Evolve or be extinct

Evolve or be extinct

CIOs are currently on a challenging journey as their role rapidly changes. They are being pressured to become far more 'business relevant' and can expect to see their importance, profile and pay packets, increase - if they can adapt.

Most executives know how much technology costs, but few can accurately measure how their technology performs. Head count, hardware inventories and budgets can be calculated, but the reasons and metrics underpinning productivity variances, defect rates, root causes of delays and skill leveraging, are a lot less clear.

CIOs need to develop a bigger picture of how their businesses run; they need to demonstrate more flexibility, become more business-minded and be better able to quantify the value of IT.

These are just some of the fascinating revelations about the current quandaries facing CIOs today, highlighted by new research by global management consulting, technology services and outsourcing company Accenture.

The IT Investment: Performance and Priorities in South East Asia's Major Economies project is part of an extensive, ongoing Accenture global research exercise involving CIOs and CTOs across industries and governments in Europe, North America and other parts of the Asia-Pacific.

The research aimed to help executives to better understand the drivers for performance and productivity in managing and executing information technology. Involving 48 CIOs and CTOs in top public and private sector organizations in Malaysia, Singapore, Indonesia and Thailand, the research unearthed some interesting vulnerabilities in the CIO armor.

New projects

A key message was that CIOs must lower their focus on, and maintenance of, IT spending. Instead, they should be actively reinvesting in new projects to meet overall business objectives and to deliver measurable value. The research found they could do this by investing in newer technologies, delivering superior price or performance, new cost efficiencies in business processes, or even by adding strategic value. Closely involved in the project was Andrew Weekes, Accenture's executive partner, technology consulting, for Southeast Asia and India.

Based in Singapore, he specializes in assisting CIOs to create high performance organizations focusing on how to run IT as a business, IT strategy, enterprise architecture and IT governance. Weekes has nearly 20 years' experience leading project teams in the government, communications and high-tech, financial services and resources industries. He also has expertise in service-oriented architecture (SOA) and helping clients align technology and business objectives.

He says CIOs are generally aged in their 50s and up to 40 per cent are women. The research found that Malaysia appeared to be leading the push for CIOs to become more relevant in the boardroom. Singapore followed the American model, with CIOs sometimes at board level, sometimes not. Indonesia had not yet developed the CIO role and mainly had CFOs with the responsibility for IT.

Whatever country they were in, CIOs were struggling with how to shift the mindset that IT was just a cost center, and how to truly make IT a strategic weapon for business.

"They're generally more focused on costs today, because that's what they're being driven with," Weekes says. "But they need to be asking 'how do I free up more of those dollars for more strategic IT spending, how can I actually help the business with real growth or better working capital or whatever it may be'; real business benefits versus just saving costs in IT."

The research found that true high performance businesses treated IT as an investment. Instead of varying IT spending depending on the business cycle, successful enterprises invested year in and year out, something like dollar cost averaging on the stock market.

Weekes says the research found too many CIOs could not quantify the business benefits of IT.

"We sort of hit the CIOs pretty heavily on that, what are they doing today, what do they think they need to do, and there's clearly a gap," he says. "They realize they need to measure IT metrics, measure true business results and outcome metrics. There's a recognition by CIOs, that they need to head that way, and where they are today is a long way from getting there. So there's going to be a considerable journey for them.

"But what they have in place today, to try and measure that and evaluate it, just isn't there. They need to put in their own processes or own ways of capturing information that recognize what's occurring in the business."

Rise of SOA

With SOA becoming a major component of most businesses over the next three to four years, Weekes believes organizations will start service-enabling their businesses, joining business processes and making their underlying structure and processes more agile.

"The CIO will become more like a CPIO, or the chief process information officer. It's that sort of concept he'll have to worry about. And that's how he's going to make himself relevant; he's going to relate himself to the business much more."

He believes having much more of a 'service mentality' will ensure CIOs evolve with the times.

"So the CIO who starts moving to this service mentality in all parts of his organization will become much more about the business processes inside the business.

"As the CIO tries to align more with the business and understand the business processes, he will become much more business-relevant, in the boardroom as well.

"So I think we're going to see a bit of a shift where CIOs need to move. That will be partly driven by some of the technology changes going on, and partly by the business environment."

Innovation is becoming far more important for CIOs who want to stay relevant. "They need to be bringing new things to the business where they can. So they need to be much more interested in looking at merging technologies that can truly add business value back to their enterprise," Weekes says.

"The reality is most don't think this way; they're not progressing as fast as some other countries, like China, which is very aggressive in innovation. They still haven't been able to convince their business that this is the right thing. They're having difficulties turning emerging technology and explaining and articulating it so that the business sees it as true business-enabling value; that's the trick at the moment."

"Lots of CIOs are used to reporting to somebody else on the executive board; they have the title that sort of sounds like a C-level executive, but are they really acting in that? "When they step up to the next level, that will be when the pay increases. Once they become more business-relevant, the business will reward them more as well, on how much they help the business grow and save IT costs."

CEO view

Chief executives CIO Asia spoke to generally supported the Accenture research findings and conclusions.

Barry Cheung is CEO of the Titan Petrochemicals Group, a downstream oil logistics company providing end-to-end sourcing, transportation, storage and wholesale distribution to oil companies and users. Titan operates in China, Hong Kong, Singapore and Malaysia. It is one of the top 10 bunker suppliers in Singapore by volume. "There's no question that IT is an integral part of any organization today, but I'm results-oriented, not technology-oriented," Cheung says. "Technology is there to reduce costs, increase efficiency and improve our ability to service our customers.

"We don't want the CIO to be only a technical person. We want the CIO to be a businessman who has the ability to understand what people do, where they want to go, what needs they have, and to offer a solution to take them there in a way that justifies all the expenses.

"As well as the technical skills, they must have the aptitude to understand businesses, understand processes, people dynamics, have the ability to really work with people and, of course, the ability to manage projects and to involve nontechnical people in the implementation. That's very important.

"The CIO must be someone who's able to make full use of the users; to make sure they receive what they've always wanted and use it to produce great benefits.

"CIOs must be able to encourage the users to take ownership, rather than think IT is something that is just thrust upon them.

"To add value, CIOs must proactively identify improvement objectives and convince users to adopt them."

Cheung says the CIO should be involved in the formulation of a company's overall strategy because that might depend on what technology could bring to the table.

"You want to involve the CIO at the outset so they can know what the company is trying to achieve and perhaps even give input to say what's possible or whether something better should be considered.

"People should view IT as a strategic asset or tool, rather than something they 'have to live with'. You wouldn't dream of doing anything without involving the finance people. My point is; 'why shouldn't IT be the same?"

One very practical demonstration of the value of IT for Titan has been the implementation of SAP at two oil and chemical storage facilities in Nansha and Fujian in China, which, Cheung says, are set to be the biggest of their kind in their respective markets.

He says because of the very high standards of safety, environmental protection and IT automated systems at these two facilities, they have been branded by customs in China, as bonded terminals.

"Now that might not sound very much, but, to have an entire storage facility bonded in China is actually quite unheard of; it's never been done before," Cheung says.

"It's because we have used technology to enable the customs authorities to have complete visibility into our operations; complete transparency.

"We have installed proprietary systems in their offices so they can see everything, down to the temperature in every tank. It has increased their confidence that nothing untoward will happen and it has increased our competitive advantage."

Happy marriage

From energy to entertainment, IT and digital technology have become essential components.

This year, Zareth Nalbandian, managing director and co-founder of one of Australia's most creative and technically-advanced visual effects houses, Animal Logic, won an Academy award for Best Animated Feature, as the executive producer of the hit animation movie Happy Feet.

Animal Logic is also the digital production house behind other popular movies such as Babe, Babe: Pig in the City, The Matrix, Matrix: Reloaded, Moulin Rouge!, Harry Potter and the Goblet of Fire, Stealth and World Trade Center.

Nalbandian was featured on the panel for CNN's Future Summit: Virtual Worlds program, airing on CNN throughout June, July and August, to discuss how technology will change our world.

He has no doubt about the value of IT to his business and says Happy Feet simply could not have been made without digital technology.

"While we were making it, we were rated the 86th biggest super computing center in the world, which was ahead of the Pentagon at the time," Nalbandian says. "It was quite an achievement because we had a 4,000 CPU render farm, with 2,000 dedicated blade servers, each with two CPUs, running."

A render farm is a large cluster of computers used to render computer-generated imagery (CGI) which requires very intensive calculations. Each frame of animation can be calculated independently with the main communication between processors being the upload of initial models and the download of the completed images.

Nalbandian says film is a tough industry, because the cost of technology investment is huge, but the shelf life of the technology is very short.

"On top of what we buy, we spend a huge amount--millions of dollars a year--on research and development to stay innovative and competitive, yet the business we're in is not consistent, it's very cyclical. It's very dependant on when someone comes up with an idea and when a studio chooses to finance and green-light it, and, because of the cycles, we have to be very prudent managers."

Animal Logic designed the now-famous 'code' in the Matrix films.

"The design of the code was one thing, but having a stream in the way was another, and it required some, not overly complex, but some original software to be written for that streaming to occur both in two and three-dimensional space," Nalbandian says.

"That was a great example of design and technology coming together to support a really great idea in a film, which became quite a popular culture. It was on every screen that you saw after that as a screen saver for years to come.

"In other films, it's less obvious, like Moulin Rouge, where we married traditional technology of miniature sets, with digital sets, and the marriage was seamless."

Animal Logic is now working on the visual effects for director Bazz Luhrmann's new film Australia, starring Nicole Kidman and Hugh Jackman.

"It's a big boost to the northern part of Australia, of course," Nalbandian says. "I think Bazz is going to be a real statesman and a champion for Australian tourism, and I am sure that the film will bring a lot of attention back to Australia as a great tourist destination."

Ross O. Storey is a director, manager, editor, writer and communications strategist, formerly based in Australia, now working in Singapore. He has 30 years' experience in the media industry.

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