This is the second in a series of three stories about the factors shaping the IT organization of the future. In this story, experts describe the business and technology drivers that could change the CIO role significantly, as well as the role of IT within the business. In the first story, CIOs and experts explore the transformation of IT into a services business and potentially into a component of an enterprise business services organization. In the third story, Andrew Horne, managing director at The Corporate Executive Board Company (CEB), outlines seven new IT skill sets that reflect "fundamental" changes under way in enterprise IT organizations.
Chief services manager, or maybe chief business services manager: The terms are part of a new vocabulary that Andrew Horne, managing director at The Corporate Executive Board Company (CEB), is trying out to describe the role he believes the CIO could play in the IT organization of the future.
Rather than an IT organization aligned with the business -- the past decade's holy grail -- the IT organization of the future will be structured as a fully integrated business services organization, said Horne, who recently co-authored a research report titled "The Future of Corporate IT," for which Washington, D.C.-based CEB surveyed 127 enterprises about the changing role of IT and the changing roles within IT departments. The survey's results are featured in the third article in this series.
With IT departments becoming business services organizations, CIOs will find themselves at a crossroads. According to Horne, either CIOs will become strategic leaders of business services, or their role might be diminished to that of operations and technology organizer supporting the business services leader.
Not everyone sees this scenario as a seismic shift. An emphasis on services (versus IT operations) is nothing new, said Mark Bowker, senior analyst at The Enterprise Strategy Group Inc. (ESG) in Milford, Mass. Many CIOs have begun to position IT as a service already. "There is no major shift in the industry or the business on services," he said. "More than anything, businesses are recognizing, and have more focus than ever, on improving operational efficiencies and business processes. That is perhaps causing some of the enlightenment [around services]."
In Bowker's view, virtualization opened the eyes of the business to the potential for IT efficiencies and that efficiency roadmap is moving up the stack to higher-level business processes. Outsourcing also is moving up the stack in terms of applications, he said. "So, yes, a lot of CIOs will be looking at a different consumption model for services, but it won't be an all-or-nothing approach but a process based on the benefit of moving that service up and out over time," he added.
As services are outsourced, pure technologists -- such as those in data center operations -- will be better off working for a vendor or third-party service provider, CEB's Horne said. New roles will emerge as well, the most important of which will be that of services manager. Services managers will combine business and technology skills and probably will report to the CIO. Collaboration and data analytics experts also will be widely sought after in the future IT organization, he said. The likelihood that CIOs will lead the business services organization depends on their ability to do two things: first, transform IT into a business and make the cost of that business transparent; and second, develop services that tie to business processes and present those services in terms of relevancy to the business, he added.
Cloud, social networking and Big Data reshuffling the services deck
IT cost transparency is one factor shaping the IT organization of the future, but cloud computing, social networking and the need to decipher large data sets also are reshaping businesses' expectations about the IT services they need.
The cloud is pushing CIOs and IT departments into being general managers of business services and shared services. "Shared services are becoming more prevalent at global companies, and at the same time I see some CIOs being pushed into more of an operational role," said Shawn Banerji, CIO recruiter and managing director of technology and business services at Russell Reynolds Associates Inc. in New York. "I think you'll start to see two roles: operational CIOs and CIOs who are more focused on shared services and who have time to spend on innovation and strategy."
Because shared services reside on shared infrastructure, CIOs are going to spend more time acting as services brokers of internally and externally integrated services, experts said. A push is on as well to develop shared, reusable business services internally. That's the case at Hallmark Services Corp. (HSC), a Naperville, Ill., division of Health Care Service Corp. that administers individual health insurance policies. HSC's Neal Kaderabek has a title -- CIO and executive director -- that reflects his role as transformation expert in business services, not just IT services. Within three years, he and his IT team of 80 staff members developed services now being reused across HSC and its parent company's business processes.
"The exact same data and applications that we built are reused by [Health Care Service Corp.'s] internal sales, and on our Web pages used by insurance agents selling and individuals shopping for insurance," Kaderabek said.
Making IT services social
At New York Life Retirement Plan Services (RPS), staying ahead of consumer technology is an ongoing challenge. "The newer generation is using technology from a much younger age, so we need to build products that are ready for tomorrow, but at the same time, balance out the product needs across multiple demographics," said Neal Ramasamy, managing director and CIO at RPS, a Westwood, Mass.-based division of New York Life Investment Management LLC, in a recent podcast interview on IT transformation.
Today's generation doesn't seek information from authoritative sources; it seeks it from communities.
David Castellani, CEO, New York Life RPS
RPS is building a "social site" that lets clients post information and ask questions of each other or of RPS employees. The reason the company is investing in a social networking service? "Today's generation doesn't seek information from authoritative sources; it seeks it from communities," said David Castellani, CEO at RPS. "How do we interface with social media to make the points we wish to make, and make the education available to [clients] in a way that's going to affect their outcomes?"
Social networking and mobile technology are falling under a catch-all term, consumerization of IT. Just as enterprises are trying to figure out how to develop social media services and avoid the pitfalls of social media projects, large organizations are experimenting with mobile collaboration services for employees and customers.
Pharmaceutical company Merck & Co. Inc. has an experimental budget to investigate the use of new mobile apps, including one that would collect patients' vital signs and report them to a central location, said Jim Worth, Merck's director of global services, during a presentation at Boston's Enterprise 2.0 conference in June. Another potential app would send an alert to patients' mobile devices when it's time for them to take their medication.
At this point, it's unclear who will be in charge of social media and mobile application development projects. At some organizations, marketing leads these kinds of projects. That means CIOs will have to work across business groups to develop social networking and mobile services, as well as the social media policies that govern the use of such services.
Data overload requires data analytics
Among technology areas, perhaps the most difficult one to create -- and the most valuable area that CIOs are being tapped to deliver on -- is that of data analytics services. Enterprises have vast amounts of information but need new services that can decipher which data is most relevant to the business -- or better yet, that can help create new business service offerings based on that data.
At its 2010 Business Intelligence Summit, Gartner Inc. showcased a host of organizations that are developing services based on business intelligence and data gathered from internal and external information sources. Guy Carpenter & Company LLC, a New York-based risk and reinsurance service provider, has developed a service that lets customers develop what-if scenarios against their portfolios. Another service would aggregate data to allow customers to see how their portfolios compare with those of competitors.
If CIOs can manage and mine Big Data, the payoff for their businesses -- and possibly their careers -- could be huge. The McKinsey Global Institute recently published "Big data: The next frontier for innovation, competition and productivity," a report that contains numerous calculations that back that claim. According to McKinsey, U.S. health care could use large data sets to drive more than $300 billion in value annually, two-thirds of which would come from reducing national health care spending by about 8%. The report asserts, for example, that the total value these large data sets could generate would result from their being made more accessible to stakeholders, enabling experimentation and automating business decisions that depend on them. By using Big Data, the retail sector could increase its operating margin by more than 60%, McKinsey estimates, while the developed European economies could save more than $149 billion in operational efficiencies alone.
Let us know what you think about the story; email Christina Torode, News Director.