Emerging Challenges

Obviously, the increasing business focus that's demanded of the IT department is having a profound effect upon the function. Some of the challenges that the department faced five, ten, and even twenty years ago ”such as delivering new technology faster and more efficiently ”continue to be crucial components of the job. However, the growing business focus of today's IT department also emphasizes new challenges:

- Identify opportunities for business innovation that come from technology, and then coordinate with the rest of the business to hone strategy accordingly

- Speak the language of the business to improve IT's credibility amongst business peers

- Unify services across multiple, otherwise -distinct business units

- Mitigate the risk of change in the face of continuously evolving technology

- Do more with less by extending the lifecycle of human and capital assets

Identify Opportunities for Business Innovation

The first challenge facing today's increasingly business-focused IT departments is to monitor technology advances for opportunities that could facilitate business innovation. In effect, this represents the logical evolution of the strategic role for IT executives that emerged during the New Economy. Unlike during the bubble, however, today's executives are expected not only to identify opportunities, but also to coordinate with the business to chart a single, coherent strategy for the corporation.

This process involves communication both from business to technology and vice versa. The business-to-technology dialogue is more straightforward: Important technology decisions ”which projects to green light, what standards to set, which vendors should become preferred partners ”should always be made with one eye on business impact. To promote this type of exchange, the CIO has to be both a technology visionary and an accomplished business executive.

Communicating from the technology side of the house to help shape business strategy is important as well. One of the major roles for the modern IT department is to interpret emerging technology trends for the business. The CIO needs to be proactive in this regard by taking potential innovations directly to the senior leadership team, communicating the opportunities and pressures, and steering the business strategy appropriately. It's the CIO, in other words, who makes sure that the leadership understands technology, or at least the role that technology should play in transforming the business. To accomplish this, IT needs to be a storyteller who identifies promising technology scenarios; communicates the benefits, risks, and challenges to the business; and then helps to coordinate between business strategy and the technology that supports it.

Speak the Same Language as the Business

The second challenge is to rebuild the faith in technology that was lost with the collapse of the New Economy bubble. One way for IT to reestablish credibility is to speak the same language as the rest of the business: that of profit, loss, return on investment (ROI), and so on. During the mainframe days, when IT was still a tactical exercise, the department was able to pawn this function off to the finance department and the CFO. And during the New Economy, of course, IT was essentially given carte blanche to pursue technology projects with reckless abandon ”and little concern for financial metrics.

But now, the collision between IT's continuing strategic relevance and the end of the era of irrational spending demands that projects be justified according to business value and risk ”just like any other company initiative. This is important for tactical projects, of course, where costs are justified by direct financial returns. But it's even more essential when the IT department has identified technology trends that it believes will contribute in the future, but that can't yet be reduced to dollars and cents .

In a sense, the IT department's role here is similar to that of the CFO and the finance department. Like the CIO, the CFO is responsible for interpreting complex information (financial data instead of technological advances), and then identifying trends and opportunities that will impact strategy. Unlike the CIO, however, the CFO has automatic credibility to the business by virtue of their financial focus. CIOs need to earn their seat at the table, and the most effective way to do this is to become bilingual: to be able to speak the language of technology to identify opportunities, trends, and threats, but then also to be able to communicate this information to business executives in the language that they expect from their peers.

Unify Services Across Multiple Business Units

The CIO, unlike other business unit heads, doesn't have a specific focus limited to the unit that he or she manages . Some of the tasks for which the IT department is responsible (establishing a development methodology or selecting preferred vendors and implementation partners, for example), do service the department directly. But the vast majority of projects that IT undertakes are designed and deployed for end-users outside the department.

First, and most obviously, there's the complete universe of employees who rely on IT for things like voice mail, PCs, and mobile handheld devices. Then, there are vertically integrated functions that rely on enterprise applications to do their jobs: an HR administration system for human resources, CRM for the sales force, and so on. And the complete group of " clients " for the IT department extends even beyond the borders of the business to include external consultants who need input for a project, or business partners (like distributors ) who want access to internal information (such as inventory levels and available to promise).

In this regard, the CIO's role is somewhat similar to that of the CEO: their sphere of influence includes every part of the business. Dawn Lepore, the former CIO at discount broker Charles Schwab, tells Harvard Business Review that she believes the two positions "do share a number of characteristics. Most unit heads need to have a very focused perspective," she explains. "CIOs must also be focused; additionally, they must be able to consider the business as a whole, as the CEO does." ^[1]

An important offshoot of this broad responsibility is that IT frequently finds itself brokering a compromise between distinct business units. For example: In order to move from a decentralized IT environment where each business unit supports their own IT functions to a centralized model where the entire enterprise shares certain common services, some units have to sacrifice the individual customization to which they've grown accustomed. Each unit, of course, will lobby for central services that are as close as possible to their previous, homegrown systems. It's the IT department's role to arbitrate between these competing groups and settle on the appropriate trade-offs that are necessary to find common ground.

Mitigate the Risk of Change

The IT department's fourth challenge is to manage functional IT change in the face of technology that, even after the New Economy collapse, continues to evolve at a blistering pace. To manage change, IT first needs to anticipate the impact of making business and technology decisions. This impact is then weighed against potential downside risks to separate smart ventures from reckless gambles.

The idea that IT is closely linked to change management isn't new. Since the middle 1990s when reengineering and process automation were hot topics, one of the IT department's key responsibilities has been to balance the promises of a new technology against the disruption that it might cause in the business. (According to findings in an Emory University study, large-scale failed technology initiatives can depress stock price by as much as 1.75%. ^[2] ) A big lesson that we can learn from ERP and e-commerce disaster stories is to not underestimate the importance of anticipating change to avoid delays, overcome employee inertia, and minimize unforeseen costs. This ability will be crucial today going forward, as technology becomes even more pervasive.

Extend the Life Cycle of Human and Capital Assets

Finally, today's IT department is being asked to tackle more projects than ever before ”while simultaneously grappling with shrinking head counts and limited budgets for new hardware, software, and services. The pressure to "do more with less" weighs heavily upon the shoulders of CIOs in both good times and bad. When the value of IT spending is being questioned, allocating resources efficiently is obviously of the utmost importance. But even during good times, CIOs are still asked to do more with less: When IT spending is on an upswing, the market for skilled employees becomes extremely tight, and companies have trouble hiring new resources with in-demand skills.