In 2007, Michael Spears became CIO of the National Council on Compensation Insurance. It wasn't the usual promotion. Spears had spent two years as the NCCI's chief data officer, and he kept that role when be became CIO. In his dual capacity, he oversees both the IT department and the data resources division, though they operate as separate entities. Over the years, he says, the CIO and CDO roles have sometimes been held by different people and sometimes by the same person.
Spears has taken some ribbing for his CIO role from his colleagues in the data analytics world. "I was just at a data conference where people were making fun of me for being in both roles. They said, 'You can't get lumped in with IT — it's just bits and bytes. You won't be respected for the knowledge you have about data.' But it doesn't have to be that way. It depends where the value is coming from, the skill sets of the leaders, and what's important to the company at that time."
In fact, many of the technologists working in the NCCI's data resources division aspire to a move to IT. "That would deepen some of their skills and open wider opportunities at NCCI," he explains. "IT developers work closely with our business units. For example, the actuarial group does some of its own things. IT people may be embedded in their department. It would be unlikely for a data person to get that kind of opportunity."
[ Learn from your peers: Check out our State of the CIO 2017 report on the challenges and concerns of CIOs today. | Find out whether you have what it takes to be a next-generation CIO and how IT leaders transform their organizations for the digital era. | Get weekly insights by signing up for our CIO Leader newsletter. ]
Welcome to the contradictory world of technology in the modern enterprise. Both the perception of IT's value and its status within an organization are in constant flux. The question is how to prove that value and maintain that status when IT's role as purveyor of all technology is nothing but a distant memory.
Just how distant is clear in the results of a recent report by managed services provider Logicalis, which surveyed 708 CIOs around the world to learn how the role of the CIO is changing. Among respondents, 84% reported that their companies' line of business departments employ their own IT staffs.
Forty percent of the CIOs said that they make 50% or less of the IT decisions for their companies. And 39% said that business departments buy their own technology without consulting IT "often," "very often" or "most of the time." Meantime, IT departments themselves perform a shrinking proportion of the technology work they still oversee, with 24% of the respondents saying they outsource more than 50% of their IT and only 9% saying they outsource none at all.
If outsourcing is the norm, and business departments outside IT are increasingly procuring their own technology, it may be time to ask exactly what IT's role and identity is in the modern workplace.
Smart CIOs, industry experts and publications like this one all agree that CIOs need a seat at the table; that IT must align itself with business objectives; and that IT can no longer act as a gatekeeper, exerting veto power over new technologies and forcing an organization to move slowly in these fast-paced times.
But once the industry has agreed on these principles, then what? How can IT continue to prove its worth in this changing business environment? How can IT leaders thrive in a constantly evolving world where less and less of their companies' technology is under their direct control? And should they be fighting to regain that control or learning to adapt instead?
These are questions without easy answers. And CIOs and other technology leaders need to make some important choices on the way to answering them.
Cost center or revenue driver?
Whatever IT's identity within an organization may be, if it's primarily viewed as a cost center, that's not a good thing. "IT is a foundational element," says Ed McLaughlin, CIO at Mastercard. "You really have to cease thinking of technology as a cost center. Technology is one of the primary assets of a business."
That doesn't necessarily mean that you should spend more money, he explains, but it does mean that both business and IT leaders need to think of IT as more than just a necessary expense, to be reduced as much as possible. "You think about your assets differently," he says. "So you move away from thinking in terms of implementation projects, and more about how to run ongoing programs and get a feedback loop where you're constantly optimizing those assets."
Some of that effort goes straight to the top line. "How do you optimize new value creation?" McLaughlin asks. "How do you optimize processes that make it easier to onboard customers and provide customer support?"
"The base function of IT is as a cost center, no different from HR or accounting," says Deanna Wise, executive vice president and CIO at Dignity Health, which operates in 39 hospitals and 250 healthcare sites in Arizona, California and Nevada. "There are some core functions that cost you, but you need them to be in business."
That said, it's smart to look beyond that base function, she says. "Partnerships with the business, being innovative and seeing how you can drive a better customer experience does translate into revenue. There are a lot of forward-thinking CIOs, and that is what they're thinking about. What new programs and new initiatives can you use to drive revenue throughout the business?"
CIOs who fail to ask these questions do so at their peril. "If IT is just perceived as a cost in your organization and you do nothing to change that, I think you're going to find yourself out of a job," says Wise. "You've made IT a commodity, and commodities can always be replaced."
What if you aren't sure how to be seen as a source of revenue and not just cost?
"Strong CIOs are not pulling themselves down into the weeds of managing a cost center. That's why they have VPs," says Patrick Meehan, a distinguished analyst in Gartner's CIO Research group. Instead, he recommends "buckling down" IT into a very efficient business services organization and finding a second-in-command who can oversee "keeping the lights on" functions and work with the business to make sure that the terms of service-level agreements are met and that the organization is getting the best value for its IT dollars.
Once that's done, he says, you should reallocate some of the savings from IT efficiencies to work with other areas on front-office functions and channel strategies — projects that grow the business and help create revenue. That way, he says, "you're moving from a cost center to a profit center."
What if the rest of the organization persists in thinking of IT only as a cost center? In that case, Meehan advises CIOs to find initiatives in which they will have profit-and-loss responsibility. "Get a partner, perhaps someone you've worked with before," he says. "You need a win here, a hook there. Once you've proved you can do it, other P&L leaders will see it and will want to play with you, too."
Data owner or data support system?
The number of large organizations with chief data officers has more than doubled in the past three years, and Gartner predicts that by 2019, 90% of global organizations will have one. Should IT departments welcome this development or fight to keep data analysis for themselves? It depends a lot on the CDO's reporting relationships and functions within an organization, and whether IT has the skills and capacity to manage data analytics.
One thing's for sure: If you want to turn enterprise technology into a source of monetary value and not just an expense, data is a great place to start. "From 1990 through 2010, companies averaged 4% productivity gains every year," says Jim Fowler, CIO at GE. Most of those gains came from technological improvements. But, he says, during the past five years, companies saw little or no productivity gains, and they began experiencing productivity losses early this year.
"That's the call for change in my role right now," he says. "Productivity gains in the next 10 years are going to come from connecting the value stream of information in a business, information about products, all the data coming off machines and turning that into signals that will help automate work."
Many companies get monetary value from the data itself. Mastercard was an early convert to the value of data and has been warehousing its transaction data for years. The company used that resource to build Mastercard Advisors, a business arm of Mastercard that provides data-driven insights to the retail, financial and real-estate industries, among others.
Similarly, at NCCI, the data resources division is a business unit, Spears says. It manages data from insurance companies, aggregates that data and turns it into useful insights that it provides to customers. "Data has been our lifeblood for almost 100 years," he says. "We were built on collecting data and making these end products available."
But when asked whether his role as CIO or CDO is most important, Spears says they both are. "It depends on how you look at it. On one hand, getting the data, and [ensuring that it's accurate and useful], is the most important thing we do for the company. On the other hand, everything we offer is through technology."
Larger organizations may truly need a dedicated CDO, says Christine Brady, CIO at Coastal Credit, an Indianapolis-based lender serving auto dealers in 26 states.
"Data is so vital to any organization's success — the complexity of your data, how many silos you have, how fragmented it is and what you need to do with it — that it could be a dedicated group on its own," she says. "At a certain size and complexity, I don't think one person can head up both of those."
But other experts believe data belongs firmly under IT's oversight. "If I were the CIO, I would want to make sure I owned data modeling, data governance — that I owned the data and had the right legal agreements in place," says Kevin Baril, a principal specializing in technology strategy and management at advisory firm Grant Thornton. If a company has a chief data officer, that individual should report through IT, he adds.
Keith Collins, executive vice president and CIO at SAS, a data analytics company based in Cary, N.C., with worldwide revenue of $3.2 billion, believes the growth of the CDO role at least in part reflects IT's failure to step up and take on one of technology's most important value-add functions. "The first thing I did in the role of CIO was I took all the [database administrators] and business analysts, and we did a week of data analytics training," he says.
"When I talk to a lot of my peers, I ask how much are they investing in education on basic analytics, forecasting and modeling, so they can answer a question for a business partner who wants to understand churn. The responses are mostly blank stares," he says. "Shame on IT, and shame on CIOs, if they don't help their companies analyze data without creating a separate organization that becomes another quagmire of who owns what."
Technology enabler or corporate strategist?
With so much IT going on in every corner of most organizations and outside IT leadership's direct control, some experts argue that the IT department's most useful role is to provide guidance, consultation and a secure and robust environment to support the often cloud-based systems it no longer owns. In this model, IT functions like a modern-day movie studio, says Charles Araujo, principal analyst at Intellyx and author of The Quantum Age of IT: Why Everything You Know About IT Is About to Change. "Today, a movie studio owns the lot and helps with distribution," he says. "But they're bringing together a lot of other organizations that actually make the movie."
Although that may sound like a keep-the-lights-on role, an IT organization that can do this well will create competitive advantage for the whole company, Baril says.
"Almost all organizations have a difficult time providing information architecture and software architecture that's able to drive the strategic vision of the company," he explains. "Being able to create a platform that quickly can respond to different initiatives and different needs is very strategic. It is a skill in and of itself, and companies that have it will beat their competitors to market. Having an information architecture and strategic software platform that allows a company to move at the speed it needs is a differentiator."
But some observers argue that CIOs should be defining strategy and not just enabling it. "A lot of companies think they have a CIO and they really have a director of IT services," Meehan says. "If you're struggling with satisfaction quotients in an IT survey around your basic services — things like laptop deployment and desktop imaging and help desk — you're a director of IT services. That's also true if you are still struggling with piles of applications and platforms in your back office and you haven't cost-optimized, centralized and standardized these functions."
On the other hand, he says, "If you're driving strategy, creating a digital, high-performance workplace, and working in consultative fashion on product development, you're a CIO."
Fowler agrees. For example, although GE's field service engineers were perfectly content with how they were doing their jobs, he suggested to them that it was time for a change. "I said, 'You're still doing this on paper.' We consolidated 86 different functions in a system that was built for a field engineer." As a result, he says, one of those services saw a productivity gain of $200 million last year.
"For years, we've been hearing that process should drive technology and technology should never drive process," he says. "I don't believe that's true anymore. Technology is becoming the process. In a world of automation, where machines are telling people what to do more than people are telling machines what to do, the person who's been doing this for all these years should be the one to explain how the work gets done. We should have the credibility and the influence to step up and show people there's a better way."
How to cope with technology outside of the IT department
The Logicalis survey also asked respondents how much of the IT decision-making at their organizations is handled by CIOs and how much is handled by business executives. Only about 6% of those polled said the CIO makes 100% of the IT decisions.
That figure has been dropping steadily for three years. CIOs who once talked about how to shut down "shadow" or "rogue" IT now mostly face a reality they might not like: They're no longer in control of all or even most of their companies' technology decisions.
How do you deal with security, compliance, licensing and integration issues for systems that you didn't buy and don't oversee? One way to cope is to provide an environment that is so responsive, so fast and so easy to use that no one in the company will ever want to go outside it.
"If I build a container architecture explicitly with security policies and profiles in place, I don't need to fight for control," says Bill Briggs, CTO at Deloitte.
"Instead of IT being dominated by infrastructure teams, I want to automate that as much as possible on standards that it would make no sense not to use, because they're built on leading platforms and you can get things set up in seconds."
People skills are essential. If you build relationships with leaders of business units, they will listen to you when you ask — not demand — to be involved in technology decisions.
"We've been trying to work with the business to say, 'Please don't go out and sign a contract without our knowing about it,'" says Coastal Credit's Brady. "We want that sort of partnership where they involve us so we can point out that maybe there's another vendor that does the same thing but their integration tools are better. Or that the product you want will solve your immediate need but won't scale."
This kind of thing takes a delicate touch, Brady says. "If your approach is that IT needs to have its fingers in everything, they will end up not talking to you because no one wants to feel that from another department," she says.
Instead, offer to point out issues that business executives might not notice. "The better your personal relationships, and the more you understand the business, the more people will turn to you," Brady says. "They're usually happy to have input."
What happens when, despite IT's best efforts at persuasion, a business unit insists on purchasing the wrong product? "That has happened," Brady says. "We pointed out Product X had very few integration tools, that it wasn't very good and would require manual work from business users. They were OK with that. They put the product in place and after a year and a half, they realized it wasn't going to work. They had hit the point of scaling and integration where the only answer would be for their department to hire more people."
In that kind of situation, "It comes down to how mature everyone is," she says. "They were mature enough to admit the product wasn't a good choice. And after that, they were some of my biggest supporters."
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.