Much has been written about the future role of the Chief Information Officer in the last few years. Many opinions have been put forward. All pretty much agree that fundamental changes, already underway, will take place over the next few years in how the IT function is organized and managed. Some feel that the CIO role is likely to significantly diminish, with its various responsibilities distributed across the business or subsumed within the CFO organization. Others are of the opinion that CIOs will play an even more influential role. Given the growing importance of information technologies to all aspects of the business, the CIO role will likely be viewed as being as critical to the business as the CFO.
I am very much in the latter camp. I strongly believe that CIOs are in the eye of the IT storms that continue to rage all around us. While their impact on business is hard to predict and unlikely to be the same for all institutions, few will dispute that over the past couple of decades IT has been significantly transforming just every company, industry, economy and society around the world, as well as our own personal lives.
To put my opinions in context, let me first briefly discuss some of the powerful market and technical forces that are unleashing the stormy business environment in which CIOs have to operate:
Just about everything seems to now be digital. The digital technology revolution shows no sign of slowing down in the decades ahead. Today’s CIO, for example, has to deal with an IT infrastructure that not only includes the classic enterprise systems and networks, but also digital consumer technologies of all sorts, sensors used in all kinds of smart solutions, digital voice and video communications and on and on and on.
IT is now everywhere. Once upon a time, computers were primarily used to automate back office operations, as well as in R&D, manufacturing and selected other business areas. Today, IT is integrated into every nook and cranny of the business, used in just about every single function and department, and connecting to every stakeholder inside and outside the institution. This trend will only accelerate as our economy and society are going increasingly digital.
Competition continues to intensify. Globalization, commoditization, the fast pace of innovation, increased customer choice and the like, have made the competitive environment that just every business faces fiercer than ever. Competitors, whether across the street or across the world, are now literally one click away. Moreover, new competitors seem to rise up all the time, some coming from entrepreneurial companies with flashy disruptive innovations, and others from existing companies that are taking advantage of increasingly porous industry boundaries to look for new growth opportunities.
The rise of cloud computing. Every institution needs to decide which IT services and applications it will continue to do in-house; which it should procure in the marketplace as-a-service at significantly lower costs and higher quality; and which of its services and applications are world class and should be offered to everyone in the marketplace as a new, revenue producing cloud-based businesses.
Growing complexity. Along with the many benefits of the IT revolution comes a significant increase in complexity. Given our increasingly global, integrated, fast changing environment, managing a 21st century business is not for the faint of heart. While such an environment is full of business opportunities, it will also give rise to serious, unpredictable crises, - e.g., infrastructure failures, security breaches, global supply chain disruptions, - that have to be addressed, often in real time.
These are just some of the forces that today’s CIOs are called upon to deal with. While the forces are primarily a result of rapidly advancing information technologies, their impact is felt throughout the business. But, as the chief IT expert in the enterprise, the challenges faced by the CIO feel particularly daunting because they have to both understand and explain to their business colleagues what is going on at the technology level, and also be closely involved in assessing the impact of the technology on the overall business. Today’s CIOs truly work at the junction between technology and business.
How should we best discuss something as complex as the evolving role of the CIO? Let me offer a simple and hopefully comprehensive framework for such discussions, based primarily on my own experience working with CIOs over the past several decades as well as on various excellent studies on the future of the CIO.
Two major dimensions stand out along which to develop such a framework. One dimension focuses on whether the activities are more operational versus strategic, that is, oriented more toward the near term or the longer term. The second dimension focuses on whether the activities are more internal versus external, that is, primarily aimed at supporting the business functions or at growing the business in the marketplace.
While each of these dimensions is more of a continuous spectrum than just two discrete roles, it is helpful to discuss each of the four roles resulting from such a 2 x 2 framework.
Internal & Operational. This is the original CIO role, with responsibility for the overall IT infrastructure of the enterprise, including operational excellence, productivity, performance, security, availability and expense management. But even this classic CIO role is in flux. While increasing outsourcing and cloud-service opportunities might well decrease the need for CIOs to monitor day-to-day operations, they are still responsible and accountable for those operations, regardless of whether they are done in-house or by a service provider. Thus, they have a major voice in the selection of service providers, and must be involved in monitoring their performance and taking action if things go awry. You can outsource work, but you cannot outsource accountability.
Dealing with an increasingly complex IT infrastructure presents numerous technical and management challenges, which CIOs are ultimately responsible for. On top of which, cloud computing is now driving a much needed industrialization of IT data centers and IT infrastructures in general. While many data centers have grown in a relatively ad-hoc way, the only way to effectively achieve the needed high volumes while effectively manage the growing complexity is to apply engineering discipline as well as a holistic, systems-wide approach. This has been successfully done in manufacturing over the past few decades. Data centers are now becoming the manufacturing plants for information and services delivery.
Internal & Strategic. Beyond delivering IT services, CIOs have a major responsibility in the continuing transformation of the overall IT infrastructure and of the IT-based processes supporting the business. According to the State of the CIO 2010 report of the CIO Executive Council, leading such transformational change is the predominant activity of 45 percent of the CIOs interviewed in their North America study, versus 34 percent primarily focused on driving operational excellence and 21 percent on business strategy.
These strategic changes include consolidation of the IT infrastructure and business processes to achieve increased productivity and lower costs, as well as to better support global operations; implementing system architectures and developing platforms that help the business become more flexible and better able to respond to competitive pressures; the rapid integration and support of innovative ideas, applications, marketing programs and business models; and embracing technical and industry standards that facilitate the integration of the various operations of the business, as well as being better able to work with business partners around the world.
External & Operational. Given the increasing importance of IT to all aspects of the business, just about everyone agrees that successful CIOs need to focus more of their attention on external business issues. CIOs must be key contributors to the overall company strategy. They can help the business understand which strategies are well aligned with existing IT systems, and can thus be brought to market in a relatively short time, and which require major changes and must therefore be implemented incrementally over time. A lot of strategies fail because they are not well aligned with operations and thus take too long and are too costly to support.
There is no longer any business area beyond the scope of IT. Information technologies have evolved from being primarily used for back office operations, to now being a major channel for dealing with customers, partners and other stakeholders in the marketplace. As such, the CIO can now help the rest of the business understand how to best leverage IT to improve customer service, marketing programs, online sales and other front office operations that are critical to just about every unit in the business.
External & Strategic. The last 15 - 20 years can be best characterized by a series of disruptive technology innovations that have been significantly transforming just about every business, industry and economy. The Internet and World Wide Web are the most prominent such disruptive technologies, and have led to massive changes in all aspects of business, from the original move to e-business; to Web 2.0 and social networks; to smartphones and cloud-based services; and to big data and information analytics. The coming decades promise more of the same.
CIOs have a growing role to play in anticipating such disruptive information technologies, assessing their potential marketplace impact, and helping the overall company embrace the resulting business transformations in as smooth a way as possible. The earlier the business can learn about such major disruptive technologies, the better it can figure out how to embrace the innovations, both for its own competitive advantage as well as to avoid the competitive pressures from fast moving entrepreneurial companies built around the new technologies.
In conclusion, I would expect CIOs to lead this broad use of technology across the business. They will continue to play a major role in managing the use of IT in the daily operations of the company, as well as in exploring ways of improving the IT infrastructure and all IT-based processes. As the top information technology experts in the company, they will have to work closely with all other senior executives to help them design, build and support their increasingly complex applications, solutions and services, as well as bringing them the latest technology advances that will help them keep up and surpass competition. In addition, as companies look to grow their businesses by developing all kinds of cloud-based services, CIOs will now play a major role, akin to that of the CTO, in helping to identify and build up these new IT-based business opportunities.
Given these critical and varied roles, will the CIO organization become more centralized or more distributed? Probably some combination of the two, depending on the business or the industry, as is the case with the CFO and HR functions.
Will the role of the CIO grow in importance and report directly to the CEO, as the heads of Finance and HR generally do today, or will the role report to other functions and/or be distributed across the business? I would expect that CIOs or the equivalent function by other names will increasingly report to the CEO. In a number of companies, their Chief Administrative (CAO) or Operations Officer (COO) have essentially assumed the various 2 x 2 responsibilities discussed above, and are the de-facto overall CIO of the business.
Can I imagine a senior executive with little technical education and experience as the overall CIO of the company regardless of what the actual position is called? In my opinion, that would be akin to appointing a CFO with little financial experience. I have seen it happen, but the results are not pretty.
As information technology becomes increasingly important to all aspects of the organization and to the overall success of the business, the role of the IT function will significantly change. While it is difficult to accurately predict how companies will be organized in the coming years, we can safely conclude that there will be much greater collaboration between the business and IT sides of the organization. Finally, we can also safely assume that major new opportunities will open up throughout the business for those that combine strong technology skills with strong business and management talents.