The Endangered Species

In his provocative 2003 article, “IT Doesn't Matter,” Nicholas Carr presents a compelling case for the diminishment of IT funding and the function itself. Through a series of examples that compare IT with popular and ubiquitous infrastructural technologies like water, telephone, and power utilities, Carr makes the argument that IT rarely generates sustainable competitive advantage. In fact, the very ubiquity of IT resources renders the function inadequate as a strategic asset, given that scarcity, not ubiquity, is what sets up a firm's opportunity to generate a sustainable competitive advantage. As an example, consider the proliferation of cloud-based alternatives mentioned in an earlier chapter and how these providers now offer a viable option to an otherwise expensive IT proposition. In essence, the democratization of IT resources and the leveling of the playing field it creates remove a significant barrier to entry for firms and thereby eliminate a source of competitive advantage for the privileged few once able to attain it.

To address the new environment of IT ubiquity and commoditization, Carr offers a cogent playbook that encourages enterprises to think differently of their IT investment and resources. He encourages them to spend less on IT, citing evidence from the consulting firm Alinean comparing IT expenditures with the financial performance of 7,500 large companies with sobering results: The most conservative spenders on IT were also the most successful. He tells companies to follow, not lead, and allow impatient competitors to experiment with new IT solutions and bear the burden of higher costs and buggier implementations as a consequence. Finally, he asserts that companies are better served focusing on defense as opposed to offense where IT is concerned. The function is best viewed through the mundane lens of mitigating risks rather than the rose-colored glasses of generating opportunities for the enterprise. Carr crisply summarizes his article as prescriptive advice to an audience of eager readers still left reeling by the devastating bubble burst of the time:

In fact, Carr was prescient in his assessment of IT. For a variety of factors unforeseen at the time of his writing, including the outright disintermediation of IT to third-party providers by the very employees the function is paid to support, the CIO and his corps increasingly find themselves the endangered species of the enterprise. But, warm up the chorus, for it is the very extinction of the function that may secure its reinvented future as strategic to the enterprise.

The CIO's road to strategic relevance has been rocky at best. To Carr's point, enterprises became enamored with IT around the dawn of the personal computer in the 1980s. As Carr cites numbers from the U.S. Department of Commerce's Bureau of Economic Analysis, in 1965, less than 5 percent of the capital expenditures of American companies went to information technology. By the early 1980s, that figure had increased to 15 percent. In the early 1990s, it was at more than 30 percent. By the end of the decade, information technology comprised nearly 50 percent of a firm's capital expenditures.³ The CIO function was lauded by self-proclaimed pioneering firms who suggested that the IT function was critical to their strategic objectives.

Yet, for all the hype, many in the IT department found themselves unable to rise in rank to the coveted executive corner office. According to a 2011 study by the Chally Group, which surveyed top executives worldwide to better understand the leadership characteristics required for the C-Suite, just 12.8 percent of C-level executives came from the IT department. In contrast, other departments far outperformed the function in providing fertile farming ground for tomorrow's top leaders, including two functions that often suffer credibility challenges themselves: 34 percent and 24 percent of C-levels were sourced from Marketing and Human Resources, respectively.⁴ It appears that the outcome has something to do with how the IT function—once eulogized as critically strategic and showered with exponential increases in company resources over several decades—has diminished in capacity and influence. The same Chally Group study found less than one-third of respondents agreeing that “developing an accurate and comprehensive overview of the business” is an essential function of the CIO. Even fewer respondents, just 22 percent, said that “creating a strategic vision” is a key role for CIOs.⁵

In stark contrast to the IT love affair and associated spending frenzy at the turn of the millennium, today's CIO finds her department the subject of relentless scrutiny—often the target of budget cuts and outsourcing plans—which is only exacerbated in a stagnating economy. According to a 2010 study by PA Consulting Group and Harvey Nash, more than 60 percent of CIOs had experienced a salary freeze since the start of the recession. One in 10 suffered a pay cut. Nearly three-fourths had been asked to cut costs to ensure organizational survival, while the same number had been asked to increase operational efficiency (the tired cliché of doing more with less). Nearly 90 percent planned to maintain or increase investments in outsourcing projects. And, the realities of the constant pressures generated a kind of death spiral to the strategic value of the function itself—more than half of respondents admitted to not setting innovation targets.⁶ Carr's prescription in 2003 appeared to be reality by 2010 and the chorus was in harmony with him. In 2012, Alcatel-Lucent asked more than 200 executives if the time was finally right to reinvest in information technology, and received the following response from a small business non-IT executive, almost as if taken from Carr's playbook verbatim:

Although just about every enterprise function finds itself the victim of budget pressures in today's recessionary times, the CIO and his or her team are a bit more unique. On the one hand, they must answer the call of increasingly demanding employees who view technology as indispensable to their work productivity. On the other, they must justify their very existence as they compete against external providers for the right to perform the IT function. In the heyday of the 1980s, when the CIO moniker first came into the corporate narrative, the IT department was the sole arbiter of determining how and when technology decisions were made in the enterprise. Of course, all that changed when a more adept and tech-savvy generation of workers, propelled by advanced technology options adopted in the household, demanded equal or better alternatives in the enterprise. The CIO who does not respond may find his team completely circumvented by the employees he is paid to support. All the while, budget pressures persist. While the consumerization trend has increased the burden experienced by IT managers, with nearly one in three IT employees indicating that personal technology in the workplace has led to an increase in support needs (according to the 2012 Alcatel-Lucent study), the IT operational budget per employee is at its lowest in six years, based on a 2011 assessment conducted in the Computer Economics IT Spending and Staffing Benchmarks study.⁷ In an ironic twist, the people most influential in assigning budget cuts to the IT department, the CFO and his guild, are equally difficult in their expectations as internal customers of the function. A 2011 KPMG study of 444 CFOs from around the world found 52 percent of U.S. CFOs blaming their IT department for being “out of date and inflexible” when they experience less-than-ideal finance functions. Perhaps more interestingly, 73 percent of U.S. CFOs said that issues with finance-related technology and systems are the biggest reason they can't achieve their objectives.⁸

Beyond these challenges, it appears that IT departments risk being tone-deaf to the organizations they support. In the 2012 Alcatel-Lucent study, there are several cases in which IT appears out-of-sync with the rest of the business. As noted above, roughly one-third of IT personnel indicate that the support needs of the enterprise have increased with the advent of personal technology in the workplace. However, this opinion is not shared by the frontline workers they support. In fact, among that audience, only 7 percent report that they contact their IT department or provider more as a result of the consumerization trend. IT employees also hold a higher opinion of themselves than warranted as perceived by the rest of employees. In the study, 76 percent of IT employees said their department “equips employees with innovative tools, services or capabilities that foster a healthy culture.” The sentiment was shared by only 45 percent of frontline employees, with another 13 percent admitting, “IT is a frustration, often a source of employee aggravation due to inferior tools, services or capabilities.” Finally, in one of the bigger disconnects discovered in the study, more than one in three IT decision makers agree that managers have a right to monitor their employees at all times, compared with only 16 percent of frontline employees who find this approach acceptable.

Before being overly critical of an IT function appearing out-of-tune with the rest of its company, consider the potential reasons for the gap. It's not entirely surprising that IT decision makers would perceive an increase in support demands due to the consumerization trend or find it necessary—even a right—to keep an eye on employees at all times. After all, IT shoulders the burden of defending the enterprise's information assets. With more and more personal devices and technology making their way into the enterprise, the threat of attack rises commensurately. A 2011 global study of 250 IT decision makers by Evault found 95 percent of US respondents indicating that at least some of their company's data is on mobile devices.⁹ In addition, Symantec's annual 2011 Internet Security Threat Report showed a 93 percent increase in mobile malware over 2010 levels.¹⁰

All too often, breaches occur at the hands of current or former employees or even their families, given the accessibility of information far beyond the enterprise's walls. Pfizer made unenviable headlines for three distinct security breaches occurring over a few months. In one instance, an employee had two laptops stolen from his car. In another, an employee's spouse illegally downloaded information from the company compromising the security of 17,000 employees. In yet another, a former employee stole confidential information, including names, Social Security numbers, birthdates, and banking information for 34,000 employees, former employees, and healthcare professionals.¹¹

Of course, IT professionals are human too and are subject to making mistakes that, in many ways, are even more dangerous than those of the average employee. In late 2010, the Mesa County Sheriff's Department in Colorado found itself in a public relations nightmare when an IT employee inadvertently posted thousands of internal, computerized records collected over 20 years. The mistake came when the employee attempted to park files from the sheriff's records-management system on a server the man thought to be secure. Contained in the exposed files were names of confidential informants to the drug unit, e-mails between officers about crime victims, and personal information for the County's employees. Turning the situation from bad to unbelievable, the security breach was not discovered for some seven months, leaving the information exposed to being accessed “multiple” times by unauthorized parties.¹²

In addition, if not current or former employees deliberately or unintentionally exposing corporate assets for the world to discover, there's always the matter of policing employee activities that may appear harmless at face value. The consumerization trend is far more sweeping than employees simply wishing to connect personal mobile devices. Employees are transferring technology habits of all kinds from the home to the workplace. Surfing the web and engaging in personal social media comprise the metaphorical smoke break of the twenty-first century worker. In the 2012 Alcatel-Lucent study, 61 percent of frontline workers agree that taking breaks through the workday to peruse social media and personal websites makes them more productive. Most enterprises in the study share the sentiment, with more than two in three not blocking access to these leisure sites. However, such a cavalier attitude toward permissive technology usage will prove dangerous if Amit Klein is remotely accurate in his prediction of the top cybercrime trends in 2012. Klein is the CTO of the security company Trusteer and has a unique perspective given that his company is in the business of scanning for malware, spyware, and viruses across 26 million agents installed on devices in the field. He predicts that the corporate raiders of 2012 will increasingly enter the enterprise border by surreptitiously duping unsuspecting employees—those who freely engage in social media activities at all times of the day—into downloading harmful links while connected to recreational websites via the corporate network. Those links can monitor keystrokes, among other insidious activities. And, contrary to conventional wisdom that the target of these attacks is likely sitting in the corner office, Verizon reported that 80 percent of those victimized in this way are regular employees.¹³

IT employees are often the first, last, and only line of defense against attacks or leaks, a hat they may unwillingly wear, but one that helps explain, in part, the disconnect between their reality and that of the employees they support. Additionally, they are also the go-to department for enabling an increasingly mobile workforce while addressing the concerns shared by the very frontline employees asking for the flexibility. As discussed in an earlier chapter, enterprise workers in the 2012 Alcatel-Lucent study ranked the three greatest drawbacks to a mobile workforce as being increased challenges in coordination and monitoring of work (cited by 29% of respondents), difficulty of developing work relationships with coworkers (16%), and difficulty of managing employees (15%). The IT department must simultaneously create a noninvasive border surrounding the enterprise's assets while creating a permeable internal membrane that facilitates real-time interaction in complex organizations where speed is the currency.

To Carr's potential dismay, IT management today is anything but boring. Quite the contrary, those finding themselves in this function today are stuck in a quandary. They can't ignore the technology appetite of a changing workforce any more than they can a new string of malicious threats crouched at their virtual threshold. They likely lack the budget to do their job effectively, yet external competitive pressures are forcing them to compete at market rates. They yearn for a more strategic focus within the enterprise, yet they can't escape the trappings of daily fire drills.

Despite the seemingly insurmountable challenges, there is at least one reason to be excited about the future of IT—not despite, but because of, the role's current metamorphosis. When asking the more than 2,500 enterprise employees in the 2012 Alcatel-Lucent study a battery of questions surrounding their perception of company success and the perception of IT within the company, some interesting correlations may be fodder for boardroom and water cooler discussion. Specifically, 74 percent of employees in companies with rapidly increasing profits, rising employee populations, and superior revenue growth agree that their IT function equips employees with innovative tools, services, or capabilities to foster a healthy culture. Only 30 percent of employees in companies on the other end of the spectrum of financial performance could say the same. Not to contradict Carr's evidence of a negative correlation between IT spend and company profitability, this is not merely about IT investment. It is much more about IT's role within the enterprise as a strategic enabler (or inhibitor) to cultural transformation and the subsequent advantage that may be gained by companies as a result.

As an alternative to Carr's prescription, we offer the following remedy for CIOs struggling to find their place in today's consumerized workplace:

• Let your people go, but don't leave them feral—Although it may be difficult to accept, the technology emancipation of employees has already occurred. CIOs must fundamentally rethink their position in the new value chain in which employee opinion increasingly holds sway. To do this effectively, they must redefine the current parental role occupied by many IT organizations to one of trusted business partner. The consumerization trend does not suggest that CIOs will be less relevant. However, it does require the IT function to behave in a way that showcases unique value to those it serves. For example, IT may accelerate the consumerization trend by aggregating its purchasing power to negotiate better rates or terms of service for its employees. IT managers old enough to remember the first consumerization trend in the enterprise—that of the personal computer in the 1980s—may find comfort in a strangely familiar place today. Just as the personal computer craze left many organizations spinning in a sea of fragmented platforms, the current consumerization trend has even farther-reaching consequences. IT professionals learning from past mistakes can proactively address the current trends by focusing on streamlined management capabilities that simplify internal architectures. To avoid being sucked into a less valuable tactical role, these management systems should also consider workforce monitoring capabilities (using caution so as not to be seen as surreptitiously snooping on employees) to address the very real concerns shared by employees and management as the workforce becomes more virtualized. Finally, not to understate the importance of security in this unending story, CIOs must occupy the role of guardian of corporate assets without becoming so difficult to work with as to actually encourage employees to bypass their department entirely. According to PwC, doing so requires a paradigmatic shift in defining the jurisdiction of the CIO—one from control of all things (such as business processes, compliance, security) to control over those assets most meaningful or required under law.¹⁴ Of course, this presupposes a renegotiation with business leaders throughout the enterprise, not the least of whom is the CEO, to properly align expectations and objectives for the evolved CIO position.

  However, liberating employees should not be conflated with allowing them to roam wild in the enterprise wasteland. Security issues and business process concerns notwithstanding, there is evidence to suggest that such wildly unconventional organizations perform at a lower standard compared with those with IT oversight and partnership. Specifically, in the 2012 Alcatel-Lucent study, those companies that embrace a culture where IT acts as a partner to business units represent 40 percent of the top-performing companies in the study. In contrast, those unrestricted cultures where IT policies are largely void account for only 21 percent of the elite performers.

• Focus on your differentiation—The latest souped-up devices in the enterprise are worth little more than paperweights if not connected to an equally high-performing network. Luckily for IT professionals, this is one technical bastion of their former role still within their grip. Although it may be relatively easy for an employee to bring her device into the workplace and bootstrap it until it works, manipulating the performance of the corporate network itself is much more difficult. Not only is IT well equipped to address the need, but also doing so will add immediate and tangible benefit to those they support. In the 2012 Alcatel-Lucent study, respondents were asked a series of questions regarding network performance in the enterprise (whether while downloading or uploading files over a fixed or wireless network). More than one out of three respondents indicated that current network performance in a variety of situations was either merely sufficient or inadequate to get their work done. Faster devices require faster networks, as the more than one in five respondents who pay for their own mobile or fixed broadband connections out-of-pocket and use them primarily for work purposes will attest. Even resourceful employees looking to cloud-based alternatives to satisfy their demand will require a more intimate understanding of how network and IT performance are linked (as mentioned in Chapter 2). By equipping employees with better network performance backed by robust SLAs to mitigate delivery or security risk, IT departments and providers will reinsert themselves into the consumerization value chain.
• Get more political—IT is an integral function to the operation of the enterprise. Yet, the function itself is not perceived by many of its peers as being particularly engaging, nor with a need to be. The role of IT is still largely relegated to tactical implementation, perhaps a case of the “urgent” pushing out the “important.” In the Chally Group study, 70 percent of respondents indicate that staying on top of technical and business competencies is a key function for CIOs. More than half believe that performing timely and effective execution is a primary role of CIOs. In contrast, less than half say that being collaborative is a main duty for CIOs, and only 16 percent of respondents believe that these executives must inspire others and maintain leadership responsibilities. Finally, only about 10 percent say that CIOs must be politically astute.¹⁵

  At the same time, IT decision makers tend to have an inflated view of their capabilities when it comes to collaboration. Many believe that they are working the political angle of the business to remain relevant and engaged with senior decision makers. Unfortunately, their peers aren't likely to feel the same way. In the 2012 Alcatel-Lucent study, 41 percent of business decision makers indicate a great amount of communication between the IT department and business leaders in their enterprise pertaining to how IT can help their company fulfill its goals. In contrast, 65 percent of IT decision makers feel the same. Perhaps more concerning, nearly 20 percent of business leaders say that there is at best some communication (many indicate little to none) between IT and business leaders. This compares with only 1 percent of IT decision makers rating their communication efforts so deplorably.

  It goes without saying that IT needs to forge tight partnerships with senior business leaders who are indirect arbiters of if and how IT funds are authorized and distributed. However, IT has a more strategic role to play in influencing major cultural touchstones within the enterprise. To do this effectively, IT should consider new bedfellows in the organization that have an increasing dependency on the IT function—human resources, legal, and marketing. Human resources are the change agents of an organization, and, in order to attract and retain the right talent, IT policies and capabilities have a role to play. Of the more culturally progressive companies canvassed in the 2012 Alcatel-Lucent study, more than two-thirds agree that there is a connection between IT tools, services, and policies and employee recruitment and retention. This compares with only 13 percent of cultural laggards admitting the same.

  Of course, policy is a necessary, although insufficient, means of influencing employee behavior. Simply having a policy is not enough and, in fact, could be dangerous if assumed as such. In a 2011 IDC study, only 40 percent of IT decision makers indicated that policy allowed workers to access non-work-related websites, yet 70 percent of workers polled admitted to doing so at work.¹⁶ That said, there are bridges to be established between IT and Legal that can help establish new or modify fallible policies in the workplace. According to Gartner, only about half of Chief Legal Officers report having a dialogue with the CIO at least once a month. Of those who do, 76 percent reported changing their legal strategies related to IT, and more than 80 percent said they changed their corporate policies to benefit IT (compared with less than half of respondents who admitted to less frequent communication).¹⁷ Finally, to avoid the trap of creating policies written by lawyers, for lawyers, IT departments should consult the consummate storytellers of the organization, the Marketing department, to increase the chance such policies will be readily understood by the average employee. What's more, marketers will come to rely on CIOs more than ever before for their own success, given the momentum to more effectively target prospects and customers using rich analytics across a broad range of new digital channels. Although CIOs may feel a bit out of their comfort zone with becoming more politically astute, the benefits to their organization and the cultural health of the company at large should not be underestimated.

• Eat your own young—The IT function is evolving, yet the old guard largely remains. CIOs must focus more than ever in attracting employees with a passion not just for technology but in how it empowers the internal customers who ultimately justify their existence. The consumerization trend can be traced to a dissatisfaction among employees of their IT's department inability or unwillingness to keep pace with ever-growing needs. Yet, many IT employees find themselves disconnected from company strategy, leaving them vulnerable to irrelevance. In the 2012 Alcatel-Lucent study, IT workers are still primarily implementers, a fact that is to be expected no matter the function as one delves into the working levels of an organization. Yet, despite the imminent threat of disintermediation facing them, more than three in five are unsure what functions of the IT department will be outsourced in the next couple of years. Although this uncertainty may be understandable given the torrid pace of change facing the function, it is disconcerting nonetheless that these implementers may find themselves the victims of blindsided displacement. The reality paints a picture in which CIOs must either upgrade the talent of their existing organizations or deliberately outsource functions to a provider with better capabilities. In either case, CIOs must “eat their own young” of established IT professionals to address the new needs of today's workforce.

  Upgrading talent involves more than competitive compensation. There are intangible rewards for which many IT professionals hunger to increase their own abilities and relevance in a dynamic workplace. According to a 2011 Forrester study among 125 top IT professionals, nearly 80 percent report that having interesting work to do is a significant motivator—the most-cited factor. Base compensation came in fourth on the list behind autonomy and work/life balance. Among those younger than 45, employee development carries greater importance, reflecting an opportunity for CIOs to nurture an enthusiastic population of IT professionals eager to up their game.¹⁸

  Yet, outsourcing cannot be eliminated from the equation. If not to quickly scale capabilities to a third party better able to deliver, the challenge in recruiting the next wave of IT employees may make outsourcing the only option for enterprises. According to a group backed by luminaries including Microsoft's Steve Ballmer, JP Morgan Chase's Jamie Dimon, and New York City Mayor Michael Bloomberg, “US companies are hungry for talent with degrees in STEM (Science, Technology, Engineering and Math)—these jobs are increasing three times faster than jobs in the rest of the economy. However, these positions are the hardest to fill because of the dearth of native-born Americans with these degrees.” The group estimates a shortage of 224,000 hi-tech workers in the United States by 2018 and is calling on Congress to enforce some changes in immigration policy that will place the country on an even footing with its global peers.¹⁹ Until then, CIOs and company executives may find outsourcing one practical solution to an immediate and growing problem.

Regardless of how the IT function is reinvented—through internal development programs, outsourcing alternatives, or a combination of both—the approach is insignificant compared with the outcome. That is, as discovered in the 2012 Alcatel-Lucent study, the top-performing companies are neither more nor less likely to outsource compared with their counterparts. Where they did separate from their failing peers is in their overall satisfaction with the IT service—whether outsourced or insourced.

The road ahead for IT employees is unpaved and winding. More interestingly, it is riddled with fissures that create the next chasm within the IT profession itself—a type of digital divide in how the function is perceived by those who occupy it. In CIO Magazine's 2012 “State of the CIO” survey among 596 IT leaders, more than 80 percent expect that the global recession will have a negative impact on their organization within the next three years. However, CIOs operating as strategic business partners (a minority of the sample) are more likely to predict a good year ahead, confident in their abilities to mitigate risks and commanding a higher salary compared with their tactical counterparts. The most business-savvy CIOs in the population are significantly more likely to report to the CEO (60% vs. 38%), sit on the business executive committee (85% vs. 66%), and lead a non-IT area (68% vs. 57%). For these executives, they have secured their seat in the C-Suite and are acknowledged as primary drivers of the enterprise's competitive future.²⁰ In a 2011 study with comparable findings by Deloitte among 1,000 IT executives asking how they perceive their role in the enterprise: 45 percent of respondents view the CIO as an IT steward, responsible for mundane (although necessary) activities like keeping the lights on and leveraging existing IT assets. The same number see the CIO as a strategist who translates business needs into IT action and ensures that IT is relevant and keeps pace with business leaders. Most interestingly, a very small minority (just 10%) view the CIO as a revolutionary, who uncovers new markets and revenue streams, translates IT momentum into business action, and interacts with C-level executives.²¹

And, in a move that would likely not please Carr, Gartner finds that despite fears in the economy, by more than 2:1, CEOs say that they will increase IT investment in 2012, rather than cut it.²² While more head honchos of the enterprise are reinvesting in a function that has suffered whiplash between praise and criticism in recent decades, the CIO may find his true strategic value displaced by the boss himself. That is, when CIOs focus on the wrong side of the digital divide—consumed by distracting fire drills at the expense of connecting their role to the strategic outcomes of their companies—the CEO steps in to fill the void. According to Gartner, one-third of CEOs say that they are their company's innovation leader. Only 4 percent would give the same credit to the CIO.

CIOs are the organization's endangered species, subject to complete bypass by their own internal customers or marginalized to tactical activities by their peers and leaders. Although CIOs are challenged, there is evidence that a reinvention of the role is in order. In fact, there is a fairly clear divide among CIOs who have already shed their purely technical skin to evolve as business leaders capable of effecting tangible cultural change, often a precursor to financial success. Perhaps the richest irony of all is that those who embrace the extinction of their role will finally be free to evolve their purpose and relevance within the enterprise.