CIOs, Meet Your New Boss

Kevin Moultrup is running with a different crowd these days.

As executive vice president of North American operations for Micro Focus, the British enterprise software company, Moultrup used to spend a lot of time dealing with CIOs of large companies. Now, not so much. He’s hanging out with the chief financial officers instead, because that’s where the power increasingly lies in corporate IT.

"We rarely do a significant deal where the CFO is not involved," Moultrup says. "I deal with them all the time, sometimes to get permission to talk to the CIO." And when CIOs act on their own, the stakes are often low. "Discretionary spending for CIOs is way down," he says. "We have been doing $49,000 deals with one CIO at a very large company, because his discretionary spending cap is down to $50,000."

Research backs up Moultrup’s observations: According to the latest member survey from the Society for Information Management, nearly 30 percent of CIOs and senior IT executives report to their organization’s head of finance. That number is up from 25 percent in 2006 and 22 percent in 2005.

More CIOs are reporting to chief operating officers, too–more than 22 percent in 2007 versus the recent peak of just under 21 percent in 2005. And the decline in the number of CIOs reporting to their company’s chief executive is precipitous, too: 31 percent of those surveyed report to the CEO, down from 45 percent the year prior.

The increasing prominence of the CFO in IT management signals a change in the way companies view technology strategy and deployment. "There’s a lot of blurring and sharing of responsibilities across the traditional, stovepipe functional categories," says Erik Brynjolfsson, the Schussel Professor at the MIT Sloan School of Management and director of the MIT Center for Digital Business.

It may be that the conventional model, in which a CIO oversees all aspect of technology, is being unbundled. The job of maintaining installed systems on which CIOs tend to spend much of their time–sometimes referred to as "keeping the lights on in the data center"–is increasingly seen as an operating function that falls under the CFO’s purview. "There is a trend of CFOs expanding beyond finance to more functional area responsibilities," says Mike Nuzzo, vice president of finance at retailer Abercrombie & Fitch.

Meanwhile, other key elements of the current CIO job–the purchase and deployment of information technology and the shaping of information as a strategic asset–are more often being driven by the business units that use the tools on a daily basis. "Decisions have to be made in the field, close to the sound of the guns," says Steve Player, president of the consultancy Player Group and North American director of the Beyond Budgeting Round Table, an international group that works to improve practices and processes for financial officers. "A lot of technology projects fail because IT organizations don’t understand what the users are looking for, and they don’t change with the needs in the field."

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Broken System?