Endangered species?
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In recent decades, IT directors have controlled some of the largest budgets in business. But their role is being questioned as never before.
As Bob Calderoni, an accountant by training, took his seat for a conference in London in November, he found himself surrounded by people from his former profession. And not just a handful of people, but dozens - in fact, the organisers would later claim that 90% of the 250 delegates were finance directors and purchasing executives.
Understandable for an accountancy conference, perhaps. But Calderoni is the CEO of Ariba, a US software company, and the event was his company's European user conference.
Where were all the 'techies' - the people whose job it is to specify and manage information technology? "We were mainly selling to IT directors during the
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Ariba is perhaps unusual, in that its software is aimed squarely at financial and purchasing functions. But Calderoni's observations are nevertheless widely shared: that the IT director is no longer the sole, and sometimes not even the leading, decision maker when it comes to buying IT goods and services.
Werner Sulzer, European vice president of NCR's Teradata data warehousing division, has noted the same thing: two-thirds of people who request information about his company's products are marketing executives, finance directors and CEOs, he says. "These [IT buying] decisions are taken by a lot of people - and not always IT people."
In fact, many suppliers, some analysts, and certainly some line of business managers, go further than this. They think the traditional buyer of IT - the IT director - is losing power and influence. And even where this hasn't happened, they think it should.
The reasons are not always the same and are sometimes contradictory: some say that IT directors have too much freedom and need to be more accountable; some say they are too technology-focused; some think they have become too tight and wary with budgets, some think they are too close to supplier; some that they have made too many expensive mistakes.
Whatever the arguments, almost all believe that, more often than not, the IT director does not have the training, the experience or the remit to act strategically or commercially. And that, they conclude, is bad for everyone.
"The IT department may be living on borrowed time. In the IT decision process, especially for outsourcing - it is apparent that it is the finance director, and not the IT director, who has the power," says Brian Hadfield, European managing director of systems and services giant Unisys.
It is not the first time that the IT director has been given such a gloomy prognosis. One IT periodical announced 'The Death of the CIO' on its cover back in 1998. Even in the 1980s, some observers called for the unholy alliance of the IT director, the consultant and the supplier to be broken up after huge overspend and overrun at a string of high-profile projects.
But this time around, the calls for change are louder and more insistent. The Harvard Business Review, for example, recently carried an article urging its executive readership to take an unprecedented degree of control over IT buying decisions. Why? To better align business and IT strategy and reduce the number of failed IT projects.
Tarnished and wary
Many IT directors have noticed the trend and they don't much like it. In some instances, it is even creating some frostiness between suppliers and IT directors.
At the Infoconomy Technology Business Forum in November 2002, for example, Martin Band, a director of database giant Oracle, told a panel of IT directors that one of his biggest challenges is how to get to the CEO "without being gatekept by the CIO." The prickly response from the IT heads: Don't bother trying; you'll be referred back to the us anyway.
But suppliers are trying - persistently. They perceive that, whatever the IT director says, his or her influence - and credibility - has taken a battering. In some cases, the managing director and the finance director have even taken back overall control of IT decision making.
Colin Beveridge, an interim IT director, says this is partly due to a backlash from business executives punch-drunk from project failures and the "non-event" of the Millennium Bug - an episode which led to enormous outlay on products and services in response to an overstated threat.
"IT has lost some of the old mystique. Businesses are less respectful towards us. I have had the distinct feeling that the business feels it is more capable of managing the IT function than the IT department is," he says.
The excesses of the recent past mean that, even where they have not lost any of their power, many IT directors are anxious to prove that they are good corporate citizens, spending wisely and consulting widely. Some are even being offered incentives to cut costs or under-spend their budgets, according to David Roberts, chief executive of The Corporate IT Forum (TIF), a UK technology user group.
That doesn't make for the kind of gung-ho, chequebook-wielding decision-making that suppliers like. In fact, to vendors, this can mean only
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"Suppliers have been bypassing IT directors for years - but they are doing this now more than ever because they can't get decisions out of IT directors," says David Taylor, the founder and president of IT director association Certus and the former CIO of Cornhill Insurance.
In fact, the current technology industry recession is causing suppliers to radically rethink their selling tactics. And a common approach is to target people outside of the IT department. "People are trying to talk to everyone right now," says Chris Blaik, European marketing director of Divine, an enterprise software and services company.
That can be a risky tactic, especially because, as Certus' Taylor points out, "if anything, budgets are even tighter elsewhere, especially in marketing and human resources." But it does have one big advantage: many line of business or functional heads have an immediate business interest in delivering better results, and they may be much less sceptical about the impact of IT than battle-hardened IT directors.
Such managers, however, are no push over. First, they are not necessarily any less sceptical. And second, they usually consult with their IT colleagues. "I don't think that IT by itself is the answer," says Jo Foster, business improvement manager of UK rail operator Virgin Trains, who is often approached by software companies. "IT can facilitate improvements to processes, but it is not the be all and end all."
Outsource the IT director
Another reason why many IT directors are being pushed to the side: many line of business managers, especially those who grew up with information technology, are exasperated by the performance of their internal IT departments and think too much is made of the complexity. They think they can do just as well.
Most IT directors think this is unfair. A 2002 survey by market researcher Vanson Bourne, for example, found that 70% of IT managers think their business colleagues do not appreciate the difficulties involved in upgrading systems, and almost half of these colleagues were ignorant of the benefits that IT could provide.
But fair or not, there is growing pressure to make IT managers and their departments more accountable. In some cases, that means stricter service level agreements; but increasingly,
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The clearest threat to the IT department is the trend towards outsourcing - and not only mission-critical functions, but also entire business processes. By 2005, according to Gartner, 40% of Europe's IT and business process expenditure will go on outsourced services. The role of the IT director, then, will be unclear: he or she may be replaced by an accountant or executive more used to managing supplier relations.
Richard Holway, a director at IT industry analyst firm Ovum Holway, believes that the long trend towards outsourcing will become more marked. "The people who will be in charge of IT in the future will be those who are in charge of the business processes. The days of having the IT director as the head of a standalone function are numbered."
Service providers are seeking to accelerate this trend with a strong recession-era sales story directed at finance directors. The major providers use a proven tactic, offering to buy IT equipment from prospective clients based on its residual value. This is then leased back to the company.
"This is effectively a sweetener for a deal. Such an approach can be particularly attractive at a time when cash is tight," says John Handby, chief executive of IT director networking group CIO Connect and the former IT director of pharmaceutical company Glaxo Wellcome (now part of GlaxoSmithKline).
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One of the UK's leading advocates of outsourcing, Richard Sykes, chairman of IT consultancy Morgan Chambers, believes that the IT industry is reaching the point where all products will be delivered as a standard service. As the vice-president of IT for chemicals giant ICI in the 1990s, he cut the corporate IT department from 1,300 people to fewer than 30, 'selling' them off in a series of outsourcing deals.
Reinvent the CIO
One thing is clear: IT directors, faced with conflicting mandates to improve service and cut costs, and to be more commercial while keeping up with the technology, feel under pressure.
A recent survey of European heads of IT by computer services company Synstar, found that only 42% of UK-based IT directors had 'no concern' for their own position (their counterparts elsewhere in Europe were far less worried).
All of this has led to a flurry of activity among IT directors, partly to demonstrate their value, and partly to ensure their evolution into rounded business people. "If information systems (IS) leaders do not demonstrate the business values that they are delivering, then they will know, from experience, that their budgets will be cut and the survival of the in-house IS organisation will be threatened," says John Mahoney, research director of Gartner and the former CIO of the British Library.
Rene Carayol (author of the management book Corporate Voodoo) and David Taylor (author of The Naked Leader), two IT directors turned authors and business advisors, both urge IT directors to reinvent themselves, and become 'multi-role' business leaders. They think the death of the IT director means the birth of the new, commercially savvy CIO. "These people are young at heart. They are coming in under the agenda of business transformation. They do business turnarounds," says Carayol.
Richard Sykes' role at ICI is an example: with his business perspective, he was not emotionally tied to the IT department and oversaw its creative dissolution. And he was in charge of IT - not finance. Another new style IT director is Richard Granger, the IT director general of the National Health Service and the UK's highest-paid civil servant.
"Shake off your functional mantle", Carayol tells IT directors. "You wouldn't have a business without a finance director on the board. Every organisation should have a CIO on the board".
"2003 is the critical year for us," says Certus' Taylor. "CEOs have had enough - it's time for us to stand up and be counted."
