How the CIO lost control: Why cloud computing and millennials have got tech bosses running scared
For CIOs, the headline figure is startling: almost two-thirds (64%) of organisations now allow technology to be managed outside the IT department.
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The figure comes from the latest edition of recruiter Harvey Nash and consultant KPMG's annual CIO survey and makes uncomfortable reading for IT leaders who are traditionally charged with being the guardians of technology implementation in the business.
The research offers proof that what started as a covert, user-led activity known as shadow IT has now become a fully blown business tactic. The purchase of IT in the digital age has been decentralised; line-of-business managers are now buying their own cloud-based services, with or without the knowledge of the CIO.
SEE: Digital transformation: A CXO's guide (ZDNet special report) | Download the report as a PDF (TechRepublic)
Harvey Nash CEO Albert Ellis recognises the scale of this shift but denies it signals the impending death of the CIO role. Instead, he says the results are the after-effect of a governance-heavy approach to IT initiated by some CIOs, who tried to curtail the impact of shadow IT and have instead been circumnavigated.
"CIOs were encouraged to grab the issue, but what we often saw was an over-reaction," he says. "CIOs who have been at the forefront of that control-heavy approach have not prospered. What we're seeing now is the rise of business-procured IT, where millennials are using cloud-based services to choose their own functionality."
The research, which bills itself as the biggest IT leadership survey in the world and surveys 3,645 technology leaders, confirms that for many organisations the concept of an IT department with a traditional CIO is anathema. Successful digital leaders are swapping control for influence and are re-thinking how they partner with the business, says Ellis.
"The future of the CIO role is all about being a digital leader – it's about being the change agent who's ready for disruption," he says. "If you're running a business today, you must have a digital offering if you're going to prosper. The CIO's role is to help the rest of the organisation to understand and then manage the balance between analogue and digital worlds."
The research confirms that 44% of organisations expect to change their business model in a fundamental way in the next three years. The good news for CIOs is that involving the technology team in business-led IT decisions creates advantages, with 52% of organisations saying those that do have a faster time to market for new products than their competitors.
But while CIOs should be using their experience to help influence the business transformation process, the research suggests that isn't always happening. Almost half (43%) of companies are not formally involving IT in their business-led IT decisions. Ellis says the lack of CIO input is "surprising" and suggests business and technology alignment remains a concern.
"The risk is too many CIOs are being left behind because they're not visible and they're busy and buried in change programmes," he says. "These IT leaders are working in key areas like payments systems and supporting the business rather than delivering change. Too many CIOs are still not fully integrated with the rest of the executive team."
The lack of integration is perplexing. Experts have spend the past decade telling CIOs they need to be more aligned with the business. Yet the research shows that fewer CIOs sit on the board today than in the past, dropping from 71% to 58% in just two years. "It's concerning," says Ellis. "CIOs think they should have more responsibility but they need to deliver first."
It's a sentiment that resonates with KPMG principal Steve Bates, who says CIOs must first focus on their ability to influence the business before worrying about their position in the executive pecking order. Bates recognises there's plenty of competition when it comes to digital leadership – and CIOs who don't prove their capability could be pushed to the side.
"There's a dynamic between the CIO, the CTO, the CDO and all these various forms of modern technology executive. Most companies are trying to figure that dynamic out. They're trying to work out how technology leaders operate in a hybrid model, where they need to manage both digital and traditional channels, and they need to decide who makes decisions in terms of investment, data, design and security," he says.
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This dynamic situation creates a lack of clarity and helps explain why many digital leaders are not involved in business-led IT decisions. As more end users take technology spending into their own hands, many CIOs are now stuck between being operationally minded IT chiefs and becoming true change agents who help the business deliver value from technology.
"That's where we are at the moment – if you look at digital leaders right now, they have a chasm to jump. Many CIOs are stuck in that halfway house right now, but they can't stay there – if they do, they'll be overlooked," says Bates.
So, the emerging research picture for CIOs is mixed at best. Some are being snubbed when it comes to input on technology buying decisions. Others find themselves in a battle for power with CDOs and CTOs, never mind CFOs and CMOs. Yet it's not all bad news – and hope comes in the form of long-term business problems that arise from circumnavigating the CIO.
Organisations that don't formally include CIOs in business-led IT decisions are twice as likely to have multiple security areas exposed than those that consult IT. They are also 23% less likely to be 'very or extremely effective' at building customer trust with technology, and 9% more likely to have been targeted by a major cyberattack in the past two years.
The best CIOs will use their influence to help the business overcome these problems. Rather than being the point of contact for all IT decisions, CIOs will use their knowledge to help the business exploit the technology investments it makes. Successful CIOs of the future will be customer-centric executives with an expertise in governance and an obsession with creating inherently safe products and services.
"The key difference is that the CIO of the future is going to have to be highly collaborative," says Bates. "I see the CIO of the future as a service leader – they won't build a fiefdom; instead, they'll drive value and want to put IT into the hands of the people who actually create value for the business."
Almost two-thirds (64%) of organisations now allow technology to be managed outside the IT department.