Show Me the Payoff

By Erik Sherman  |  Posted 07-19-2002 Print Email

Show Me the Payoff

FACT: One out of two business executives don't measure the success of their technology spending.—The Forrester Report, September 2001.

Not anymore. At companies across the corporate landscape, chief executives have had enough and are once again shaking up their corporate IT departments. Their mantra: Show me the payoff.

Sure, some companies, from J&J to Campbell Soup Co., are trying to improve technology's bang for the buck by thinking more strategically, hiring or installing a business person as CIO, or kicking their CIO upstairs, making him or her part of the executive team so as to more closely align technology goals to business strategy and avoid wasted spending.

But there's also some evidence lately that some companies are moving in the opposite direction, reducing the size of their IT departments or limiting the focus of the CIO—if not outsourcing much of the job, or the CIO, altogether.

Consider some of the evidence. In May, CMS Energy Corp. of Dearborn, Mich., jettisoned its CIO in a cost-cutting move. Now, IT staffers report to an interim business manager. Parsons Corp., a Pasadena, Calif.-based construction firm, is outsourcing the CIO job to Perot Systems Corp.'s CIO John Thomas. At Houston-based BMC Software Inc., the old CIO left, and sales vice president Jay Gardner was sent in to be the new CIO so as to "give business some input into technology," he says.

Meanwhile, troubled Polaroid Corp., like many companies facing red ink, is sending in business-side shock troops to make quick fixes. There, Cindy Micavich, a former business-side executive in charge of technology operations, agreed to trade in her old job for the CIO title, on orders to "downsize" Polaroid's IT operations. During the past eight months, Micavich has scrapped an upgrade of the company's business software, scrapped its frame-relay network in favor of a cheaper, Net-based VPN, reduced the size of the old IT department, shut down separate IT departments for specific business units and replaced the old IT organization with a central help desk responsible for servicing the entire company. "I wouldn't want to do it again, but it's amazing how much we cut from IT without impacting the basic business," says Micavich, who now reports to the CFO.

Indeed, says headhunting executive David Brown, "traditional CIOs don't seem to be doing very well lately." Brown, a managing director in the Chicago office of Russell Reynolds Associates, says: "Every day, I get between five and 20 resumes e-mailed to me from people who have been CIOs. But there aren't very many CIO searches under way. We may have a few big ones, for a super-CIO, where it's critical for a company to bring in a new CIO to drive new strategy. But there are also some companies that think they can survive without a CIO. In places like these, I think, it's because the CIO didn't live up to the CEO's expectations."

No kidding. Says Steve Schuckenbrock, managing partner of client services for the Feld Group, an IT leadership consultancy that provides CIO services to major corporations: "If you step back over the last five years, I do think the IT profession is in somewhat of a credibility crisis."

Old-Style CIOs, Beware

The shake-up by fed-up CEOs isn't just a short-term trend brought on by tougher economic times. Gartner vice president Marianne Broadbent and others suggest more permanent, structural changes are occurring. Broadbent, for one, sees a hollowing out, or "devolution," of the traditional CIO role in a small number of companies as technology becomes more important to the business side—and as many CIOs struggle to make the transition between technologist and business strategist. "Look at the well-run IT shop these days, and frequently you'll find some business jock at the head," says Bobby Cameron, chief technology analyst at Forrester Research Inc. "Do they have the title of CIO? Sure. But the job is different now in some places, less tech-oriented and more strategy-focused. The purely technical CIO, as we have known it, is disappearing."

The trend may be accelerating. In the past 18 months, Broadbent says, "there's been a small but very evident trend under way by some companies to dismantle the 'corporate CIO' role and retain only business-level CIOs and IT directors." She agrees that some of this is being triggered by the new focus on cost-cutting and negative experiences installing ERP systems. But not all of it.

"A number of companies, including those in manufacturing, have gone from having an office of the corporate CIO that mirrors the centralized, shared services structure of the corporation and are instead reversing that into a more devolved structure, in which case they don't believe they require a corporate-level CIO," Broadbent says. And they buy in services and don't see the need to have someone at a very strategic level."

Who's to blame? Adds Broadbent: "It's often a combination of unrealistic expectations, an embedded culture of business autonomy and the realization that perhaps the businesses don't share customers, suppliers or processes that can be easily centralized by IT."

So what does this all mean for today's CIO—especially those who want to stick around? John Parkinson, chief technologist for Cap Gemini Ernst & Young, says CIOs have basically two choices. "There are two viable roles for the CIO going forward: upward—as a peer with the executive team contributing directly to executive business strategy—or as a line manager of technology, who will eventually be outsourced."



 

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