Once upon a time, in a land that looked a lot like our own (only with far clunkier—and fewer—smartphones and computers), CIOs and their IT departments ruled over their technology fiefdoms with an almost absolute power. Centralized IT shops controlled the technology infrastructure and doled out tech services to business units and employees: They told departments which technology they could have, how long they would have to wait to get it, how they should go about learning it, and what they could and could not do with it.
That version of IT in corporate America is starting to sound like a fairy tale, and it's not hard to understand why.
Thanks to cloud computing, the proliferation of mobile devices, and the ever-amassing amounts of data, customers—both of the company and of the IT department—are feeling powerful and entitled, and CIOs and their IT departments are being forced to change. On the one hand, there are plenty who think the CIO and the IT shop are headed straight for commoditization. On the other hand, the opportunities to become a key strategist who helps to lead business technology strategy is very real.
(Tech) Power to the People
It can be truly dizzying to step back and ponder just how much the technology landscape has changed in recent years. Remember how BlackBerry was virtually synonymous with the word smartphone, or that the iPhone was only introduced five years ago? Then there are the recent advances in laptops, and introductions of tablet computers and e-readers. And what about the time when cloud referred to a fluffy white thing in the sky? Add to those the increasing number of social media platforms and the amount of customer feedback and interaction they enable.
"The rate of technological change is only getting faster," says David Nichols, Americas Advisory IT Transformation Leader for Ernst & Young. And as technology becomes more complicated, it's becoming exponentially difficult for the CIO keep up, he says.
Nichols points to consumerization of technology as a particularly powerful force driving changes in businesses and thus in the IT shop. "Technology has entered people's pockets, and people have gotten used to getting complicated service in simple ways."
This in turn can increase frustration with IT, he says. The expectations of customers and end users are growing right along with the proliferation of technology, and their patience with IT is shorter because of it: Why is getting the technology I need at work so difficult when it's so easy at home? Why can I buy a smartphone, download all my contacts, access multiple applications, and make my life easier—and do it quickly—yet work technology offers such a different experience? The result of this frustration? People simply go outside of IT.
"IT is now being put in reactive mode," says Nichols. "It's the first time in history that the CIO is not making all the decisions on what technologies are being used." It's not like it was before where the CIO said, I'm going to tell you what to use and how to use it. Now, end users can more easily say, Fine, I'll figure out how to get what I need without you.
"End users are forcing IT to react," says Nichols. And there's no going back. "The CIO must respond to customers—both inside and outside the organization."
Principal and founder of IT consultancy Gabriel Consulting Group Dan Olds agrees. With today's instant communication, customers can find out mountains of information about any given product or service and buy it from almost anywhere in the world, he says. This has put great power in the hands of buyers, and has put a tremendous amount of pressure on businesses to change, he says. And in turn, it gives new stress to CIOs and their IT departments.
IT: More Important—and More Marginalized—than Ever
Just how much are IT departments changing? According to one recent report, The C-Suite Challenges IT, which polled more than 500 C-suite execs, a little more than half believe their IT function will change in a significant way over the next three years, and 12% expect a complete overhaul.
Changes in cloud, mobile, and data are at the technology heart of this trend. For example, one-half of respondents reported that they want to improve customer service by investing in mobile innovation, and three-quarters think investing in data analysis tools that create insights from the mass of business information would help them make better decisions.
Nearly one-half say their company is using private cloud services, and just over half are using cloud models to access business applications as a service. A substantial minority (34%) of companies are even using the cloud for business critical functions.
But don't think that IT is leading this charge. According to the report, one out of six CIOs are either simply "consulted" or have no role at all when IT strategy is formulated. In other words, they are merely implementing rather than playing a major driver of business technology strategy development. The report points out that the marginalization of the CIO and the IT shop is worsened by the disconnections between CIOs and their C-suite peers. Fewer than half of C-suite executives rate their own CIO positively in terms of understanding the business (46%) and the technical risks (44%) involved in new ways of using IT.
In other words, many CIOs have no role in setting IT business strategy, but are merely "implementers." And in the opinion of many, that's a big mistake.
The Danger in Relegating IT to the Workhorse Role
It's incredibly risky to marginalize the CIO and the IT department, says Nichols. For one thing, companies that leave out the IT group run the risk of duplication on multiple fronts, such as purchasing, services, and application development. "You're simply not leveraging your buying power," he says. In addition, although business units may have a better sense of what their technology needs are from a certain view, IT is more likely to understand the deeper implications of a given technology, for example, how that technology fits within the landscape of a company's many technology platforms or how what one vendor offers stacks up against the company's current technology platforms.
Indeed, according to the aforementioned survey, superior financial performance and a CIO who is involved in setting business strategy appears to go hand in hand: Of the 37% of respondents who say their CIO is actively involved in setting business strategy, 47% describe their company's financial performance as superior to that of their industry peers. Compare that with the 20% who say their CIO has no role in business strategy; of those, only 28% say they are performing better than their peers.
Such stats align with Gabriel Consulting Group's Olds take as well, both from the clients he has worked with and from studying the business landscape at large. "The top performing companies are those in which the CIO has a seat at the table." On the other hand, he says, companies with commoditized IT tend to underperform their competitors. Those businesses ignore IT at their peril, essentially leaving revenue unrealized.
Olds recommends that companies include IT "early and often." Making the CIO a key part of the business strategy team will pay dividends, avoid problems, and help generate solutions and new approaches. As an example, he points to the mergers and acquisitions landscape: Companies that included IT as part of initial and ongoing processes were better able to troubleshoot issues around merging technology platforms and create solutions to do so well, thus avoiding customer retention issues and more.
What Is IT Doing Wrong?
So if IT leaders are so important to creating successful companies with strategic IT, why does any CIO get left out? "The business-IT divide is not a one-way street," says Olds. IT has at times been guilty of creating an even wider divide, he says. One common issue is not being accessible enough, he says, and another is relying on "tech-speak" or having a superior attitude: This is technical—you wouldn't understand.
Another problem can be IT folks who make no effort to discuss technology solutions in a way that is accessible to the businessperson. Then there is the "IT-knows-best approach"—You tell us what you want, and we'll tell you what we can give you—an attitude especially prevalent among those who can best be described as "old school IT." With that kind of attitude, it's impossible to actually understand business needs and processes, because that requires listening and being open, for starters.
To stay relevant, competitive, and, for that matter, employed, such attitudes have to change, says Olds. Today, if you're hard to work with people will leave you out of the important conversations or they will simply outsource their tech needs to third parties.
Nichols agrees that some CIOs and IT groups play a large part in contributing to the business-side's negative assessment of them. "IT can be slow to react," he says. In many cases, blame it on being tired. After one or two big IT change efforts, IT folks settle in, get too comfortable, and in today's world, that's a huge mistake, he says. "If you don't embrace change, you're embracing going out of business." In other words, you have to constantly be thinking, What else can I do to help save costs or grow the business?
Three Tips for More Strategic IT
Companies do need to realize that CIOs are a crucial part of the business strategy team. The authors of the "C-suite Challenges IT" report recommend that companies empower their CIO, saying that "increased access to IT infrastructure as a commodity presents an opportunity to rethink—and at times reduce—the scale and scope of the IT function." And a PwC report states clearly that companies who let the CIO report to anyone other than the CEO are doing things wrong. But IT leaders need to be proactive about being seen in a valued and strategic light. Here are three pieces of advice to consider.
Get close to the business. Especially if the perception is that IT doesn't understand the business side, then it's incumbent on IT to be seen, and to learn and understand the business side, says Olds. CIOs and IT staff should actively look for ways to grow the business.
In some situations, the business side might be right that IT doesn't know the business or doesn't want to know, he says. And with huge workloads and too few staff, this may be difficult. But despite that reality (and if for no other reason than self-preservation), IT managers need to do a better job of reaching out proactively—not just saying, We need a bigger role, but instead taking the initiative to meet with their business peers and find out what they need, says Olds. "IT must actively seek out business concerns, and brainstorm how can they help solve those concerns," he says.
Rethink teamwork. Nichols recommends that in addition to IT's greater involvement on the business side, the CIO should ensure that cross-representation in the IT department occurs as services and products are discussed and developed. For example, development teams shouldn't include only programmers, but should also include end users, technology folks, designers, and so on; the appropriate cross-section should be represented.
In addition, Nichols recommends IT departments consider new job roles, for example, including someone on the IT team who is not a technology person but who is intimately connected to the business. This person understands how the company typically generates revenue, acquires and talks to new customers, and so on. Key functions of such a job include making sure that the business segment is happy with what IT is doing, understanding business systems more intimately as an end user, and essentially functioning as a key business liaison. In many companies, says Nichols, such a position is a brand new job and role.
Rethink the IT model. The changing face of business technology is no doubt complicated—just ask a CIO whose IT infrastructure is now operated by multiple external service providers—but these complications are also opportunities for IT leaders to be playing a more strategic role, says Nichols. For example, CIOs and IT can look for the look for opportunities in hybrid IT models to provide valuable insights and business technology leadership in managing multiple vendors and providing more flexible services.
In addition, a progressive IT organization rethinks cost models and let's business units choose from among IT services and charges accordingly, says Nichols. "You pay just for what you get," he says. It's a line of thinking that's becoming increasingly common. The "C-suite Challenges IT" authors also recommend such a tactic, writing that CIOs should "push budgeting down into the business;" those who benefit from a service are the same group that pays for it.
By delving into what makes the business tick, prioritizing relationships with business unit peers, and looking for ways to add value, IT can start to cut through the dizzying amount of change and see next steps more clearly.