STRATEGY

Is a CIO a Luxury or a Necessity?

In a world where technology is king, can your organization do without a CIO? It’s a tough question that deserves careful consideration of the strategic value of technology in your business.
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How many things can you name in your business or personal life that are not driven in some way by technology? These days, not many. Everything from your car, your healthcare, entertainment and communication -- they’re all technology-based.

In virtually every sector today, dependence on technology is growing. Just look at the recent flurry of national technology positions created by the Obama administration: a Cyber Czar, a National CIO, a Chief Innovation Officer, to name a few. All signs point to an elevation of the strategic value of IT and the need to clearly define the roles of your technology leaders.

CIOs as strategic partners

Does this trend mean you must have a CIO? It all depends on the value your company places on IT. Consider your website, for example. Very likely, it’s the front door to your business, and it’s a tool that didn’t exist only a few years ago. What value does it represent for your organization today? Chances are, it has changed the way you do business. Technology like this eliminates the boundaries of time and distance in interacting with clients and customers -- a significant contribution, to say the least.

For many businesses, technology is a strategic part of the delivery mechanism for client service, the development and delivery of products or meeting other requirements such as regulatory and compliance issues. When this is the case, having a CIO is not a luxury -- it is a necessity.

Today’s CIOs manage much more than systems and data. They must be as business-focused as they are technology-focused. In fact, the most effective CIOs bridge the gap between the two disciplines. Businesses of all sizes can benefit from their leadership, particularly when going through a growth phase or a transition, such as a move from legacy to enterprise systems. Even relatively small firms regularly need to address strategic issues and make sure current initiatives properly align technology to support the business. A CIO can help streamline your systems, avoid costly mistakes and integrate new technology into your business.

Technology: cost or asset?

If your IT leaders do not view technology as a business asset, then you lose sight of the value proposition that technology provides. Technology for technology’s sake does very little for your organization. You start getting highly fragmented from your technology, and your operations become more complex. By refocusing on strategic planning and integrating it into your business, you are better positioned for future growth and opportunities.

A common mistake firms often make is entrusting high-level technology decisions to a “default” CIO, possibly a lower level IT manager or director, who lacks the experience needed to effectively manage IT resources. These individuals tend to focus on interfaces, hardware and networks, rather than how these systems integrate with your overall strategy. This lack of a truly cohesive strategy can prevent an organization from recognizing the benefits, and in some cases new revenue streams, that a solid technology strategy can bring.

The outsourcing alternative

If you have determined that IT is not a strategic part of your business, you probably don’t need a CIO. You could consider outsourcing the majority of technology -- both your infrastructure and applications. But even in doing so, you cannot ignore the value of strategic thinking. You must still assign a senior level business executive to think about the technology implications of business initiatives that your company takes on, particularly as your company grows or needs to consolidate, re-tool, or reset costs.

Outsourcing may help you become more stable. A large commercial real estate firm recently hired an outside firm to investigate IT practices, revealing that a recent investment in server upgrades wasn’t being put to full use, weakening the flawed, outdated infrastructure. Simple help desk requests took weeks or months to rectify, causing technology deficiencies that harmed sales and prevented managers from growing the firm’s business units. The outsourced firm objectively recommended a new IT staff and a fully operational infrastructure. Within a month, the firm lowered technology costs and cut help desk responses from weeks to just hours or minutes. Once technology was aligned with the overall business strategy of the firm, the business stabilized, frustrations faded, and focus returned to clients.

When handled properly, outsourcing can help you achieve greater economies of scale within your budgets. In fact, if your budget cannot handle a full-time executive, you might even consider buying a portion of time from a consultant with multiple clients, giving you the high-level guidance you need without the heavy price tag.

There is also a downside to outsourcing. It may be difficult to decipher whether a company is advising you on what’s best for your business or what will give them the highest margins, causing a natural conflict of interest. Conducting thorough research on reputation in your industry and prior achievements, along with a healthy dose of skepticism, can help you identify a possible conflict.

Whether or not you outsource or bring on a CIO, consider how your IT efforts are positioning you for the future. Some businesses thrive without a fully functional CIO, while others seek outside guidance to develop systems that support business strategy. Whatever your choice may be, don’t relegate your infrastructure to another line item on the balance sheet. Take a look at your technology platform and make sure you have the resources in place to gain competitive advantage and prepare for what’s to come.

Mike Gorsage is a Partner and Technology Practice Leader for Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership nationwide.

Last updated: Jun 1, 2009




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