Thanks primarily to government regulations and increased security risks, IT and the CIO are either the agents of business transformation and change, or the obstacles, according to a new report from Deloitte & Touche USA LLP.
This pivotal role positions the CIO as a builder and defender of shareholder value and means that all C-level executives should be concerned with their company's IT challenges, the consulting firm asserts.
Based on feedback from roughly 1,000 Deloitte practitioners worldwide, Deloitte's Financial Advisory Services practice compiled a list of the 10 biggest IT opportunities and challenges in 2005. While the "usual suspects" -- business alignment, governance and outsourcing -- are on the list, four others stand out as the most pressing issues for CIOs (in no particular order):
- IT and the law: With more complex regulations taking effect (the Sarbanes-Oxley Act (SOX), the Health Insurance Portability and Accountability Act), CIOs must design and build business processes, systems and organizational structures that not only comply with the law today, but that also will be responsive to tomorrow's laws.
- Security and risk: Deloitte said a leadership team needs to work together to identify threats, balance risk and cost, and conduct vulnerability tests to ensure the organization's safety.
- Business integration: Information and technology can simplify and streamline business processes, as well as strengthen partnerships and supplier relationships. Deloitte said CIOs need to work with their business colleagues to pinpoint the possibilities and obstacles.
- Value: CIOs must work with their fellow business leaders to shift projects and assets to areas most likely to produce returns. They must also work together to identify and cull the assets and operations that destroy value.
Of those four, value is the most important, according to Ann Senn, a global leader of Deloitte Consulting's CIO Advisory Services practice.
"You've got to start with value -- that's clearly the end target of everything," she said. "Once you understand value and know how to achieve it, the structure of things follows."
Senn believes that it's significantly easier to define value these days than it was three to five years ago. Technology and experience have enabled organizations to relate operational measures of the business to the financial measures, which allows executives to better define IT's role and where it fits into an overall business strategy. "As a managerial science, that's exciting," Senn said.
She added that IT and the law have become a large, complex issue that isn't limited to SOX but has extended to areas such as consumer privacy. This means CIOs need to put more thought into the design of their IT architecture. "You want [your] infrastructure to adapt to regulations without having to constantly react to changes," she said.
The evolution of the CIO to an essential part of the executive team isn't lost on Mrinal Sattawala, senior vice president in North America for Mumbai, India-based outsourcing firm Patni Computer Systems Ltd. He's noticed a change among his client CIOs, many of whom work for large enterprises. Increasingly, they're becoming integrators and managers of external service providers that provide best-of-breed services, he said. Fewer CIOs are simply IT stewards who keep the lights on.
"To keep an IT shop running, you must do many things -- the goal should be to minimize costs to free up money for adding value to the business," he said.
Sattawala added that aggregating outsourcing services and formulating governance to manage them has become an important focus, particularly in this era of compliance. "You're only compliant if your outsourcers are compliant," he said.
"The role of CIO is changing dramatically," Senn added. "IT is the most junior of management disciplines, but it's really growing up as a discipline within the business."
Here are the other six hottest challenges and opportunities for CIOs in 2005, according to Deloitte:
- Alignment = collaboration: IT must be included at the business table to ensure that IT's role is clear and that spending ties back to business goals.
- Governance and funding: It is critical to adopt a simple governance model that produces timely decisions, responsible actions and reasonable results.
- IT sourcing: Business leaders should develop a sourcing strategy based on fact-based assessments of cost and quality, core competencies and effective management/control structures. Outsourcing a "problem" could result in even more problems.
- Performance measures: CIOs should regularly assess and "benchmark" performance to validate internal improvement targets and identify stellar performance. Balanced scorecards are useful in balancing critical performance measures such as cost, value, quality, risk, customer satisfaction and alignment with strategy.
- Growing talent: Senior management should make more effective use of current talent by realigning the work to match people's interest and skills. Opportunities should be created for people to learn and grow into specialist or master roles.
- Beyond customer service: As a "scarce resource," IT simply cannot satisfy every customer demand. To manage demand as well as supply, IT should take a lesson from customer segmentation and perform a critical assessment of its customers' needs, its cost to deliver and its value to the company. In addition, when customers are more aware of volumes and costs, the most responsible of those customers will more carefully manage their own demands.