The Fortune 500’s disappearing CIOs

Save the CIO, save the enterprise! It might not be the catchiest slogan, but there’s more than a little truth in it.

Several Fortune 500 companies are eliminating their corporate CIO positions. They plan to move IT into the business units (BU), on the theory that an IT staff that isn’t distracted by corporate initiatives can provide better support for BU priorities. A minimal corporate IT staff will support only corporate functions, such as HR, Finance and Legal. An IT leadership group (ITLG) composed of the BU CIOs will establish IT direction, create standards and allocate resources for projects across all departments.

This restructuring might be viable for a holding company with semiautonomous business units or in a utopian environment with aligned priorities and no political agendas. And it might be a way to fire a CIO, but there are far less disruptive approaches.

Limited corporate perspective. ITLGs chaired by corporate CIOs balance corporate perspective with BU needs. Without strong corporate leadership, ITLGs usually lack long-term focus and make decisions benefiting individual BUs at the expense of the enterprise (and shareholders). Rotating the chair rarely solves this problem. Typically, BUs with more money acquire additional IT capabilities, and those with less money fall behind.

Standardization impasse. The best IT architectures and infrastructures balance BU-specific requirements with enterprise commonality. Both an effective architecture and the supporting infrastructure require a great deal of planning. In the absence of corporate leadership, any BU can slow the process until it stops. Dissenting BUs always insist that they are different and that the rest of the organization doesn’t understand their business. Proving that a common solution would work requires analysis that employees from the other BUs don’t have the resources or authority to undertake.

A lack of new enterprise applications. Companywide software rollouts usually change business processes and require active support from BU executives. Without a CIO, BUs rarely agree to release their best staffers to work on projects that don’t benefit them directly.

No clear decision-maker. ITLGs strive to make decisions by consensus. But they often degenerate into factions, and the need to make tough decisions can lead to extended, acrimonious debate, with no consensus possible. Without a corporate CIO, critical decisions might remain unmade. Worse, they might be made by a CEO with little IT knowledge who merely succumbs to political pressure.

Limited accountability. Architectures and standards provide value only when everyone embraces them. BUs often disagree with some standards or parts of the architecture. Without corporate review, BUs can simply ignore standards they dislike.

Decreased economies of scale. Effective organizations standardize business processes, technology platforms, supplies, etc. Standardization allows consolidated purchases that obtain the best prices from suppliers. But the consolidation process requires a high degree of coordination. Without a CIO negotiating on behalf of the entire organization, it becomes significantly more difficult to maximize economies of scale.

Some business executives even believe IT has become a commodity that can be migrated to the cloud and forgotten. Unfortunately, the cloud does not address any of the above issues.

Good governance requires checks and balances inherent in the tension between corporate and business unit priorities. Within three years, each of those Fortune 500 companies will re-create a corporate CIO position. Betcha.

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