2005: The Year of Growing Carefully

The recession is over, the economy is improving, IT spending is increasing, and IT hiring is rebounding. When this combination of conditions last occurred a decade ago, companies launched an IT arms race. Fortunes were spent and frequently wasted on information technology in the days of the Internet bubble and Y2K.

Today, we’re once again in a post-recession growth economy, and both Sarbanes-Oxley and the fight to secure corporate networks and information are forcing companies to spend on IT.

After re-examining a year’s worth of CIO Insight‘s research for the trends that will shape the CIO’s world in 2005, it seems that chasing killer apps and large spending increases won’t be among them. Instead, restraint rules, and the focus is on executing fundamentals.

That’s not to say it will be a year of retrenchment.

On the contrary: CIOs are focusing on generating revenues and improving customer service, rapidly replacing legacy systems and hiring application developers and project managers.

But this forward movement won’t spiral into a keep-up-with-the-Joneses frenzy. No new technology like the Internet is gripping the imagination of consumers and business strategists. Cutting costs and improving productivity remain top business priorities. IT spending and staff levels will only increase modestly. CIOs will put most of their energies into integrating their applications and data, standardizing and consolidating their IT infrastructures, improving processes, and measuring performance.

The future that CIOs have in mind doesn’t resemble the Jetsons; it looks more like the NFL’s New England Patriots: intelligent, versatile, quick to adapt, and capable of succeeding despite seemingly crippling injuries.

84% say CIOs will need much more business experience in five years.

44% say they don’t see any value from offshore outsourcing.

39% of CIO lieutenants say low IT morale is harming their companies.

5% say their company has done an excellent job of creating IT career paths.

Can CIOs succeed at this agenda, despite the fiscal restraints they must live with? There’s no good reason why not.

It’s hard to think of a time when CIOs have had as many opportunities to lower costs as they do today.

Open-source software is providing a low-cost alternative to other platforms and applications. The IP revolution has simplified networking and interoperability, and now it’s forcing telecom vendors to lower costs and improve service. Hardware is cheap: A desktop PC or server costs about as much as a few weeks of groceries for a typical family.

And while many CIOs remain reluctant, they can shop the world for competent, low-cost IT labor. There’s no reason for CIOs to regard innovation and thrift as incompatible, or to treat cost-cutting as a limitation or a personal affront rather than the reality the whole business world must live with.

CIOs have something else going for them: They’re now part of the inner circle of strategic decision-makers.

Most CIOs now report directly to the chairman, president or CEO, and three quarters are members of the corporate strategy committee.

Just as important, CIOs—indeed, executives in general—have gotten better at managing IT during these tough years. They now appreciate the value of back-end integration and platforms, and the importance of business processes and metrics. They have gotten better at alignment and grown skeptical about vendor claims and promises.

Now comes the hard part: CIOs are going to have to get as smart about people as they are about technology, processes and strategy.

The past few years have been tough on budgets, but they’ve been far harder on IT staff. The late 1990s witnessed an HR bubble as well as a dot-com bubble: Executives talked about empowerment, creative incentives, and making work exciting and fulfilling. But once the economy tanked, all that was brushed aside as companies imposed layoffs, burn-out hours, and pay freezes and rollbacks on their employees.

Today, morale is a major problem in IT organizations, yet CIOs appear strangely blind to it: While 17 percent of CIOs see morale as a serious issue in their IT organizations, 39 percent of their deputies do. CIOs must face up to the dissatisfaction and cynicism inside their organizations.

CIOs will also have to understand consumer psychology and employee behavior if they want their customer-facing initiatives to succeed.

It’s more than just the old horse-and-water problem of getting people to use the systems; IT organizations must also understand user reactions and preferences.

Will customers find personalized Web sites helpful or a threat to privacy? Will such sites help customers find what they need now when personalization is based on that customer’s past purchases? And when companies install CRM, analytics or any other system that changes how people work, will the necessary behavior and attitudes change too?

The main risk for CIOs isn’t that they’ll repeat the excesses of the late 1990s; it’s that they will overlook the complex human issues now confronting them.

If they are to reach their goals, CIOs must refocus on the most elemental requirement of leadership: inspiring followers and understanding motivation.

That’s why it’s tough to decide which of 2004’s research findings is most alarming: That only 49 percent of CIOs think leadership is one of the most important attributes they need for success? That a mere 37 percent believe leadership ability is one of their strongest attributes? That 27 percent of lower-level IT executives cite weak IT leadership as a problem while just 4 percent of CIOs do?

Whichever you choose, it’s clear: If you want to be a successful CIO, the biggest obstacle that stands in your way could well be you.

CIO Insight’s Survey Methodology

Each month, CIO Insight’s editors survey hundreds of IT executives on a different topic, then cross-tabulate the results to uncover differences by company size, industry, role and other groupings. Except for our annual alignment survey, which includes both IT and non-IT executives, our research includes only IT executives who are CIOs, CTOs and vice presidents or higher at companies with more than 50 employees. In our 2004 research, on which this special report is based, we conducted 13 surveys and included a total of 7,413 qualified respondents; 62 percent of these participants, on average, were CIOs or CTOs. One of these surveys, the May 2004 survey on Sarbanes-Oxley, was conducted jointly by CIO Insight and Gartner Inc. The surveys are designed by the editors of CIO Insight together with Equation Research, LLC (www.equationresearch.com), an Estes Park, Colo.-based supplier of custom research services. IT executives gathered from Ziff Davis Media publication lists are invited to participate in our studies by e-mail, then answer questions by accessing a password-protected Web site.

Click here for an Overview of the research.

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