Are CIOs losing their mojo?

Troubling statistics and technology trends force top IT execs to reexamine their roles and influence.

A recent SIM International study finds that fewer CIOs are reporting directly to the CEO. Instead, they're answering to less strategic executives, such as the chief operating officer or chief financial officer.

Baby boomer CIOs are retiring and being replaced by less business-savvy (and less expensive) successors. Regulatory concerns are eating up the bulk of IT's time and budget, while increased outsourcing and automation are changing the way business views IT overall. And not always in a good way.

Taken together, these trends don't seem to bode well for today's CIOs and their influence on the business side of the house. But what's the reality? When CEOs and company presidents and boards of directors think of their CIO, do they think innovation? Do they think competitive advantage? Or do they think of someone who just keeps the IT lights on?

While findings like SIM's are troubling, many experts say today's CIOs are actually gaining influence."I'm not concerned – well, not overly concerned," says Jerry Lofton, vice president of academic affairs at SIM International and a co-author of the study. "If we saw the trend continuing, perhaps that would be an indicator. But other findings such as the fact that IT resources, as well as IT funding, are on the rise are very positive in comparison to looking at where the CIO reports."

In fact, IT spending overall is on a growth spurt, with North American IT expenditures increasing 5% in 2007, compared with a 4.1% increase in 2006, and a 2.5% increase in 2005, according to Computer Economics' latest IT spending and staffing survey

And other data seems to run counter to the SIM study. "We see exactly the opposite," says Harvey Koeppel, executive director of the Center for CIO Leadership in New York. "CIOs really are finding their way to a seat and voice at the table and being fairly heavily involved in setting strategic direction and becoming business partners with the rest of the C-level suite."

In fact, in research conducted by IBM and the Center last June, 80% of the 175 CIOs polled felt they were valuable members of the executive leadership team, with 69% indicating significant involvement in strategic decision making.

Survey of CIOs losing influence

The tale of two CIOs

So what's behind the clashing numbers? The role of the CIO is changing, and where it ends up depends on a variety of factors, including the type of business an organization is in, the stability of its technology portfolio, and especially, the CIO's own traits and expertise.

"The role of the CIO is at a crossroad," Koeppel says. "CIOs are in a place where they can start to make choices between developing the business subject matter expertise, business understanding and leadership skills that really can position themselves as strategic partners with a voice and the seat at the table. Or the alternative, which is to increasingly become much more technical and operational, where the focus is much more about keeping the lights on and reducing expenses. Both are in play."

Koeppel and others say recent trends are tugging at CIOs to take on less business-changing, more operational roles, and it's a tug they need to resist. While the operational side of IT is important, it's not the end goal.

For example, consider a large corporation that has grown through mergers and acquisitions. As the constituent companies — each with their own CIO — merge, the former CIOs find themselves reporting to line-of-business executives vs. the main CEO, a situation that could help explain away the SIM data point.

Plus, "large companies that have grown through acquisition tend to have multiple applications for the same business process or proliferation of data centers that have not yet been consolidated," Koeppel says. "For these firms, integration is always an immediate priority. But once the acquisition is done, very often the integration is not completed. And this leaves behind a multiplicity of platforms which then become that much more difficult and expensive to maintain. In those environments, the tendency is very much to spend the dollars on business as usual, keeping the lights on and saving money on IT every year." And that can sap a CIO's time and influence level.

CIOs feel similarly pulled by regulatory requirements, another factor that could be affecting their reporting level. "The CEO may sense that the CIO really needs to have a closer relationship, for example, to either the CFO or COO, especially as they go through the Sarbanes-Oxley, HIPAA and other regulatory changes," SIM's Lofton says.

Because such initiatives become a drain on IT time and budget, the CIO eventually gets very good at handling audits, but less adept at big picture IT innovation.

Another tug is the pull of outsourcing, automation and new tools such as managed services and software-as-a-service. In the end, the IT environment that makes smart use of these tools will become more stable, cost-effective and easy to maintain.

"At that point, problems can crop up," says Josh Hinkle, manager of network management and security at the American Heart Association in Camp Hill, Pa. "When IT is focused on what we can do to manage our networks or our servers better, there's a plus to that. We can provide better uptime and so on. But sometimes people get too much in that mode. It becomes more about making less work for us and not so much about serving the business, which is really where they should be focused. That's a copout to the job."

And it all depends on how the organization views IT, says Jeffrey Kaplan, managing director of Thinkstrategies, an IT consultancy. "If the organization views IT simply as a utility that's best valued if it doesn't create a disruption, then the CIO may be at risk as the systems become more stable and it may be seen as a more mundane responsibility under those circumstances."

The flip side

But CIOs who are willing to resist the tug of operational minutia and instead focus on learning and serving the business can become more influential within their organizations.

Seven nontechnical skills that CIOs must develop

For example, Tom Franciosi, CIO at Covenant Dove, a skilled nursing and healthcare firm in Memphis, Tenn., moved up from reporting to the CFO in his past job to his current position, which reports directly to the chief executive.

"A lot of times, CIOs don't necessarily have financial discipline, and that can lead to them reporting to a CFO," he says. "In my past job, I reported to a CFO and subsequently learned quite a bit there. And I'm bringing all of that knowledge and experience to bear in this role and really conducting myself with the highest business acumen, making sure that the CIO stays a strategic function."

Because Covenant is growing through mergers and acquisitions, Franciosi's first task is implementing a $12 million data standardization and centralization project that will consolidate 35 separate data centers into one large facility in Memphis. The idea, however, isn't just to make IT more cost-effective or easier to maintain, although those goals are important.

"The idea is to engineer into the infrastructure a tremendous amount of flexibility," he says. "Because that will pay off in ways you can't anticipate at the beginning."

In his last job, for example, Franciosi had embarked on a centralization program for the nursing home company's overall time-and-attendance system, as well as implemented Citrix to centralize applications and standardize his end users' desktop experience.

The moves paid off, when in 2004, two of his locations needed to evacuate because of hurricanes. "We had 240 residents that were moved from two locations to six receiving locations, and in the middle of this process, one of the regional vice presidents called me and was concerned about processing payroll and continuing billing and collections, since the employees and residents were spread out all over the place," Franciosi says.

"Because we had made the centralization decisions up front, there was no problem. When they came into the receiving locations, all they had to do was find a local computer and walk up to the local time clock and swipe. Everybody got paid. We continued to do what we had to do, and it worked out fine. I would not have anticipated that as a need when I did the design work three years prior to that, but wow, that really paid off to the business as a whole."

Of course, not every CIO is as effective as Franciosi. According to the Center for CIO Leadership study, a majority of CIOs understand that promoting collaboration between IT and lines of business is a top priority. But only 15% of respondents believe they are extremely effective at doing so, while nearly a quarter rate themselves as at or below average. In other words, there's plenty of room for CIOs to get better at IT/business alignment.

The evolving CIO

Others say the recent focus on handling regulatory requirements can also be used to increase the CIO's role and influence well beyond IT.

"In the next three to five years, I see an evolving CIO that's being asked to solve business problems that in many cases have nothing to do with IT," says Stephen Pickett, CIO at Penske Corp. and a past president of SIM.

For example, a CIO might be tapped to create an engineering release process for the organization's engineering department. "What steps should an engineer follow to properly release a component into production? That's a skill the CIO has because he's had to do that on the technology side. Dealing with regulatory issues like Sarbanes-Oxley has been a great teacher in helping us meet that requirement to be perfect and have a high level of accuracy – and that's something that can be extended to the business overall."

The important thing, experts say, is not the org chart but the CIO's ability to play a strategic role in the business. "Irregardless of the reporting relationship, do they sit on the executive committee, do they have interactions if it's a public company with the board, or at the highest level of whatever their organization might be?" says Robert Keefe, SIM president and senior vice president and CIO at Mueller Water Products in Atlanta. "And when I speak with my colleagues, the answer continues to come back as yes. They continue to see exposure and reliance at the highest levels of the organization."

And that's a good thing, especially with today's rapidly changing technology. "You can't run a company without a strong CIO anymore," Pickett says. "If you do, you're definitely running it with more risk than you should be."

Cummings is a freelance writer in Massachusetts. She can be reached at jocummings@comcast.net.

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