BOSTON (06/15/2000) - Relationship management, business partnership, sourcing strategies, visionary leadership--these are the highest priorities for CIOs trying to steer IS successfully through the sea change created by e-commerce. "IT knowledge is almost a liability," says Michael Gerrard, a Gartner Group Inc. research director focused on CIO and IS issues. "What's more important now is an ability for CIOs to develop a sense of strategy and to implement sourcing solutions."
Other analysts and research organizations have studied the forces of change affecting IS and reached similar conclusions. Business owners and external vendors will assume more control over traditional IS tasks. Where contention remains, however, is over the fate of the CIO. Some see the CIO role diminishing to pure IT procurement; Gartner's Gerrard still sees a bright future for the smart CIO. "I don't see the richer CIO roles being significantly usurped by an outside entity," Gerrard says. "I see CIOs becoming much more business visionaries and technology opportunists."
To avoid becoming procurement managers, CIOs have to change their IS management practices. In observing companies that have redirected their IS organizations, we see many common strategies for success.
CIOS MUST BECOME VENDOR MANAGERS Even Bobby Cameron, the Forrester Research principal analyst who predicts "The Death of IT," sees a bright future for the IS leaders who have proven vendor management and partnership skills. IS executives must first recognize that they do possess valuable vendor management skills gained during their years of work with consultants, software and hardware companies, and other external providers. CIOs need to take these skills and make them broader and deeper, going from buying software applications to buying functionality from ASPs, vertical industry portals and other software service providers; from buying boxes to buying hosting services; from "renting bodies" to hiring consultants who help set technology strategy.
These IS people--catalytic CIOs, Cameron calls them--can survive any outsourcing initiative by proving their ability to manage external relationships. In fact, in an e-business environment where partnerships are everything, relationship management becomes one of the key corporate competencies, and the IS executive who possesses these skills can ride them into new roles as general managers or COOs. "Not every CIO is prepared to step into these new roles--to have these new thoughts and conversations about new ways of doing business," Cameron says. "These people face a huge hurdle." But for those IS leaders who can clear the hurdle, the track ahead is wide open.
And while the dotcoms get most of the credit for leveraging multiple partnerships, even some of the traditional enterprises are changing their partnership strategies. At the Walt Disney World Resort in Lake Buena Vista, Florida, where the IS group has traditionally kept a tight rein on all things IT, President Al Weiss recently hired a new CIO for information technology, former Campbell's Soup CIO and Senior Vice President of IS Roger Berry, in part for his proven ability to forge partnerships. "Historically, we would have gone after someone with a background in IT and various systems," Weiss says. "This time we knew the leader had to have technology skills but also an ability to partner across our complicated corporate organization."
In Berry, Weiss found an IS leader with multiple industry experience (he worked at Tenneco before Campbell's) and a track record developing internal and external partnerships. The latter skill will be especially important as Disney, which traditionally has kept all IS functions in-house, follows Weiss's mandate to explore outsourcing. "In the past, there have not been a lot of [external] systems solutions that could meet all our needs, but now there are real-world solutions coming down the pike," Weiss says. "We're going to leverage the talent out there in the world."
FOCUS ON STRATEGY, NOT TACTICS CIOs content to focus on network uptime and PC upgrades are doomed to be replaced or superseded by someone the business views as a strategic leader of technology. This isn't just about outsourcing (although outsourcing is a component of shifting IS's emphasis to the strategic); CIOs must become strategic tutors to the other Os in the business.
As businesspeople take on increasing levels of responsibility for technology, they can always use IS's advice on purchases and partnerships. To leverage this position of "most favored counsel," CIOs must develop their relationship management skills--work with the business users to help them understand technology and the cultures and contracts of the external suppliers that will increasingly provide that technology to the business. "It's almost a consultative role," says Alastair Robertson, leader of Andersen Consulting's Leadership Development Practice Area.
Robertson has studied in-depth the evolving role of executive leadership, and he identifies a growing opportunity for CIOs to teach business leaders the possibilities of IT. "If CEOs don't understand IT, then they will shy away from it," Robertson says. "You'll see CEOs calling on their CIOs to play more of a partnership role and stretch the range of the CIO's skills." Rather than a career setback, this move could be a significant step toward a COO or even a CEO role.
At New York City's Aetna, where IS and the business side are collaborating to fulfill the company's e-health initiative, CIO John Brighton has already embraced the role of relationship manager for his colleagues. "I'm the facilitator, the negotiator, the bridge between business senior managers and vendors," Brighton says. But he's not the only person in his company who understands IT--that's a new reality for the catalytic CIO. Business users are smarter and more demanding than ever of their IT suppliers. "It used to be that businesspeople didn't care what technology they sat on so long as it worked," Brighton says. "Today they know the difference between Java and Cobol." They also know the difference between real vendor management and someone who's faking it.
MAKE OUTSOURCING THE FIRST OPTION Smart CIOs operate with the confidence that not everything should or will be outsourced, but they also have the resolve to outsource everything they can. Marty Lippert, CIO of the Toronto-based Royal Bank of Canada (which owns the Security First Network Bank), is constantly looking for new opportunities to outsource internal IS functions. He's already outsourced credit card processing and some application development, for instance, and he's looking for new opportunities to save costs and improve IT efficiency. But Lippert also realizes that there are some tasks that can't be outsourced. "I look at 100 million lines of legacy code running on our embedded systems, and at this point, at least, that would be difficult to outsource," Lippert says.
Rather than viewing outsourcing as a threat to marginalize the IS contribution, Lippert looks at the practice as a means of distinguishing IS for its ability to choose partners and manage relationships--highly desirable skills in the new economy. "We're continually active in increasing the number of partnerships and alliances we enter into with third parties," Lippert says. "As we add more and more third parties into the IS mix, the degree of complexity increases as well.
That trend further suggests a need for a strong and focused IS group to manage that environment."
CIOs should see outsourcing not as a threat but as an opportunity to enhance IS's impact, says Charles Popper, former CIO of Merck & Co. and now managing director and chief technologist at Orama Partners, a New York City-based e-commerce consultancy. "The role of the CIO is to get the work done regardless of who does it," Popper says. "I never cared whether I was buying [the services] internally or externally. There were requirements and standards, and I held people's feet to the fire to make sure the work got done."
LURE NEW STAFF WITH UNIQUE OFFERINGS Contrary to popular opinion, not every skilled IS worker wants to sell his or her soul for stock options. Some talented--yes, even some young--technology people still prefer the sane hours, financial stability and solid benefits of a traditional corporation. But the work has to be important, something that will set the company apart from its competitors, or something that fills a vital need that no outsourcer, consultant or ASP can provide. That means focusing development efforts on differentiating Web and electronic commerce functionality, or setting people loose on really challenging integration efforts--linking the back-office systems to the website so that the company can do electronic commerce, for example. "There's still a huge integration job to be done in enterprises," says Rich Brennen, managing director of the IT practice at Spencer Stuart, a Chicago-based executive recruiting company. "That's what distinguishes your IS people from the company down the street: You can outsource components of technology, but the integration of those components can't be outsourced."
Royal Bank of Canada's Lippert is adding people to his electronic commerce team as quickly as he is outsourcing functions that primarily require maintenance and support. He's hiring IS talent skilled in such hot technologies as Java programming, Internet development and TCP/IP networking. These are the people who are building the e-commerce systems that Royal Bank will retain as competitive differentiators. Everything else, as far as Lippert is concerned, is on the table to be outsourced if the right opportunity arises.
WORK WITH THE BUSINESS--NOT AGAINST IT--TO MANAGE IT At Sony Electronics in Park Ridge, New Jersey, CIO William Gauld finds himself inside a traditional enterprise that's trying to become an e-business. There's already a separate e-solutions team--the business-driven, IS-supported group that's focused on creating Sony's Internet presence--while Gauld's IS group concentrates on infrastructure, data management and application development. Gauld foresees a not-so-distant future, though, when the business process owners will take control of the applications. "Once we get to the point where traditional apps are replaced with workflow software, then the businesses will take over significant aspects of the IS group's application development role," Gauld says, believing the next generation of apps will be more plug-and-play than the current. "I think we're a ways away from that," yet headed in that direction nonetheless.
To prepare for this divestiture, Gauld is focused increasingly on driving business process improvement. What new technologies or partners could be leveraged to improve procurement or fulfillment? Some IS personnel now are assigned to work in the business units and vice versa in cross-business partnerships aimed at making the technologists more process-aware and the businesspeople better IT vendor managers. "We have to move quickly to help the business sort out what technologies are appropriate for us and what would just be nice to have," Gauld says. "It can be mind-boggling. We've got to help them understand what's relevant, what's not, and then we've got to create the infrastructure that allows us to evolve as a business quickly. It's not for the faint of heart."
MAKE A NAME FOR YOURSELF Call the top IS position anything you want--CIO, CTO, C3PO--the bottom line is that businesses will continue to need a senior-level IT person to drive strategic technology initiatives. That position isn't going to go away, no matter what you call it.
But it would be naive to think this title debate doesn't complicate things for the IS executive. The CTO title especially has created a lot of buzz (see "The Wolf at the Door," CIO, May 15, 2000). Companies suddenly are creating CTO positions, CIOs are transitioning into them, and some executive recruiters are even changing the names of their practices to reflect the market buzz about CTOs. Phil Schneidermeyer, a senior recruiter for Korn/Ferry International, used to be known as the head of the recruiting company's CIO practice, but now he calls himself the Technology Officer Practice Leader. "I'm filling more CTO positions now than CIO jobs," Schneidermeyer says. CTOs are what his clients demand, in some cases no doubt just because the title is hot.
Clearly, career decisions are being affected by people's definition of these roles. But two important points for IS executives to focus on are, What kind of leader do you want to be? and How will you define and market yourself? After all, the names might change, but the IS executive's job remains the same, and the business and technology demands will only increase--that's the one point upon which everyone agrees. "Companies want it all," Schneidermeyer says. "They absolutely want it all."
DEATH DEFINING Forrester's maverick analyst explains his prediction of IS's demise First of all, Bobby Cameron never actually says the IS organization is going to die. Yes, the Forrester Research principal analyst's January 2000 report is entitled "The Death of IT," and certainly Cameron raises several legitimate concerns about the future of the IS group. But, no, he never really says IS is going away--just that it's going to play a far different, lesser role in e-businesses of the future. CIO asked Cameron about his forecasts and the reactions they've received.
CIO: WHAT DO YOU MEAN WHEN YOU SAY IS WILL DIE? Cameron: The IS organization may stay on as a specialist group in companies that need a savvy procurement person for IS...but as the owner of all things high-tech, the IS organization is going to go away.
CIO: OTHER PEOPLE HAVE MADE SIMILAR "IS IS DEAD" PREDICTIONS BEFORE. WHAT'S DIFFERENT ABOUT YOURS? Cameron: Before, people assumed that there would always be a separate business unit managing technology. I'm saying that, as a logical extension of the move of technology into the business units, the presumption that it's a good thing to have technology [management] inside [a company] shifts. Now the idea is that if you can acquire this technology outside the company, then that's a good thing.
CIO: YOU SAY COMPANIES WILL BUY THEIR IT SYSTEMS AND SERVICES EXTERNALLY. WHAT WILL THEY RETAIN IN-HOUSE? Cameron: They'll keep a CIO equivalent, someone who will own nothing but research--no applications development or operations responsibilities. Companies will retain IT skill sets only to do things that are related to competitive advantage or can't be found outside the company.
CIO: WHAT HAVE BEEN THE REACTIONS TO YOUR REPORT? Cameron: Confusion. Anytime you've got a large organization like IS, it's hard for people to be able to see it ever going away. But the topic is shining light on how the technology management environment exists today. CEOs and CFOs are much more inclined to have this conversation than CIOs are. The CIOs are the most confused. They were hired to be control freaks; now they're faced with driving business change.
It's a huge problem for them.
CIO: HOW WILL CIOS RUN IS IN THE FUTURE? Cameron: The smart IS manager will restructure the IS organization by process, push as much as possible outside and prepare the enterprise for the transference of IT capabilities to process owners. The right [CIOs] are leading that change; the wrong ones are worrying about it. -T. Field