July 2011

Mandate Sets Direction for CIOs

Research from IBM provides insight into how chief information officers are directing their resources depending on the organization’s expectations for the IT function.

Tim McCollum
Associate Managing Editor

Chief information officers (CIOs) are embracing one of four types of mandates to align IT operations with their CEO’s priorities, according to The Essential CIO report (PDF, registration required to download) from IBM. Based on interviews with more than 3,000 CIOs from 71 countries and 18 industries, the study finds that CIOs’ top three priorities in the next five years mirror those of CEOs: insight and intelligence, client intimacy, and people skills. “CEOs increasingly rely on CIOs to turn data into usable information, information into intelligence, and intelligence into better decisions,” the report notes.

In response, CIOs are helping their organizations make better use of data through business intelligence and analytics. Respondents also cite three success factors for IT initiatives: having the correct combination of IT and business talent, managing beyond line responsibilities, and creating the right conditions before starting. The report asserts that the specific initiatives CIOs pursue depend largely on the mandate set by their organization — leverage, expand, transform, or pioneer.

Fourteen percent of CIO participants fall into the leverage category, in which IT functions are expected to help their organization streamline operations and increase its effectiveness. Most of their time and resources (52 percent) are spent providing fundamental technology services, while 28 percent go toward facilitating process efficiency organizationwide.

Organizations with a leverage mandate expect their CIO to focus on ongoing, essential IT activities and to help decision-makers receive information faster. The CIO’s principal goals are internal collaboration and client interaction. “Nearly three out of four expect changes to their internal collaboration processes to have high transformative potential for their organizations,” the report states. “And almost as many view changes in client interactive processes as high-impact initiatives.”

Among leverage-mandate organizations that the IBM report has designated “top performers,” two-thirds of CIOs say sharing more information through real-time messaging, company blogs, and other internal communications tools is an important customer relationship initiative. Nearly half of CIOs from such organizations emphasize having the “right combination” of technology and business talent to complete projects. Based on these findings, IBM recommends that leverage-mandate CIOs prioritize improved communications and collaboration, standardize and consolidate IT processes organizationwide, and make use of dashboards to measure key business and IT metrics.

Half of study participants fall into the expand category, with a mandate to continually refine IT operations to optimize efficiency and provide a competitive advantage. These CIOs divide their time and resources relatively equally among facilitating process efficiency, providing technology services, and delivering industry-specific solutions.

The report notes that CIOs with an expand mandate are asked to reengineer their organizations to make processes and products simpler, faster, and more flexible, as well as to convert data into better decision-making through the use of analytics. In these organizations, better integration of business and technology enables CIOs to focus resources on critical business needs.

Among top performers in this category, 71 percent of CIOs are emphasizing internal communications and collaboration, using tools such as wikis, blogs, file repositories, event calendars, and collaboration spaces. Sixty-one percent have integrated business and technology for innovation. IBM recommends CIOs with an expand mandate adopt enterprise collaboration tools, tighten business/technology integration, allocate internal resources to areas that are most valuable to the organization, and simplify and automate business processes.

One-fourth of CIOs have a transform mandate. Although they are expected to apply about one-third of their time and budget to providing industry-specific solutions, they also must facilitate process efficiency and be an enabler of the organization’s vision. Specifically, organizations call on IT to help “rethink” how they interact with customers and partners by harnessing data captured through sensors, RFID tags, and real-time Web transactions. Traditional database management tools aren’t capable of analyzing the “staggering volumes” of data organizations produce, the report points out. “To deal with them, real-time data collection and advanced analytics are a primary focus of organizations that have a transform mandate.”

Indeed, most CIOs with transform mandates say they will focus on customer analytics, product and service profitability analysis, and master data management using integrated data warehouses and analytical tools to enable the organization to make decisions and take action. Moreover, nearly all CIOs in this category are focused on simplifying internal key processes and making things easier for customers.

To that end, 58 percent of top-performing CIOs in the transform category expect to lead or support simplification initiatives for external partners, while 64 percent plan to implement visual dashboards to assist in decision-making. The report advises CIOs with transform mandates to continue focusing on efforts to make the organization “easier to do business with.” Also, CIOs should analyze and act on business and IT metrics data, as well as increase transparency and collaboration among customers and partners.

Just 13 percent of CIOs interviewed for the report have a pioneer mandate in which most of their time and resources are focused on enabling the business’ vision — less than one-fourth of their efforts are allocated to providing IT services. Typically, these pioneer-mandate organizations are in industries such as financial markets and entertainment in which they must “reinvent themselves to keep pace with relentless advances in technology or dramatic changes in consumer behavior.”

Top priorities for pioneer-mandate CIOs are analysis of product and service profitability and utilization. Most in this category say adding new revenue sources is the area where IT can deliver the greatest benefit in the next three to five years. Among top performers in the pioneer category, 69 percent are focused on product/service profitability analytics and 60 percent are focused on new revenue sources. IBM advises pioneer-mandate CIOs to execute plans that lead to new products, services, and markets; use social network analysis to customize the customer experience; and develop a “culture of analytics” based on predictive intelligence capabilities.

To comment on this article, email the author at tim.mccollum@theiia.org.

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