In an environment where outsourcing specialised technology functions is increasingly recognised as the most effective method of achieving business value, the role of the CIO has to adapt from a technical to a business management focus.
This is the view of Mike Sewell, Group Executive: Outsourcing at Business Connexion, who cites Gartner research that indicates that the role of the CIO is likely to undergo fundamental changes in the next three to five years.
"The role of the CIO has evolved considerably; his responsibility was traditionally comprised of keeping technology systems up and running. As a result, technical skills and understanding were essential, while business skills were not considered necessary.
"However, today`s environment requires a completely different set of skills - technocracy is no longer a prerequisite, and the CIO is expected to contribute meaningfully to the business, its objectives and its profitability," he explains.
Gartner predicts that the next three years will differ dramatically for most IT management teams. The organisation says five key trends will drive change for IT organisations and service providers. These are an increasing use of external service providers; enterprise partnerships, which will become a critical focus of IT value, IT`s role in business transformation, the growing scope and importance of IT in all industries, and increased business pressure for consolidation and federalisation, which will drive an increase in technical and relationship complexity.
Sewell notes that while most local companies in the medium to large sector have a CIO, the role associated with the designation is not presently well defined - it typically varies widely from the technical focus to the business-oriented.
"Unfortunately, many of our CIOs have come up through the ranks and have a technological background. While this may appear to be an ideal grounding, the reality is that the skills necessary in an environment where outsourcing is recognised as the preferred method of delivering better business value, those skills drop by the wayside. Instead of managing technology, the CIO now has to manage relationships, service level agreements and suppliers to ensure business value is being created and delivered to the organisation," Sewell explains.
In addition to managing these factors, which constitute the supply side of technology, Sewell says the second critical area that the CIO must focus on is building demand. "CIOs of the future must work with business leaders to establish the key differentiators of the company - which might be cost, service, innovation or products - and define how IT can support and enhance these differentiators," explains Sewell.
"The skills needed to successfully lead the company`s IT efforts require more business understanding and management skills than ever before. Technical knowledge is no longer a prerequisite; translating IT into business value is," he adds.
The emerging role of the CIO demands focus on cutting deals and managing service providers, rather than keeping the environment up and running. As CIOs continue to reap the benefits of outsourcing IT infrastructure and support to external providers, negotiation and management skills become essential.
"In the business role, the CIO has to identify those areas which are best dealt with internally or externally; define contract requirements; distribute requests for proposals and then identify the partner who can best provide for the business` needs, at the best cost to company," Sewell explains.
Following agreement, Sewell says CIOs then need to manage the contract and service level agreements with clearly delineated deliverables.
"We have seen many CIOs discovering that `managing` partners often has a financial equivalent - or cost to company - of 3% to 5% of the cost of supply. Outsourcing can deliver clear cut benefits to business, but it is not a simple affair to engage an appropriate service provider - and the CIO has to have the business acumen to identify, engage and manage suppliers at a high level, or face the risk of failure," he says.
"This is a far cry from many of today`s CIOs who focus only on reducing the cost of IT by say 10%, which has left him micromanaging outsourcing, dabbling in supply rather than focusing on identifying and creating meaningful, value-adding demand. Not only is the CIO unlikely to get the best from outsourcing with this mentality, but he is unlikely to have a job in the near future," he concludes.
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