CIOs Shift: Focus is On Revenue, Not on Saving Money

Achieving growth is the order of the day:

According to this month’s CIOInsight study on alignment, 80 percent of for-profit companies say increasing revenues rather than reducing costs is their primary strategy for improving earnings. That means the never-ending task of aligning IT with the business is now focused on launching new products, improving speed and service, and supporting mergers and acquisitions.

Our survey of more than 1,000 business and IT executives has good news for CIOs: Business executives understand just as well as IT executives do that alignment is critically important for growth. It also turns out that the same practices that help with alignment, such as collaboration between IT and business and a flexible IT infrastructure, really do help companies grow.

Our study points out some problems: For example, IT organizations still need to be quicker to drop projects that are no longer strategic necessities, and systems often aren’t flexible enough to accommodate users. Yet, considering that business executives often give IT organizations higher grades for achieving alignment than IT executives do, it’s clear that the hard work CIOs have put into achieving alignment really has paid off.

Finding No. 1

IT alignment is important for achieving corporate growth.

IT and business executives are on the same page: Consistently, about four out of five agree that achieving growth is their company’s main strategic goal, growth is difficult or impossible to achieve without alignment, and alignment has had a direct impact on growth. Are they right?

It turns out that faster-growing companies are more likely to be well aligned than slower-growing companies, by significant though not overwhelming amounts. Many factors besides IT are necessary for -business growth, of course, but alignment and the ability of IT and business to work together are important ones.

Finding No. 2

The state of alignment is strong. The news is good: Four out of five IT and business executives say their companies are well aligned, IT and business executives give similar grades for improving alignment, and more executives than in 2004 feel the two groups work well together. IT budgets are better aligned today than in 2003, judging by the responses of business executives, but there’s room for improvement in aligning budgets and knowing when to kill projects.

Finding No. 3

IT systems must become more adaptable if companies are to grow. Three out of four executives say IT is doing a splendid job helping companies grow. But even CIOs at well-aligned companies can’t take their IT organization’s ability to support growth for granted. Even well-aligned companies are sometimes unable to meet requests to change systems or help their companies adapt to change. In fact, 53 percent of business executives at large companies complain that their IT organizations can’t accept change requests. CIOs shouldn’t find that acceptable.

Finding No. 4

Communications and collaboration are as important for growth as they are for alignment. In addition to a clear strategy—which more than a quarter of companies lack—companies are more likely to grow when they have a culture that supports alignment. That’s consistent with last year’s alignment survey, which found a powerful connection between corporate culture and alignment. Tying the compensation of both IT and business executives to alignment might also help generate that culture of alignment.

Finding No. 5

High-growth companies are not growing faster just because CIOs are involved in strategy. Only 33 percent of firms in the exceptionally fast-growing financial services industry placed CIOs in charge of corporate strategy, less than other industries we sampled. That explains why there is little correlation between high earnings growth and firms with strategy-making CIOs. There’s a stronger correlation between growth and the more common practice (especially among financial services firms) of including CIOs on the corporate strategy commitee, yet the fastest growing companies aren’t the most likely to include CIOs. Are CIOs making as much of a personal difference as they could?

Finding No. 6

Investing in IT infrastructure and emerging technologies pays off with growth. Business executives are not as concerned as IT executives about whether their company is investing enough in IT to grow. They should be, especially when it comes to IT infrastructure and discretionary spending. High-growth companies are far more likely to have boosted their IT infrastructure spending. Did spending boost growth, or did growth allow for more spending? For many companies, it was the former: An infrastructure that enables flexibility and agility also strongly correlates with high growth. More companies could also benefit from finding payoffs in emerging technologies, and setting aside some IT spending for high-risk/high-reward projects.

Finding No. 7

IT governance, not dominance, is most likely to help companies grow. While about three-quarters of IT and business executives agree that their IT governance structure supports alignment, they’re less likely to agree that their company’s corporate governance structure does. Which kind of IT governance structure best supports growth? Shared decision-making by IT and business executives at several levels appears to work best.

To download the survey results, click here.

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