CIOs who still report to the CFO may as well be groovy extras in That 70's Show.
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"People who think the CIO should report to the CFO are still living in the '60s and '70s," said Dean Lane, IT director at Symantec Corp. in Cupertino, Calif. Back then, CFOs spoke the language everyone understood -- the language of dollars.
But this Esperanto of business has switched tongues. Lane claims that in 2004, CIOs speak the language -- the language of information -- that transcends departments, and therefore should report directly to the CEO.
And judging from the Society for Information Management's recent member survey, Lane isn't alone in his thinking.
Of the respondents who work at companies with less than $1 billion in annual revenue, 55% said their CIO reports to the CEO, and 23% said the CFO was the CIO's boss.
That's a far cry from 2002, when 41% of respondents said the CIO reported to the CFO. Forty-one percent also said the CEO was the CIO's boss.
Jerry Luftman of the Stevens Institute of Technology and lead researcher for the SIM survey, said this is not a fluke, but affirmation that the C-level hierarchy is changing within smaller organizations.
"For the smaller shops, that direct link between CIOs and CEOs is growing, although the larger corporations have stayed consistent with their reporting dynamic," Luftman said in a statement.
Luftman also found that in larger firms -- those reporting more than $1 billion in annual revenue -- 36% still have their CIOs still reporting to the CFO, while 41% report to the CEO and 11% report to the COO. Those numbers have been consistent over the past couple of years, according to SIM.
CIOs and CEOs alike believe that a company's culture and the wiring of its executives should govern whose door the CIO darkens.
Bob Denis, CIO of Sunnyvale, Calif.-based Trimble Navigation Ltd., a firm with less than $1 billion in annual revenue, falls into the 55% category -- he reports to the CEO. There are pros and cons to this arrangement, he said.
"I would say the CEO gives you the highest leverage, but for a more interactive role, the CFO or the COO is easier to work with.
"If you report to the CEO, you need to be a business-astute CIO, because the CEO wants you to talk the language of business," Denis said.
"The CFO and COO have more patience with the nerdiness of the CIO," he added with a laugh.
But perhaps above all else, the CIO needs to be able to speak everyone's language, as Symantec's Lane stated.
"We need multi-translations to what we do," Denis agreed. "CIOs need to be able to translate ROI and so on and be able to adjust their explanations as they go from department to department. So it's really a question of how well you communicate with a particular constituency."
At least one CEO thinks that hierarchy takes a back seat to communication at the C-level.
"The reporting structure is less important than making sure communication lines are open and everyone's motivated by the same things," said Robert Gryphon, CEO of Airframe Business Software Inc. in San Mateo, Calif. "[Whom a CIO reports to] has more to do with the makeup of the executive team than the culture of the company."
Gryphon also thinks the reporting structure should depend on whether the CEO understands the operational side of the business, and many CEOs do, he said.
"Today's CEO is fairly modernized in terms of knowledge of what's possible with software," he said. Gryphon definitely fits that bill; he co-founded Octane Software and helped designed the first enterprise CRM suite at Scopus Technology Inc.
Wyly Wade, vice president of the real estate technology division at The McLain Group Inc. reports to the CEO. Little Rock, Ark.-based TMG falls into the sub-billion-dollar revenue category.
But Wade sees an even more profound reporting change on the hierarchical horizon -- a merging of the CIO and CFO roles into one entity that reports to the CEO.
"CIOs are going to be educated as COOs and CFOs," Wade said. "We're seeing it now with CFOs for IT; they're taking certain controls from the CIO and allowing them to focus on business strategy.
The CIO's business savvy will be especially critical over the next 10 years, according to Wade. He predicts that more firms will lease, rather than own, buildings. And with the building lease will come the entire IT infrastructure, including the network and other utilities.
"It will require the CIO to learn how to leverage assets or get them off the books if they are not part of the core competencies," Wade said.
"It's getting to point where a company needs to be focused on what it does rather than on the infrastructure to do it."
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