There is a wide communication gap between CEOs and their IT managers. Unlike other departments, the decisions IT people make tend not to be linked back to the success or otherwise of a company. In many ways, IT is perceived as an expensive research and development department, where much is expected to and allowed to fail.
Richard Firth, chairman and CEO of software development company MIP Holdings, says: "No other business unit is allowed to operate in this way in today`s economy. The IT manager should be given the title of chief information officer (CIO), and made to sit on the board. Where he was traditionally responsible only for expense containment, his first commitment should be to improve the bottom line."
One of the biggest changes to business in the last 20 years has been the application of IT to help run companies, but at what point does the cost of IT justify the benefits it should offer?
Firth says the South African corporate market has spent billions on IT projects, often without having precise information or figures on what the projects will achieve. The main reason is that many CEOs simply do not understand what IT is all about.
"These CEOs today run their organisations without having a PC on their desks," says Firth. "This translates to IT ignorance, and its impact can be devastating if, for instance, as a consequence companies do not evolve their e-business strategies."
Firth points to the dot-com shakeout as a prime example of IT ignorance. Heavily dependent on technology, dot-coms were in vogue, although few business people seemed to understand what they were all about. Even analysts were caught up in the hype - they were swayed by the figures, but they did not understand the IT and convergent forces driving the development of online companies.
"In essence, IT should be a strategy and not a department," Firth notes. "CEOs must understand the value of software in achieving business goals - the days of changing business processes to suit applications are over."
Companies buying packaged solutions need to be aware that they do not own the intellectual capital behind those solutions, nor will they obtain a competitive-edge if they use the same applications that are readily available to their competitors.
"If we view IT as a strategy, the question will be how to leverage IT to improve the business. Professional IT consultants have the necessary skills to enable companies to strategise, but then all companies can end up with similar strategies."
Companies that understand the true value of IT will look at owning their own source code as a differentiator that will enable them to inject their own flair into applications.
Financial systems are fundamental to all organisations. Companies must also ensure they have one, integrated application running key business applications, feeding into and supporting the core financial application - the days of having five separate applications are long gone.
Taking ownership of a financial application and its source code - and developing and extending it to suit specific business requirements - will assist businesses in achieving true competitive differentiation.
Firth says this process has to be driven from the top. Alongside the appointment of CIOs, IT should be directly linked to the bottom line, and CEOs must make the effort to become IT-literate. This can be achieved by following the industry and attending training courses.
"IT is a relatively young industry where change is the predominant factor - it`s time for CEOs to accept that and to understand they too have to alter their approach to leadership."
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