What Will the Role of the CIO Look Like In the Next Five Years?

I recently spoke with Todd Taylor from Apptivo, who is writing a book on IT technology management.  Apptivo provides IT business technology management, and is focused on transparency of IT application usage.  Todd is also affiliated with the CIO Technology Council, and is writing  book on current trends in IT.  He notes that CIO’s are increasingly starting to think about IT in terms of supply chain principles, and are thinking about the changes associated with this transformation.

Traditionally IT has been focused on tactical elements such as enterprise application management, and has been quick to adopt new technologies whenever demand from a business emerged.  Todd points out that in sourcing decisions, the IT functional owner is often things to put them (ei.e. Aptivo, the software vendor) at an advantage.  Vendors often have much deeper knowledge of the market, and are often brought in with comparatively little market intelligence activity by IT, putting them at an advantage.  Other CIO’s acknowledge that IT is often unprepared when it comes to negotiating, contracting, and market intelligence skill sets, and are confident that their technical expertise will carry them through the sourcing decision.

This is starting to change. Although IT leaders perceive a bureaucracy exists in procurement and that procurement should be avoided, more and more IT is finding that they are going to have to begin partnering with procurement, using a process known as category management.  In category management, a scorecard is defined very early in the software/hardware specification cycle through a collaborative process with the business owner, the functional owner in IT, and supported by procurement.  This needs to happen early in the negotiation, before the selection of vendors, primarily because the scorecard forms the basis for the selection itself.  Elements on a scorecard might include features, maintenance agreements, functionality, and (by the way), life cycle cost…

The other application of supply management principles to IT is in the area of Demand Management.  In IT, the first step here is to understand spend, and develop a reliance on transparency.  This doesn’t mean constraining spending, but a first step is to collect spend data and reflect the overall impact on the business unit’s budget.  This could reflect, for instance, IT support chargebacks or shadow bills back to business  partners, what are they spending on services, and showing consumption levels.

This is particularly true when you consider the impact of mobile computing devices, which are rapidly escalating as the number one spend area for IT.   IT category management goes beyond a single device to a whole portfolio of devices where the complexity drives increased costs, security challenges, and other issues.  Organizations want to support technology choices of end users but need to balance with cost, complexity, and implementation needs.  CIO’s need to start having these conversations with business partners around standards for supporting these devices,  and once you have that framework, give further transparency to decision-making.  This needs to happen soon, as the number of apps for business support and authentication networks into the network continues to grow and will surely continue to escalate as a big issue.

Todd mentioned one of Apptivo’s big customers (and I mean really big!) and problems they had with escalating mobile phone costs.  The CIO knew culturally as long as they could give end users visibility to their costs and consumption, they could drive behavioral changes  All they had to do was show consumers what they were consuming  and give them incentives for stock options.  Once this happened, they drove change in behavior, which also led to renegotiation of mobile contracts.  Rather than rely on simple constraints, rules, and compliance, driving change was about leveraging costs and driving  transparency of costs to the business, and then letting the business make decisions about what they should be consuming.  This implies managing not just the numerator (cost), but all the rate of consumption (denominator) in the demand management equation.

Another part of the IT category management equation is around supply chain risk.  Loss of control is a theme more CIO’s are concerned with relative to Cloud computing.  Business partners are going more to Cloud computing not just for software, but using cloud providers for infrastructure.  There is a perception that cloud computing drives loss of control, and exposes the organization to yet another portals for computer hackers from China and India to enter.

There is no question that the move from a centralized authoritarian IT organization to a shared service working with procurement through a category management approach is the future vision of where IT is gong. What should a CIO be doing or technology leader be doing to earn control by providing value from being the intermediary?  Is there something they should be doing better to help manage the trend they see?  I believe that the need to drive transparency, employing category management approaches, adopting total cost of ownership toolsets, and working more in collaboration with procurement are all issues that CIO’s need to begin thinking about in the years ahead.  In the next 3-5 years, IT organizations will look very different than what they are today.