WHEN JIM BROWNELL was CIO of Williams-Sonoma, he sat on the executive committee, reported directly to the CEO, and oversaw a strategic, multimillion-dollar replacement of the retailer's merchandising and warehousing system. But when a new CEO took over, he decided he wanted his own CIO. So last October, Brownell, a 25-year IT veteran, began looking for a comparable position elsewhere. He couldn't find one.
"When I looked at opportunities in CIO-land, they were unappealing.The cycle of CIOs reporting to CFOs is coming back, and it's not pleasing," Brownell says. "I heard the same story in every interview: 'We're looking for a new CIO because IT projects never deliver on time and they cost more than we expect and they don't deliver what we want. All our systems need to be replaced. Oh, and we're reducing the amount of money we're allocating for IT."
In May, Brownell accepted a job as senior vice president and general manager of Escalate, a California software vendor, rather than settle for a lesser CIO job. "Quite honestly," says Brownell, "I don't know why anyone would want the CIO job today."
The Dumbing Down of the CIO Role
Brownell has a point. Consider the following:
The net result in many enterprises is an unofficial demotion of the CIO--a dumbing down of the job.
"CIO is no longer the same level of position," says Phil Schneidermeyer, CIO practice leader for executive recruiting company Highland Partners. "Companies are stepping back and saying the job isn't that big anyway. We're making less investment in IT. We have a smaller headcount. We're not going global and doing any mergers. We're done with ERP. We're sending it all offshore. Therefore we don't need the caliber of CIO we may have had in the past."
Whatever the reasons for the disrespect the CIO has become heir to (and there are some good ones, including multimillion-dollar implementations that didn't deliver and Y2K remediations that failed to impress), there's no question that in some quarters the critical role of the corporate CIO as commander in chief of technology-driven business opportunity is in jeopardy.
As it now stands, Brownell (who was recently promoted to COO), says, "Companies no longer view IT as a profession. It's a no-win situation." And if things don't change, the list of potential losers is long: CIOs, their users and staffs, their companies, and possibly the future of American IT.
From Back-Room to Boardroom...and Back?
In the early 1970s, IS gave way to IT, and data processing managers were plucked from the technology closet. The corporate CIO was born.
"When information technology was a new innovation, it was an exclusive little game," says Sheleen Quish, global CIO and vice president of corporate marketing of packaging manufacturer U.S. Can. "CIOs became keepers of the treasure chest."
But as that IT treasure became something every enterprise felt it had to have, many CIOs, coming up through the technology ranks, lacked the business skills to run departments that, in many cases, rivaled in size and budget of some of the companies' largest business units.
ROI? What was that? Spreadsheets? Isn't that something Excel did?
"It's not that CIOs were irresponsible; it's just that they weren't fiscally aware," says Bill Glassen, CIO of Cashman Equipment, which sells and leases Caterpillar construction equipment. "If the president of the company said one day, 'Hey, I want to do e-commerce," Glassen says, "the CIO bought tons of servers, hired Web programmers, basically spent a lot of money," frequently without building a business case.
Of course, when the dotcom bubble burst and the bottom fell out of the market, CEOs didn't need to look far for a scapegoat. "As a leadership position, the CIO role had little or no credibility left, and we deserved every bit of it," says Malcolm Fields, CIO of office furniture and fireplace manufacturer Hon Industries.
And so CIOs, who had achieved a place in the executive ranks and a straight-line reporting relationship to the top of the organizational chart, are now seeing that access threatened.
When hired as CIO by Cashman in 1998, Glassen had no contact with theCEO or the executive committee. When a second CEO, an IT enthusiast, came aboard, Glassen was invited to participate in the executive committee. In late 2000, a more cost-conscious CEO took over, looked at what IT had spent and what it had produced, and decided not to include the IT head on the committee. "I was dropped as a participant, and rightly so," he says. "I needed to prove that IT had value. And until I could justify that there was an ROI to what we were doing, IT was relegated to a support function again."
Since then, Glassen, who reports to the CFO, has been trying to earn his way back into the monthly meetings, upping his face time with theCEO and communicating the financial impact of all IT initiatives. It's working, to an extent. "I'm participating in a somewhat active format," Glassen reports. "I'm not involved in the decision making anymore, but I try to be involved in the information dispensing aspect of it. The CFO usually tells me the things he knows about so I'm not totally out of the loop."
When Money Talks, I.T. Has Nothing to Say
As executives and corporate boards remain focused on cost cutting, they're tightening the reins on IT. According to the 2003 "State of the CIO" survey, 84 percent of CIOs said their IT function is currently being budgeted as a cost center that generates expenses rather than an investment center that generates new business capabilities.
And as corporations continue to cut technology spending, more and more companies are going for an off-the-shelf IT strategy, influenced in part by vendors' claims that they can clean up the "mess" CIOs have created. "Many organizations have come to believe that they can live with a certain level of technology that's plug-and-play, not complex,and gets the job done," says Highland Partners' Schneidermeyer.
Even CIOs are drinking the Kool-Aid. "It only makes business sense. If you can get it out of the box, why build it? Today, everybody's there with the 'buy before build' mantra," says David Robinson, CIO of insurance broker Lockton Cos., who recently replaced an application built in-house with a Web-based system provided by an ASP.
Add to that the pressure to save money by outsourcing more and more IT, and CEOs wonder why they should pay someone a hefty six-figure salary and bonus just to piece together these seemingly simple IT parts.
"Put yourself in the shoes of a CEO," suggests Hon CIO Fields."They're asking, Do I really need a CIO, and if I do, why not report it lower in the organization and let the CFO handle it as a cost matter?"
What CIOs Can Do
For the most part, say analysts, CIOs haven't helped matters in the way they're responding to the current crisis in their corporate status. "Their scope of operating has been cut back, and most of them are holding on for dear life," says Mark Lutchen, lead partner for PricewaterhouseCoopers' IT business risk management practice. "They're told to cut costs, and they take out the machete. They're in survival mode, doing what they're told, reporting to whomever they're told to."
Glassen admits it. "When everything started becoming very expense-oriented, we withdrew," he says. "If we had been more involved and proactive sooner, maybe users and executives would be involving us more."
What does it mean to be proactive?
CIOs who are fortunate enough to report to the CEO would be wise not to bank too heavily on that fact. Other C-level executives can make or break you too. Quish notes that she once had a great relationship with her CEO but got fired anyway. "Unfortunately, I didn't bother with my peers, and they joined forces and got me outplaced," Quish recalls."You need access to the entire executive team. And the best way to do that is to be a key component of their projects, provide advanced warnings of problems, recommend solutions and speak in business language--not technology. Then they'll actually want you involved."
If there's no official relationship with the CEO, CIOs should create one, unofficially. "I report to the CFO," says Fields. "But when the CEO has a meeting or get-together, I'm there. A lot of times, I'm the only person there who doesn't report to the chairman." Fields never makes a point of that fact other than to make a joke about it. But he knows that the day he's no longer there, he could be on his way out. And that's no joke.
No CIO? You Don't Want To Go There
Once CIOs regain credibility, they can argue against the weakening of the CIO role from a position of strength. And the case to be made is powerful.
Former Williams-Sonoma CIO Brownell says CIOs need to make it clear that the cost of handing the responsibility for IT over to the CFO (a reporting situation that's almost never set up for any other CXO) can be high. "In the past, I've had the CFO say to me, 'Can you stop working on this thing for the next three months?" Brownell recalls."Every time we stop, we lose 20 percent to 30 percent of the work we've done, and we have to start all over from scratch."
Sikorsky Aircraft CFO Longo enthusiastically supports a policy that requires his company's CIO to report straight to the top. "They asked, Should the new CIO report to you now?" says Longo. "But I believe theIT function should not sit in the background. It should be at the table with other key support functions like finance, like HR. Out of all of them, IT has the most potential to change the business."
CIOs should make it clear that a seat for the CIO on the executive committee is essential to the successful implementation of any IT strategy. Eighty-three percent of CIOs identified as best practitioners said serving on the executive committee was critical to their effectiveness, according to the 2003 "State of the CIO" survey. "When you're not actively involved, there's a lot of information you don't have access to that affects IT," says Cashman CIO Glassen. "You end up with departments going out on their own and finding their own solutions."
At Cashman, the sales department decided it needed CRM software, negotiated a deal by itself, and Glassen knew nothing about it until the department came to him and said, "Oh, by the way, we need this many laptops, this customization, this many days of training," Glassen recalls. As a result, his staff of seven was completely overloaded. Scheduled maintenance work and upgrades had to be put on hold, and six months later, his staff is only now getting back on track.
The irony is that many companies are weakening the CIO position at precisely the time when the skillful and strategic management of IT resources matters most. As many technology experts argue, it is technology management that confers competitive advantage, not technology itself. Hire someone who's not up to that task, and you jeopardize your marketplace advantage.
"A good IT shop and a CIO can be part of a company's competitive advantage if they're closely tied to the business and help it improve processes faster than their competitors. In fact, most competitive advantages have an IT component today," says Fields of Hon.
"You need a CIO because you have to have someone to translate between IT and the business," Glassen says. "If they view IT as a commodity, we'll have everyone buying their own thing like we did 10 years ago, and we'll end up with systems that don't talk to each other. A CIO is necessary to bring coordination and focus."
Finally, the line of reasoning that says, "Hey, we're outsourcing it all anyway? We don't need a CIO," is fallacious on the face of it. "One of the key roles of the CIO has always been vendor management, and that's going to be even more important going forward," saysFields. "The more you outsource, whether you have people jumping to India or whatever, the more you have to be on top of everything. If that's what a company's going to do, they need a really good CIO, and they need to make the CIO position even more important. In general, the business just doesn't understand the kind of risk'' you have to manage when you outsource.
That's the heart of the problem, and the most powerful argument of all. CIOs, or anyone in that position, manage an incredible amount of business risk. Even when it comes to highly commoditized IT services, such as keeping a network up, one small mistake can cost a company millions.
"There's no asset more important than a company's data," Fields says. "You can't give that responsibility to someone who doesn't know how to handle it. That doesn't argue for dumbing down the CIO role.
"It argues for making it even more important and keeping the seat at the executive table permanently."