Chief Information Officer (CIO) definition

Contributor(s): Linda Tucci

Chief information officer (CIO) is an executive job title commonly given to the person at an enterprise in charge of information technology (IT) strategy and the computer systems required to support an enterprise's objectives and goals.

In the mid-1980s, the CIO role was primarily a technical job. As the storage, transmittal and analysis of electronic information became more important to industries of all types, CIOs have come to be viewed as key contributors to formulating strategic goals. In many companies, CIOs report directly to the chief executive officer (CEO), and at some companies, the CIO sits on the executive board. An important component of the CIO role is to educate executive management and employees on the business value and risk IT systems hold for an enterprise.

As a result of their increased strategic responsibilities, CIOs in large organizations typically will delegate the oversight of day-to-day IT operations to a technology deputy and rely on a team of specialists to manage specific areas of IT. In a 2015 survey of 2,810 CIOs by the consultancy Gartner Inc., nearly half of CIOs globally said they have a "chief operating officer of IT" in place who performs this function. The authors of the Gartner report, "Global Perspectives on Flipping to Digital Leadership: The 2015 CIO Agenda," note, however, that the title of the role "varies enormously" as does the prevalence of this structure geographically and by industry. For example, 60% of CIOs in Asia have a COO of IT, according to the Gartner polling, compared to only 34% of CIOs in North America; nearly 70% of communications industry CIOs have one whereas only 30% of wholesale CIOs do. Gartner sometimes refers to this structure as bi-modal IT.

Evolving role of CIO

The CIO role traces its lineage to the late 1950s and 1960s when businesses began to incorporate computing into business operations. According to authors Jeanne W. Ross and David F. Feeny in their 1999 study, "The Evolving Role of the CIO," first-generation IT leaders were typically senior or middle managers in what businesses called the electronic data processing department or, later, the information systems (IS) department. The report, published by the MIT Sloan School of Management, refers to this time period as the mainframe era, an interval spanning roughly from the 1960s to the early 1980s and so named for the mainframe computers procured by enterprises to, among other large computing tasks, automate back office processes. According to Ross and Feeny, these data processing/IS managers of the mainframe era were rarely involved in determining the enterprise's IT strategy (let alone business strategy), preferring to let the dominant vendor (usually IBM) set the course. The main responsibility of these early IS managers was to deliver new IT systems on time and on budget and run existing systems with "a high level of reliability," Ross and Feeny said.

As enterprises learned more about how to apply mainframe technology to their businesses, the IS leader role became more visible -- and controversial. IS departments were given more and bigger projects, but project backlogs also grew, prompting complaints that IT leadership was insufficiently responsive to business needs. The business side's early dissatisfaction with IT's ability to keep up with demands persists to this day. The need to align IT with business needs would become a top agenda item for the emerging CIO role -- and along with it a new set of skills: In addition to technology know-how, a successful leader of enterprise IT needed to be able to manage effectively, have good communication skills and preferably advanced business training.

CIO role in distributed, dot.com and digital eras

With the adoption of personal computers (PCs) in the enterprise by the early 1980s, IT systems were no longer concentrated in data processing departments staffed by IT professionals but were distributed throughout the enterprise. Business units outside the central IT organization began procuring their own IT systems from a new crop of IT vendors, including Microsoft and Intel. Employees became accustomed to having powerful desktop technology at their fingertips.

However, it quickly became apparent to businesses that supporting autonomous pockets of IT (sometimes referred to as shadow IT) was inefficient and expensive, and many enterprises adopted a federated model in which some IT systems and services remained under IT's control and other technologies were under local control. Figuring out how and from whom these systems should be procured, architected and networked end-to-end became an important part of the CIO role. This period also marked the emergence of the large enterprise resource planning (ERP) software suites to collect and manage the data produced at different levels of the business. Implementation of these complex systems was costly and difficult, required significant business process re-engineering (BPR) and sometimes resulted in spectacular failures for CIOs, prompting the now-old joke that CIO stood for Career Is Over.

Public access to the World Wide Web in the early 1990s extended the role of IT in business operations, opening the door for the CIO, as the enterprise's foremost authority on technology, to step forward and map out a business strategy for what Ross and Feeny have dubbed the Web-based era. While CIOs were still responsible for overseeing IT systems and for managing IT services, it could be argued that their most important job at the dawn of the Web-based era was foreseeing how the commercial use of the Internet would affect the organizations that employed them. The task required vision, the ability to re-engineer business processes to take advantage of the new platform and the leadership skills to convince others that change was necessary.

Business reliance on IT spawns new 'information chiefs'

To figure out how IT can generate business value, CIOs must grasp and quickly respond to a number of market forces, including innovations in technology, vendor product offerings, disruptive technology and, increasingly, a customer base that expects to do business across physical and virtual channels. Many experts believe the pressure on CIOs to adapt to these market forces is more acute today than it's been in the 30-year history of the role. The increasingly rapid pace of technology change, coupled with widespread consumer adoption of digital technologies such as social media, mobile devices and cloud computing, have forced CIOs and their enterprises to rethink the role IT plays in nearly every aspect of the business, from operational efficiency to employee productivity to customer service to business goals and even business survival.

As business processes have become more digitalized and customers become digital data points, the CIO's reach and portfolio have expanded, some would argue to a breaking point. In any case, some CIO responsibilities are being transferred to other executive roles. In addition to a chief technology officer and chief information security officer, a host of new "information chiefs" are cropping up with titles that include chief data officer, chief digital officer and chief analytics officer. Some experts believe that as companies strive to compete in the digital marketplace, CIOs are well-positioned to become chief executive officers. Others argue that IT strategy-setting and the procurement of IT systems will be subsumed by business functions, putting the CIO role, as traditionally defined, in question.

CIOs at inflection point?

Twenty years later, as businesses of all types become more and more digitized, the challenge remains the same for CIOs. Native-digital companies such as Google, Amazon and Facebook have ushered in a new set of competencies for the CIO. These include the need for cloud-based IT, mobile-first computing, big data analytics and social collaboration platforms. Advances in computing power are paving the way for commercial application of artificial intelligence (AI) and the Internet of Things (IoT). Digital disruptors such as the ride-sharing service Uber and streaming media company Netflix are redefining business models and whole sectors of the economy. Meanwhile, the responsibility of safeguarding enterprise IT systems and data becomes a nearly impossible task in the face of relentless cyberattacks. A high-profile data breach can cost CIOs their jobs, as was the case with Target CIO Beth Jacobs, who left the company  following the 2013 security breach that affected 40 million customers. (The breach also resulted in the resignation of CEO Gregg Steinhafel.)

Some have observed that the ubiquity of computing has brought the role of the CIO to a point where it must change, with some CIOs eager to exploit technology to create business value. Other CIOs, according to executive search professionals, are concerned they have not been trained to carry out the initiatives they're expected to lead. As the flow of information becomes ever more central to business success or failure, the role of the CIO is filled with risk and primed for great reward.

IT budget, CIO salary and compensation

The CIO's budget for IT is calculated at many companies as a percent of revenue. The ratio of IT spending to revenue varies depending upon the industry and its reliance on technology, but can range from 1% (construction, materials and natural sources sector) to 6.7% (software publishing and Internet services sector), according to the "IT Key Metrics Data 2014" report from Gartner Benchmark Analytics. In recent years, as technology has become central to business operations and competiveness, the metric has come under fire. Some see it as counterproductive, effectively rewarding IT organizations that spend below their industry average -- a result that could actually have a negative effect on revenue.

CIO compensation, like IT budgets, also varies widely, depending on years of experience and, in particular, company revenue and size. A 2013 IT Salary and Careers Survey of 464 IT executives done by TechTarget found that the highest earners' average total compensation of $225,301 was more than double the $101,562 average total compensation for low earners. Among those in the low-earner category, only 5% worked for companies with 10,000 or more employees, compared with 21% of high earners. Nearly half (48%) of high earners worked for companies with revenue between $500 million to more than $10 billion, compared with only 4% of low earners. Those findings were borne out in TechTarget's 2014 IT Salary and Careers Survey, which found that, among senior IT executives, more than half of all high earners (52%) worked for companies with 1,000 or more employees, compared to just 29% of low earners. Three-quarters of the companies where senior IT high earners worked had annual revenue of more than $100 million. Most of the companies (64%) where senior IT low earners were employed had revenue of $50 million or less.

This was first published in May 2015

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