Today’s enterprise IT managers know very well that it is critical to understand business expectations and the language of business to be able to effectively carry out their responsibilities. Ask any CIO or next-level IT manager about how the CIO’s role is changing, and the answer you are most likely to get would have a heavy dose of understanding business needs, dynamics of business, language of business, business alignment, partnering with business and so on.
The fact is: Today’s new enterprise IT professionals are not just aware of these needs but are more than convinced about their need to move beyond technology and understand business.
But just when the idea was sinking in and the IT leaders were beginning to find their new ‘well-defined’ role, it got disrupted again. This time, it was to do with their home turf – technology.
A few years back, Gartner came out with a sensational statement that Chief Marketing Officers would soon spend more than CIOs on IT. That was a futuristic assessment based on forecasts, which some took seriously and some did not. But three years back, in 2016, the research firm came with a far more definite statement, quoting actual spend data to suggest that, indeed CMOs would spend more than CIOs on technology by 2017.
Of course, as it has been clarified
now, the spend Gartner was referring to was what it called business IT—that excludes the large spends on infrastructure. But even then, it was quite disruptive as a news.
But Gartner’s forecast about CMOs tech spending is not an isolated observation.
Changing Tech Decision Equation
Four trends have changed the technology decision-making equation in enterprises. These phenomena are only too familiar to us.
First is what is called consumerization of technology—more aware users demanding what they want in terms of devices and applications. They were no longer willing to comply by everything that the corporate IT ‘thrusts upon’ them. But in isolation, this trend was initially restricted to mostly end-user devices and front-end applications. In any case, that was not the prime worry for CIOs in organizations with a more mature IT.
The second big driver was large-scale adoption of cloud—especially SaaS—which provided a far bigger disruption. It is not that business users did not want specific applications earlier. But to get that, they had to ensure that the infrastructure is in place. The business managers neither had the wherewithal to manage that IT infra nor had the authority to take capital expenditure decisions.
SaaS changed all that. It turned the purchase to a pure opex purchase. All functional/LOB managers were empowered to make those purchases. And they did not have to worry about managing the underlying tech, which was done by the service provider.
That was a big power shift. While some of the big purchase decisions found roadblocks when there was need to connect them to enterprise IT systems—in order to extract their true value—many of the tactical point solutions continued to be purchased by the LOB managers. Corporate IT got bypassed for many such decisions.
While this changed the equation quite in favor of line managers, it still was not big enough as most large purchases were still going through corporate IT.
The third lever was the wave of digital transformation. Many businesses wanted to transform themselves, moving beyond just incremental efficiency enhancements. This necessitated a need for Chief Digital Officers. Initially, CIOs and CMOs got into almost a duel on who was a better fit to take that position. But today, in hindsight, one can easily say that it is neither the CMO and CIOs but the core business managers who dominate the CDO landscape. Even organizations that did not have a designated CDO gave a lot of technology decisions formally to the businesses, so interwoven was technology now with business!
So far, this had impacted largely the services components of a business—sales, marketing, line businesses, HR, finance, customer service and so on. In 2016, World Economic Forum (WEF) Founder, Klaus Schwab, pronounced the arrival of the Fourth Industrial Revolution—it was all about digitization of manufacturing, leveraging emerging technologies like IoT. Every piece of manufacturing equipment was now more and more digital. This was the fourth big trend.
To be fair, this was never a CIO’s area. But with more IT going in, the expectation was that enterprise IT would have a role in managing some of it. Thanks to the completely different dynamics in which manufacturing OEMs operate, corporate IT, by and large is out of it.
All these changes did a few things to CIO’s role.
One, it shrunk the IT budget that corporate IT handled. Cloud only accelerated that.
Two, it further aligned corporate IT from business IT—the more transformational IT, going by Gartner’s bimodal IT classification.
However, it never freed the CIO from these responsibilities. CIO was still the go-to man (okay, woman too) for anything that did not go right. Security and compliance were becoming big issues. Cyber security risk is one of the top five risks in the world today, according to WEF.
Also, as organizations started to think of complete transformation, those that did not have a full-time CDO—and such organizations were large in number—expected that the CIOs would provide a path. At least, CIO was
the first person with which the top management started that discussion.
The CIO is now expected to play a more important role in organizational transformation. At the same time, his control over budgets and technology decisions was most definitely on the wane.
It is time for transformation for the CIO’s mind. One of the things that is immediately required is to manage the changing situation in enterprise. And that is by collaborating well with the other business managers.
The Collaboration Imperative
To succeed in this new role, the CIO needs to have a strong collaboration with other C-suite members (CFO, CMO, CISOs, COO) as well as with heads of operational technology (OT) and line of business managers. For example, in today’s customer-centric economy, CMO and CIO must collaborate and push their business forward, rather than work independently. As Kathleen Schaub, IDC Vice President - Research & CMO - Advisory Service, mentions, “No CMO today can be a good marketer unless they become a good technologist.”
Today’s marketers are harnessing the power of technology to reach out to potential prospects, increase brand awareness, and market new products. It is predicted that by 2025, the overall spend will grow to 10% of the USD 1.2 trillion total marketing spend compared to just 1% today, which is a colossal jump.
The changes are also becoming clearly visible. From companies implementing Customer Relationship Management (CRM) software to use of marketing automation software and digital marketing tools, marketers are constantly engaging consumers in new and innovative ways on various digital platforms. The interpretation of statistics, insights and intricate silos of data are essential in today’s fast-paced digital world is bringing marketing and IT together, shows a new IBM survey, which mentions, one of today’s top priorities is to inject data-driven insights into every marketing decision.
The use of technologies, such as augmented reality and virtual reality, sensors, real-time social listening and several such tech-based marketing decisions are further making the CMO and the CIO collaboration even more potent.
Another very important relationship in the C-suite is IT’s alignment with finance, which is often seen as siloed and disjointed. Several studies have shown CFOs often do not “speak the same language” with their CIOs and IT peers and they struggle to aggregate data across siloed systems beyond their direct financial management tools. As a recent research shows that part of the problem again is incompatible team cultures that are likely to hinder understanding and communication.
Successful organizations have managed to bridge the gap between the two roles. As Deloitte Consulting’s Principal, Matt Schwenderman observes, “The CFOs that I consider being progressive and innovative, look to the CIO for ways to improve their own function, and are using the CIO to bring knowledge and skills that can be leveraged by finance.”
CFOs are increasingly valuing the potential that CIO and his IT team brings, in the form of enhanced data analytics and technology adoption, just as CIOs need to develop greater influencing skills in order to deliver the change their business requires, believes Sunny Gupta, CEO at Apptio.
He opines, “CIO and CFO need to accelerate new delivery models, such as AI, cloud and agile, optimize technology spend to fund new innovation, and boost financial agility to make resource decisions that are aligned with the speed of business.”
A close working relationship between leaders in IT and operational technology (OT) is being driven by digitalization. It is an important factor for improving the trust and confidence of supply chain partners.
While digitalization demands convergence, a report by the Ponemon Institute released in February 2019 shows, executives often see convergence as a challenge that cannot be achieved without support from the company’s CIO and other C-level executives.
Conflicts created by turf and silo issues are also significant organizational barriers to successful convergence. In this context, the creation of a cross-functional team to manage cyber risk across IT and OT systems will help eliminate this problem. A good understanding of third-party risk management, compliance with regulations and standards, and privacy program management can be a game changer, suggest experts.
Another change accompanying digital transformation is the shift in technology spending from IT to the Line of Business (LOB). A 2018 IDC forecast emphasizes that technology spending by line of business decision makers will overtake technology spending by the IT department by 2019-end. Roughly half of that spending will come from the IT budget while the other half will come from technology buyers outside of IT funded by LOB buyers and “shadow IT” without IT involvement.
Eileen Smith, Program Director - Customer Insights & Analysis believes that cloud technologies, especially, SaaS, have been a key enabler for this transition. LOB managers are going for cloud based services, to deliver new services (because of speed and convenience), whether or not they are officially sanctioned by the IT department.
Cloud services will continue to play a large part in making the CIO more efficient. Cloud computing also brings standardization of functions and services, which in turn enables automation and in turn, less time and more productivity. For example, outsourcing infrastructure maintenance and operations to the cloud frees up time, and so allows CIOs to focus more on the strategic needs of the business.
In practice, this means spending more time with LOB managers and with C-level executives, and less time overseeing operational matters.
Chris McGugan, a senior manager with Avaya, believes that the problem that exists is, while IT is focused on siloed technology developments, LOB is working to drive company-wide modernization. “Companies cannot have a siloed approach. Collaboration must increase between IT and LOB, whether that means IT having more involvement in LOB technology purchases or CIOs being more consultative to understand the problems that different business units face,” mentions McGugan in her official blog.
The Way Forward
Collaboration is the starting point for next-generation IT managers, which helps them in understanding not just needs from an external perspective but the way these functional managers think.
But what exactly is the CIO role evolving into? The jury is still out on that one but here are some pointers:
1. As organizations go for technology-leveraged strategic transformation, they expect technology to help them maximize business value, as an organization. This is different from better decision-making or operational efficiency or a specific new capability at a functional level. The whole value accrued to the organization must be more than the sum of parts. Someone needs to drive that.
That someone, for a very few selected organizations, is a dedicated Chief Digital Officer. But more than 95% of organizations do not have a CDO role; most of them do not intend to have one. Yet, they still need someone to put all the pieces together to create organizational value.
That integration has to be done by someone who thoroughly understands technology and its direction as well as business. In most organizations, CIO is the best person to drive that role.
The reason why it has not happened so widely is not as much because the top management has doubt over CIOs’ capability as it is because the CIOs are not ready to move on from nuts and bolts because that may mean giving up control over a big chunk of budget on IT infrastructure. The moment IT leaders are ready to let that go, they will present themselves as the best available—if not perfect—candidate for this new integration role. So, are CIOs ready to be Chief Integration Officers?
2. Governance is becoming a major requirement at large companies. It requires a complete visibility as well as technology understanding today to be able to ensure effective governance. This is another role that CIOs are naturally suited to take up.
3. However, the most important CIO role is in helping to decide on and roll out technology for the organization’s strategic goals and priorities. Today, technology impacts all the three planes—product, process and strategy. The individual business units mostly decide on the product-process related technologies. The organizational strategy—such as leveraging data or switching to platform model or helping create organizational ecosystem (not any subcomponent of it) are still the work of CEO’s office. These changes need to leverage the emerging technology today. That is a role only an enterprise-level technology manager can play. No marks for guessing who that is.
NexGen Managers: Are You Ready?
It is clear that the next-generation IT leaders who are likely to take over as CIO in the next 2-5 years need to be well prepared to take up this new expectation from the CIOs.
While today’s IT managers are well-aware of the need to upgrade their skills, the big change required here is in attitude, not skills.
Here are a few specific changes required:
a. They must start thinking themselves as strategic value creators than drawing their power from big budget and control.
b. Since collaboration is becoming a must in any major transformational exercise, just understanding business needs is not enough. Successful IT managers of tomorrow must be great in relationships and leveraging those relationships.
c. They should try to look at things from an external perspective—an outside-in view. Only that will help them find disruptive changes that can add significant value to business. Internal-focused business need understanding, however strong it is, can only create solutions for already created problem. It cannot pre-empt a challenge.
d. Governance is one area that every IT leaders should thoroughly understand.
e. Finally, every IT leader should figure out how to integrate. The integration skills will be their survival skills tomorrow.
In short, the tech to business transformation of CIO is necessary, not sufficient. A good CIO must be able to work with everyone and integrate to create value that is more than sum of parts of the values brought in by technology to individual units.
It is becoming a core strategic role. But they have to give up what gives them a false sense of power—large technology purchase decisions.