It’s difficult to imagine Star Trek or its offspring, The Next Generation, without their respective technology gurus, Spock and Data. Emerging from their initial one-dimensional “techie” supporting roles, they evolved into multi-faceted lead players, greatly contributing to making Gene Roddenberry’s space exploration series one of the century’s most enduring cultural icons and financial success stories.
Boldly going where Spock and Data have gone before, CIOs are helping their corporate “enterprises” navigate the business universe at the warp-speed of technology innovation. In doing so, they are graduating from supporting to leading roles in the development and realization of their company’s business strategy. Not only must today’s CIOs manage technology issues, they must have a keen eye on the ramifications of their IT choices on the bottom line and how those choices might be used to create competitive advantage.
There is a continuing trend within companies whose main business is not IT to turn their attention away from strictly technological issues in order to concentrate more fully on their core operations. This movement is also trickling down into the realm of the CIO and IT manager, who are increasingly outsourcing applications maintenance and other services, and focusing more on strategic issues and fundamentals such as IT architectures and policies. IT teams are becoming smaller and more specialized, while being asked to develop a whole new set of core competencies. They are having to procure and manage outsourced resources to supplement their teams, focus more of their time and energy on IT fundamentals, and adopt a more aggressive leadership stance on issues that go beyond the purely technical.
FROM PROVIDER TO PROCURER
Although the “insourcing vs. outsourcing” debate is not a new one, the question of whether to outsource IT services to an external IT services provider is occupying a bigger part of the CIO’s schedule — and will continue to do so. According to a July 1999 Merrill Lynch report, some $60 billion of outsourcing contracts will be signed worldwide in 1999, with 41 per cent of IT managers devoting at least 26 per cent of their IT budget to the contracting out of a major portion of their ongoing IS operations and infrastructures.
What’s happening, in fact, is that today’s CIOs and IT executives are less frequently being required to provide internal IT services and spending more of their time procuring and managing outsourcing contracts. Their job increasingly involves researching best-of-breed suppliers, and then developing and managing long-term agreements with these firms.
“At B.C. Gas, IT is almost totally outsourced,” says CIO Duncan Vickers. “Our Business Leader of IT Operations, Dale Pace, probably spends 90 per cent of his time managing our outsourced functions.”
As deregulation continues to impact the utilities sector in British Columbia, the various business units of B.C. Gas are going in different directions. “It would be impossible for us to try to meet all of their needs internally,” admits Pace. “The managed outsourcing model works well for us and we plan on continuing to operate along these lines.”
B.C. Gas uses external firms whose core competency includes addressing internal requirements such as hardware and software maintenance, software development, communications infrastructure and desktop support, thereby freeing the company’s internal resources from their “housekeeping” duties. As a result, those internal resources have the opportunity to provide a contribution that may have a more direct impact on how the organization does business.
Outsourcing, however, does not imply laissez-faire. “Outsourcing is by no means an abdication of responsibility,” adds Pace. “Some organizations get too comfortable with their IT suppliers and can lose touch. The cold hard truth is that, regardless of whether a function is outsourced, the buck stops at the IT department and you have to be able to defend your supplier’s actions.”
The ongoing management of long-term outsourcing agreements is time-consuming and requires a level of business savvy uncharacteristic of the traditional CIO. But day-to-day reality dictates that intimate knowledge of the company’s business and an ability to closely manage disparate resources are no longer “nice to haves” but bona fide core competencies.
FOCUS ON THE FUNDAMENTALS
“It is absolutely vital that IT architecture and governance be conducted in-house,” says Vickers. “This is one area that you can’t hand over responsibility to an external firm.”
Indeed, one of the most fundamental ways in which CIOs and their internal IT teams can contribute directly to the success of their organization is to create IT architectures, standards and policies that support business objectives. B.C. Gas, with its vast network of external suppliers, has a small in-house team almost entirely devoted to issues of governance, business analysis, communications and architecture design. External advice may be sought in some cases, but this contribution is limited to consultation or review.
The focus on key infrastructure questions has always been part of the IT executives’ mandate but was often put on the back burner as they were forced to devote their time to “cleaning windows and unblocking drains”.
Ownership of the corporate IT vision is a crucial element in the ability of the CIO to play a strategic role within the organization. By focusing on the fundamentals, they can contribute to determining business orientations based on existing and emerging technologies. The establishment of firm guidelines of practice to govern both internal and external users also has a significant impact on how the company operates and how it is perceived by the outside world.
“By placing a high value on architecture and governance, you are providing decision-makers with tools to help themselves,” adds Pace.
BECOMING A BUSINESS/I.T. LEADER
In the past, IT managers traditionally came out of the technology stream and existed almost independent of the business side. Today, sitting atop an IT pedestal is no longer an option. It’s crucial for management to know what’s happening on the technology front and for the IT executive to understand and work in line with corporate business objectives.
The addition of business drivers into the IT equation has been an important factor in driving the IT executive out of the director’s chair and into the decision-making cast. However, some organizations are more open to the idea than others. In many companies, there is still a tendency to view the IT exec as more of a set technician or special effects expert than a principal actor.
The type of organization and its management philosophy may, indeed, have a lot to do with whether IT is considered a core business element or an added contribution — as does the personality of the CIO or IT executive. No matter how progressive the company, it is still often up to the CIO to set his or her own place at the boardroom table and make sure that management understands the value of their contribution and why certain decisions are made.
By stepping onto centre stage, more and more CIOs will find themselves playing a strategic role within the organization. This is especially true given how much business is changing as we head towards a more knowledge-based business paradigm. A strong track record of clear, strategic IT decisions will go a long way in forming people’s perception of how critical the CIO’s contribution is, and will continue to be, to the company of the future.
It is ultimately up to CIOs themselves to prove that IT is a key cast member — just like finance, marketing, product development, etc. — in staging a successful business performance. But doing this takes credibility, and credibility is built on a strong track record of shrewd decisions and the ability to communicate at a high level the core importance of information technology.
When asked at a recent seminar what the future held for the CIO, renowned business writer Peter Drucker responded that their role might actually evolve into what it was always meant to be — part organizational strategist and part IT strategist. “You guys might actually turn into real CIOs some day.”
Sid Stephen is the Director of Application Portfolio Management Services at DMR Consulting Group.