Change Isnt optional for today’s

ale
py Michael Earl

he CIO, or chief information officer, started to be found on organization charts in

the early 1980s. The IT or IS director — a ’more humble synonym — has a longer
heritage. As many people know, “CIO” soon became interpreted as “career is over”.
Well, CIOs still exist, continue to get appointed in organizations and command
good salary packages.
Seven years ago I studied 20 UK ClOs, comparing 10 who were still in their job
with 10 who had lost their job. Turnover rates at the beginning of the 1990s seemed
to be 30 per cent or more. The search was for any variables that might distinguish
survivors from non-survivors. Although survival is not-identical to success — except -
“perhaps for CIOs themselves — it is quite-a good proxy. Ten “critical survival
factors” were identified, the five most significant of which are listed below. I believe
the results are still valid today.
Shared vision
Survivor ClOs spent a good deal of.time discovering and then promoting a shared
vision of how IT could make a difference to the business. This may seem like a
banal piece of mission statement (or “motherhood”). However, the twin issues that
have dominated the management agenda in IT for the past 15 years have been:

m how can we deploy IT to yield a sustainable competitive advantage?

m how do-we ensure that we make IT investments that match our business
strategy? — |

So the “shared vision” is the discovery of one or two dominant themes which will
drive the IT agenda, but which are business rather than IT themes. In this the CIO
clearly has to work with the business. very closely and also has to keep everybody
constantly reminded of, and focused on, the goal. “The day you relax from this
you're gone,” said one survivor CIO. _
In contrast a non-survivor recalled that “the global IT vision was mine and mine
only”. It was perhaps no surprise that no one else owned or shared his enthusiasm
for the massive IT investment programme he was seeking to implement.

Relationship with peers and superiors

In developing a shared vision, it is essential to work closely with peers and
superiors not only to understand their problems but also to gather ideas and then
build alliances. Survivor CIOs spent a lot of time doing this. Indeed, they would
often make sure the IT department satisfied the IT needs of newly appointed senior
executives so that a dialogue would start and a readiness to help the business be
conveyed. “Serving but not being subservient” was how one survivor put it.
Contrasting behavior was typified by the non-survivor who admitted that “I did
not enjoy the diplomacy and politics required in a corporate role.” In other words,

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 . <a
. *

as well as inside thei,

survivor CIOs managed upwards and across the organization
eyes of their own [tp Staff i
own function. Non-survivors often were heroes 1n the
.
but they spent most of their time inside the IT department
Relationship with the CEO ,
executive. Oft en, of
One relationship turns out to be critical: that with the chief
course, the CEO hires and fires the
CIO and so a good relationship makes sy 'Vival
a much better chance F
sense. However, if you get to know the CEO you have
on your side. You may eva
discovering that shared vision and getting the business
One CIO observed that
be valued for your non-IT contributions to the business.
expectations of me and to let him,
“with each change of CEO I had to get to know his nding is requireg
, a two-way understa
know my expectations of him”. In other words
change in organization, I becam,
A non-survivor remarked that “with every
bad patch I had no support dr
more remote from the MD. Then when we had a
’ Of course, some CEOs do not want to play; it takes two to tango
sponsor.’
However, savvy CIOs know just when and how to enga
ge the CEO. In turn, the
ation age should be ready and willing t,
CEO who is competent to lead in the inform
build a partnership with the CIO.
com 4s Credibility
Em peo talk strategy if the plumbing breaks down.
Many CIOs know that _you_cannot In one.
Io CIO's words: “IT has a good reputation for delivering, which
is why | am still here
for making on
sure that they spent time keeping
ae So the survivor CIOs were notable
in
4)! top of operational and project performance every day. If they were inexperienced
al number two.
IT management, they made sure they appointed a very good technic
so did I”. What
One non-survivor reflected that “the function lost credibility and
distinguishes CIOs from many other directors is that they have very visible
operational responsibilities. If the network goes down today, customers, supplies
and your own executives — including the chief — notice very quickly.

. ; C Sensitivity
Ww CIOs are in the business of change. However, they do have to, be sensitive to the
r \ a4 ‘ degree of change that is necessary, what will work and when to introduce it. They
a o also need to be able to pick up signals that indicate when they themselves need to
. change. CIOs cannot march to a different beat . . . although it does pay to be one
step ahead in thinking and preparing.
Qne CIO lost his job because he resisted decentralization of his IT function when
the rest of the organization was decentralizing. Another went because he refused to
accept the budget cuts everybody was expected to make in a recession. It sounds
crazy, but IT people can sometimes believe that IT is “different”.
Conversely, one survivor CIO observed that “you must be dynamic, but only in
must be able to read the ©
ae what the company is ready for”, In other words, you
weather, And working out when your own function has to change in response to
new corporate agendas you must be able to distinguish a passing squall from a sea
change. These are the Skills of the politician.

The model CI0

ae ined CIO (Figure 1) combines all of these qualities. But it is unlikely to be®
B : : mone in the fast-changing world of IT. I am presently researching how i
role of the CJO is changing. There have been four big developments in recent years:

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 ote ag ipi ESSEGe ammo oeattnee ee MMANGE ISNT Optionalforfor
:The model CIO ae ASS ISN Optional
a

Vislon bullder

Change master.
“Several ClOs have taken on Wider reg
re-engineering and business chan Ponsibilities, especially
for business process
ge, P eople often judge tha
standing of business processes t CIOs have good under.
, have
enable
— an
dd have experience
of m

added responsibilities such

. as ai
HR i and Strateg
strates;ic planning; or su i
management and operations. ee Supply chain _

Many enterprises have been going through programmes

of building new, global or
enterprise-wide infrastructures. These include not only networks and
new com-
puting platforms (not to mention standard “desktops”) but also common
enterprise-
wide systems. In other words, IT departments have been busy “re-architecting”.
CIOs will not spend too much time on the complex technical details but they
certainly hatove
ensure that the new architectures fit curr
and antic
en ipate
t d.
business needs. And increasingly they are expected to keep in touch with develop-
ments in new technologies
and to advise on what to bring into the organization and
when, As one CIO put it, “I am the group’s technology watchtower”. at
Reformer
lm the 1990s we have witnessed huge changes in the practices of many IT >t
departments. Downsizing, outsourcing, quality programmes and new processes of
systems development are typical examples, In other words, the winds of change
that have hit most areas of business have hit the IT function as well. On top of this,
newly converging technologies such as multimedia and the internet have placed
new demands in terms of skills, methods and organization. 7
Thus CIOs of leading-edge companies have become reformers. They have to lead
their own departments through change and they have had to work out some critica
questions. Not least have been: .
be outsourced, run
™ what are core activities, and what non-core activities. can
down or managed as legacy issues?
| how do we runa “new-paradigm’” yet unsta ble IT activity alongside an older one
which still underpins much of the business?.
— _ 3 = = ie

Alliance manager a vl
has several in te rf ac es an d several rivals. The
Today’s IT department nee post
e that are strategic ant
thos
Vendors grows daily and attempts toc lassify ¢ y °
the IT en vi ro nm ent changes so qul
Managing are not easy because ey provide ou
as allies rather than sup pl ie rs , particularly if th
Vendors can be seen
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 ici O mark 2 ae a
QURAN

“vision builder
Change master
SER
Deliverer
ee
Re-architect _ y

Reformer

,
the ne w br ee d of “p ower users”, sophisticate
n ther e is ng
sourced activities. And the
de ve lo pi ng the ir ow n systems (even bringi
s and
users who are adept at using PC be seen as good news or
bad news,
and soft w are ). Th ey can
in their own hardware novel applications and bui
ld Dy
in new tec hn ol og ie s an d
They innovate, bring necessarily
spe nd mon ey y, - dis lik e standards and do not
systems. But they
bu Iding industrial-strength applications.
understand all the disciplines of
these
~The CIO and his or her management team have to build alliances with all have
iors of old. They ty
stakeholders, as well as with the executive peers and super partnerships and which
prioritize their time, decide which should be transactional
ion management philosophy
more strategic — and they have to provide an informat ance manager.
CIO is now an alli
that binds them all together. In short, the
qualities
~ We can superimpose these new roles on Figure 1 to illustrate the eight
d
of the new model CIO (Figure 2). One begins to see why the top CIO jobs comman
ever more attractive remuneration packages.
I am currently studying CIOs in some of the world’s leading companies. Further
developments in their work could be just around the corner. As IT is increasingly
seen not just as supporting but influencing business strategy, CIOs may be
assuming, or being given, a more strategic role. Over. the next few years, their
responsibilities look set to increase in scope. So CIO does not mean “career 1s over”
— rather, it might more appropriately stand for “change isn’t optional” or “challenge
isn’t over”. Y

Summary |
What qualities does a successful CIO have? A few years ago, Michael Earl’s research indicated that the
most important were: a vision shared with the company’s wider management, so that IT supported
strategy; a close relationship with senior executives, especially the CEO; a willingness to pay attention .
to day-to-day IT performance; and an ability to judge the importance of political and organizational
changes in the business. These qualities are still critical for ClOs who want to flourish in their posts. But
IT and all things connected with it change quickly, and ClOs are now being confronted with new respon-
sibilities. The perception that ClOs have a good understanding of business processes means that thelr
job descriptions are now likely to encompass human resources and strategic planning. Like all
managers, they have
to be able to lead their departments through rapid change but they are often also
expected to be the “corporate radar” for new technologies. Finally, today’s ClO needs to
manage rela
tionships with an ever-growing range of extern al suppliei and co
, packages have grown,
neration rs 7 ntractors. It is little wonder that remu-
i s l i

Suggested further reading

Earl, M.J. and Feeny, D.F. (1994) “Is your
Clo adding value?” Sloan Management Review 35
(3, spring).
Earl, M.J. (1996) +O sie, oration officer: past, prese
nt and future”, in Earl, Mu. (ed.) Information
Management: Th ational Dimension, Oxford: Oxford University
Press, 1996 and 1998.

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ee I LE

Selective sourcing and core

capabilities
py David Feeny and Leslie Willcocks
5 the 20th century draws to a close, IT functions are receiving unprecedented
levels of management attention. Some of this, of course, is caused by the need
for information systems to be Y2K compliant; then there have been the systems
-yequired for the launch of the euro; and in many cases organizations have chosen to
set up a new-generation systems infrastructure based on so-called “enterprise
resource planning” (ERP) software.
All of these developments serve to emphasize the extent to which the operations
of today’s businesses are fundamentally dependent on the use of IT — and therefore
on the professionalism of IT people and IT managers. Furthermore, we have the
rhetoric of the “information age” and the “information superhighway”, with its
suggestion that technology is becoming a central factor in shaping the future
strategies and fortunes of business. So have we entered a new golden age for the IT
function? Is yesterday’s Cinderella becoming today’s Princess?
Certainly some IT functions — for example, those at BP Amoco and Safeway — are
now demonstrably playing a critical role in the forward strategies of their__
companies. But IT staff everywhere are conscious of another factor in the evolution |
of their profession: the rapid growth of IT outsourcing companies, such as EDS, |
CSC and many more. ;
Many IT executives, instead of enjoying promotion to the top table, have seen}
their entire organizations ‘outsourced. Their chief executives, skeptical of
information-age visions, have signed long-term outsourcing contracts in the belief
that they have secured low-cost provision of commodity support services.
Even chief executives who accept that IT is becoming a strategic resource can be
tempted to outsource. If IT is becoming that important, the argument goes, why not
form a strategic partnership with a world-class provider of IT services and thereby
_ tap into economiesof scale and scope that must be unavailable to an in-house IT func-
tion? Most of the UK government's IT activity has been contracted out on this basis.
Perhaps the right issue, then, is whether the IT function has any long-term future.
At Templeton College’s Oxford Institute of Information Management we have
worked closely with dozens of companies. during the past decade, researching
appropriate responses to both the technology opportunity and the outsourcing
Phenomenon. We have come to the view that an in-house IT function is indeed a
Potentially critical future asset for any company — but that radical change in its
shape, scope and staffing is often desirable.

The impact of outsourcing

“a Cur experience the use of outsourcing is only one part of the long-term
blueprint
7 4 company’s exploitation of IT. We prescribe a selective approach to the
sourcing
of IT activity, within which there are essential and complementary roles for both an
‘nternal IT function and for external providers. The central ideas of this approach
are threefold:

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1. Itis a mistake, potentially a very expensive mistake, to make
overall judgment that the IT function should be sntsoutcad in a
single contract; it is another mistake to decide that it should not be
outsourced at all.
In any company the IT function is responsible for a wide range of activities
a portfolio of assets. Some activities — such as payroll system operation or
desktop computer installation — are quite properly positioned as back-office
commodities. Other activities — perhaps supply chain management systems
or network management — may also be seen as necessities rather than order
winners but their successful operation to a high standard is business-critical.
Increasingly in organizations there are also IT activities that underpin
competitive differentiation — online customer service support, for example, or
a knowledge management infrastructure which enables more effective
problem solving. A selective approach to IT sourcing recognizes these
differences and identifies the arrangements — using external or internal
resources — that will be effective for each part of the portfolio.
9. Successful implementation of a selective sourcing approach brings a
. 7)
number of benefits. }

and
Many established IT services may.indeed be delivered at high quality
under
lower cost by external suppliers who operate scale-efficient facilities
e from A
world-class IT management practices. The IT cost structure can chang
being predominantly fixed to being substantially variable as a smaller in-
supply with demand.
house IT function uses the external market to match
ologies or applications
The quality of projects that involve unfamiliar techn
are brought in to work with
can be enhanced as skilled external resources
for free.
internal teams. But these benefits do not come
capabilities to operate a
The IT function needs a new set of management extent of
selective sourcing approach, and in most companies the nature and
na ge me nt tas k has bee n poo rly understood. IT outsourcing — selective
the ma of |
or otherwise — is not a quick fix; it represents a transfer of activity, not
order to fulfil its continuing
accountability, The IT function must adapt in

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 responsibility for IT services in new ways. And penalty payments for
contractual failures. are a poor substitute for successful services.
\3 Selective sourcing allows the redirection of internal IT resources
) 4 towards the highest value-added activity.
At companies such as BP Amoco, ICI and Thames Water this has become
the dominant theme. If future business success is increasingly dependent on
exploiting new information technologies, the premier objective of the IT
function is to help the business to understand what the opportunity is and
how to grasp it. By deliberately outsourcing as much service delivery, support,
and even development activity as possible, CIOs such as BP Amoco’s John
Cross have driven their IT functions to focus on the capabilities, activities and
culture that are required to achieve this agenda. While external
providers can
be motivated and managed to deliver the IT services of today
, an in-house IT
function which is committed to the business can
enable it to reali ze the oppor-
tunities of tomorrow.

Collectively these ideas provide the guidelines for desi

gning an IT function fit for
the future. This design should be based on establishi
ng and developing what we
call “the core IT capabilities” — those that are necessa ry
and sufficient to fulfil the
function’s proper role within the business.

The core IT capabilities

Over the past few years we have worked with
IT functions in a variety of contexts
Some have been strongly
focused on the need to generate a more
creative and valuable agenda for IT in their business; ambitious,
others have set up task forces
to consider how to respond to the opportunity (or threat)
of [T outsourcing;
quite a
few have faced the challenge of rebuilding an in-house
outsourcing decision had led ['T function after a total
to both operational and strategic difficulties Drawin
their various experiences together, we have icuntified nine core capabilities
IT function. Figure 1 broadly indicates af tre
how each relates to the recurring challenges
of exploiting IT. .
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om
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—
—
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Arch tecture

SS
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 ness systems thinking allows the IT function to make a direct and effecti
Busi
contribut understanding
jon to the company’s capabilities of opportunity.
(certainly) As business
change over c vt exts
time hore nts
( probably ) and technological
continu ous need to examine how best to move forward. Business eyslenis thinkers
are ade pt at understanding the connections and interdependencies between
activities, and at communicating how existing processes work; they use that base to
catalyZe understanding of processes that technology can enable in the future. IT
functions with people who possess such skills are sought-after contributors to new
. .
pusiness initiatives.
Individuals with relationship-building capability facilitate the wider dialogue
petween business and IT communities. Comfortable in both business and technical
domains, they act as bridge builders in achieving mutual understanding and trust.
Gifted individuals, in our experience, can completely transform the climate for
exploitation of IT.
As businesses’ strategies and operations are increasingly dependent on IT for
their delivery, the scope and integrity of the technical infrastructure over time
becomes critical. While the construction and operation of such platforms can be
effectively contracted out, the core capability of architecture planning safeguards
the future ability of the business to keep its technical evolution in line with its
.
business needs.
Making technology work is our innocuous label for the quite extraordinar
capability some IT specialists show as they rapidly troubleshoot complex problems
that have been disowned by others along the technical supply chain. A few
individuals who excel in this respect, using their ability to “keep the show on the
road”, can ensure the credibility of the IT function’s service arrangements.
Informed buying is the first of four core capabilities required to manage success- »
fully a selective sourcing strategy. It provides the insight needed to determine and
to shape the appropriate (external or internal) sourcing for each activity in the IT
portfolio. .
Contract monitoring capability then ensures that each service provider is held to
account against existing contracts, and is more broadly assessed and benchmarked
against the developing standards of the external market. Meanwhile, contract facil-
itation is a more action-orientated capability, which ensures that service users can
have problems resolved promptly and fairly within the framework of agreements
and relationships.
Last but not least of the service delivery capabilities is vendor.development. The
Worst aspect of IT outsourcing is that changing suppliers generally involves
vendor
‘ Substantial switching costs and considerable disruption; the objective of
situations in which the
development is to maintain motivation by creating win-win
add value
supplier can increase its own revenues and profits through services that
to the business. ;
one” ninth and central capability is IT leadership. Biiactlee IT leadite dvi the
vie ational arrangements — structures, processes, sta en which the IT
UNctio senna As individuals theywellshape the valueetienor cnee, the perception
time ‘They at
are also, of
@ to n eae to the business, as as Cae
and per aL ance. eee therwise
Course ° the business of IT’s role, potentialIT functions progress
to » instrumental in determining the
ards the model we have described.

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“The challenge of transition
A fuller discussion of the core capabilities long period of time. But we suggest that an IT
model and of the associated approach tolIT —_ function fit for the future is a considerable
sourcing can be found in the suggestions we _ prize. Current evidence suggests that the
make for further reading. We do notunderes- _ pioneers have achieved dramatic improve-
timate the degree of change represented by —_: : service,
ments, inthratoh
both business
spore? FYcontribution
Acaand
our prescriptions; there are major implications
for structures, career paths, recruitment and employ roughly one-tenth as many pe oplé-as

development. Many organizations

may wish _ their traditional predecessors. —_
_ to manage such changes gradually, over So 3

Summary
Information technology is becoming more and more important to business. At
the same time, it looks
as if IT departments are being sidelined by the increase in outsourcing. But it would
be wrong, argue
David Feeny and Leslie Willcocks, to write off the corporate IT function: across
-the-board outsourcing
can often prove to be an expensive mistake. Instead, the IT function should
be analyzed as a portfolio of
activities to be selectively outsourced. Internal resources can
then be focused on helping the business
to grasp the opportunities represented by IT. Ultimately, the
function needs to develop a set of core
capabilities that will enable it to anticipate future developments in business
and technology, maintain
the IT infrastructure over time and manage outsourcing. Above
all, it needs skilful leaders to build an
organization that can achieve these diverse aims.

Suggested further reading

Cross, J., Earl, M.J. and Sampler, J.L. (1997) “Transformation
of the IT function in British Petroleum”, MIS Quarter}
(December): 401-23.
Y
Feeny, D.F. and Willcocks, L.P. (1998) “Core IS capabilities for exploiting information technology”, sigan
Management Review 39 (3, spring): 9-21.
Lacity, M.C., Willcocks, L.P. and Feeny, D.F. (1996) “The value of selective IT sourcin
g”, Sloan Management Review
37 (3, spring): 13-25. :
These topics are also covered at length in chapters of Managing IT as a Strategic Resource (eds Willcocks, L.
Feeny, D. and Islei, G.), New York and London: McGraw-Hill, 1997.

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