CIOs Told to Make Conspicuous Contribution to Revenue

Every year, thousands of information technologists gather in Orlando to hear Gartner Inc. analysts tell them that information technology should be aligned with business. Gartner always comes up with a new twist on the message, but the message never goes away.

At the Gartner Symposium/ITxpo conference going on this week in Orlando, some 6,000 attendees are hearing that they particularly need to be aligned with the revenue side of business to avoid being treated as a cost that can be cut in an economic downturn. They heard it from a parade of analysts at the kick-off session on Monday, and they heard it again from a panel of chief information officers who talked about what has worked for them.

Gartner says the message is particularly critical now that economic trends, such as the credit crunch connected to the collapse of the housing market, suggest that IT people need to brace themselves for another round of cost cutting.

Gartner says that IT spending will rise 8% this year to $3.1 trillion, but also predicts that growth will slow to 5.5 percent in 2008. And that might be optimistic. Peter Sondergaard, senior vice president and global head of Research at Gartner, said IT leaders should create two IT budgets for 2008, with Plan B outlining where to cut in the event of a recession. If that happens, the IT organizations that don’t want to be gutted need to be able to demonstrate the value of what they do for the company.

“In 2008, your goal should be to stamp out generic IT,” said Mark P. McDonald, group vice president for Gartner’s executive programs.

In other words, you have to work harder at making sure IT initiatives are strongly identified with priorities like attracting and retaining customers and generating revenue, not simply providing basic functions. Otherwise, when the CEO and CFO want to cut costs and raise profits, “if you have generic IT, they’re not going to be sure what they’re going to lose.”

So that’s this year’s twist: not only should IT and business be aligned, but IT needs to be aligned with initiatives that really make a difference for the business. In fact, McDonald argues that technology leaders should try to get out of the habit of talking about “IT and the business” as two different things and try to define IT as an integral part of the business.

Sticking to this linguistic slight of hand proved difficult for the participants in a “partnership for performance CIO Keynote panel” on Tuesday. This was an on-stage interview featuring Leslie Brennan of the New York State Department of Environmental Conservation, Leo Genders of the Ohio Board of Workman’s Compensation, Michael Goodwin of Hallmark Cards, and Patricia Graham of Centerpoint Energy.

Although all four said they had been successful getting that coveted “seat at the table” with the CEO, they also said they are continually challenged to prove they deserve it. “You get the right to play in the business space when you’ve earned the right to play in the business space, and not before,” Genders said. A CIO needs to prove himself all over again “every time something changes,” he says.

As government CIOs, he and Brennan say they have to reestablish their leadership credentials every time a new administration takes power.

Brennan says that she was initially concerned when the new commissioner, who is effectively her CEO, began his tenure by interviewing all the other department heads-but not her. That was in April, when Pete Grannis, a state legislator who had been active on environmental issues, was named to the job.

Her response was to network intensively with all the other people whom the commissioner was quicker to invite into his inner circle. Besides making sure they understood what IT could do to make them more effective, she got a lot of information from those who knew Grannis better about how to approach him. Ultimately, many of those management peers told him that he needed to talk to her, she says, “and I really got to hone my message by the time I got to the CEO.”

When she showed him her budget, she says, “I put everything into three buckets: risk reduction, operational efficiency, and mission enhancement —which is what he really cared about —and got him to understand that we need investments in those other areas in order to get to that.”

CIO vs. CEO Attitudes

One of the things the CIO panelists were asked to react to was a survey of CEO attitudes Gartner produced in cooperation with the Wall Street Journal (the results were published as part of a special advertising supplement on Tuesday).

Although CEOs recognize the importance of IT, there is still a gap between their attitudes and those of their CIOs, according to the study. CEOs were more likely to see the need for only evolutionary change, with only 2% recognizing the change for “significant change across the enterprise,” while 38% of CIOs saw the need for a broad and significant degree of change.

Also, the survey suggested that while CEOs recognize the importance of IT for maximizing corporate performance by cutting costs, they don’t necessarily see it having a large role attracting and retaining customers.

But Centerpoint’s Graham said CIOs have to be about more than delivering efficiencies.

“You have to do that to even be at the table,” she said, but IT also needs to demonstrate how it can help the business grow. She talked about the importance of “staying away from that downward spiral of talking about the costs,” rather than benefits, of IT.

“Growing the business is where companies need to go,” Hallmark’s Goodwin agreed. “You can’t cut your way to prosperity.” One of the ways he is contributing is by working on Hallmark’s strategy for marketing digital products, in addition to paper cards.

Like Brennan, Graham said she has had success with a strategy of getting the CEO’s attention through alliances with her peers. At the utility’s last financial planning meeting, she says she went last, purposefully, because she had worked with the other departments to make sure the role of IT in their initiatives was apparent.

“By the time they got to me, the business managers had already validated the dollars. So it was a no-brainer conversation —and it’s just fabulous when that happens,” Graham said.

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