CIOs: What to do with newfound power?

NEW YORK – CIOs have earned respect in boardrooms everywhere, but they’ll have to continue innovating while keeping costs down to retain that respect in the future.

That was the consensus of IT leaders who presented their views at this week’s SIMposium 2003 conference held in New York by the Society for Information Management.

After years of being thought of simply as overhead or a function of finance departments, IT is now being recognized as strategic to business. While that recognition gives top IT execs power, they must use that power to effect changes – or risk losing it.

“We’ve earned a seat at the main table. Now, how do we keep it?” said Dan McNicholl, CIO of GM North America. His answer is to demonstrate value to the business.

In particular, his group was able to show that a centralized network and IT infrastructure for product development – which the company calls the “Math Pipeline” – cut development time on cars from 48 months in 1996 to 18 months today. That, McNicholl said, fundamentally changes how GM operates, giving the company new flexibility and agility.

“This is one of those areas you can point to and say, we made a difference,” he said.

It’s this kind of strategic potential that has raised IT’s visibility in corporate boardrooms, said Richard Nolan, professor of business administration at Harvard University. But the problem is that CEOs and board members often don’t understand IT, leaving technology-related issues solely to IT people. Doing so is an admission that the managers don’t know what they don’t know, and it signals that they don’t value IT.

“That’s dangerous. That’s got to change. That’s an accident waiting to happen,” Nolan said.

However, boards of directors are starting to wake up to this fact. Nolan said a strong analogy is what has recently happened with accounting. When the accounting scandals broke out across corporations, CEOs and board members were saying they weren’t aware of the accounting shenanigans going on. Now, accounting oversight committees are springing up.

Similarly, IT oversight committees are arising out of a realization that IT is as critical accounting, Nolan said. FedEx and Mellon Financial are just two companies putting these committees in place.

While some IT professionals may see such interest from the business side as unwanted interference, most CIOs believe they need the involvement – and the blessing of the business’ leaders – to get things done.

With the backing of new leadership at Campbell Soup two years ago, Doreen Wright was able to begin an IT transformation that will continue for another year or so. The company has collected many individual brands over the years, ranging from Godiva to Pepperidge Farm to Prego. This created a silo atmosphere, with each organization doing its own IT.

Wright set out to change that.

Campbell standardized on LAN and WAN equipment, and took advantage of its size to renegotiate its outsourcing contracts for the whole business. It also saved money by canceling development projects that duplicated efforts.

Top leaders also recognized that Campbell had serious information security issues, Wright said. While she wouldn’t go into detail, she said the company failed numerous internal security audits, and this actually advanced her cause among the top business executives.

“We didn’t have to make a business case” for the changes, Wright said. “There was a leap of faith that this investment had to happen.”

While such carte blanche might be rare, CIOs at the conference agreed that it is possible to find the money to do the things that need to be done.

For instance, former JetBlue Airways CIO Jeff Cohen stressed that, in the current economic climate, it’s inexpensive to get good employees.

“You no longer have to pay extraordinary prices to get good people,” he said. “Spending money on good talent will make your IT structure strong.”

Cohen also is a fan of cozying up to vendors to get deep discounts. JetBlue’s priority was to be one of Microsoft’s “first and best” customers, actively seeking out the vendor’s beta programs.

“If you’re constantly looking at new technology, it’s a lot less expensive than doing a [periodic] refresh,” Cohen said. “We were one of the first to receive new technology, which is a competitive advantage.”

By finding creative ways like that to cut costs, Cohen was able to stay within JetBlue’s strict IT budget of 1.4% of revenues.

GM’s McNicholl said he cuts back spending on legacy programs to “harvest” funds for new ones. With a ruthless focus on cutting backroom costs, the company’s IT spending has decreased, while it retains money for new initiatives. “Is [cost cutting] strategic? You bet,” McNicholl said. “It sounds tactical, but it fuels everything.”

And what does GM’s top brass think?

“We’re heroes,” he said.