The future of the CIO

By Ben Thompson

I don’t generally go in for scaremongering, but when someone as knowledgeable on the subject as Neil Dyke, Group CIO for EMEA at General Electric, starts to question the long-term future of the corporate IT function, then perhaps it’s time to sit up and take notice. “In my lifetime I’m sure that every enterprise is going to have an IT function,” he says in our meeting at the recent CIO Summit held at Dubai’s Meydan Hotel. “But maybe in the next generation that will change.”

“I don't know whether IT would even need to exist as a separate function - particularly if you take the concept of the cloud to its logical extent.”
-Neil Dyke

It's a bold claim. But given the increasingly strategic nature of technology decisions and the ubiquitous role of IT in the day-to-day running of businesses both large and small, Dyke believes that the traditional divides between IT and business are becoming ever more blurred. "We talk a lot about the need to have IT people who really understand the business, but shouldn't it be the other way around?" he asks. "Shouldn't we have business people who really understand IT? Perhaps it's time to shift the emphasis and give the people who have to live with the consequences of their decisions in terms of technology choices greater accountability. The typical IT project manager just shows up, delivers the project, moves on to the next one and doesn't have to live with the consequences, whereas the actual users of the technology do."

After all, he points out, people are much more IT-savvy now. "IT used to be a specialisation, but today everybody understands it - my five-year-old probably knows more about IT now than I did when I was 20 years old," he suggests. "People just understand IT better. They understand what they expect technology to do for them. They often don't even see it as IT. When you're running your Gmail account at home, do you think of that as an IT solution or is that just your e-mail? I think most people would just think of it as their e-mail, and they don't need an IT guy to help them with their e-mail. Similarly, I buy stuff from Amazon but I don't think of that in terms of using an IT solution; it's just my online shopping experience."

It's a scenario that's only going to be accelerated by the new generation of IT-familiar employees coming through - the so-called digital natives, for whom technology is just part of everyday life. "IT is so integral to everything we do nowadays," says Dyke. "Take our business, for example. A lot of what we sell now is software. We sell rotating machinery and we also sell software to monitor that. We sell diagnostics capabilities in the form of software. But that software is no longer developed by the IT department. We are maybe used on a consultative basis because we have deep skill sets in those areas, but the responsibility for developing software to sell to customers is not done by the internal IT department, it's done by the business unit itself or by third-party developers. And I guess that's my point: do we need a separate IT function? Because even when information technology is being used to develop and deliver customer value and drive revenue for the enterprise, it's not the IT department that's developing it.

"We are still too often looked at as a back office commodity service provider that just provides people with PCs and Blackberries," he continues. "And fighting those perceptions is really difficult."

As such, Dyke is working hard to instigate a change in the way his department is viewed - and a large part of that is about changing the mindset of the IT department itself. "We have a senior business leader running the IT department now, and not only do business-focused CIOs have the right mindset, they also have the ear of other senior business leaders because that's where their shared history is," he explains. "Hopefully it's a different approach to IT. It's thinking about the employee and how to empower them rather than just putting in a series of controls."

Nowhere is this more apparent than in the area around security and governance. "Every IT department in the world has IT security policies and approvals that they have to implement," says Dyke. "But when you actually put yourself in the employee's shoes and think about what that means to them in terms of doing their day-to-day job, they're just a hindrance. So we've got a very fresh set of eyes in terms of how we look at those types of things at the employee level."

In terms of aligning with the business, Dyke believes that GE has taken a slightly different approach. "Rather than having IT develop a strategy and aligning it with the business, we've developed the IT strategy with senior business leaders in the room helping us define the structure. It's not an IT strategy anymore; it's a business strategy in which IT is very prominent. It's a very different approach to how we've done things in the past. And I think it's going to give us a place at the table where we've struggled in the past."

Indeed, Dyke is in the vanguard of progressive CIOs who feel that there is no longer any such thing as an IT project, just business projects with a strong IT component. "I don't know where that leaves the IT function," he admits. "Whether we still need an IT function or whether every business function will have an IT component within it, with people who have a core IT skill set. Going forward, I don't know whether IT would even need to exist as a separate function - particularly if you take the concept of the cloud to its logical extent, where you don't need on-premise IT because somebody else is doing it. Maybe the IT function of the future will be located within the large service providers, and within the enterprise you will have relationship managers and business folks that understand how to use systems, and that will suffice. People talk about the future of IT, but I think it's just crystal ball gazing: why would you need a separate IT department? Today, everything is a business project."

So how should CIOs and IT departments respond to the possibility of their own extinction? Dyke, as ever, has some practical advice. "I think we just need to be pragmatic," he says. "I think once you get to a certain level within the organisation, you need to be a business leader rather than a function specialist anyway, and I would hope that a good CIO would have transferable skills relevant to any other function."

However, Dyke does not for one moment believe that that IT as a profession will disappear; rather it will move from inside the enterprise to outside partners and suppliers. "I think in future if you want to be an IT guy then maybe you'll be working at an HP, a Dell or a Microsoft," he says. "Those guys are here to stay, but maybe their long-term future lies as infrastructure or software-as-a-service providers. Just look at the huge numbers of firms moving to Salesforce.com. All of the IT folks that used to focus on CRM-type applications at those firms are no longer part of the business. They're now at Salesforce.com. And if MySAP and Oracle On-Demand and those sort of applications start taking off, will people with the specialist skills for ERP implementation or architecture development remain within the enterprise or will they be at SAP and Oracle?"

Dyke uses the example of deploying and running payroll systems as a comparison. "That used to be an IT specialisation, but most businesses today outsource their payroll," he says. "There are big providers running those services where you pay a cost per payslip, and that's how you provide your payroll. And I see IT gradually moving to an infrastructure/software-as-a-service model, call it cloud if you like, to take advantage of the cost savings. The enterprise doesn't have scale anymore, and you can get better price points using services. That doesn't mean that IT is going away; if anything it is becoming more pervasive. It's just where it is moving."

The search for value

Outsourcers are set to feel the squeeze as CIOs go hunting for value, says KPMG.

Outsourcing vendors can expect to come under increased pressure from their clients after recent research signalled the intent of chief information officers worldwide to squeeze more value from their outsourcing arrangements. According to the report, From Cost to Value, published by KPMG International, the renewed outsourcing focus is symptomatic of CIOs' wish to place getting value from their IT as a top priority.

The report suggests that the new post credit crisis CIO agenda is dominated by securing value for money, but that it also wants to focus on using IT to help transform the business in terms of innovation and productivity.

"Whenever you hear of organisations wanting to focus on value, it's tempting to immediately think of cost cutting," comments Bryan Cruickshank, a partner with KPMG Advisory. "However, our survey suggests a dual focus amongst today's CIOs. Understandably, they are pursuing value by reviewing outsourcing arrangements and retaining a firm focus on cost optimisation, for example. At the same time though, they are demonstrating their willingness to move the CIO role from its typically operational home into something more transformational. With that in mind, the days when IT was seen merely as a way of improving efficiency seem behind us. These days, CIOs expect IT to contribute directly to realising the business strategy and to have a central role in management."

The transformational shift is evidenced by the fact that 65 percent of respondents felt that IT could assist in enabling and driving business innovation while a similar number felt it could assist with increased productivity. Over half also saw IT's potential for enabling competitive advantage and improving external customer satisfaction. "These are not the responses of CIOs who still see IT's predominant role as an operational cost center," suggests Cruickshank. "Accordingly, the survey shows that the bulk of CIOs expect to be judged by how they create business rather than by how they control costs."

Not all CIOs are making this move from an operational mindset to a transformational mindset at the same pace, however. The KPMG research suggests that CIOs in the financial sector see themselves as remaining heavily involved in operational matters, with a focus on risk and compliance issues; something which may in part be attributable to a credit crisis hangover. By contrast, their counterparts in the manufacturing sectors claim to be focusing more on ways to innovate and transform their business with the help of IT.

Not that this means that financial sector CIOs do not have transformational ambitions or that other CIOs have consigned their risk and compliance requirements to the past. Rather, it simply suggests that both groups have differing priorities at this point in time. In fact, argues Cruickshank, striking a balance between operational and transformational priorities is all part of a new reality whereby risk and compliance objectives are fused with commercial and business objectives. In turn, this is leading to a fundamental change in the way in which businesses approach the twin challenges of innovation and transformation within their organisation.

If there is one area in which all CIOs are seemingly in agreement it is around the issue of people. Recognising that IT value is not just about technology, almost 90 percent of respondents cited people as the most important component of the value equation. Applications and processes ranked second and third with 75 and 69 percent respectively, well ahead of hardware with just 21 percent.

As Cruickshank explains, this high response rate may be driven by the knowledge of what can happen with the wrong people in place. "Successful IT value creation needs to integrate and align the organisation's technology, people and processes," he says. "One of the major potential pitfalls is the inability of many organisations to find suitably skilled people to take this forward. Often, precious time to create value is lost as organisations embark on ambitious projects with the wrong people at the helm. CEOs and CIOs need to ensure that sufficient importance is attached to this aspect during project initiation."