Recently, we surveyed a group of Microsoft Enterprise Architects to collect their observations about what differentiates successful CIOs from those that don’t do so well, based on experiences working with and observing CIOs in many different industries.
Thanks to the following people for providing information and feedback for this article: Peter Deane, Larry Hanthorn, Johan Klut, Paul Lidbetter, Brian Loomis, Stephen Kell, Robbi Laurenson, Mary Lynn Pontier, Blessing Sibanyoni, and Sree Sundaram.
CIOs often have very limited tenures, lasting about 24 months in their positions. However, there are CIOs who beat this average, and who succeed in leading effective IT organizations. Most of these CIOs use similar strategies and follow similar patterns.
In recent years, to keep up with the changes in the IT environment—new technologies, new services, and new service models—the CIOs who have succeeded have worked to reprioritize the responsibilities and tasks of their IT organizations. These CIOs recognize two primary functions for their IT organizations:
The IT organization provides services on which the business depends.To maintain these services consistently at the level the business expects, the IT organization needs to operate according to a service management model.
In addition, when multiple data centers provide services, the services need to be standardized and globalized to remain consistent. These factors are especially important in companies that have outsourced services; IT organizations in such situations may spend more effort on interfacing with service providers than on fixing technical problems, and standardized service management processes are key to successful integration.
The IT organization helps the company function and compete successfully, thereby adding business value.The IT organization needs to function as a partner to the rest of the business – able to listen to their needs, offer solutions, and help with strategic planning. In general, in companies where the CIO reports to the CFO, the IT organization is functioning as a cost center that is separate from the rest of the business. In such cases, the IT organizations are not closely connected with their respective businesses, and the businesses do not see them as partners or contributors.
We asked Microsoft Architects what they saw successful CIOs doing that less successful CIOs did not do. Their observations boil down into six strategies that successful CIOs use in managing their organizations and rebuilding the relationship between the IT and the business:
- Make tough decisions and drive changes through the organization.
- Manage beyond the corporate boundaries.
- Consolidate, rationalize, and streamline.
- Become demand-driven.
- Build communication channels.
- Become a business partner.
1. Make tough decisions and drive changes through the organization
To deal with these challenges, a CIO must have a clear vision of how the IT organization should work, and must lead an effective team. The CIO needs to develop a clear IT strategy that identifies what needs to happen, what resources are needed, and how to best use those resources. The CIO also needs to articulate the strategy for the IT organization and for the business units it supports, and needs to present a vision that explains why the strategy is important.
2. Manage beyond the corporate boundaries
The CIO's area of responsibility is becoming extremely complex, and the role of the CIO is changing. Traditionally, a CIO managed assets within a company's boundaries. New phenomena such as cloud-based services mean that the CIO maintains control of the base IT platform, while managing outsourced or subscription services.
New device technologies mean that the CIO may also end up managing employee-owned devices. The company's boundaries are less relevant and the number of factors beyond the CIO's control has increased. In the meantime, CIOs are finding that business units want to consume services as utilities (like electricity), regardless of where those services come from.
The CIO could now be called the Chief Innovation Officer: the conduit that brings in the services, partners, and technology that the business units need.
As a result of this increasing complexity, the CIO can no longer expect to know everything needed to plan strategies for the IT organization. Some CIOs have realized that they need outside expertise in addition to their own knowledge, and they have benefitted by getting access to this expertise. They are forming strategic partnerships with vendors and service providers that go beyond products and services to the expertise involved.
The Microsoft Enterprise Strategy program is an example of a service provider acting in this role and responding to this need. Its premise is to establish a deep, long-lasting relationship based on trust and intimate knowledge of the customer's environment.
Not all CIOs have integrated this expertise into their environment yet; few have begun to consider service providers as "expertise assets."
The enterprise architects reported that CIOs who stay focused on technology—such as the number of servers they manage—and see cloud-based services as a threat tend to have more difficult relationships with business units.
Faced with this approach to IT, business units are more likely to bypass the IT organization and obtain the services they want on their own. The enterprise architects have seen such moves create significant difficulties for the IT organizations involved, and ultimately for the business as a whole.
3. Consolidate, rationalize, and streamline
Many CIOs today don't understand how convoluted and redundant their IT organizations have become. They may have been able to streamline some processes and reduce some costs by outsourcing, but these savings may diminish over time as provider costs increase.
Some CIOs have improved their IT operations by consolidating data centers and reducing the data center resources that their companies need. They have worked to globalize and streamline the infrastructure, applications, and processes that their IT organizations use.
This process includes eliminating redundancies and rationalizing applications, workflows, and processes. In companies with multiple data centers, these CIOs have worked to ensure that resources are fungible (consistent across all data centers; for example, personnel from one data center can function effectively in another data center, even in a different time zone).
These CIOs have also ensured that the processes are standardized, transferable, and leverage known best practices.
4. Become demand-driven
The most successful CIOs are focusing less on technology and more on outcomes that add value to the business. Most IT organizations today are supply-driven: they run certain services, and that's what they provide to the business.
However, demand-driven IT organizations usually function more effectively. In such organizations, CIOs analyze the business, assess the business needs, implement a solution, and effectively market that solution to the business. They can demonstrate the business value of IT investments and strategies. As new technology becomes available, they consider its possible uses, come up with new opportunities, and present those to the business.
5. Build communication channels
In order to accurately understand what the business needs, most CIOs need to improve the communications between IT and the business.
Some CIOs have accomplished this by designating senior liaisons who aid communications between IT and the business units. Not only do these liaisons help IT identify what the business units need, they build faith within the business units that IT will listen to them and respond.
These liaisons can provide immediate feedback from the business units to the IT organization. In addition, because they have approachable points of contact with IT, the business units believe that IT hears, understands, and will address their issues.
Microsoft Architects have seen various types of liaisons, including:
- One CIO has appointed business analysts from the IT organization to act as business liaisons, and assigned them to business units.
- Another CIO has designated a Business Integration Officer (BIO) to manage the relationship by working with both the IT organization and the business units.
- One company improved communication by mixing IT and business leadership. This company has group-level CIOs, who are also business unit heads. Fifty percent of their responsibilities are related to IT, and the other fifty percent are related to the business (and in both of these capacities, these CIOs are responsible for hiring and retaining quality employees).
6. Become a business partner
The most successful CIOs are seen as peers by other business leaders in the company, instead of heads of cost centers that report to the CFO. Many of these CIOs have worked in business units or otherwise have business credibility. They are involved in the business planning process, rather than "aligning" the IT organization with the business.
The CIOs that can make this breakthrough are those that can express the value of IT to the business–how the IT organization can add more value to the business by acting as a partner than by acting as a support function.
To do this, CIOs need to use credible metrics to measure added business value, and track and communicate those metrics regularly. They need to be able to define business cases to support their actions in the same terms as the other business leaders in the company.
Microsoft Architects have observed that if the business units believe that the CIO understands their business needs, they are more likely to come to the CIO if they want a service change or new service (such as external cloud-based services). The CIO can then evaluate the request based on business needs and benefits, and determine the best way to accommodate the request. The CIO can take on the role of advisor and coordinator for the business unit.
In companies with CIOs that cannot or do not articulate this idea, Microsoft Architects report that IT organizations become less relevant to the business units, and a culture of conflict (rather than of partnership) may develop between IT and the business units.
In such situations, business units are more likely to bypass IT to buy services from external providers. When business units are not confident that the CIO understands their business needs, they are more likely to pursue changes like external cloud-based services on their own, bypassing the IT organization.
Many CIOs are trying to engage with the business at this level, but as far as Microsoft Architects have seen, only about 50% are succeeding.
Unfortunately, in many companies, the business units tend to react skeptically at first to such planning and prioritizing initiatives. They're not accustomed to discussing issues like productivity, risk management, and compliance with IT. They don't believe that IT understands their business processes or their ROI requirements.
It takes time and multiple conversations between the business units and the IT organizations to build the trust and credibility needed for the groups to work together effectively. Most companies are still working their way through this learning process.
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