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During recent Executive Programs community events in the southern U.S., CIOs discussed how their organizations are responding to current business conditions. After examining the Gartner CIO Agenda results, they were keen on the challenge of re-imagining IT. All of the CIOs were actively exploring at least one of the four main opportunities (see list below) described by our findings. Through a quick survey, we also verified that most CIOs’ variable compensation is linked to business results, which supports our projection that bonuses will increasingly be linked to how CIOs re-imagine IT to drive their enterprises’ financial performance.
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Mark McDonald (GVP and Gartner Fellow) and his team completed the 2011 CIO Agenda analysis for CIOs to help their enterprises best respond in today’s business environment. All CIOs attending these community events reported re-imagining IT in one of the following four ways:

• Changing business priorities, and calling for growth and innovation
• Changing infrastructure models to free resources that can support growth and innovation
• Exploiting new technologies that offer new platforms for delivering information and services
• Understanding the potential to evolve the organization’s digitization level.

Re-imagining Compensation
In addition to discussing the CIO Agenda, a quick survey sought the degree to which each CIO’s variable compensation was linked to business growth and business results. Across the group, only a few reported zero linkage between their variable compensation and business results. On the other end of the bell curve, about 22% of CIOs reported a 100% linkage between variable compensation and business results. But most of these CIOs were somewhere in the middle.

Forty-four percent of CIOs reported that their variable compensation is discussed informally on a periodic basis with respect to business results. These CIOs do not have a formal review process, and their variable compensation is not directly linked to business results. Only about one in five CIOs reported that their variable compensation is formally discussed as part of the performance management process.

Follow the Money
For those CIOs whose variable compensation is based on business results, 100% are actively working to deliver information and services through new technologies and platforms.

Of the CIOs whose variable compensation is not linked or is minimally connected to business results, not a single one (0%) indicated that their plans include re-imagining IT for the changing business priorities calling for growth or innovation.

The indication of our informal survey is that the stronger the linkage between a CIO’s variable compensation and business results, the more likely it is that the CIO would be examining a different IT delivery model to support growth and innovation. If the compensation link to business results is weak, (33% of CIOs), CIOs are more likely to focus on changing infrastructure models.

CIO CALL TO ACTION
CIOs should:
• Actively pursue opportunities to contribute to business growth
• Re-imagine IT capabilities and delivery models to contribute greater value – leveraging new IT capabilities to challenge current assumptions
• Work as a true business partner to integrate their personal reward structure to those of other business leaders responsible for delivering business growth (to be a credible business partner, CIOs should work to measure their success in the same way as other business executives).

Bottom Line:
In the current environment, CIOs must increase the value contribution of IT and focus IT efforts on enterprise growth and innovation. To promote this model, CIOs should work to establish compensation models for IT leadership, including the CIO, to reflect the structure used to motivate and measure other commercial business leaders.

Business Impact:
As CIOs further establish IT as a contributor to enterprise value and growth, the benefits include improved technology and a more innovative, agile delivery model. Compensation alignment will promote this change faster, result in shared objectives and accountabilities, and should help accelerate enterprise growth, productivity and profitability.

Additional Insights:
1. Reimagining IT: The 2011 CIO Agenda (Research)
2. Seeking IT Performance Transformation (Research)
3. March 2011 Talking Technology Program (Podcast)
4. The 2011 Gartner Scenario: Current States and Future Directions of the IT Industry (Research)
5. Predicts 2011: Executive Focus on Revenue Growth Puts Added Pressure on CIOs (Research)
6. Key IT Workforce Decisions CIOs Must Make to Support Business Recovery in 2010-2011 (Research)

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At a recent CIO Forum in Phoenix, Arizona, 60 senior IT leaders met (in a workshop) to exchange ideas on how to interact effectively with the board of directors. The initial discussion focused on why board interaction presents an important opportunity for CIOs, followed by a review of the most and least important board priorities. The participants explored effective ways to present, key lessons in interacting with the board and ways to meet rising expectations.
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IT leaders invited to present to their boards have a valuable opportunity to advance their careers and obtain commitment to IT investments that address key business initiatives. As boards become increasingly interested in IT (due to significant financial investments, possible risks and potential business enablement), our research shows that more than 80% of CIOs are invited to participate in board meetings at least once annually year. In our workshop, 95% of the participants had presented to the board, while more than 10% attended every board meeting. The CIOs agreed that board presentations are critical to their success, yet little training is available to aid in preparation.

To become more effective in engaging the board, the CIOs were asked to share their ideas on: (1) how to structure a presentation to the board, (2) key lessons learned from presenting to the board, and (3) the ways IT and the IT organization (ITO) will meet rising board expectations.

Exercise 1 - Participants proposed the following outline for presenting an initiative to the board:
Slide 1: Set the context.
Explain the reason and nature of the proposal, and include current limitations (e.g., resources, financial,) related to the proposal.

Slide 2: Define the vision and costs.
Tie the investment to business strategies and initiatives.

Slide 3: Describe the value proposition and business benefits.
Explain the value to the stakeholders, including qualitative and quantitative benefits. Detail the risks associated with the proposal and the risks of not accepting the proposal. Include risk mitigation and return on investment.

Slide 4: Outline a road map to reach the future state.
Include the timeline, people and technology required. Define success and a benefits realization process.

Slide 5: Request approval and next steps to keep the board informed of progress.

Exercise 2 - Participants identified these key lessons learned when interacting with the board:
• Understand the board’s expectations of the presentation (discuss with CFO or CEO).
• Become familiar with the board’s culture and priorities.
• Gather all facts, including benchmarking, detailed costs and industry reviews.
• Research similar initiatives in other companies, including Wall Street analyst views of the topic.
• Anticipate questions and prepare answers.

• Rehearse the presentation (again use the CFO or CEO as a sounding board).
• Use concise, business language; communicate clearly the link between the proposal and business outcomes.
• Prepare by meeting with a few directors to understand their perspective (and modify your presentation as necessary).

• Keep the presentation short.
• Coordinate with other executives who are either affected or might sponsor the initiative, especially the CEO.

Exercise 3 - Participants defined the following ways IT will meet the rising expectations of the board. The goal is to meet or exceed the board’s rising expectations in 2011.

• Decrease IT resources in “running the business” and increase IT resources to grow and transform the business, employing a portfolio approach.
• Align key IT capabilities with the key initiatives of the board.
• Manage expectations and roles.
• Separate information from technology. IT is already reducing costs and is generally considered a commodity. Provide information the business requires.
• Create an IT public relations team to communicate to the board and business leaders.
• Avoid the perception that IT is only about operating costs by showing return on investment.

• Do not guess; ask questions to elicit priorities.

CIO CALL TO ACTION
Based on the findings of this workshop, CIOs should:
• Develop the skills to interact effectively with the board.
• Build board acumen by understanding the board’s expectations and agenda.
• Thoroughly prepare each board presentation.
• View board presentations as opportunities to demonstrate they are business leaders.
• Increase their influence with their boards.

Bottom Line:
CIOs must develop the skills to better communicate with boards to gain their appreciation and approval for key initiatives. Board interactions are key opportunities for CIOs to demonstrate they are business leaders.

Business Impact:
CIOs who make effective board presentations can accelerate IT exploitation by helping the board make more rapid, informed decisions on business-enabling IT investments that can drive improved market share, revenue growth, profitability and future opportunities.

Additional Insights
• “Executive Advisory: Gartner-Forbes 2011 U.S. Board of Directors Survey: IT Expectation Rise Dramatically for 2012”, 25 March 2011, Jorge Lopez (Research)

• “Working with the Board of Directors”, 1 July 2006, Tina Nunno and Chuck Tucker (Research)

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Many IT organizations have been through, are in planning or are in the process of implementing a reorganization. Among a small sample of 30 Executive Programs members, 80% are implementing some facet of organizational design as an initiative this year.
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Restructuring IT organizations (ITOs) is again a major CIO initiative. One CIO we queried provided a quick retort: “The organizational model that worked in the past is not flexible enough to meet the challenges I am facing [coming] out of this recession.”

For years prior to the recession, this company used structural changes to eliminate expenses and raise operational excellence. Now, the firm is shifting its strategy to drive efforts around innovation, growth and client retention; forcing the CIO to quickly adapt the organizational model to this new direction.

Another CIO’s quest for a flexible infrastructure has him staying ahead by proactively managing the organizational design. Unfortunately, this proactive stance has required almost annual restructuring. “My [IT] shop is stressed to the limits with capacity issues, and now trying to overlay another reorganization will likely stop the team dead. But if I don’t change, I won’t be prepared to support my business by year-end.”

The loss of productivity during an organization adjustment generates more churn, which incites inefficiency. Teams are easily distracted, especially with recent history around so many layoffs. This agitation translates directly into time impacts on IT deliverables and often hurts team morale.

CIOs cannot afford to impact either delivery or morale if they expect to deliver everything necessary this year. In pursuit of the perfect organizational model, successful CIOs appear to take smaller steps and tweak rather than making large over-arching changes more frequently.

CIO CALL TO ACTION
CIOs should eliminate reorganizing for perfection; smaller changes can often achieve the desired impact.
• Assess the issues that require resolution, and identify problems that can be mitigated through smaller changes prior to a full-blown restructuring.
• Assess skills, not longevity, in positions. By placing legacy staff in critical roles, teams end up with bad fits for the strategic vision and leadership. Selecting people with the right skills to lead often improves team flexibility and generates stronger results.
• Pilot major changes and even minor ones. Seeking opportunities to create standard processes that span teams will temper short-term changes. This could provide time to validate whether the adjustments create the desired result.
• Finally, when the change benefits demonstrably outweigh potential negative impact, move aggressively to implement new approaches. There are times when reorganization is the best option for solving the problem and creating a strategic advantage.

Bottom Line
Creating a flexible IT strategy can provide a more stable organizational model to support many business changes. Thoughtfully assessing and implementing smaller changes will create less disruption and drive greater productivity.

Business Impact:
Productivity, retention and IT delivery are all put at risk during large reorganization efforts. These issues can negatively impact the business, causing project overruns and resource losses, and thus negatively impact profits as well as long-term IT synergy with the business.

Additional Insights:
• Meehan, P. & Pack, D.B., “Effective IT Organizations: Design Matters”
• Mok, L., Pack, D.B., Colella, H. & Berry, D., “Organizing for Success”

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In recent IT Odyssey* interviews, CIOs are expressing their desire to “offload” the business of specifying, supplying, owning and supporting user devices such as laptops, tablets and smartphones. Beyond just leaving the device business, some believe they must morph to a “personal-centric” architecture in order to enhance the performance of knowledge workers. If this is so, a major architectural and management shift lies ahead.
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Recently, over half of the IT Odyssey CIOs expressed a desire to either allow users to acquire their own devices (within limits) or to move to a virtual desktop model where end users get a thin client that relies on enterprise servers to provide data and functionality.

That’s big news. But several CIOs also spoke of their need for a dramatically different view of enterprise architecture that is designed to optimize the performance and user experience of knowledge workers and customers. CIOs often feel that their current architectures are inadequate, dysfunctional or counterproductive for more tech-savvy knowledge workers.

Most organizations offer “firm-centric” architectures (FCAs) as shown in Figure 1. FCAs are the evolutionary artifact of business transaction systems. Knowledge workers are tightly linked to the core business systems and generally provided a “controlled pass” or limited gateway to access the Web. EA emphasis and resources are targeted to optimizing the technology and infrastructure of the firm-centric core and firewall.

Figure 1: Firm-Centric Architecture


New “personal-centric” architecture, (PCA) as highlighted in Figure 2, starts with recognition that different knowledge workers have different styles of work and are used to consumerized IT. EA emphasis and resources are focused on enabling the knowledge workers to exploit what their devices can do and to provide access to information and IT services available inside and outside the organization. PCA is about optimizing the performance of the knowledge worker and is similar to the model from U.K. consultancy Differentis, as shown in Figure 2.

Figure 2: Personal-Centric Architecture (as adapted from Differentis)

The Game Has Changed
“We’ve spent 25 years optimizing business processes,” said the CIO of a consumer packaged goods company. “Knowledge workers have been an afterthought. The next decade will be about empowering our knowledge workers by giving them the tools and access to what the Internet can provide, which allow them to collaborate for economic gain and be as effective as possible to improve enterprise yield. We just don’t have an architecture that allows them to choose an appropriate device, see out of our four walls, connect with the world in which we do business and then capitalize on the opportunities.”

“We are getting pounded by far smaller firms whose designers have access to customer trends, whose engineers are aware of the latest approaches, whose suppliers are in real-time collaboration and whose sales force knows where their customers are going,” lamented the CEO of an engineer-to-order manufacturer. “Our CIO appears totally absorbed in ERP, being locked down and his firewall. Young professionals we would like to hire visit us and giggle at our approach to IT support.”

“My old company was terrified of employees wasting our time Googling, Facebooking or fantasy footballing,” said a manufacturing CFO who recently changed companies. “We should have been concerned about the 30% market share we’d lost to offshore competitors. My new company starts its IT planning around further enabling and accommodating the most creative, effective knowledge workers. Our IT architecture supercharges the professionals.”

Have the Strategies and Architectures Changed Along With It?
Since June, over 80% of the interviewees have cited “increasing business yield” of asset utilization, markets, new products and revenues as a top business objective, and they believe this is enabled by increasing knowledge worker effectiveness. One would assume that rethinking the IT support of those key differentiators would be under way. Yet, three schools of thought exist:
1. “What we have works”: These IT organizations (ITOs) believe their current firm-centric approach is adequate. They believe switching to, adding or opening a partial PCA has too many risks and problems, and that costs will outweigh achievable benefits.
2. Separate and parallel: These ITOs are establishing parallel, distinct PCA approaches for appropriate knowledge workers. The architectures optimize around personal preferences, consumerization, Web presence, flexibility and proprietary productivity capabilities.
3. Hybrids and accommodators: These ITOs offer limited capabilities to selected knowledge workers but do not currently plan parallel architectures.

Often the sales force, senior executives and some mobile workers receive a basic personal-centric approach. But in my visits, fewer than 10% of the ITOs are pursuing a well-architected and broad separate and parallel approach.

CIO CALL TO ACTION
The FCA and PCA are dramatically different. The strongest resistance may come from the current EA group. Before adopting or dismissing the PCA concept, the ITO should explore whether a firm-centric, closed approach is placing their knowledge workers at a competitive disadvantage or limiting their effectiveness. If the answer is a yes or at least a good possibility, the ITO should examine how other ITOs are adopting architectural alternatives:
• Examine whether EA principles, target Architectures, governance, standards, staffing and skills align with empowering knowledge workers.
• Identify segments of users, customers or partners that could benefit most from alternative, PCA or more-open architectures.
• Determine how those segments might benefit through increased agility, speed and access, and document how change will drive corporate benefits, versus merely making users happier.
• Target a pilot segment and create a parallel or hybrid approach, while still assuring security, privacy and appropriate access to the company’s systems; include issues of policy, practice, training and awareness.
• Outline the steps required for more broad-based PCA deployments and develop the capabilities users may need to link outside facilities to those they use internally.

Bottom Line
CIOs shouldn’t be caught without a well-articulated approach that enables knowledge workers to capitalize on the tools, information and capabilities that lie outside the organization. Simply saying no or treating these issues as a sideshow is increasingly a losing position.

Business Impact
Failing to adopt what Gartner calls an “embrace and manage” strategy that provides more freedom for users to select their personal devices and to exploit external information resources will increasingly put the business at a disadvantage versus more open and properly supported competitors. This could result in productivity declines, and also negatively impact revenues, profits and the recruiting of top talent.

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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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Recent discussions with over 100 CIOs indicate that organizations are finding innovative ways to use Apple’s iPad to increase personal, professional and organizational productivity. CIO and business-sponsored projects are delivering positive impact by driving revenue, reducing expense and improving customer service. CIOs are exploiting opportunities, assessing risks and driving the required policy changes that safely incorporate the influences of consumerization in the workplace.
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Gartner Executive Programs held two CIO sessions at Symposium/ITxpo 2010 in Orlando to explore and discuss personal, professional and organizational interest and activities regarding the use of iPads. The sessions were attended by 104 CIOs and other senior IT executives, and more than 50% of them had iPads in their hands. Thirty-three percent of the group indicated they are actively pursuing iPad-related projects (60% IT-led, 40% business-led). CIOs were asked to share their ideas for using iPads (now and in the future) and how the devices are currently delivering value to their organizations.

Group discussion revealed an enthusiastic and cautious optimism for the iPad as a way to drive productivity and value at many levels of the organization. CIOs indicated that they and their executive peers are using the devices for e-mail and Web access as a more productive alternative to smartphones and laptops. Key factors for improving productivity were instant-on, lightweight tablet, larger screens, better document viewing and integrated connectivity.

CIOs are also finding ways to access corporate applications (e.g., via Citrix or VMWare), running i-Series/AS 400 apps via 5250 terminal emulation, and writing applications that drive customer-service-related activities. One CIO commented, “The use of virtualization and emulation technology is allowing me to deliver value by extending current applications on new devices without significant new investment.”

Examples of current iPad usage include the following:
• A pharma company equips its sales force with iPads to do e-detailing of physicians about their products. The CIO said that the interactive nature of the iPad has resulted in longer and more meaningful discussions with physicians.
• An electrical utility developed a native iPad app to allow customers to voluntarily “opt off” the grid during peak use periods and get paid for it. Another utility uses the device to facilitate utility pole installation tracking by e-mailing forms data directly to the ERP system. The company’s CIO said they now see improved productivity, with jobs completed faster, when it previously took three to five days for the manual processes to get data into the company’s systems.
• A casino company uses iPads to support customer service and device repair on the casino floor, increasing revenue generation through improved customer intimacy and satisfaction, and by keeping the most profitable machines in working order.
• A food manufacturer/distributor profiles store- and market-specific sales data for the buying managers of retail stores carrying its products, and was able to increase product sales and seasonal promotion updates.
• A university uses iPads as e-readers and an access point to Web-based e-mail and Google apps, and as an alternative laptop – hoping to reduce costs and improve information accessibility and use by students.
• A college is adding a magnet school, grades 6 – 12, to its campus and will be giving each student an iPad as a textbook e-reader and access point and note-taking device, providing a more consistent, interactive and effective learning environment.

Each of the above examples is about driving customer-facing functionality or improving operational efficiency or reduced expenses, in addition to providing a more convenient way to access e-mail and the Web.

CIOs were acutely aware of potential security risks, lack of enterprise-class management tools, the “fragility” of the consumer technology, and the fact that iPads and other tablets are early in the Hype Cycle. But they also believe that the potential to differentiate their organizations, products or businesses is worth careful exploration.

There was consensus that the opportunity was high, the investment point was low, and the learning value was sufficient to offset potential security or technology risks or concerns about early adoption and product/technology lock-in. These groups of self-selected CIOs were enthusiastic but cautious, as the technology and its potential are still in early stages.

Key features underlying the interest and use of this new platform include: instant-on access to e-mail and the Web vs. two to three minutes for a notebook; lightweight quality display with touch interface, driving easy and interactive use; the ability to leverage existing applications with virtual technology, extending current investments; and a robust, consumer-friendly platform for new application development and deployment. One CIO said, “The iPad has opened the door to a new way of thinking about applications, their deployment and use.” The iPad itself may not be the final solution, but it is setting a direction CIOs should be actively considering.

Three underlying characteristics of iPad use really stood out:
• The potential for significant productivity gains
• Fast, agile turnaround in creating business value
• Success in working around the security and manageability limitations

CIO CALL TO ACTION
• CIOs should not ignore the iPad and the potential benefits this disruptive technology can bring to organizations of all kinds.
• CIOs should focus on both client-facing and internal opportunities to exploit the iPad, as well as forthcoming derivative tablets (e.g., RIM Playbook, Samsung Galaxy, Dell Streak) based on other operating systems (e.g., Android) and new mobile device formats – as part of a managed device diversity program.
• The convergence of an inexpensive consumer-based device format, with instant-on, high-resolution screens, touch-based interfaces, WiFi and 3G internet connectivity, and high battery life presents a unique opportunity to explore and exploit new approaches to mobile devices, application functionality and media delivery.
• CIOs should not underestimate the “cool factor” for people associated with these devices, to enhance relationships with executives and even boards.
• CIOs should use this opportunity to rethink implications for security, information protection, and enterprise deployment and management of consumer technology (since this will be required for other external “entities” such as customers, partners, contractors, etc.), while anticipating that the iPad is a leading indicator of a new technology direction for employer- and employee-owned devices.

Bottom Line
The iPad is delivering real value at personal, professional, organizational and executive levels, and is a leading indicator of future end-user device approaches. CIOs should invest part of their personal and organizational R&D budget in this and related disruptive technologies as part of their innovation program. Leading CIOs are actively investing in and pioneering creative ways to leverage this technology and bring real business value, often in a client-facing manner.

Business Impact:
The iPad presents CIOs with an opportunity to rethink how they bring innovation to their organizations to drive market opportunities, while improving efficiencies and effectiveness. Early indications from CIOs show there are many ways to leverage this disruptive technology in client-facing applications that directly drive an organization’s financial levers – increasing revenue, reducing expenses and building customer intimacy.

Additional Insights:
• Summary Notes Symposium 2010 EXP Session on iPads
• “CEO Advisory: Seize the iPad Opportunity Now”
• “iPads: Not Notebook Replacements, but Still Useful for Business”
• “Use Managed Diversity to Support Endpoint Devices”

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In a recent CIO workshop during the Cannes Symposium/ITxpo, several attendees shared their experience on top questions they will probably be asked by CEOs over the next 12 months. The most vexing issue cited by the group was the challenge of exploiting IT to help drive top-line growth.
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Forty participants, representing major industries (financial services, telecom, energy, government, manufacturing), shared their answers to five top questions.

Q1. Your CEO is reorganizing top-level management, creating some new roles he’d like you to consider. Is there any non-IT role you would consider? What would you say if offered a two-year assignment overseas?
A. Everyone seemed to be ready to address questions on personal development. Several examples were presented on new role experiences overseas or on roles changing across the organization. The most appealing roles outside IT for CIOs were new positions in Operations or in Planning & Organization, depending on the specific industry. The majority of attendees were also excited about the opportunity to work overseas, and some had already experienced it in growing emerging markets such as Latin America, India and China.

Q2. How can IT help top-line growth? How could you advance your marketing and sales models, based on what technology can do today? How could you use technology to innovate?
A. Approximately one-third of the participants were ready to address the question about the top-line growth. Regarding strategies to drive innovation, several interesting examples were presented. One attendee has experienced new business models coming from different industries, supported and enhanced by IT. An interesting example was in a healthcare equipment company that has exploited IT flexibility and agility to innovate, with an aggressive time-to–market, new lines of products in the fashion industry.

Q3. Are you ready to deal with new taxes and regulations? What systems and process changes must you make to cope with taxes and regulations?
A. This question has been covered by most of the participants, and approximately 60% of them have already addressed tax and regulation issues, planned in advance their impact for the coming year, and dealing in tight contact and coordination with risk management and the compliance department. A manufacturing company has declared it will exploit the taxes and regulations of different countries; in the near term, it has created a committee that facilitates relationships with CIOs, tax managers and risk managers in different countries.

Q4. What are you doing about your succession? Have you got any plans for developing the capabilities of specific internal successors?
A. Most of the participants declared they have addressed their succession with a plan and shared it with HR. In the majority of cases, the successor was still part of the IT structure; in a few cases, the CIO has planned a career path for the substitute that would also include experiences in different business units (e.g., business development, marketing, logistics) with the aim of complementing IT experience with a solid business background.

Q5. The iPad is a real breakthrough. How are you going to get your customers and your people to use it?
A. Only a few attendees were already leveraging the excitement their executives had for the iPad within business processes. In particular, an insurance company explained that the iPad was being trialed as a sales support tool.

CIO CALL TO ACTION
• Create an elevator pitch for the CEO that highlights IT-enabled business ideas that will drive top-line growth.
• Develop concrete business cases, using business terms leaders can easily understand.
• Where possible, exploit incoming regulations by working closely with compliance and regulation managers; IT leaders can sometimes use regulations to develop new business opportunities and competitive advantage.
• Provide (at minimum) concierge-level iPad (and smartphone) support for key users.

Bottom Line:

CIOs are increasingly prepared to address questions about organizational dynamics, HR and regulations, and less comfortable talking about the specific contributions technology makes to innovation and supporting business growth. This will be a 2011-2012 challenge.

Business Impact:

CIOs must develop a well-articulated business leader (and board-level) message about how they will exploit IT to open new markets, develop new products/services, attract new customers and increase enterprise agility. These efforts should easily translate to revenue and earnings growth (or in the case of the public sector, more and better services for comparable budget).

Additional Insights:
• “CIO Advisory: What Would You Discuss If Your CEO Suddenly Invited You to Lunch?” 17 December 2010, Ken McGee (Research)
• “Meet Your Next CIO: 2010 Update”, 21 September 2010, Ken McGee (Research)
• “General Motors: Using IT to sell cars and enact the recovery strategy”, 16 April 2010, Barbara Gomolski, Ken McGee, Kathy Harris and Jorge Lopez (Research)
• “Gartner CEO and Senior Business Executive Survey, 2010: The Post-Recession ‘New Normal’ Starts to Emerge”, 28 March 2010, Mark Raskino (Research)
• “CEO Concerns: Peering Into 2010 and Beyond”, 4 March 2010, Jorge Lopez and Mark Raskino (Research)

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As CIOs plan how their organization will evolve to support future business demands, they look to enhance their team’s valuable relationship management capabilities with deep analytical skills to ensure that the IT team can bring as much predictive capability to the business as historical analysis.
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In recent gatherings among CIOs in the Western U.S., we have noted an emphasis on changing organizational dynamics, as most are examining the evolution of their organizations from cost centers to partners that provide material information to the business. In this latter scenario, most agree that the unique skill sets needed to perform this service are at least informally buried in their current organizations. There is also a need to heighten the visibility of these skills and evolve the function.

The CIOs considered data analysis and predictive analytics to be the most exciting part of their organization’s future. Most agreed that they are well-positioned to make a difference to the business by building, nurturing and leveraging skills in these areas. After all, the IT organization (ITO) has better visibility into information across the organization than any other group in the company, and the trends, information and data are ripe for this proactive analysis. The use of heuristics and predictive analytics, the CIOs agreed, can make a difference in driving new customer services, new markets and even new approaches, which will be critical in supporting strategic directions.

The question arose, however, about better understanding what success criteria should be established and how to recognize their impact. Executives are currently overloaded with information, so simply generating more did not make sense. Hence, the group ultimately agreed that the production of “material data” was the appropriate goal of the analytics team. “Material” meant that the information had the potential to cause an executive to consider changing course or direction.

The next question was about starting such a change. Asking the business the right questions made the difference. But simply asking “What data or information do you need?” was generally ineffective. Instead, inquiring, “What data/analysis would provide the confidence that we could improve sales by 30% in this demographic over the next 24 months?” had more of an impact. “Specific questions aligned with the business strategy make the difference,” said one pharmaceutical industry CIO. Material data is a key to driving value.

CIO CALL TO ACTION
To evolve, an ITO must extend beyond basic operational excellence and analytics to provide information that makes a strategic difference.
• In considering how to source skills in analytics, consider the concept of a BI competency center. Additionally, consider whether IT should take a lead role in analytics or operate (at least to start) as data custodians.
• Infuse the ITO (via training and new blood) with competencies in next-generation analytics and heuristics (e.g., including social network analytics).
• Establish a pilot initiative to apply analytics and provide “material” insight that has the opportunity to effect business change.
• Consider the data points the ITO can access and analyze, including leading indicators, trending and historical data.
• Ensure that the business relationship managers/analysts are asking the right questions of the business.
• Keep the focus on producing material data versus more data.

Bottom Line
Focusing on strategic information through data analysis and predictive analytics positions the ITO as a key influencer in strategic business considerations and direction. Those CIOs who do not tackle this must accept their fate of being managed as a cost center.

Business Impact
Developing dynamic, predictive analytics will increasingly become de rigeur for leading ITOs to help their business leaders make critical business decisions that will improve productivity and drive new services, secure customers/constituents and create additional revenue streams.

Additional Insights:
“Business Intelligence and Decision Impact,” Patrick Meehan, John P. Roberts (Research)

“From Business Intelligence to Intelligent Business,” John P. Roberts, Patrick Meehan (Research)

“Seek Information Patterns With Data Mining and Predictive Analytics,” Bill Hostmann (Research)

“Gartner’s Business Intelligence, Analytics and Performance Management Framework,” Bill Hostmann, Nigel Rayner, Gareth Herschel (Research)

“The Four Styles of Integrating Analytics Into Business Processes,” Gareth Herschel, Betsy Burton (Research)

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Recent CIO discussions indicate that as the economic conditions plateau, many CIOs are planning and strategizing their future vision. They positioned how their organizations would evolve, and the key elements and people changes that would result. They also explored the role that IT organizations would play in the overall business, as well as the skills and competencies that will be required.
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These questions were examined in a recent session among prominent cross-industry CIOs in the western U.S. With few exceptions, the CIOs agreed that they do not anticipate an increase in their IT expenses (especially relative to revenues, or in public sector, the overall budget) in the foreseeable future. They indicated that the business has been satisfied with how well they produced during the last two years’ austerity. As such, the CIOs considered how the IT organization would likely evolve to ensure a continuing economic and strategic impact.

The participants agreed that having a simple and well-defined sourcing strategy was key for the future management of IT. Even if the organization has no intention of procuring services from third parties (including cloud or SaaS), these outsourcing options should always be considered (they are tools that should be part of standard due diligence and comparison). A sourcing strategy ensures that services are well-defined and that they can be evaluated for competitiveness. This approach ensures the business that operational services are being provided efficiently and effectively.

Many CIOs had adopted a zero-based budgeting model for IT spending. This involves the simple, yet rigorous, portfolio management activity of identifying all applications, number of users, support and maintenance costs, and then identifying the business owners who “sign up,” indicating that they “need” the app and that they understand the associated cost. In this approach, cost cutting is driven directly by the business based on its requirements.

At the highest level, these two basic models enable IT organizations to target proactive initiatives that can make a material difference to the business. The CIOs unanimously considered this to be the most exciting part of their future (see Part 2).

CIO CALL TO ACTION
Doing the exciting work in the future IT organization demands that the basics are in order. CIOs must build confidence with the business that they’re running the basics efficiently and effectively.
• Build or review the sourcing strategy/framework (include cloud and Saas options).
• Communicate the model and compare market costs/options.
• Adopt a budgeting approach that ensures business ownership.
• Consider the future competencies required to grow and evolve the IT team into new roles (see Part 2).

Bottom Line
Relative to running operations, CIOs must get the basics right and communicate their sourcing model/decision framework and budget approach. This will build confidence with the executive team so that CIOs can focus on proactive initiatives that can further drive the difference IT makes in the business.

Business Impact
Developing new IT metrics, organizational structures and funding models (e.g., zero-based budgeting) around portfolio management (especially for applications) will ensure that IT costs are optimized and that the business properly exploits IT to further automate (or eliminate) functions, thus further reducing costs. These savings can be utilized to invest in business-differentiating applications.

Additional Insights:
“Selective Sourcing Model’s Strengths, Weaknesses, Opportunities and Threats,” Frances Karamouzis, Claudio Da Rold (Research)

“The Impact of Cloud Computing on Sourcing Strategy Models,” Claudio Da Rold (Research)

“Cost Cutting in IT: When to Use Zero-Based Budgeting,” Ken McGee (Research)

“Toolkit: How to Set Budgets and Staffs for Sourcing Strategy Projects,” Claudio Da Rold (Research)

“Key Issues for Service Sourcing Strategy, Management and Governance, 2010,” Frances Karamouzis (Research)

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At a recent roundtable gathering of CIOs in Bogota, Colombia, a presentation and discussion focused on how successful CIOs are becoming involved in enterprise architecture to benefit the business. IT leaders can use enterprise architecture to compare the current and future states of the business and define the steps needed to reach the vision, creating business value.
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Many IT leaders mistakenly believe that enterprise architecture (EA) is limited to a set of technical standards, such as an ERP application or a data warehouse. IT leaders with these misconceptions do not obtain business support for the architecture, missing major opportunities to make a contribution. Enterprise architecture is the process of translating the business’s vision and strategy into effective enterprise change by creating, communicating and improving the key requirements, principles and models that describe the enterprise’s future state and enable its evolution toward it.

The participating CIOs liked the concept of using EA to create business value. One CIO from a financial institution said that a clear road map based on architecture provides the justification for IT investments. The group brainstormed ideas on how they plan to use EA to benefit their businesses, selecting the following as most valuable:

1. Market the EA concept to additional areas by:
• Involving others (in a friendly way) in the development of strategic plans, using the architecture as a guideline
• Developing and communicating a road map to achieving business value
• Providing easy-to-understand solution alternatives to business issues

2. Help the business understand and leverage IT capabilities by:
• Developing and communicating a holistic vision of the business at a strategic level
• Translating the strategy into required organizational capacities
• Explaining the interactions among key processes in terms of the business’s vision
• Linking IT investments to business goals by developing business cases describing the expected results

3. Achieve synergies and implement improvement in the organization by:
• Creating integrated project teams that encompass process, people and technology change
• Participating actively with other areas by becoming part of the organization’s project management efforts
• Improving the “time-to-market” of IT solutions

CIO CALL TO ACTION
Based on the findings, CIOs should do the following:
• View EA as a tool to deliver business value instead of seeing it only as a set of standards.
• Promote the EA concept as a process to translate the enterprise’s vision into a road map of the changes needed to achieve business benefits.
• Involve other areas in developing IT strategic plans based on the architecture.
• Help the business understand and leverage IT capabilities by developing a holistic vision of the enterprise and linking IT investments to business goals.
• Position IT projects as business projects through sound business cases and the delivery of expected benefits.

Bottom Line
A paradigm shift is occurring among some CIOs. Instead of limiting their work to managing projects and infrastructure, effective CIOs are expanding their responsibilities to incorporate architectural thinking in their role definition. These CIOs are working with enterprise peers to uncover opportunities and ensure that the enterprise is prepared for growth.

Business Impact
Effective CIOs use enterprise architecture to translate the business’s vision and strategy into the required enterprise change. Our research shows that CIOs can leverage their understanding of the enterprise to develop architecture useful for leading the organization in defining and implementing ways to create competitive differentiation and business value.

Additional Insights:
• “Leadership Development Module 1, Chapter 5: Enterprise Architecture,” 19 May 2008, Colleen Young (Research)

• “How to Develop Enterprise Business Architecture,” 4 September 2008, Betsy Burton, Bruce Robertson (Research)

• “Guide for Determining EA Business Value,” 23 April 2009, Betsy Burton (Research)

• “What the C-Suite Needs to Know About EA, and What the EA Team Needs to Know About the C-Suite,” 5 May 2009, Anne Lapkin (Research)

• “Findings: An Enterprise Architecture Program Focus on Current State First Is a Common Mistake,” 20 October 2009, Philip Allega (Research)

• “The CIO as Architect: Leading CIOs Use EA Thinking to Drive Transformation and Enable Business Success,” 23 March 2010, Bard Papagaaij (Research)

• “Gartner Clarifies the Definition of the Term Enterprise Architecture,” 12 August 2008, Anne Lapkin, Philip Allega, Betsy Burton, R. Scott Bittler, Greta A. James, Bruce Robertson, David Newman, Deborah Weiss, Richard Buchanan, Nicholas Gall (Research)

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At a recent gathering of federal government CIOs, attendees expressed heightened concern about the challenge of protecting sensitive data from unauthorized use by employees, whether intentional or through careless practices. Even though this is a perennial issue, it is especially relevant today because the frequency and severity of breaches continue to escalate – from internal sources as well as external attacks. The key question and focus of the discussion became: “Why does this continue to occur, and how do we as CIOs provide seamless access to data for valid business purposes while preventing unauthorized use that results in data being exploited for potentially nefarious purposes?”
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Executives continue to be bombarded by the media with examples of security breaches whose impacts range from financial and intellectual property loss to national security threats. Many agree that these breaches are the direct result of risk management that isn’t focused enough on insiders.

One CIO characterized the WikiLeaks incident in the summer of 2010 this way: “How does an entry-level military employee exceed his authorization and download over 150,000 documents and other classified materials, with sensitive content that some would argue compromises national security, and no one notices?” The leak was eventually discovered through a tip from an outsider, not even from any internal controls or processes.

Another CIO referenced a Google announcement in May 2010 that an engineer had developed a program that collected private information from unsecured wireless networks as Google vehicles traveled through neighborhoods across the globe to collect street images for Google Maps.

Still another CIO related how a government employee compromised and used citizen data for personal purposes. Especially telling was the review by a CIO of a recent incident published in Federal Computer Week ( November 8, 2010) where an employee e-mailed 12,000 names and Social Security numbers to private e-mail addresses, exposing these individuals to potential identity theft. The CIO reinforced an earlier statement: “These are not new problems, but that they continue to occur with such severity makes it clear that CIOs must renew their focus and plug the dam to stop such breaches.”

Security technologies and resources have been in the Gartner CIO Survey’s top 10 CIO technologies for the past five years and are expected to continue as one of the top investment areas. As one CIO said, “Security is not a static environment; it must continue to evolve in response to both internal and external threats and cannot be an area of complacency.”

CIO CALL TO ACTION
The CIOs agreed that a list of initiatives enterprises could pursue to eliminate internal breaches would exceed available financial and human resources, but that the following were most important:
1. Prioritize and project the crown jewels. As noted, enterprises do not have the resources required to eliminate every possible threat. Identify and protect those resources that if compromised would present the greatest risk to the enterprise.
2. Establish a risk-aware culture. Implement programs with periodic refreshers that educate employees not only on threats but also on security-conscious practices to which they must adhere.
3. Recognize that both the private and public sector’s contracting processes involving sourcing partners increase the risk of unauthorized data usage.
4. Make the business an equal partner with the IT organization in information risk management; both must ensure controls and enforce security requirements.
5. Employ extensive monitoring and security tools for audit, content monitoring and filtering, event management, etc., to identify and respond to suspicious behavior.

Bottom Line
The importance of risk management in protecting enterprise information resources will grow in importance as more information becomes available online and more people have selective access to it. Threats will occur as some employees exploit their position to compromise data for financial (or other personal) benefit, for a malicious purpose or simply due to carelessness. Prioritizing and protecting the crown jewels must be the priority.

Business Impact
Internal security breaches have caused actual and reputational damages in the billions of dollars. They can also result in the loss of life – for example, when sensitive intelligence data is compromised. Brand images can be tarnished, competitive advantage lost and careers ended. The risks are escalating and becoming more quantifiable.

Additional Insights:
• “Best Practices for Managing ‘Insider’ Security Threats,” Perry Carpenter, 25 July 2008 (Research)

• “Security and Risk Management as a Social Science,” Tom Scholtz, 25 August 2010 (Research)

• “Controlling Staff Behavior Takes More Than Technology,” Jay Heiser, 27 January 2010 (Research)

• “15 Common IT Risk Management Pitfalls,” Tom Scholtz, 17 June 2010 (Research)

• “Key Issues for Risk and Security Roles 2010,” Paul Proctor, Carsten Casper, Jay Heiser, John Bace, Roberta J. Witty, 26 March 2010 (Research)