to make the technology go forward but still issues arise; the researchers are not ready yet to let go of the technology (in certain cases) they still are using. The other area he wants to concentrate on is the whole “Teaching and Learning” area. UMSL has done well but according to Dr. Tom, “we are not there yet…we can make much better use of technology.”

One example is the integration of others’ work into course development. Open source course material, which is available online, could be used by a student who wants to tutor himself about any particular course he wants. Here is where the issue arises because, in a university, five different professors may teach the same course and they all consider their way to be the best one to teach the course. Unfortunately for the CIO, he cannot just emphasize one professor's work and ignore the rest. Dr. Tom recognizes that there will always be different teaching styles, but would like to encourage professors to take advantage of open source material to help improve their course content, and possibly even find ways to integrate them all for the students to use.

What Keeps Him Up At Night? “SECURITY!”

One more thing that we found common among all the CIOs in our case studies, as well as CIOs in general, is their concern about security. Some organizations are very dependent on technology and educational institutions rate very high when it comes to usage and dependence on IT. Overall the security issue has been a big one for Dr. Tom. He and his department have spent a lot of time in the background worrying about problems such as keeping the school's virus protection information up to date, keeping the firewalls updated, and detection of attempts to hack into the school's computer systems. From time to time they will have special concerns. For example, last June UMSL was required to undergo a security audit by a credit card company to determine if it was safe for the students to use credit cards on campus. On the whole, the university passed the audit but that does not mean it can never happen and Dr. Tom worries about this possibility.

The Importance Of Leadership

Dr. Tom realized and learned from his job the softer side of management, and it applies not only to being a CIO but also to his peers and subordinates (managers, etc.). This is consistent with our prior research on CIOs in general. It has also helped him with issues such as general leadership skills, human resources study etc. If one were to look at any technical organization, often the technically talented people are promoted within the department into management roles, but they often struggle because they lack leadership skills and experience.

Having the technical knowledge or just the management skills is not enough. There should always be a good mix of the two skills if one wants to make professional progress. For example, an employee may have a sick child that needs medical attention but he (employee) also has a deadline the same day. The question arrives what to do in this matter; should the manager let the employee take the day off or make him work? This is just one of the few kinds of issues that Dr. Tom has faced over the years. One other important issue he mentioned was about training the staff. A week before the interview had taken place, Dr. Tom had arranged a group session for his staff to help them learn more about how to manage along with their technical skills.

LESSONS LEARNED

Although the size of the three companies we interviewed is different: Smurfit-Stone is a large company with 35,300 employees, including 380 IT employees, $8,291 million annual revenues; FACRI (China) is a middle size company with 4,000 employees, including 100 IT employees, $1,900 million annual revenues; UMSL is an government support education institute with 3,319 employees, including 146 IT employees, the three case study interviews do demonstrate some points of our research.

All of the interviewed CIOs are male. Research tell us that 91% of CIOs are male and only 9% are female. Smurfit-Stone’s CIO is 54 years old, UMSL’ is early 50 years old, and the Chinese CIO is 43 years old (in China, there is a strong tendency to use younger people, such as between 30-45, to be in the high positions.). Our research shows that the average age of CIOs is 47 years old. For IT budget, Smurfit-Stone increased its IT budget in 2005. Both UMSL and FACRI Corporation (China) maintained their budget. Our research revealed that from 2004 to 2005, the average IT budget increase was 5%.

Both our research and three case study interviews point out that aligning IT strategy with business strategy and security are among the most concerns facing CIOs. All of the three CIOs we interviewed strongly emphasis them. Smurfit-Stone’s CIO also feels reducing Total Cost of Ownership is another of his main concerns. The Chinese CIO’s other concerns are technical in nature. The UMSL CIO in concerned about building effective relationships with his IT staff.

Our research shows that 9% of American CIOs have a business background, 26% have both business and IT backgrounds, and 65% have only an IT background. In our interviews, both American CIOs have both business and IT backgrounds and the Chinese CIO has only an IT background. It shows a clear point: in America, CEOs prefer CIOs who have business backgrounds. These CIOs understand business concepts better, so they are more likely to align IT strategy with business strategy, and they have more business thinking. In China, the CIOs’ role is just in the early stage. Most companies are merely satisfied by the IT’s technical supporting function. As a result, Chinese CEOs prefer CIOs with a pure IT background.

Both Smurfit-Stone’s CIO and the Chinese CIO have been in their position for four years. The UMSL CIO has been in his position for less than one year. These interview results do not contradict our research, but they don’t necessarily validate it either: the average number of years as CIO of current company = 5.4 years.

The CIO’s status in a company is a big issue. Some CIOs have a high status; they can participate in business strategy meetings and report directly to the CEO. But other CIOs are not so fortunate; they are rarely invited to business strategy meetings. They only conduct their own IT department meetings. These CIOs usually report to the CFO or CXO. In our three interviews, two of the CIOs report to CEO. They have a high status in their organization. Only UMSL’s CIO reports to someone positioned lower than the equivalent of the CEO.

Although most IT departments in China are viewed as merely a support function in the company, and the definition of the role of CIOs is not as mature as in America, CIO status is improving. Many roles and responsibilities of Chinese CIOs are similar with their American counterparts. Chinese CIOs consider security, aligning IT strategy with business strategy, and IT governance to be priorities just as American CIOs do. Chinese CIOs use similar methods to add value to their companies and have similar priorities and challenges. However, there are also some differences between Chinese and American CIOs. Most Chinese CIOs have only IT backgrounds, whereas American CEOs prefer CIOs with some business background. Chinese CEOs like to spend more money in IT than America CEOs because IT departments in China are relatively new and CEO’s hope they will bring competitive advantage that will generate an increase in profits. Chinese companies are quite motivated about catching up with the world’s IT trends.

FINAL THOUGHTS AND CONCLUSIONS - WHAT DOES ALL THIS MEAN FOR US?

Overall, we believe that James Burdiss of Smurfit-Stone represents the most professionally mature and influential CIO out of the three we studied. This judgment is based upon several factors. First, he is well positioned in the company due to the fact that he reports to the CEO. Additionally, there are many indicators that he is highly regarded among the executive leadership in the company. For example, he participates in strategic decisions that affect the company and, partly due to his own initiatives in communicating the value of his IT department to the company in an annual report, the company seems to have a highly IT-supportive culture. They are definitely considered part of the team.

Next, Mr. Burdiss’ goals give us insight into his standing within the company as both a technical advisor and operational leader. His top priority as stated in his presentation is to partner with the business. Such a goal is only achievable by someone who is a well-respected and valued team member with considerable influence among key decision makers within the company. Another of Mr. Burdiss’ stated goals is to reduce the total cost of ownership of IT in the company. This goal reveals that Mr. Burdiss is aware that the burden of reducing costs is not someone else’s problem, but rather that – as a member of the team – it’s also his problem. His willingness to take ownership of the company’s challenges is perhaps a key factor in explaining his high status within the company, and particularly among the executive leadership.

Finally, we believe that Mr. Burdiss has partially benefited from the mere nature of the organization he serves - he is the CIO of a publicly traded American company. This is significant in several ways. First, American companies are among the most mature, technologically advanced businesses in the world. Many technology-based trends begin in the United States and competition motivates companies to adopt these innovations in order to remain viable and profitable. Next, the simple fact that Mr. Burdiss works for a publicly traded company means that the company’s leadership is accountable to shareholders and therefore must consider the effect of every decision on the bottom line. As Mr. Burdiss stated, “All decisions are made on an ROI basis.” This being the case, the results of Mr. Burdiss’ decisions are more measurable than those of a CIO in the non-profit or educational sector. If Mr. Burdiss successfully leads the implementation of an ERP system that makes the company run more efficiently, the result will be an increase in profit to the company. Consequently, his credibility and status will be elevated, giving him more power within the company. Further, he will have a higher likelihood of obtaining funding for future projects based on solid past performance and a strong business case.

While Hao Jun of FACRI also reports to the CEO of his company, his level of influence does not seem to be quite equal to that of Mr. Burdiss. This is not to say that he is personally inferior to Mr. Burdiss, but rather that the conditions he works in are not as mature as those found at Smurfit-Stone. For example, many companies in China still consider IT to be a supporting function at the tactical level only, not a full partner in the strategic sense. This is one reason why many CIOs, including Mr. Jun, are promoted out of purely technical IT careers with little or no business or management training. Among Chinese companies, Mr. Jun actually appears to be well-positioned, but nonetheless positioned within a less mature business environment than that of the United States.

Finally, we consider Dr. Jim Tom at UMSL to be the CIO who is most handicapped by the type of organization in which he works. The organizational structure of the university system seems to be quite bureaucratic and therefore less responsive than that of a profit-driven business. Because the quality of the product of a university (students’ education) is difficult to quantify, likewise the effect of any particular project or initiative that Dr. Tom might propose would be difficult to measure. In such an environment, it is easy to think of IT as a commodity that is costly and presents more risks than benefits. In order to protect against such an entity, a common thing to do is control its budget tightly and prevent it from becoming too powerful. The result for Dr. Tom is that he is put in a position burdened by high expectations from his numerous customers (students, faculty, administrators) and hindered by a tight budget and relatively low degree of influence (as demonstrated by the fact that he does not report directly to the chancellor of the university). Fortunately, he seems to be motivated by a sense of civic duty and selfless service based on his responses during our interview and the fact that he left the business world to return to academia.

WORKS CITED

Alter, Allan. “The Role of the CIO; meet the Hybrid CIO: Well-Paid and Powerful.”

CIO Insight. 5 April 2005. pp. 65.

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. Viewed: 29 September 2005.

Blair, Robin. “The Future of CIOs.” Health Management Technology. February 2005.

pp. 58.

Broadbent, Marianne. “The New CIO Leader: Setting the Agenda and Delivering

Result.” Harvard Business School Press, Gartner, 2004.

Brown, Patricia. “Defining the CIO: An Optimize Research Report – CIOs Shift to

Playing Offense in 2005.” Optimize. 1 June 205. pp. 29.

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2004.

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Strategic Information Systems.” MIS Quarterly. March 2003. Vol. 27, Iss. 1: pp. 155-174.

Franz, Laura. “On the Cover.”

viewed 29 September 2005.

Hawkins, Brian. “A Framework for the CIO Position.” EDUCAUSE. Nov/Dec 2004.

pps. 94-103.

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2005. Section: FEATURE.

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Interviews / Presentations Cited

1. Notes taken from presentation made by James Burdiss to IS 6800 (Professional MBA) class at the University of Missouri – St. Louis (UMSL) on October 14th, 2005. Attended by Farwah Gardezi, Yakun Liu, and Ray Phariss.

2. Interview of Dr. Jim Tom in person by Farwah Gardezi and Ray Phariss at UMSL on October 25th, 2005.

3. Telephonic interview of Hao Jun, CIO of FACRI Corporation (China) by Yakun Liu on October 13th, 2005.

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CIO of Information Center: Hao Jun

Product development

Customer Service

Human Resource

James Burdiss

Administration

Vice President of R&D

Labor Union

Inertial Navigation Systems

Vice President of Financial department

Flight

Control

Systems

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Electronics

& Optics

Xinguo Zhang

CEO

Vice President of Manufacturing

Vice President of Experiments & Testing

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