The CIO’s Job Keeps Getting Harder and Outsourcers are Partly to Blame

By Jon Tonti

In recent years, CIOs have been expected to focus a lot more on top-line sales while also doing their ‘day job’ of navigating the IT department through new opportunities in mobile, social and big data. In addition, CIOs are shouldered with the task of pivoting away from outsourced R&D as they re-think real  requirements for internal capacity. Re-egineering the innovation function and figuring out where it sits within the enterprise is one of many CIO issues that Mark Peacock, CIO and IT Consultant at Archstone Consulting, is hearing out in the marketplace.  Peacock, a former CIO at Pegasus Solutions, guides CIOs through IT transformation to optimize organizational structures of IT departments and re-craft their service delivery models. Far from dry technical know-how, Peacock provided a window into the concerns of CIOs.

IT is not simply an area for cost reduction and efficiency improvements. More than ever CIOs are being challenged to make IT a profit center. Nonetheless, most enterprise focused IT organizations are cost centers that only make money by saving money. Some IT organizations bridge the gap, between having IT as an actual profit center or simply a cost reducer, by bringing their expertise closer to the point of sale.

“I see more and more CIOs focused on how they can enable both the top-line of the company as well as the bottom-line by providing the capabilities or technologies necessary to help the company grow their sales. You tend to see IT departments much more involved in product definition and product roll-outs because so many products in the services sector (financial services, banking, and insurance) are enabled either partially or fully by information technology. Even in something like hospitality, a hotel room is a hotel room – it is not defined by technology, but how you package it up with complementary services, how you price it, how you offer it, etc. is all defined within a transactional central reservations system,” Peacock said.

Innovation Ambition and Innovation Reality

Whether CIOs are trying to launch profit centers or further reduce costs, there is a recognized gap between the innovation utopia these visionary CIOs can imagine and the innovation reality their IT organizations are capable of delivering. This dynamic plays out amid pressure to keep costs static or in decline, maintain current and legacy systems, and bring new systems online.

Although many CIOs struggle to keep up with the current operations, they push themselves to think how they can make time to bring innovation and technology thought leadership into the company, says Peacock. “It’s a tough one, a lot of people who outsourced 5-10 years ago with the big guys like IBM, HP, EDS, etc. put innovation clauses in the contracts. For instance, once a quarter the provider would bring in new innovations, tell the customer what is going on in the world, implement best practices they are using with other clients, or bring in the new whiz-bang solutions, etc,” Peacock said.

“I have yet to find a CIO who believes their providers have brought them any sort of innovation above and beyond what they beat on them contractually for. It is one of the fundamental disappointments of the outsourcing industry. And I hear it not just from CIOs, but from business leaders, CEOs, CFOs, heads of organizations, etc. A familiar refrain goes something like ‘I thought IBM, Accenture (and the like) were these big multinationals all-knowing technology organizations that were going to bring in thought leadership and it never gets done, and if it gets done it is only because I have been hammering on them for it. That is theme I hear throughout.”

Over 75 percent of CIOs surveyed in a 2012 Harvey Nash study say that at least a quarter of their workforce was made up of flexible labor and 43 percent recognie that multi-sourcing would increase in their organizations.

Building Enterprise Architecture Groups

CIOs that have had mixed results with outsourcing various parts of their IT organizations are now “pivoting” back towards building enterprise architecture groups that had been stripped out. Enterprise architecture groups (EAGs) are gaining ground again to provide structure and governance to the hunt for new technologies that can be transformative for lines of business, says Peacock. “CIOs are also bringing back enterprise architecture groups so the innovation portfolio has a place to sit. The EAGs are tasked with looking externally for new technologies / ideas and bringing them back into the organization. Companies tried to outsource the first part of the innovation pipeline, which is research and ideation, and for the most part they have seen that fail. There is a need for it from the other business units and for employee satisfaction of technology workers,” affirmed Peacock.

The Basics, Process and Alignment

“We look at the process maturity of the IT organization…are processes well defined. We ask, is it a process oriented organization or people oriented organization?” Peacock went on to explain that it is important to identify how much coordination an IT organization is doing just for the sake of coordination itself. More often than not when an IT organization is coordination heavy and real-time communication dependent it is because of a lack of investment in processes and not having those processes ’embedded in a set of tools that enforce the processes.’

The consequence of loosely defined processes and disparate tools is difficulty in moving more commodity-like activities offshore and or taking advantage of flexible labor. Over 75 percent of CIOs surveyed in a 2012 Harvey Nash study say that at least a quarter of their workforce was made up of flexible labor and 43 percent recognie that multi-sourcing would increase in their organizations.

“It is really all about alignment. The ability to communicate quickly in real-time over IM, phone, or email reduces the cycle time for decision making. The second is cultural alignment. The third is motivational alignment, quite often when contracts are FTE and cost based as opposed to outcome based there is not full goal alignment between the customer and the provider,” elaborated Peacock.