Dual paths of the CIO Role

Dual paths of the CIO Role

by | 16 Aug 2015 | Consulting, Technology

Why do we spend so much time scrutinising the role of the CIO?

Much of the reason is probably as a result of the pace of technology change

With every major computing paradigm that comes along driven by vendor marketing departments, CEOs tend to worry when their competitors do well at quarterly fiscal announcements that they are leveraging technology better, potentially asking:-

“We must not have the right kind of CIO!”
“We have an operations person, but we need an innovator!” or
“We have a visionary but our operations are inefficient!” or
“Our CIO is not technical enough!” or “Our CIO is too technical!”

Having recently read a report provided by CA Technologies on the ‘Changing Role of IT’ it is bound to raise even more questions about the role of the life of the CIO role.

According to this research, more than 70% of CIOs are reporting to CEOs, which signals a rise in the strategic significance of IT; however a mere 14% of CIOs see their role as a driver of new business initiatives. Also from the research, many CIOs have finally been able to strike a 50-50 balance between spending on new products versus spending on maintenance; but despite this success in IT investment management, CIOs are giving away their budget: More than 35% of IT spending is occurring outside of the IT department, or what is commonly called ‘Shadow IT’.

With technology now becoming as ubiquitous to a company’s operations as the finance function, we may have to be realistic to the notion of saying farewell to one centralised technology leader in the business. Realistically technology strategy, spending decisions, and resources will extend out of IT into other business functions or external third parties due to demanding digital agendas in order to serve all of a company’s technology needs.

According to the report the CIO role is evolving along two interesting parallel paths:

The Chief Innovation Officer:

One group of CIOs will travel on the innovation path. These CIOs will leave IT operations to someone else as they focus on the convergence between engineering, R&D, and software development. They will build organisations populated by entrepreneurial types who look toward data, software, and even business processes for new revenue ideas. They will meet with external customers, forge partnerships with universities, launch innovation labs, acquire technology services, and lead the charge in getting their business’s executives to focus on the future. These CIOs can create a vision of future products, business models, and customer engagement channels, and they have the credibility to inspire their colleagues to believe them and to follow.

The Chief Shared Services Officer:

CIOs that have spent their careers running air-tight operations might just not have the gene for business model innovation. Or maybe they have the gene, but their CEOs do not see them as innovators. All is not lost for this breed of CIO however. Having spent their careers managing large operations that deliver a complex array of IT services to tough customers, these CIOs will outsource more and more of IT and free themselves up to manage other key business services. Just because IT operations are being commoditised does not mean that “operational CIOs” should be commoditised, as well. If they play their cards right, CIOs who excel at running IT as a support function, will expand their roles into other shared functions, like legal, procurement, and HR.

This CIO might even wind up in the new Chief Business Process Officer role beginning to emerge in the executive suite corridors. These CIOs will hand innovation over to those business executives who are clamouring for a piece of the IT budget. But rather than be relegated to an IT services babysitter, these CIOs will take their considerable expertise with business process change, continuous improvement, project management, and vendor management and bring a new era of leadership to their companies. These CIOs will run IT organisations that are largely outsourced; they will populate their organisations with people who have expertise in vendor management and a wide array of business processes while maintaining corporate process standards and SLA’s.

“Technology certainly is turning the whole businesses upside down, as CEOs everywhere struggle to find the best way to manage and leverage IT.” commented Craig Ashmole, Founding Partner of London based CCserve consulting. “This is why so many industry experts are talking about the CEO having the CIO at the boardroom table, as IT done ‘right’ will be critical for Digital proliferation and business market growth.”

It makes sense that as technology increases its impact on businesses, the role of the technology leader will evolve. The key for every CIO today is know which path plays to your strengths, and get a grip with the evolution and be the new technology leader of the 2020’s.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

IT role in Corporate Acquisitions

IT role in Corporate Acquisitions

by | 6 Aug 2015 | Consulting, Technology

IT role in Acquire, or Not-to-Acquire

The changing landscape of the IT Technology arena within corporate Merger or Carve-out

To acquire, or Not-to-acquire – The question most CEOs ask their CFO is:- Will the transaction drive financial rewards and what are the risks, but really the glaring missing player here is the CIO!

Ask yourself, How many CFOs have you come across that have a full and clear understanding of the value an ‘Open and connectable’ versus ‘out-dated and proprietary’ IT department can make in driving business revenue growth.

This means that Board Executives are negotiating in the dark and potentially loosing large percentages of cost of sale value. There couldn’t be a better time for the CEO to bring the CIO to the table.

Businesses today are under more pressure than ever to deliver value to stakeholders, particularly when undertaking bold initiatives such as mergers, acquisitions or asset disposals. This is true not only for corporate acquirers but also for private equity (PE) or Venture Capital (VC) firms, whose strategy is leaning toward add on acquisitions as a means of growing their portfolio companies.

Under the current economic conditions and the rising cost of debt, corporate business management teams will require additional focus on effort in order to restructure or streamline operations, and specifically the IT departments of acquired businesses to deliver success in the absence of financial engineering. For a while now Information Technology (IT) is fast becoming a key lever which management can use to deliver operational benefits — whether in reducing operational costs, entering emerging markets or scaling their business across multiple geographic regions. With the advances in technology and its impact on today’s business models, companies are increasingly pushing the boundaries to remain competitive. IT is one key area to do this — Technology should be looked at as a business enabler and not look at as so many boards still do today, as a cost to do business.

“The sooner that executive boards put the CIO or the IT department on their monthly agenda as a regular discussion point the better,” says Craig Ashmole, Founding Partner of London based CCServe consulting. In my humble experience and far too often I see the CIO struggling to get the ear of the CEO or even agendas on the board table; businesses need to view IT as a business enabler rather than viewed purely as a cost centre.”

Part of the reason the CIO is not at the board table is that often they do not speak the language of the business board executive. Technology scares most senior board members and until the Generation Y and Generation X group get into those senior positions we will continue to see a disparity with Technology and Fiscal business matters.

The CIO challenge is to do his/her bit too, they really need to fully engage with the commercial business functions, and stop hiding behind technology to protect themselves. The ‘head-in-the-sand’ CIO will have a rapidly growing threat from the likes of the CMO or emerging CDO Digital Officer. Understanding the business functions that deliver revenue is a key focus going forward.

With the fluid market of M&A today there are two clear distinct areas a corporate or global business can go with this. One; is to look at how costly it will be to split companies up or carve out elements that are no longer key areas of business growth for that organisation and IT efficiency should be at the forefront, not just fiscal separation.

The other area on the acquiring side of an M&A transaction – Many CEO/CFOs look at the cost of acquisition proposed by the big 5 consultancy houses, often building in huge elements of ‘cost of sale’ to mitigate IT integration risk especially where transaction teams are uncertain.

“Making ones own IT and infrastructure easy to connect with while utilising open standards or cloud services could help the process of bringing together two disparate lines of business,” Craig Ashmole goes on to say, “More importantly M&A is about the shortest time to ‘joined-up’ business revenue growth which gets the attention of the CEO. Well prepared IT and infrastructure are key success elements to that joined-up process.”

There is a large growth of non-accounting technology focused personnel being hired into the Big-5 consulting transaction teams as more emphasis is given to IT & Technology within the merger/carve-out transaction process. This however should be a balanced process, in my opinion, with ones own CIO office within the organisation. What an IT department or CIO office may lack however is in the broader wider exposure that seasoned interim independent consultants might bring to the negotiations. Independent interim IT consultants have often engaged in similar situations or have awareness skills from engaging in many other organisations as they move from assignment to assignment.

Whatever the CEO or board choose to do as they grow through acquisition, or transform through business carve-out, they have to put the IT agenda firmly on the boardroom table and should seriously consider taking advantage of the experience and quick turn-round support that so many senior and interim consultants have to offer, to support their own CIOs.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

Outsourcing in Europe 2015

Outsourcing in Europe 2015

by | 31 Jul 2015 | Outsourcing

Outsourcing hits record levels in Europe – Summer 2015

Outsourcing activity in Europe recovers after the lull in the lead up to the UK general election, with more contracts negotiated than ever before

The value of outsourcing contracts in the UK increased by 150% in the three-month period to the end of June 2015, as Europe saw a record number of contracts awarded.

In its latest index of IT and business process outsourcing contracts, Information Services Group (ISG) recorded 169 deals valued at €4m or more, with a total value of €2.2m.

This is welcome news for the outsourcing sector in Europe, which suffered a 25% fall in spending in the first three months of the year. ISG blamed this on caution in the run up to the UK general election.

In EMEA – the world’s largest outsourcing market – there were 128 contracts signed, valued at $2.4bn, according to the latest figures from ISG. Both these were 25% lower than the same period in 2014.

A drop in outsourcing in the UK – which dominates the area’s outsourcing market – had a big impact on the EMEA and global figures. “The drop was due mainly to a drop in sourcing business in the UK, due to the election,” said ISG.
Global outsourcing slowed as contract value reduced in a price war among suppliers, said ISG.

ISG’s Outsourcing Index – which measures commercial outsourcing contracts with annual contract value (ACV) of $5m or more – show first-quarter contract value fell 18%, to $5.1bn, well below the average for first quarters since 2006 of $6bn.

The number of contracts for the second quarter of 2015 was the highest ever, but the total value was 12% lower than the same period a year ago, with only two mega-deals worth €80m or more signed.

The financial services and energy sectors recorded a lot of activity in the period, while there was a decline in contract activity in the manufacturing, transportation and telecoms sectors.

ISG Europe partner and President John Keppel said the outsourcing industry is seeing an increase in smaller deals. “More deals than ever are being signed at much lower contract values, driven by increased use of multi-sourcing and the impact of digital strategies. The ever-increasing activity levels in Europe, the Middle East and Africa indicate that outsourcing is more popular than ever,” he said.

Keppel said of multi-sourcing, where buyers seek shorter and smaller contracts with niche providers, is driving this.

“Digital disruption is also having a significant impact, with buyers avoiding larger, longer-term contracts as they plan their digital strategies amid a wave of new technologies and operating model,” he said.

In the UK both the value and the number of contracts increased by 150%.

Keppel said ISG is bullish in the short-term and expects the next quarter to record growth compared with 2014. “Longer term, it will be interesting to see how the trend toward a higher number of lower value contracts plays out in the second half of 2015,” he said.

But what about the Financial Services sector?

Since the start of Q2 2015 there is expected to be an increase in the use of IT outsourcing in the global banking sector for the next 12 months, but the use of expensive consultants [The Big5] will drop, according to research by Finextra.

The CSC-sponsored research, which surveyed more than 50 global banks at the end of 2014, showed banks are cautious over what they spend on IT.

It also revealed that 49% of banks plan to increase the use of IT outsourcing over the next 12 months, while only 9% of the banks said they will reduce IT outsourcing.

Some 42% said they will reduce their use of consultants, while 22% are set to increase their use. Contractors will be increasingly used by 40% of banks, but 37% will reduce the number they use. The research also showed that internal IT headcounts will increase at 35% of banks, but reduce at 32%.

The numbers suggest banks are eager to develop IT but are conscious of the need to keep costs down, with Big5 consultants’ notoriously expensive resources.

“More often than not the Big5 – consultants are twice the daily rate compared to independent interim IT contractors, so moving to the smaller bespoke interim consulting market it’s a quick way to shed costs,” states Craig Ashmole, Founding Partner at London based IT Consulting CCServe. “The report indicates more judicious usage of consultants mainly for advisory and design activity, leaving the implementation to the organisation themselves. Interim consultants being a useful source of reliable skills.” he said.

Outsourced IT is the fastest growing resource. The flexibility and cost advantages of suppliers that can tap resources in low-cost regions are increasingly popular for banks. “A wide range of flexible models incorporating outsourcing, offshoring and even insource-offshoring deals are being pursued,” said the report.

Allied Irish Bank and ABM Amro are examples of banks that have recently increased IT outsourcing but banks may be taking risks by outsourcing and offshoring some of their legacy operations, as well as their security.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

Cloud Affecting India Outsourcing

Cloud Affecting India Outsourcing

by | 29 Jul 2015 | Cloud, Outsourcing

Cloud Computing Is Going To Rain on India’s Outsourcing Parade

There are dark clouds on the horizon of India’s information technology and outsourcing industry.

AstraZeneca PLC is sharply scaling back the business it gives to the Indian outsourcing companies that it has long relied on for tech help. David Smoley, AstraZeneca’s technology chief, said he expects to cut in half the $750 million the drug maker used to spend annually on outsourcing over the next two years. He said the number of people working on information technology also would drop by 50%.

The changes at AstraZeneca are part of a major shift toward cloud computing, which is starting to bite into the revenue and profits as well as hiring in India’s critical outsourcing industry and poses an existential threat to the players that fail to adapt.

Outsourcing executives are bracing for a big disruption. “It’s like what happened when Amazon arrived,” said C.P. Gurnani, chief executive of Tech Mahindra Ltd., a large Pune-based outsourcer that specializes in work for telecommunications companies. U.S. bookstore chain Borders closed and Barnes & Noble had to reinvent itself, Mr. Gurnani said.

Mritunjay Singh, operating chief of outsourcer Persistent Systems, predicts a “bloodbath” in which only nimbler companies will survive.

Outsourcing accounts for around 20% of all of India’s exports of goods and services. The industry employs millions of Indians and has become an important route into the middle class in the world’s second-most populous country.

The impact of the move to cloud computing — where servers and software are accessed via the Internet rather than on local networks or personal computers — is being amplified by other trends, from automated code-writing to increased competition and falling corporate information-technology budgets.

There are dark clouds on the horizon of India’s information technology and outsourcing industry. Profit growth at even India’s most successful and sophisticated software companies could be doused as companies, governments and consumers around the world do an increasing amount of their computing on the cloud, says outsourcing services advisory firm ISG Inc.

Companies that have traditionally used in-house servers running on custom-made applications are putting more of their business on external servers and using off-the-shelf software. Using the cloud often means using fewer people so Indian software companies—once dubbed “body shops” because they could supply as many computer engineers as a project needed—are going to suffer as they lose much of their competitive advantage.

“It is only going to get cheaper and easier for companies to switch to the cloud, outsource providers need to get ready for the storm and modify their business models and move with the digital times”, said Craig Ashmole, Founding Partner of London based IT Consulting CCServe Ltd.

This means, developing software that allows businesses to (interact) faster and more efficiently with their external stakeholders – customers and suppliers, rather than focus on changes to the internal workings of a client.

Around one in four of the deals ISG helped advise involved cloud computing last year. That’s more than three times more than the percentage of cloud deals it saw three years earlier.

India’s software and outsourcing companies are still too reliant on the business model that uses lots of relatively inexpensive Indian engineers and sends them to client sites to build software and fix problems, ISG and other analysts say.

Cloud providers use external servers, sophisticated technology and automation to manage clients’ data using fewer employees. Where a traditional service provider deploys one employee to monitor up to 200 servers, cloud players can use one employee to monitor up to 10,000 servers, ISG estimates.

The cloud infrastructure players are drastically cutting down prices and starting to create pricing pressure on service providers in India and elsewhere who continue to set contracts based on the number of engineers deployed in a project.

Cloud infrastructure providers such as Amazon Web Services, Red Hat, Rackspace Hosting and others are emerging as a formidable threat to Indian outsourcers and other traditional service providers and consultants including IBM and Accenture that earn revenues from managing the technology infrastructure of clients.

Traditional service providers now have to strive to get more cloud contracts–where they help clients shift data to cloud infrastructure providers–rather than focusing on creating their own clouds, ISG said.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

Gartner findings on CIO role in 2015

Gartner findings on CIO role in 2015

by | 18 Jul 2015 | Technology

Gartner findings on the CIO Role change in 2015

Takeaways from Gartner research on the ever evolving role of the CIO.

If you take a moment to scan the social media, technology is a constantly moving ball, but sadly the CIO role does not always move at the same pace and there’s a lot of discussion being written about CIOs where you’ll get a range of different perspectives — the job is fraught, constantly in flux, no one wants it, or the CIO has not moved into the digital arena fast enough.

“There is validity in all these views, some more so than others, and the fact that so many are discussing this on social media proves there’s a good reason to be addressing it,” says Craig Ashmole, Founding Partner at London based IT consulting CCServe. “What is clear to me however is the boardroom needs to take the ‘bull-by-the-horns’ now, by asking those difficult questions:- Do we have the right CIO for the job?”

It would be naive to think that the CMO or even the evolving CDO (Chief Digital Officer) role can really just walk in and replace the CIO and the company will carry on from a technology perspective. If the CIO is addressing their technology department by moving to a world of innovative leadership and commoditising the utility elements of IT then the CIO is well on the road to getting things right.

So, how to get a grip on what’s going on in the world of the CIO? Reading a recent blog I notice that it is a serious C-Change environment, here’s a rundown of some of the most recent data from research firm Gartner about the role of the CIO, from the descriptive to the prescriptive over the first 8 months of 2015.

Perception is important

According to the Gartner report “CIOs Should Consider a New Approach to User Satisfaction,” perception of IT performance plays a significant role in how CIOs view the extent to which IT is delivering on executive expectations. The unfortunate thing here, the report says, is that what executives expect isn’t always matched up with what IT is actually able to deliver. The report details better methods of gauging satisfaction by asking the right kinds of questions to the right people in the company. It describes CIOs as bridge builders, in part by “[enabling] business leaders to better interpret the needs of their organisations.”

The percentage of female CIOs has plateaued

In Gartner’s CIO Agenda 2015: A Gender Perspective, 337 of the 2,473 respondents were women, which is about 13.6% of the sample. That percentage fits into the worldwide average of female CIOs, which is estimated from 10-14%. Gartner said the numbers have plateaued and actually are fairly similar to the plateaus found in the numbers of women in senior positions in non-technology leadership roles.

Women CIOs expect greater budget increases in 2015, more so than male CIOs

The breakdown is 2.4% vs. 0.8%. It’s unclear why exactly that is, but it’s happened two years in a row. Gartner did point out that other previous data showed that when it comes to risk management, women CIOs were more concerned about underinvestment in risk initiatives. Risk data plus budget numbers might hint toward women putting more attention toward resources.

Software-defined infrastructures, IT service continuity, and integrated systems are the top 3 emerging trends that will affect CIOs’ decision-making this year.

When looking at these trends, Gartner recommends a trio of being aware, engaged, and proactive. That means tracking trends, understanding how they’ll affect current, new, or future operations, placing them on the “shortlist” for things to evaluate or implement. The report describes a situation where people expect to have access to everything always, and as a CIO, merely delivering on that expectation is the “bare minimum.”

CIOs should take another look at their company’s chief strategy officer

Gartner put out an entire report focusing on this idea, saying that culturally, even though CSOs are c-suite, they’re often viewed as “externalities” and even treated with suspicion. In the digital business era, that should be the case, and the report talks about how CSOs increasingly affect the IT and digital business agenda.

Men and women CIOs are more similar than different

One of the report’s recommendations was to avoid gender bias as it found that there are actually more similarities than differences between men and women CIOs in their approaches to leadership, how they view technology, and how they handle digital leadership priorities. For example, the top two tech priorities for men and women CIOs in 2015 are BI/analytics and infrastructure and data centre. Women put cloud ahead of ERP in the third and fourth spots, and both put mobile as no. 5. Similarities went on from there.

Publicly announced initiatives are up

When looking at the world’s largest insurers (CIOs of World’s Largest Insurers Continue to Invest in Digital Transformation), Gartner found an increase of 10% in publically announced IT initiatives as compared to 2013. They interpreted this as a possible indicator of growth in IT spending.

A large chunk of those initiatives are mobile apps and digitisation

Gartner said about a third of publicly announced initiatives were digitisation (18%) and mobile applications (15%). They recommend looking at these trends as a point of comparison and seeing where one’s own company was in relation to market trends.

One thing not addressed by specifically by Gartner however is; how the boardroom gets their CIO to change if they have not already done so. The first and primary move should consider external support to bring creative recommendations to the table the secondary move should be the actual transition based on the revised TOM.

“There is the obvious Big-5 consultancy houses that can be approached and are so often used, but don’t neglect to consider the huge pool of innovative and agile interim consulting and transformation resources from the smaller boutique marketplace.” comments Craig Ashmole. “These interim independent resources are often well qualified for this change game, especially where it’s to support existing CIOs for short periods of skills Top-up”.

Boardrooms should do less finger pointing but enable the CIO function to transition as quickly as possible and don’t look at skills augmentation as a failure but as a means to take the CIO from their present comfort zones to where the “IT Magic” is.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe