SPECIAL REPORTTHE CEO GUIDE TO TECHNOLOGY
The CEO's Tech Toolbox
Tech's "Dearth of Innovation"
Tech: Spending Wisely, Not More
"The Door Is Unlocked" for CIOs
Slide Show: Tech for the Chief
There's an old joke that CIO (chief information officer) really stands for Career Is Over. Well, that can't be the case if you accept the Watergate-era advice from Deep Throat and follow the money. According to consultancy Gartner's 2005 survey of 1,400 CIOs, two-thirds of their companies are actually raising their information technology budgets faster than their operating budgets for the first time in years.
"It's not so much that they're expecting miracles [from technology] as much as they're expecting serious contribution and significant results," says Mark McDonald, Gartner's head of executive-programs research. "We see companies that are looking to grow fast coming back to recognizing that there's an investment in technology that they need to make."
CIOs that turn in solid results get asked to join CEOs in mapping out corporate strategy and entrusted to manage projects outside of IT, says McDonald, who's in charge of administering Gartner's annual survey.
McDonald, who prior to joining Gartner was a partner at management consultancy Accenture, met recently with BusinessWeek Online reporter Olga Kharif to talk about how CEOs can use information technology to their best advantage and how they should evaluate the performance of their CIOs and IT departments. Following are the edited excerpts of the interview.
Q: The dot-com bubble and Y2K fiasco caused a backlash among some executives, who felt that technology was oversold. Is that view changing, and is information technology becoming more strategic in the eyes of top execs?
A: CEOs are recognizing that, of all the levers they have to implement their strategy, technology can push all those levers. You want to change the sales force? Part of that change revolves around technology. You want to change the supply chain, how much inventory you need to have? That has a technology component as well.
The big thing that everybody has learned [over the past few years] is it's not technology alone but technology used appropriately, together with changed business processes, that can really deliver the big bang for the buck.
Q: Is that changing the role of the CIO?
A: We see CIOs' credibility with CEOs being driven by two factors: One, by how well the CIO runs IT -- are they managing their resources responsibly? Are they providing quality services? Two, by how well IT helps the business to achieve its goals.
Businesses that achieve their goals generally do that with a really effective IT organization. We don't know the cause and effect quite yet, but we do know that at about half of those highly effective businesses, the CIO reports directly to the CEO.
Where they have low IT effectiveness, the CIO reports to some other officer. So the good news is, the CIO's relationship with the CEO is a function of how well the CIO delivers business results -- the same as with any other business manager.
Q: How would a CEO evaluate whether an IT organization is doing a good job?
A: On a basic level, is IT meeting its current obligations, such as providing services to users? Then, does the CIO understand the company's strategic direction and are decisions made that support it, as opposed to just making decisions that support IT?
And the final criteria: Does the CIO bring multiple options to the table to help solve business problems? Oftentimes, CIOs will say, "This is the only way to do something." But CEOs are business people, and they know that there are always options. So to present only one option really damages the CIO's credibility.
High-credibility CIOs come with a business solution to a problem and a couple of technology options to solve it. Then they enter into a dialogue with the CEO about how to solve the business problem.
Q: What was the biggest surprise in Gartner's 2005 CIO survey?
A: One was that there was definitely a group of CIOs who are contributing to the business and who play a substantially different role than all the other CIOs. They're at the strategy table. Their priorities are markedly different, in terms of being focused on competitive advantage and growth.
Another interesting discovery was that a number of highly effective CIOs should probably be pursuing higher-growth strategies than they're pursuing right now. They should be aiming higher.
Q: How do you know that?
A: We took the IT and business measures that we use, and then we looked at companies' stated strategies. We had a number of companies whose stated strategy was to grow at the market rate. But their IT effectiveness was much higher than other companies'.
So there was some hidden opportunity. We found a lot more power in some businesses' ability to execute than their strategy would entail. Their strategy is to just keep up with the traffic. But in reality, they've gotten a sports car.
Q: Whose fault is it that these companies aren't taking advantage of the sports car?
A: I think part of it is that these companies have never looked at IT this way. One of the things that's very hard to figure out when you're sitting inside the company is: Who else is in the traffic? And how good are they?
When you evaluate 1,400 companies, [as we did in our survey,] you can begin to identify companies with a lot more power under the hood than they're taking advantage of.
Q: This survey was done several months ago. What has changed since?
A: A couple of things. There's now a real recognition from CIOs that they have an opportunity to be bigger business leaders, provided that they have an effective IT organization. CIOs that can say what they're going to do, do what they say, and deliver the business results are really starting to get rewarded now with responsibilities outside of IT.
One example: IT departments are, generally, pretty good at managing their suppliers, whereas a lot of other parts of the organization don't manage their vendors well. So we've seen CIOs starting to get responsibilities for managing vendors and managing alliances outside of IT. We've also seen CIOs that are good at project management being given responsibility to manage product launches.
Q: So it's not a dead-end job anymore.
A: The door is unlocked for IT organizations that can deliver results and solve business problems. The door isn't open, but it's unlocked now. So the potential is there for them to play a bigger role.