If there’s one thing all CIOs arguably now have in common, it’s that they can’t escape the impact of digital change.
Digital is changing every aspect of their businesses – from how they interact and communicate with customers to developing and delivering products and services that drive efficiencies. The question today is what organisations, and their executives, are doing to address such wholesale change to the way they function and go to market.
At the same time, the digital era has raised questions about the ongoing influence of the CIO, and the strategic priorities IT leaders must assume to remain relevant. If this year’s State of the CIO report is any guide, many CIOs not only believe they’re becoming more important in this transformation, they’re working to make such change happen right now.
This year’s State of the CIO is a barometer for how IT is being perceived and responding to these winds of change. Many respondents indicate they are meeting the challenge head-on by creating new, innovative products and services to achieve their business goals and secure their future growth.
More than 25 per cent are being asked to lead a product innovation effort this year, compared to just 6 per cent in 2014. At IP law firm, Griffith Hack, the IT group is working closely with the CEO and board to create two new products that will completely change the way the firm does business with inventors and corporate organisations, its CIO, Andrew Mitchell, says.
“It’s about changing the way we look to our clients ... and how we can provide a better service. The CEO now realises that technology plays a major part in that,” he says.
This is so much the case that Mitchell, who is also director of operations at the firm, is reporting to the board every month.
“It [business improvement through IT innovation] is high on their radar,” he says. “With the nature of our business, dealing with client’s inventions and innovations we have to show our clients that we are also helping to make them more efficient.”
Paul Kennedy, CIO at retail group, APG & Co, is also working on several IT-driven innovations that will be released to the market shortly. He adds the company’s CEO has put the emphasis on using technology to drive ‘customer-facing’ innovation to improve customer experience inside its stores.
A challenging but rewarding role
Another key finding from this year’s State of the CIO results is that CIOs are enjoying an improved relationship with their CEO. More than two-thirds of respondents said their CEO consults them frequently about the organisation’s strategy and future, a sign that technology is firmly recognised as a strategic pillar in how businesses move forward.
The majority of CIOs (87 per cent) either strongly agreed or agreed the CIO role is becoming more important to the business. Notably, 88 per cent of CIOs that report to CEOs saw the CIO role as becoming more important to the business, compared to 73 per cent for CIOs who did not report directly to the CEO.
It was also made clear that CEO support is a vital key to gaining such business clout. Just 28 per cent of CEO reports felt their role was being sidelined in the business, compared to almost half of non-CEO reports. Overall, the number who thought the CIO had been sidelined dropped from 38 per cent to 27 per cent year-on-year.
Mitchell has seen a real change in the way his company’s CEO and chairman consults him about business strategy.
Mitchell was given the dual role of CIO and director of operations just over 12 months ago, and now has a revenue target to meet. He sees this as indicative of the trust he has gained with other senior managers.
“You’ve got to build that trust. Once they know you are commercially astute, that’s where the trust starts,” he says.
For Matthew Perry, CIO at DuluxGroup, IT at his firm is a little way behind in terms of business recognition, but is on a mission to transform from a traditional IT function into a strategic partner to the business.
“Running IT like a business is key. The ability to articulate value [to the CEO and other executives] that IT delivers to our customers and consumers is a critical step in this journey,” he comments. “Delivering an agile, adaptable, business-focused and value-adding service is another step.”
IT versus line of business
As technology becomes the foundation for all aspects of efficiency and innovation, technology knowledge and utilisation is rising across the business. This is triggering a substantial shift in the relationship between IT and the lines of business, and particularly IT and marketing.Read more: Melbourne appoints first chief digital officer
Last year’s report showed 26 per cent of respondents had mutually shared and measurable goals with their marketing function. This year, 83 per cent expected to collaborate on a specific business initiative with their chief marketing officer over the next 12 months. The only peers higher were finance and operations, both not surprising given so many CIOs report to these functional heads.
Marketing’s meteoric rise as a technology investor and user in this year’s report again reflects how important customer engagement and experience management is becoming in modern business. Fifty-seven per cent of all respondents said marketing has budget specifically earmarked for technology product and services investment in the next three years, a clear functional leader.
When it comes to cross-functional partnership, it’s not all smooth sailing, however, and 51 per cent of CIOs admitted to currently fighting a turf battle with at least one c-suite peer. Sixty per cent also saw IT still being the scapegoat for other departments when they miss their own goals, and 53 per cent are convinced IT is seen as an obstacle by other lines of business.
CIOs know it’s a problem, which is why engaging business stakeholders more effectively remains the top action most important to elevating’s IT general relationship with the rest of the business for the second year in a row. Creating quick wins for business partners and training IT staff to work better with business stakeholders was in the top five actions cited by CIOs in 2015, as it was in 2014.
Technologies of change
A number of the key technology initiatives driving IT investments this year showcase the speed, agility, mobility and customer engagement quest organisations are on.
Cloud services were cited by almost 50 per cent respondents as being a key initiative driving technology investment this year, leading the list of technology priorities.
This was followed by mobile technologies (39 per cent), big data and business intelligence (36 per cent), application modernisation (36 per cent), and customer experience technologies (32 per cent).
Mitchell also saw cloud’s dominance on this list as indicative of businesses getting more comfortable with the concept of cloud computing.Read more: What you can learn from startups
“One of our new innovations will be utilising cloud [infrastructure]. We have no choice based on how we want this product to operate and to do this internally wouldn’t have made sense,” he says.
Griffith Hack has also moved all of its data backups to the cloud, a ‘cost-neutral’ environment that has freed up staff to get on with more innovative work, Mitchell says.
At APG & Co, IT investment is shifting from large capital outlays to more regular operational expenditure based on cloud services. The retailer’s cloud utilisation has risen this year with payroll, time and attendance and e-commerce systems now in the cloud. The company will then move to Office 365 in a project due for completion in February.
“We are taking the approach of identifying what we can’t use as a cloud service first rather than looking at which in-house option is the best option,” says Kennedy. “In our world [retail], speed is important.”
Current and future state
Alongside technology specific priorities, CIOs this year were asked about the activities that best characterise their focus and how they’re spending their time currently, versus expectations of the role in the medium-term.
Figures showed a huge emphasis on implementing new systems and architecture, which is not replicated in the next 3-5 years (54 per cent versus 28 per cent), a further pointer to the transformation agenda now in place. Also, while half of our respondents are focused on improving IT operations and systems performance, less than a third expect to be doing so in 3-5 years’ time.
This result was reflected in the top priorities CIOs are being set by the CEO, a list that was again led by completing a major enterprise project this year, followed by simplifying IT.
In addition, there’s a higher percentage of change management facilitation being undertaken by CIOs, with half of all CIOs currently involved in these activities (49 per cent).
All of these figures point to the fact that CIOs and their CEOs know it’s time to put the hard yards in and get the right IT platforms and processes in place for future competitive advantage and differentiation.Read more: Merged CSIRO and NICTA to become ‘Data61’
Many CIOs also expect their current focus on managing IT crises will have decreased over the next few years. While 28 per cent see this as part of their focus today, only 10 per cent expect it to be so in the future. While there’s certainly a bit of wishful thinking in these responses, what the result also suggests is that the shift to cloud services could see such potential headaches either placed into third-party hands, or removed altogether.
The emphasis in the next 3-5 years will be developing new go-to-market strategies and technologies (rising by 9 per cent to the next 3-5 years), as well as identifying opportunities for competitive differentiation (up 12 per cent in 35 years compared to currently).
Against this, what the State of the CIO report does consistently show year-on-year is there’s still a way to come before IT is holistically viewed as a value and growth driver for the business over cost. This year, 19 per cent still say they’re perceived as a cost centre in the business, underappreciated, misunderstood or unfulfilled.
However, there has been a steady year-on-year decline in the number of CIOs who believe they are perceived as a cost. This year’s result was down 4 per cent down on 2014, 5 per cent on 2013 and 14 per cent on 2011.
Let’s hope with all the work on innovation, this decreases again next year.