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With all the hype around “Big Data,” we explored CIOs’ perspectives on this topic in recent IT Odyssey* interviews. While most IT leaders acknowledged the potential value of customer and supply chain analytics, many questioned the return on their current (and past) data warehouse and business intelligence (BI) investments. We believe that before aggressively engaging Big Data, CIOs must better increase the yield from current information and BI investments.
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A restaurant industry CEO bemoaned, “IT is under siege from users demanding more data, better information (whatever that means) and more BI tools. We already spend a fortune on data warehouses, our proliferation of data marts and over 100 analytic tools someone had to have. While people tell me about individual great insights, only two execs have consistently proven real, measurable economic benefits produced by all this expense. Now they want something called ‘Big Data.’”

Over the past year, CIOs interviewed in IT Odyssey were asked which IT investments have had the poorest return. Over 35% named their data warehousing/data mart and business intelligence efforts (DW/DM & BI). Another 30%+ felt they didn’t know if these relatively large investments were paying off. Both these groups could cite individual efforts with positive business return but questioned whether the broad level of investment was justified.

The final 30% was more varied. Some felt providing DW&M & BI was a necessary cost of doing business. Others declared that such investments had brought a spectrum of dramatic returns and game-changing differentiation such as the following:
- A manufacturing division saw a 10%+ gain in revenue and a 30% increase in profit by targeting an enhanced product, pricing and term offering to a customer subset.
- A distributor found 15% of its “prized” customers had TCO costs that had grown faster than revenue.
- A retailer cut inventory and working capital by16% + and increased revenues in certain markets at certain times of the year.

Four Barriers to Increased Yield
A manufacturing CIO said, “With a mandate to do more with less, we have to examine every IT expense. Dashboards have given management insight. BI has given logistics great value. But despite 20 years of efforts with massive data stores and analytical tools, we can’t show broad return. Given our spend, something has to change.” Such a typical concern begs the question of why more enterprises aren’t getting better returns.

CIOs describe four barriers to greater yield:
1. Bad or conflicting data: Most enterprises still lack comprehensive master data management; mergers and reorganizations have left the inherent data resembling a flea market bazaar. Limited confidence in the data’s origin or meaning too often leads to real truth searches rather than exploring meaningful insights.

2. Data and information isn’t in the culture: Some organizations have strong information or data decision cultures. But many successful companies or functions base actions on social collaboration, relationships, experience, inherent knowledge, or process. Increased use of data requires major behavioral change.

3. Analysts aren’t driving business decisions: Many companies have highly skilled analysts, management accountants or strategists who examine markets, products, customers, costs, engineering, manufacturing, etc. But these people often have limited influence over daily business decisions, or they don’t understand the nuances at the practical level.
4. Decision makers don’t have the time, understanding or inclination: Years ago, banks wanted tellers to access customer profile data so the teller (who had no idle time with customers in the queue) could cross-sell the whole bounty of financial supermarket products. But the experiment generally failed because there was a mismatch between the way the data or analysis was made available and the workflow of the tellers and customers. In many cases today, the way the data is presented doesn’t match the way that deciders act or make decisions.

A distribution CIO lamented, “Vendors showing business executives fantastic insights based on neat tools that mine vast databases is like passing catnip in front of a cat. The ITO builds and maintains the DW/DM & BI. Unfortunately, most users dribble in and out for a few months. The company is left with a major expense, orphan efforts and only a few winning stories.”

But given the positive returns some companies have realized, CIOs must either assign resources to get a higher return by addressing the barriers above or begin a process to rationalize DW/DM & BI investments.

Strategies that aren’t viable include: continuing business as usual, abandoning such efforts, assuming the influx of digital natives will embrace DW/DM & BI, or assuming there will be a new Big Data panacea. While further training or awareness is often mentioned as a remedy, few CIOs felt their training regimens had achieved a lasting impact.

CIO CALL TO ACTION
Of the CIOs who have DW/DM & BI concerns. those who feel they are now making progress on increasing yield suggested the following practices:
• Examine the situation (in a constructive, non-accusatory manner) with senior executives, business leaders, analysts and involved vendors to build awareness of the DW/DM & BI expense, and potential vs. actual returns.
• Perform a use and yield assessment across intended users or functions to determine which DW/DM & BI activities are adding value and which have issues. Break the assessment down by intended user and data segments. Identify specific barriers, such as those mentioned above.
• Do a triage assessment to determine which DW/DM & BI activities should be dropped, scaled back, enhanced or accelerated. Eliminate some of the data garbage and BI tools (via portfolio management) that have accumulated for the past 20 years. This requires a major initiative and support from senior execs, the CFO and business leaders.
• Introduce the concept of charging a “yield” surcharge on DW/DM & BI activities that pays for the ongoing training, mentoring and promotion of analytic activities.
• Modify the format and style of the DW/DM & BI efforts to better connect them with the ways decision makers actually do their work. Examples include tying the DW/DM & BI efforts directly to business leadrs’ workflow or providing the capabilities through mobile devices.
• Organize mentoring teams to accelerate the use of intelligent analytics.
• Provide incentives, rewards and recognition for successful approaches.

Bottom Line
Assuming that people will actively use the DW/DM & BI capability is naïve. This resource must be viewed and managed as an IT-branded service with the proper level of support, promotion and financial evaluation.

Business Impact
Intelligent analytics can have a dramatic impact on enterprise success, or it can become a major under-contributing expense. CIOs must work with business unit leaders to develop a measurable benefits realization program, which should improve enterprise outcomes – i.e., revenue, market share or profit growth, or deeper customer engagement.

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*IT Odyssey: Each year, Bruce J. Rogow independently conducts face-to-face visits with more than 120 IT executives under the banner of his company IT Odyssey. As a Gartner Executive Programs affiliate, he summarizes his observations and thoughts based on what he is hearing.

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During a recent community event held in Austin, Texas, CIOs gathered to discuss how they govern their application portfolios. They discussed their current governance processes and considered introducing pace layers (a Gartner concept for managing core vs. differentiated and innovative business applications) to more effectively govern investments that differ in delivery approach and impact. The discussion revealed one key finding: CIOs tend to use multiple methods of governance but not for the reasons we expected.
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IT governance is often focused on matching enterprise needs to IT organization (ITO) capabilities. With limited resources, prioritization of ITO effort is necessary to determine where (and how) available funds will be invested. But all requests are not created equal.

Many of these CIOs described how they prioritized large capital projects or regulatory efforts above innovative or differentiated efforts due to pressure from senior business leaders. In their organizations, innovative applications continued to lose the battle for resources because a quantifiable business case was not apparent.

The Gartner Pace Layer Model (see “How to Use Pace Layering to Develop a Modern Application Strategy”) was designed to recognize differences related to speed-to-market, agility, investment levels and other characteristics. By segmenting efforts into Systems of Record, Systems of Differentiation, and Systems of Innovation, organizations can be more responsive to changing business needs. But these segments require different governance models.

Struggling to Govern
As we introduced this topic to the CIOs in Austin, we hypothesized that organizations using multiple governance models had learned how to adapt processes to these pace layers. In polling the participants, we learned that nearly all were using multiple governance models to manage their application portfolios. Further, the CIOs revealed that they employed different processes, architecture, funding, development practices and levels of business engagement in managing resource portfolios. But none had segmented their portfolios into the pace layers we described. One CIO said that multiple governance methods had been introduced through mergers and acquisitions, business unit autonomy, silos and other avenues. All the CIOs were struggling to gain effective control across these methods but continued supporting their business users. “I let these different governance models remain unchanged,” said one of them, “but I need to get them all talking to each other.”

Less, Then More
All the CIOs acknowledged the need to govern differently for systems of innovation. They acknowledged that innovations typically need to launch quickly, use new architectural platforms (e.g., Web or cloud) and leverage agile development techniques with or without the involvement of the ITO. Investments might cost less, and funds might be dispersed in smaller increments with less return on investment focus. They also acknowledged that innovations require different processes because business customers often view the ITO’s governance processes as overly cumbersome. “We shifted to agile development processes two years ago to focus on innovation and rapidly changing business models,” said one of them.

The CIOs were excited by the concept of pace layers to help them achieve effective governance. They realized they could introduce new and more flexible governance structures for innovation and differentiation by segmenting their portfolios and implementing one strong governance model to address systems of record. Taking this approach would enable them to achieve the control they need for traditional systems, while gaining the enterprise’s confidence and trust in delivering innovation.

But achieving this goal requires a fairly high level of organizational maturity (with respect to governance) to manage these variations. Since CIOs are struggling to manage multiple models that have evolved in their organizations, they must first focus on implementing strong governance for their systems of record. Then they can address governance in other layers.

CIO CALL TO ACTION:
CIOs should do the following:
• Define governance processes that are used consistently for systems of record (e.g., ERP, CRM, financial systems).
• Assess organizational maturity via benchmarking (e.g., Gartner ITScore) to determine if the organization is ready to adopt more advanced governance processes.
• Develop variants to governance processes to address systems of differentiation and systems of innovation, incorporating a greater emphasis on strategic value.

Bottom Line
CIOs need mature governance processes and segmented portfolios to achieve overall success with pace layers.

Business Impact:
CIOs who successfully work with their business partners to develop segmented governance processes can more quickly deliver differentiating and innovative solutions to drive business advantage.

Additional Insights:

• “How to Use Pace Layering to Develop a Modern Application Strategy” (Research)
• “Gartner’s Application Pace Layer Model: Governance and Change Management” (Research)
• “ITScore Overview for Application Organizations” (Research)
• “Practical Governance” (EXP Research)
• “Capability Assessment Tool for Practical Governance” (EXP Research)
• “Toolkit: Five Steps for Defining Effective Enterprise Architecture Governance” (Toolkit)

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In recent IT Odyssey* interviews, many CIOs described that a lack of innovative ideas and money are no longer their limitation. After a decade or more utilizing an outsourcing model, neither their IT organization (ITO) nor their suppliers have the skills to properly enable the future.
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A retail CIO had this to say: “Innovative ideas? We are drowning in great, innovative ideas of how IT can help the business. Money? It seems almost every user and business unit can find the funding to make their ideas happen. But our outsourcing partner doesn’t seem to have the relevant skills to understand our business. And internally, we don’t have the management staff to ensure that the users can get what they want.”

Over 75% of the ITOs we recently visited are either outsourced or rely heavily on outside contractors. And more than 60% of the CIOs we visited this year have lamented that this reliance on outside resources has painted them into an unfortunate corner, as their businesses increasingly seek the help of IT leaders to drive enterprise transformation. None saw the situation getting better, at least not in the short term.

Four Factors on a Collision Course
This frustration has been building for some time, but the interviewees cite four factors that have made this situation career-challenging for CIOs:

– User demand: As discussed in other Road Notes, there is dramatically increasing user demand for applications to: differentiate, generate revenue, collaborate (with customers and business partners), provide social media, go global, link to sensors, provide mobile apps, support marketing programs, enhance the customer experience and enable better business insight. And there is money available.

– Outsourcer skills: During lengthy outsourcing agreements (or other contractual relationships), providers have either allowed their assigned teams to stagnate, resulting in diminished capabilities (especially in some of the latest skills), or reduced the experienced staff that understood the nuances of that client. Indeed, most outsourcers have focused their efforts on little more than maintenance (“keeping the lights on”), while users’ requirements have become more sophisticated.

– Experience, resources and skills: At best, extensive outsourcing has often left enterprise ITOs with a skeleton crew that is less than 25% of the original resource level. Remaining ITO staff are already fully engaged and have often not had enough recent experiences to upgrade their skill sets so they can address new user demands. And increasingly, they barely trust the outsourcer/contractor to deliver the minimum requirements. In addition, many CIOs say their head count is frozen.

– ITO retirements: Many user demands require the fully integrated, or at least interfaced, support of the legacy applications, which often resembles an archaeological dig, sifting through ancient technology layers as far back as COBOL or even Assembler. And the few remaining in-house and outside experts are counting the days until retirement.

One leading financial services CIO lamented: “Users say not to worry about these factors and to allow them to engage the outsiders directly or deploy alternative IT delivery vehicles, such as software as a service; it is no longer rocket science or IT witchcraft. But given that I am responsible for the use, security, interoperability and long-term efficacy of IT-supported efforts across the enterprise, there is no way I can just let this happen without ‘adult supervision.’ I just don’t have the adults available any longer.”

CIOs describe the “adult supervision” as the skills, experience and resources to ensure that the new user demands are realistic, practical and can be achieved. This requires highly competent internal and stable ITO staff to: develop overall business-IT strategy, provide enabling (and flexible) enterprise architecture, examine business cases, perform risk and readiness assessments, manage increasing security and privacy concerns, monitor program/project management, inspect what is being done, plan the deployment, facilitate the organizational change required, design the required management processes, harvest the benefits, ensure the performance of the proposed application or technology and ensure prudent overall governance. Few ITOs we visited had nearly enough of these resources.

The CIO of a media company described his situation as “the outsourcer’s comeuppance.” I asked whether he meant the provider or his company. He said it was both sides that had contributed to the current dilemma. The CFO had wanted to save as much as possible, so he had pruned the in-house staff, removed the higher-priced professionals and squeezed the services vendor to find cheaper ways to support the company. Now the outsourcer isn’t getting the expanded business it would like, and the company isn’t getting the capabilities it requires.

CIO CALL TO ACTION:
CIOs who felt they were making progress on this issue were doing the following:
• Socializing the situation with senior executives, end users, their staff and their outsourcers to build awareness of the constraint, and also to change the parameters for application approval, governance and support
• Charging an IT management fee on existing and new outside-sourced applications to fund specific staff for supervising the life cycle of new IT capabilities
• Re-engaging retired IT execs and professionals to help deliver new initiatives, often via remote collaboration (one CIO created supervision labs in South Florida and Phoenix for local retirees)
• Organizing mentoring teams to accelerate the development of new management capabilities, often teaming less experienced IT staff with the retirees
• Sponsoring highly targeted university/community college programs to develop specific skill sets (a few CIOs are teaching legacy skills at community colleges and guaranteeing at least an apprenticeship upon graduation)
• Introducing outsourcer or SaaS ratings based on the degree of supervision required for these new user-demand sets
• Providing detailed training camps for business people who want to become IT enablement managers
• Developing “pass the baton” programs to transfer knowledge and skills from the legacy supporters to a new generation of well-compensated IT professionals from other companies in the region that have had layoffs

Bottom Line
Ignoring the collision course with the “outsourcer’s comeuppance” is not a good strategy. ITO credibility is already strained. Acknowledging new user demands, and developing a strategy for addressing them, is essential, before the situation deteriorates.

Business Impact
As enterprises reinvent themselves to thrive, IT is a key enabler. Having an ITO or cadre of outsourcers that can’t support the business will negatively impact agility, transformation efforts and, ultimately, financial metrics – especially around growth and market share.

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*IT Odyssey: Each year, Bruce J. Rogow independently conducts face-to-face visits with more than 120 IT executives under the banner of his company IT Odyssey. As a Gartner Executive Programs affiliate, he summarizes his observations and thoughts based on what he is hearing.

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IT, process and quality leaders from Bancaribe in Caracas, Venezuela, recently met to determine ways to manage project prioritization within the IT governance framework. The group reviewed and discussed the demand and supply sides of the Gartner IT Governance model. The discussion centered on ways to manage the “creative tension” most organizations face in balancing resources, developing agreements and resolving conflicting priorities.
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IT governance addresses two major areas: demand governance, or doing the right projects to maximize business results; and the supply side of addressing how IT will execute. Most IT organizations (ITOs) receive project requests that exceed available capacity. Governance helps them identify the projects that will yield the most benefits. Fundamentally, IT governance is the process that ensures the effective and efficient use of IT in enabling an organization to achieve its goals.

The participants were eager to apply the governance framework to improve project prioritization and resource management, and to solve delivery issues. One participant said that business unit personnel wanted to learn more about conditions for cancelling projects so that they could take other actions to compensate for what was lacking in the application.

The group brainstormed ideas on how to achieve effective IT governance and proposed the following ideas:

A Governance Steering Committee that Defines Project Priorities
Request that the governance steering committee prioritize projects based on strategic impact, benefits to the organization and regulatory requirements. The committee should not approve less important projects that lack resources. IT leaders must communicate the existing resource capacity to the committee.

Use of cost/benefit analysis to evaluate projects
Establish a culture of business-based cost/benefit analysis for all projects. Quantify the cost of projects and eliminate non-strategic projects with low rates of return. Request that an analyst from finance approve major project benefits.

A prioritization process for minor projects
All minor project requests, including process improvement and parameter changes, must be approved by a committee. IT leaders must define how many resources to assign to minor project requests. Implement regulatory projects, but request a business case to determine their importance versus other projects.

Organization committed to using IT governance
Educate the organization on IT governance, its benefits and the role each person plays. Reinforce the approval policies of new initiatives at all levels to avoid promising to do projects with insufficient resources. Communicate the process of approving projects so that all stakeholders know their responsibilities.

Existing Resource Capacity Measured and Communicated
Develop a way to measure existing capacity, considering the resources required to run the ITO as specified on the supply side of the Gartner governance framework. Communicate the ITO’s capacity for use as input in project prioritization. Whenever possible, assign persons full-time to a project instead of distributing the efforts of one person among several projects. Determine the total capacity, integrating resources from the technology, process and projects areas.

Elimination of Resource Bottlenecks
Evaluate the capacity constraints to identify bottlenecks. Existing capacity will include head count and the resources (with specialized skills) demanded in numerous projects that only a few employees possess. IT leaders should develop additional resources with these skills to avoid bottlenecks.

CIO CALL TO ACTION
To achieve effective governance CIOs must do the following:
• Establish an IT governance framework to develop portfolio management policies and use resources correctly to meet business objectives. Establish a governance steering committee of business leaders to prioritize projects.
• Ensure that all levels of the organization have visibility into the project prioritization process so that stakeholders know which projects will (or won’t) be executed.

• Define, communicate and use specific criteria for evaluating initiatives, such as business value, financial return, strategic fit, technical fit, implementation risk and operational risk.
• Control the approval of minor requests to avoid cannibalizing major project resources.
• Anticipate project demand at the strategic and tactical levels through conversations with business units.
• Expand the use of IT governance to “harvest” the intended business benefits.

Bottom Line:
IT organizations embracing governance will improve their business impact by executing high-value projects. Governance makes the prioritization process transparent so that all stakeholders know if their project will be completed.

Business Impact:
Companies using effective IT governance identify and implement the projects that yield the most significant benefit to the business, thereby maximizing investment returns and encouraging IT-enabled innovation.

Additional Insights
• “Defining IT Governance: The Gartner IT Governance Demand/Supply Model”, 29 March 2010, Michael Gerrard (Research)
• “CIOs Reveal Their Issues With IT Governance”, 20 October 2005, Michael Gerrard (Research)
• “Q&A: Demand Component Descriptions of the Gartner IT Governance Demand/Supply Model”, 5 February 2009, Michael Gerrard (Research)
• “CFO Advisory: IT Demand Governance; Risk Management and Mitigation”, 29 March 2010, Michael Gerrard & Barbara Gomolski (Research)
• “Governance; CIO Desk Reference Chapter 8, Updated Q4 2010″, 1 October 2010, Michael Gerrard & Alfred Passori (Research)
• “Practical Governance”, 1 November 2010, Tina Nunno Kathleen Blanton Heather Colella (Report)

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In recent IT Odyssey* interviews, many CIOs described that their enterprises are going global by becoming “transnational.” Painfully, these CIOs are learning that global and transnational are vastly different for the IT organization (ITO) and IT strategy, architecture, deployment and governance. Getting a precise definition related to the business strategy is essential. Transitioning the IT operating model (ITOM) is even more critical.
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“Our CEO calls it our globalization strategy, but it is almost the exact opposite of what our global strategy and business model have been. I don’t know what to call it, but this new definition is turning almost everything we do in IT upside down,” says the CIO of a diversified industrial supplier.

Nearly all of the global enterprises we visited say that their growth and future potential are outside of their native country or markets. To capitalize on these opportunities, many companies are making a dramatic shift from a “global” to a “transnational” strategy and business model. A chemical company CIO provided this distinction between the two:

- Global: Our products, formulation, engineering, supply chain, packaging, marketing strategy, channels, pricing, support and commercial terms were as similar and common as possible. Executives in headquarters made over 95% of key decisions.
- Transnational: Core products, corporate services and parts of our business models are common on a global basis; however, almost every aspect of our business is being tweaked or modified to a local go-to-market strategy and operating model. We are seeking the 10% to 20% of decisions that are best made at headquarters, but expect 80% to 90% of the decisions to be made in the countries, markets, regions or product business units. The days of one-size-fits-all are over.

While the percentages devoted to centralized vs decentralized decision making will vary (perhaps substantially) based on enterprise strategy, positioning, industry, etc., the basic definitions are sound and would fit most of our clients.

Feeling the effects of the recession, only a few enterprises have made significant progress on their intended journey to becoming transnational. CIOs in those more advanced transnational entities often lamented that their ITO was finely tuned to support global enterprises, and that their IT strategies and organizations were not optimized for (or even suited to) the new business model.

The Transnational Model Challenges Nearly All Aspects of IT
“It is still early in the transformation, but the shift to supporting a transnational approach may represent a challenge around the size, scope and required organizational changes, similar to our ERP implementation,” says a retail CIO. “Becoming transnational transfers most decision rights and responsibilities. With ERP, typically one executive owned a capability and decided the way it would be done. With transnational, a variety of executives decide the different ways capabilities will get done.”

Not only do the decision rights, capabilities and process flows of application systems change, but CIOs also cited a wide variety of other changes:
- Enterprise architecture is changing from being primarily about commonality and standards to criteria for supporting leverage, differentiation and evolution, and connecting core structures so that diverse capabilities (inside the enterprise, but also across partners) can interact.
- Budgeting and financial support are becoming more diverse and interdependent.
- The focus of governance is switching from a vehicle for central authority to one that is more balanced through local adaptations. This is ensuring that all the decisions (being made somewhat independently but on a global basis) fulfill basic requirements of security, professional management, control, surveillance and proper accountability.
- Sourcing and vendor management is adapting from a primarily central process, with tight controls and vendor selection that primarily targets best average global contracts, to a more local “fit for purpose” set of decisions within sourcing and vendor management frameworks.
- Application requests and requirements are increasingly being driven by more sophisticated users who can drive well-articulated, successful projects within the company’s scope, while still supporting portfolio management processes, PMOs, systems development methodologies, security and privacy concerns, and enterprise architecture. With the transnational approach, newer users are proposing less well-thought-out efforts and going through less mature approval processes.
- Strategy shifts from promoting and enhancing single-instance, global ERP to trying “deconstructing” components (including user interfaces) and selectively replacing them with more-adaptable local solutions.

Says the CIO of a consumer packaged goods company, “I don’t think the senior executives understand the business, control and IT risk associated with our transnational strategy. But we have no choice. We are just not competitive in 80% of the growth markets we want to be in. We can’t sit here in Chicago and make informed decisions fast enough in the 200+ markets we want to be in globally. We are getting killed by local competitors that are 5% our size and that are taking 20% of the time we take to actually make better decisions on their business and IT.”

CIO CALL TO ACTION
CIOs whose enterprises were the furthest along in the transnational journey, and who were making progress, offered some constructive tips:
• Introduce a transnational “IT readiness framework” and process to the executive leadership team that explains in business terms the requirements for making acceptable IT decisions on a distributed basis, and then scores the readiness of various business or IT segments to go transnational.
• Constantly reiterate that the ITO cannot lead or lag the movement to transnational. The ITO must move in lockstep with the rollout and transition.
• Be patient. Many transnational decision points may not be fully scoped or developed, and many processes, responsibilities, business rules and managers are still immature.
• Require that each part of the ITO produce a strategy for achieving a higher level of performance in the new transnational business model. Consolidate these into a transnational operating model for the ITO.
• Develop a series of frameworks, processes, education and consulting vehicles that can be introduced to the decision segments in the transnational business organization. Consider the certification of the distributed business and IT managers.

Bottom Line
For most firms, the transnational business model is at the rhetoric stage. The recession and staffing realities are limiting progress. But many companies are headed toward transnational models, and CIOs must start their planning, communications and transitions to a vastly different IT operating model.

Business Impact:

Many enterprises are now seeking transnational strategies that will provide the agility to succeed in highly competitive markets. IT will be a key element of this evolution to a new operating model that will impact future revenue growth, market share and even profitability.

*IT Odyssey: Each year, Bruce J. Rogow independently conducts face-to-face visits with more than 120 IT executives under the banner of his company IT Odyssey. As a Gartner Executive Programs affiliate, he summarizes his observations and thoughts based on what he is hearing.

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A recent announcement by Suncorp, an Australian financial services firm with approximately 20,000 deployed PCs, that it will provide a BYOC (bring your own computer) program by August 2011 has created a buzz in the regional IT industry. Gartner research believes that BYOC efforts will expand dramatically during the next three to five years (see the Gartner research note “Hype Cycle for the High-Performance Workplace, 2010” below) and certainly extend and expand “device” virtualization and VPN solutions.
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The drivers for BYOC programs are many and varied. Often they are employee driven, based on the consumer device experiences (especially with Apple devices) employees have in their personal lives (see the Gartner research note “Checklist for an Employee-Owned Notebook or PC Program” below). On the flip side, CIOs and associated business leaders are driving BYOC programs to either reduce enterprise costs, improve information security or to attract and retain top talent – or often a combination of all three (see the Gartner research note “Creating New Policies for Employee-Owned PCs and Notebooks” below).

Suncorp’s model
Suncorp announced it would use a combination of Citrix and open-source tools to create a virtualized and secure interface for its employee-owned devices. The virtualization of the company’s applications and its VPN has created an effective platform to securely stream them to their employees’ personal notebooks and other devices, through network access controls and intelligent segmenting. When employees sign on to the VPN, it has the effect of putting them in a company-controlled image; wherein all actions (e.g., downloading or printing information, locally storing it) can be monitored and managed. While this VPN (or similar) strategy is utilized by other companies for secure, remote access to enterprise files and applications, it is all but mandatory to support a BYOC effort.

Numerous Australian CIOs are closely watching the Suncorp implementation, as they are experiencing some employee demand for a similar program. Most agree, however, that their organizations are either not technically ready to adopt a similar model, or have information security and increased support cost concerns. Other organizations are seeking submissions and surveying employees to understand their level of interest and potential uptake.

Discussions with CIOs about a BYOC program identified the following concerns:
• Device and application support
• Browser compatibility
• Endpoint protection/antivirus/malware
• Encryption/data loss protection

The CIOs we interviewed felt that many of these risks could be mitigated with virtual device technology (e.g., VMware, Citrix) or newly evolving virtual Q fabric computing. While these solutions solve many technical, security and support issues, infrastructure and software costs are substantial, with limited impact on desktop TCO (see the Gartner research note “Application Streaming Gains Traction in 2011″ below).

Numerous organizations run virtual applications and desktops using encrypted protocols (e.g., SSL with RDP and ICA) to provide secure and cost-effective remote access capability. The approach by most organizations considering a BYOC program appears to be leveraging this investment in their virtual and VPN environments. It is a logical step.

Best practices for a BYOC program
Gartner analysts Ken Dulaney and Leslie Fiering advocate that each organization establish specific BYOC program requirements (e.g., demand side). Support, security and even HR policies must be rewritten to cover this next-generation information-worker environment. The enterprise IT assets must be isolated from security threats using thin-client VPN and/or endpoint security technology. Software licensing terms must also be considered, along with IT support demarcations. Finally, the financial implications must be addressed. Will the employees receive an allowance for their iPad (or other tablet) instead of a corporate laptop?
While BYOC programs deliver many agility benefits, they rarely reduce costs. Costs are typically just shifted, either to the employee’s BYOC allowance or the back-end virtual infrastructure.

CIO CALL TO ACTION
In considering a BYOC program, CIOs should do the following:
• Recognize that virtual device support is a trend (of which BYOC is a subset) that must be addressed.
• Ensure their organizational readiness, policy and licensing requirements for a BYOC program.
• Evaluate potential impacts on risk, economics and support.
• Pilot the concept to determine feasibility.
• Appreciate that employee-owned devices are not a new compliance threat.
• Recognize that a BYOC program rarely reduces enterprise costs.

Bottom Line:
In the current consumerization-driven environment, CIOs must carefully consider their enterprise’s position on BYOC and the implications on their application infrastructure, security controls and support structures. The solution architecture, however, may simply be an evolution of existing (virtualization) IT investments, though it should offer other employee benefits (e.g. morale, creativity).

Business Impact:
BYOC has the potential to revolutionize the traditional, corporate-supported device paradigm. While desktop/device support costs are unlikely to show any significant reduction, the ability to support multiple devices is becoming de rigueur for enterprises, to better engage partners, customers, etc. A well-defined virtual device approach will demonstrate agility and flexibility, and might actually improve security and application management, and thus improve growth prospects and market share.

Additional Insights:
1. “Hype Cycle for the High-Performance Workplace, 2010″ (Research)
2. “Checklist for an Employee-Owned Notebook or PC Program” (Research)
3. “Creating New Policies for Employee-Owned PCs and Notebooks” (Research)
4. “How to Support Corporate E-Mail and Other Applications on Personal Devices” (Research)
5. “CIO Attitudes Toward Consumerization of Mobile Devices and Applications” (Research)
6. “Application Streaming Gains Traction in 2011″ (Research)

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IT leaders from Compartamos Banco in Mexico City recently gathered for a presentation and workshop to discuss ways to build deeper business skills within IT. The discussion centered on the reasons IT organizations must focus on the business, communicating in business language, and using metrics to communicate IT´s contribution.
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As economic and market changes accelerate, companies increasingly use technology to compete. CIOs focused only on technical services must evolve to become business-focused and assume the role of business leader to enable their company to use IT as a competitive advantage. IT organizations must demonstrate how each project will contribute business value to the company, and communicate the subsequent results using business language.

The participating IT leaders were eager to apply the concepts. One participant said the business orientation will make IT personnel aware of the opportunities technology offers the company. Instead of working only on regulatory projects or user requests, they may proactively seek out colleagues from other areas to innovate products that will differentiate the company from competitors. The group brainstormed ideas on ways the IT organization will become more attuned to the business.

The participants proposed the following seven ideas:
1. Identify the technology advantages and best practices used by the sector, understand how each business unit uses information, and propose solutions to reduce the gap with competitors to reach the company’s objectives more rapidly.
2. Increase IT credibility by adopting business language and listening to the concerns of colleagues. These techniques will help IT staff understand the competitive environment and work as a team with other areas to create the products customers need and want. Match current IT services with business contribution.
3. Learn more about the needs of the “end” customers and how to improve customer loyalty and retention. Translate these needs to applications and programs that will improve customer intimacy and retention.
4. Negotiate a clear connection between business models’ leading indicators, service-level agreements and the value to the enterprise. Review the leading indicators used by the business to propose services that add value.
5. Contribute to the design of the future state of processes by providing insight into the opportunities new technologies offer.
6. Motivate the technical staff to understand and improve business processes as a way to achieve better results and more productive teamwork with other areas.
7. Prioritize projects to increase the number of strategic projects. Ensure that each project has a business case and indicators to prove the value in the future.

CIO CALL TO ACTION
CIOs should do the following:
• Motivate the IT staff to invest effort in learning more about how the enterprise distinguishes itself within the industry, and to speak the language commonly used by the industry.
• Gain credibility by linking IT contribution to leading indicators of performance and service-level agreements in each project.
• Work with the business to develop meaningful indicators.
• Communicate in business terms the value IT contributes.

Bottom Line:
Businesses increasingly require technology to compete, as mergers, changes in customer needs and regulatory requirements accelerate. IT organizations and personnel embracing a business orientation will increase IT contribution, obtain higher cooperation from other areas and enjoy new career opportunities.

Business Impact:
Effective IT organizations that increase their business contribution will help their enterprises increase customer intimacy, loyalty and retention, among other benefits. Companies with a business-oriented IT organization will be better able to compete in an increasingly demanding marketplace.

Additional Insights:
• “The Business-Oriented Technical Professional,” 1 September 2010, Andrew R. Walker and Andy Rowsell-Jones (Research)
• “The Real Business of IT: How CIOs Create and Communicate Value,” Richard Hunter, George Westerman, 2009, Harvard Business Press
• “CFO Advisory: Maximizing the Business Value of IT: Overview,” 26 May 2011, Richard Hunter, Barbara Gomolski and Michael Smith (Research)
• “Data Shows that IT is Clearly “In” the Business,” 6 April 2011, Partha Iyengar (Research)
• “For CIOs, Proactively Engaging With the Business Means Learning How to Sell,” 10 January 2011, Leigh McMullen (Research)

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In recent discussions with CIOs, we observed that one key to communicating the business value of IT is to focus on how IT’s actions/activities impact business performance. Although it is important to have metrics that measure the IT organization’s performance, it is more important to have common metrics that are used by the enterprise and demonstrate how IT contributes to the business’s revenue, profit or market share growth, cost management (beyond IT) and competitive advantage.
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CIOs have struggled with how to best articulate IT’s contributions to the enterprise. The IT organization (ITO) is typically perceived as a cost center, versus a revenue generator; and CIOs are constantly asked why IT (and ITO) costs are so high. The problem is not what the ITO is doing, but how what it is doing is being communicated. In the book, “The Real Business of IT: How CIOs Create and Communicate Value” (by Gartner Vice President and Distinguished Analyst Richard Hunter and George Westerman of MIT, Harvard Business Review Press, October 2009), a majority of the CIOs interviewed were thinking and acting in remarkably similar ways.

Successful companies start the process of articulating business value by changing the way they think about IT and changing the language they use to describe the initiatives they are working on. For example, a healthcare\care delivery organization (CDO) in the Southeast U.S. recently hired a new CIO from outside the organization, and one of the first things he did was to stop referring to “IT projects.” Instead, he insisted that all projects be referred to as “business projects” and delivered this message to everyone, from his direct reports to the board of directors (BOD). By doing this, he immediately changed the conversation and stopped the questions about why the ITO was doing certain projects. IT projects are now defined by their contribution to the business (for more on how to change the conversation, see the Gartner Research Note “Stop Talking About ‘IT-Business Alignment’ Now, and Start Talking About Business Performance” below).

Another CIO, whose company provides IT services to the oil and gas industry, faced challenges when debriefing senior executives on the state of IT. The information provided was highly technical, which made it difficult to understand and “make actionable.” His solution was to emphasize “what the business cares about most, so I began converting the language in some of my reports and presentations to terms that embodied the cost of a barrel of oil. Suddenly the senior executives became more engaged because they could directly relate to the business issues and the language.”

Another CIO who changed the conversation was a U.S. Mid-Atlantic retailer who recently implemented a new point-of-sale (POS) system and replaced dozens of dial-up lines with broadband access in all the company stores. “But instead of talking about the systems and the technical infrastructure changes I made,” he says, “I spoke about how these changes enabled us to service more customers, increasing the number of transactions and throughput in each store, and ultimately increasing revenue per store.” These initiatives thus became an investment in IT that resulted in a return to the business, versus being a cost (see the Gartner Research Note “Business Performance Is the Value of IT” below).

CIO CALL TO ACTION
To be successful in communicating the business value of IT, CIOs must change the way they communicate with their business colleagues. The following are some proven practices for doing so:

• Talk in the language of the business: There is no such thing as an “IT project.”

• Frame everything in terms of business performance and business outcomes: Network availability is not a business metric.

• Don’t talk about IT “aligning with the business:” IT is the business, just like sales, finance and HR.

Bottom Line
CIOs must better communicate their IT initiatives in a manner that is meaningful to their business executive colleagues. Changing the conversation about IT to one that is more business- and outcomes-focused will raise the credibility of the IT organization and should create a lingua franca that helps the enterprise exploit IT developments more quickly and successfully.

Business Impact:
As CIOs focus more on creating, developing and communicating business value, enterprises should be able to boost their agility. The more rapid, focused adoption and exploitation of IT should improve business performance and outcomes by further mitigating and managing risks, and supporting better strategies and financial management.

Additional Insights:
“The Real Business of IT: How CIOs Create and Communicate Value” (Book – Richard Hunter and George Westerman, Havard Business School Press, October, 2009).
“Stop Talking About ‘IT-Business Alignment’ Now, and Start Talking About Business Performance” (Research)
“Gartner Business Value Model: A Framework for Measuring Business Performance” (Research)
“A Simple Framework to Translate IT Benefits Into Business Value Impact” (Research)
“Business Performance is the Value of IT” (Research)

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During our initial interviews with CIOs regarding the skills necessary for the future success of IT organizations, case study participants identified a critical competitive advantage as the ability to manage expanding sources of data, and put the right data in the right hands at the right time. This requires skills in pattern-based analytics, knowledge discovery, social collaboration, advanced business insights, and innovation. Advanced workforce strategies based on scenarios for the next three to five years and beyond (five to 10 years), supported by strategic sourcing and close partnerships with academic communities to influence and change the future supply of skilled talent, are the anticipated means by which to bridge this gap.
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Almost half of CIOs plan to move the majority of their applications and infrastructure to the cloud over the next four years. That gives them an opportunity now to re-imagine IT by looking at current resources and establishing a sustainable skills sourcing and development plan to prepare for the continuing digitization of the enterprise, the rise of lighter-weight technologies, social computing and the search for technology-driven innovation.

Our initial research shows that CIOs are in agreement about the future skills critical for IT success being different from the past, and the skilled talent required to transform IT being in scarce supply. CIOs are also concerned that traditional planning assumptions and heavy reliance on external sourcing for new skills and talent will ultimately impede their ability to position IT as a source of competitive advantage. CIOs must be able to leverage new technologies and practices in ways that redirect or liberate resources to deliver greater innovation and value, while continuing to deliver reliable IT services.

The early indications from our research also show that CIOs must re-imagine themselves as process innovators and information architects focused on change leadership, collaboration and invention. More-advanced business knowledge and skills will be required in business-facing roles, with specialized, hybrid IT-business skills in partnership management, strategic discovery, pattern-based analytics and knowledge discovery aiming to make information more meaningful and relevant to the business.

Discussions with interviewed CIOs also indicate that strategic workforce planning (at least three to five years out), along with active engagement with universities to transform education and expand social skills development in future IT talent, could help mitigate the risk of scarce supply. After all, the future IT talent will not be all in IT; instead, they could be anywhere inside or outside of the enterprise. It will be the job of the CIO to effectively integrate, manage and leverage these resources to deliver greater value to the business.

CIO CALL TO ACTION
CIOs interviewed to date for this research suggest the following actions to identify, source and develop new skills for future IT:
• Understand the economic, social and technology trends and business strategy that will impact the business’s perception of IT and the demand for IT capabilities.
• Take a phased approach to strategic workforce planning, and build scenarios to anticipate changing demand for IT skills and talent.
• Expand IT talent profiles to include end-to-end skills in business process integration, advanced information management, change management, pattern-based analytics, resource planning and management, and innovation.
• Emphasize sourcing or developing hybrid IT-business skilled talent through building expanded skill networks and collaboration with universities to transform IT education.

Bottom Line:
CIOs will increase their sphere of influence as operational processes become more automated, the concept of data expands and roles such as decision analytics, user interaction specialists and information designers develop. Traditional IT training will change to build hybrid IT-business knowledge, as well as collaboration and innovation skills.

Business Impact:

CIOs will lead a greater exploitation of technologies to invent new business solutions, delivering the right data at the right time, driving competitive advantage through revenue growth, operational efficiencies and innovation. Success depends on the enterprise’s ability to anticipate, attract and acquire the talent and skills needed to maintain and grow IT’s contribution.

We invite your comments and suggestions, and encourage your participation in the research process for this topic. Please e-mail the authors with your comments and suggestions. We also invite you to participate in a case study.
John Roberts: john.roberts@gartner.com
Lily Mok: lily.mok@gartner.com

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In recent IT Odyssey* interviews, over 60%** of CIOs said that the IT organization is now actively involved in revenue generation, business development, and service and/or product development. Enterprises are embracing the use of IT for business development possibilities, but we question whether businesses’ maturity level will enable this to be successful.
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Recently, the CIO of a major hospitality/entertainment chain said: “In most enterprises, IT and the IT organization spent the last 50 years in what the restaurant/hospitality business calls the ‘back of the house,’ enabling business processes. IT organizations (ITOs) are now being asked to play a major role in ‘front of the house’ activities that touch customers, generate revenue and are a part of our basic products.”

ITOs are still involved in back-office business processes, but a shift that includes a major role in front-office activities surfaced in almost every IT Odyssey interview. Executives described some of these ITO roles:
- Being given responsibility for a part of business, product or service development

- Linked with marketing to find and exploit communications offerings
- Supporting an active role in the software life cycle of business products or service offerings
- Working with business leaders to conceive and support alternative revenue products and services
- Sharing responsibility for the customer-facing aspects of the business

Since October 2010, examples of the above have arisen in every industry interviewed, including the public sector.

What Is the Why?
Over the past two years, many organizations have said their current business models were not viable going forward. The senior executives struggle to enhance their product and service offerings, with IT-supported capabilities that can provide the needed differentiation.

“We don’t want to be the next victim like Nokia,” said the CEO of an industrial goods manufacturer. “Nokia, like us, thrived as a hardware company. Creative, embedded software and a robust IT-based ecosystem left it blindsided. We have the same vulnerability. We must rethink our product.” Another CEO said all of his company’s growth now comes from embedded sensor, software and IT-service-based products.

Another CEO justified putting the CIO in charge of business development as “the only way I could get our business and product development people to take seriously the potential of information and communication technologies. Our young folks get it, but current business managers are clueless. The CIO lacks many of the required experiences, but his last three business opportunity ideas have been blockbusters. He sees what has to be our future.”

Over 300 examples of IT actively involved in business development emerged in the last six months. There appears to be more progress in smaller and midmarket organizations. Initial business impacts include:
- A series of smartphone apps that increased sales of a building product by over 30%
- A sensor-based version of a former commodity product that has captured over 60% market share
- The fastest-growing revenue source of a professional services firm – packaged services rather than billable hours, which has also driven major share growth
- Three IT-oriented acquisitions, which have had dramatic impact on revenue growth and earnings per share in a distribution business

On New and Shaky Ground
CIOs in most IT Odyssey interviews exude confidence in themselves and their staffs when talking about their back-office work. When asked about their new front-of-the-house roles, they recognize they are on new and shaky ground and are full of questions. It is too early to identify the pitfalls, but three major challenges are consistently cited.

First is how to build trust, credibility and constructive working relationships with disparate organizations within and outside their enterprises. The incumbents in the front office often resent or question ITO involvement. There are major style, experience and incentive gaps.

Second, CIOs acknowledge that their staffs often lack the front-office skills, finesse, design talent, market understanding and ability to deal with ambiguity. Because many of the front-office skills are new to IT leaders, CIOs aren’t sure what is needed, so a capability gap analysis should be done.

Lastly, most ITOs have emphasized process and discipline. Such an experience foundation does not translate into a working relationship with the marketing, business strategy and acquisition, and product or service development staffs. CIOs are frustrated that the working relationships
cannot be broken down to waterfall processes, discrete projects and responsibility assignment matrices (RACI: responsible, accountable, consulted, informed).

No one interviewed felt they had found the best starting point, strategy or continuing way forward. Most CIOs expressed concern about whether they could overcome these challenges and add recognized value before the organization ran out of patience.

CIO CALL TO ACTION
CIOs who were making progress offered some constructive tips:
• Limit the scope of the ITO front-office efforts, and if possible, focus on no more than three obviously apparent business opportunities or threats.
• Be humble and share major concerns about fit, skills and working relationships.
• Inspire a culture of distinctive competencies where IT plays one role rather than assuming there is a mandate to take charge.
• Engage a respected (and possibly retired) front-office mentor for the CIO and ITO.
• Work on the skills, styles and working relationships rather than process and project discipline.

Bottom Line:
IT leaders’ shift to a front-office role represents a major opportunity and/or exposure for IT professionals. Successfully deploying a single-instance ERP globally doesn’t prepare a CIO and his/her ITO to redesign a business product line that exceeds customer expectations at an acceptable margin. As mentioned in previous Road Notes, this is a totally new direction for most CIOs, with multiple dimensions.

Business Impact

Businesses realize that they must change. They look to information, sensor, automation, software and communications technologies to provide that something special for business, product and service development. Get it right and the company can become the Apple of its industry. Get it wrong or lag and it is very hard to catch up. Looking to IT to help is a logical, but shaky step.

*IT Odyssey: Each year, Bruce J. Rogow independently conducts face-to-face visits with more than 120 IT executives under the banner of his company IT Odyssey. As a Gartner Executive Programs affiliate, he summarizes his observations and thoughts based on what he is hearing.

Of the 55 IT or business executives interviewed since October 2010, 35 described this “front of the house” activity.