A new global survey of C-level executives confirms that IT departments will undergo major changes over the next three years. The CIO's role must evolve or face irrelevance.
As we have discussed at length, the traditional IT department is experiencing unrelenting pressure to change, from proliferating consumer-oriented mobile devices in the enterprise, cloud computing, and big-data analytics. A new report written by The Economist Intelligence Unit and sponsored by Dell Services confirms that as this pressure erodes existing IT structures, CIOs and their teams need to align more closely with business needs or they will find themselves marginalized.
The report, titled "The C-suite Challenges IT: New Expectations for Business Value," is available for download from SlideShare (after free registration), and CIO.com has a summary.
Of 536 worldwide C-suite executives surveyed by The Economist, 57 percent said they expect their IT function to change significantly over the next three years, and 12 percent anticipate a "complete overhaul." To appreciate how radical this state of affairs is, the report suggests that readers imagine a similar level of change coming to functions such as HR or accounting.
This instability in the IT function is rooted in a disconnect between CIOs and other C-suite executives. Of the CIOs surveyed, two-thirds believe their function is well-aligned with the needs of the business; but fewer than one-half of C-suite executives share this view. In particular, 46 percent of C-suite executives believe their CIOs understand the business, and only 44 percent say their CIOs are on top of what may be considered the core competency the job requires -- understanding the technical risks inherent in using IT in new ways to meet business needs.
This disconnect is playing out in the marginalization of some CIOs. When companies formulate IT strategy, 16 percent of the CIOs are merely "consulted," or worse, have no involvement in the process. Even when the CIO is involved in strategy formation, that involvement most often takes the form of responsibility for back-office processes. Only 37 percent of respondents said that CIOs have a leading role in product or service development or in finding new ways to connect with potential customers.
Teasing apart the numbers, the report found that the companies in which the CIO is most deeply involved in IT strategy are the ones pulling ahead of their competition. The Economist's analysis also turned up the counterintuitive fact that the companies pushing hardest on IT innovation to further business goals are the companies doing the best job of cutting IT costs. Companies that put the emphasis solely on cost cutting are falling behind.
What to do
The report emphasizes the conclusion that we have discussed on numerous occasions: CIOs need to engage with the C-suite and speak the language of the business. The Economist conducted in-depth interviews as a follow-up to the survey. Here are a few of the particular tactics suggested by those CIOs who are having the most success in aligning with business goals:
- Push budgeting further down into the business, with the aim of making sure that the people who pay for IT services are the ones who benefit from them. This automatically results in more alignment between IT and business, as well as tending to minimize costs.
- Encourage the cultural expectation that IT staff will play an active role in growing the business, rather than just facilitating the efforts of other staffers.
- Experiment with IT in a way that builds knowledge or skills that will pay off later, even if increased technology costs result in the short term. "The chance to develop talent has a value that can keep paying dividends," the report concludes.
How is your organization's IT function changing, and in response to what forces? Share your thoughts.