September 1 2000 by Peter Buxbaum
Forrester Research analyst Bobby Cameron published a report in January called “The Death of IT,” in which he tolled the bell, not for information technology itself, of course, but for the intra-enterprise IT function and organization. As technology increasingly enables cross-enterprise processes such as e-business, so the theory goes, maintaining and developing IT in house is no longer necessary or desirable. Internal technology ownership migrates to the process level rather than being managed centrally.
“CIOs have already skinnied down their organizations,” says Cameron. “The organizations are no longer dominated by technicians but include businesspeople as well.”
Part of the IT conundrum, for Cameron, has to do with the competencies of the CIOs themselves. The CIO has traditionally been seen as the fellow who keeps enterprise systems up and running-which doesn’t inspire great confidence in CIOs as corporate visionaries.
“In the long run, we won’t need many CIOs as managers of technology infrastructures anymore,” says Tom Davenport, director of the Andersen Consulting Institute for Strategic Change. “One hundred years ago, companies had vice presidents for electrification. Now we just plug the appliances into the wall.”
The CIO’s narrow focus lends itself to the development of enterprise leadership only in a minority of cases. “Only 15 percent of CIOs are company leaders who understand the organizational shift to e-business,” says Cameron, whose figures come from a survey he conducted of 50 Fortune 1000 CIOs. “The bulk, two-thirds, are in a reactive mode.”
Reactive CIOs appear to share a misconception about their e-business role, according to Cameron. “Fifty-eight percent claimed that 50 to 60 percent of their company’s e-commerce budget comes from IT,” he relates. “But when I asked vice presidents for e-commerce the same question, the answer was in the 5 to 6 percent range. That’s quite a disconnect and I tend to believe the e-commerce guys.”
But all is not lost for the hapless CIO, if he or she is able to move with the times. At IBM, a company transformation has led to a hybrid business/technology role for business-unit CIOs, a development that has increased their overall influence. When the company began to transform itself to accommodate to the realities of e-business two years ago, IT underwent a shift in roles and responsibilities, a revision that mirrored changes in the rest of the corporation.
“There is the perception that IT at IBM has become disaggregated or decentralized,” allows Tony Lostaglio, director of technology deployment at IBM Americas, “but what has really happened is a cross-pollination of business and technology.”
Before IBM’s transformation, business-unit CIOs tended to report to the CFO, and IT was thought of as a service provider for the rest of the organization. “The driver was the CFO, and there was a pure focus on the expense side of the equation,” explains Lostaglio.
An earlier attempt to re-engineer business units did not yield the desired results because it was done on a vertical basis, with the focus on the individual unit. “It was difficult to quantify and qualify the results,” says Lostaglio.
IBM finally achieved its desired results once it exploded its vertical silos and instituted a horizontal management matrix. The results changed the way IBM implements technology, as well as how it views its CIOs.
“Before, we thought that the business process executives could describe how they wanted to change what they were doing and then we could let the IT guy take it from there,” says Lostaglio. “With the matrix, we married IT with business strategy and we measure the results in process transformation instead of how much money we can take out of the IT budget.”
Thus, the CIO has become less of a service provider and more of an insurer of information quality and delivery efficacy for end users. “They are business process executives at the enterprise level. They don’t run infrastructures, servers, clients, or networks,” says Lostaglio. “What we were looking for and what we eventually achieved was the homogenizing of IT strategy. By combining technology and business, we transformed IT into an enabler of business change.”
In that regard, the IBM CIO has become an information officer in the truest sense of the word for the first time, although, ironically, the title may not fit the role as it’s traditionally viewed. “To some, the title of CIO suggests a scope narrower than it should,” says Lostaglio. “The job could be called Business Transformation Officer.”
Bill McNee, president of Saugatuck Technology in Westport, CT, and a Gartner Fellow, believes that as IT deployment strategies shift from internal process automation toward e-business activity management, the IT management mission likewise evolves to that of a broker of external and internal resources. With this change in focus, the traditional CIO becomes trifurcated into three core roles, sometimes fulfilled by a single senior IT executive and sometimes emerging as three separate job titles:
1. A new CIO, or Chief Infrastructure Officer, role emerges, as “the senior technology infrastructure manager in the enterprise,” explains McNee, “whose responsibility is to ensure the reliability and up time for all mission-critical systems.” The leading candidates for this role come from ESPs, or external service providers, or from the senior ranks of the internal IT staff.
2. The new CTO, or Chief Technology Opportunist, whose core responsibility is to “evaluate emerging technology offerings within the context of evolving business requirements and opportunities.”
3. The BIE, or Business Information Executive (sometimes referred to as the Knowledge Officer), who is typically “sourced from business, in a rotational program, and whose core mission is to better leverage enterprise-wide information assets and to help improve end-to-end business processes.”
What of all the CIOs who can’t cut the mustard in this brave new world? “High-end CIOs may move into key business positions,” suggests Forrester’s Cameron, who says that all members of the executive team play critical roles in the shift to an “external technology” (exT) environment (see sidebar). “CIOs may become process owners or presidents or COOs. They may emerge as leaders in companies where technology is a key differentiator. The unwashed two-thirds of CIOs are good for dependability and efficiency and will be joining the outsourcing team. They are going to have to follow their skills.”
But the day may yet come when the traditional CIO triumphantly returns to the corporate home office. “The trend toward disaggregating IT is something of a cyclical phenomenon,” says Anderson Consulting’s Davenport. “Originally IT was centralized in mainframes. Then came a trend toward the dispersal of information in departmental mini-computers. Then it went back to centralization with enterprise systems such as SAP. Now, with network computing, there is greater user control over technology.”
IBM’s Lostaglio describes this cycle of expansion and contraction as a tug-of-war over the costs vs. the utilities of technology. “Business managers say centralized IT management is unresponsive,” he says, “while CFOs say a decentralized model is too expensive.”
But Davenport’s pendulum may now be swinging back towards centralization. “As technology becomes cheaper and more networked,” he predicts, “it will lead to yet another trend toward centralization. When functional executives control the applications, life becomes too complex. Networking will take IT back to a centralized model in the next cycle.”
The Tech Transition
“To support complex fast-changing business processes that span multiple companies, firms will disperse technology management across an external technology (exT) environment,” says a Forrester Research report on “The Death of IT.” Its author, Bobby Cameron, asserts that all members of the executive team play critical roles in this transition.
CIOs must drive the creation of a transition plan, “planning specific exT related tasks in the context of other strategic initiatives to help define the timeframes, discrete milestones, metrics and resource requirements that will affect the adoption of exT.”
CEOs must sell exT’s importance throughout the organization, selling the board on the shift of technology assets, motivating mid-level managers to embrace it, and ensuring that the CIO “lets go of IT”
President and COOs must ensure execution of the exT plan, working closely with the CIO to create the plan and holding process owners responsible for accepting technology-related responsibilities.
CFOs must “measure and report eBusiness-and exT-results,” taking into account shifting assets, staff levels, and profit center restructuring in implementing activity-based costing tools “to measure true expense levels.”