From...

November 18, 1998
Web posted at: 12:53 PM ET

by Rob Guth and Marc Ferranti

(IDG) -- LAS VEGAS -- A panel of CIOs here at Comdex/Fall '98 yesterday concluded that the increasing strategic emphasis corporations place on information systems will push IS heads to a more central role in charting their companies' strategies.

The panelists, representing a broad array of industries, agreed that IS is evolving from an internally focused cost center to a more outward-looking competitive tool. Because of that shift, CIOs and IS heads must broaden their focus beyond the technology they buy and use, but must also understand their firms' broad strategic direction.

"CIOs are more part of the fabric of the business as opposed to just providing technology," said Dave Laube, CIO of US West Inc. "The trend is to have a business person [as CIO] who has a strong understanding of technology ... if you're just a technologist, you are not part of the business strategy."

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The panelists see evidence of this in the percentage of CIOs at major companies who answer directly to the CEO -- this year, about 28%, vs. about 10% in the 1980s, according to Alan Jones, CIO at AT&T Corp.

Jones kicked off today's session with an overview of the "ultratrends" that CIOs must successfully ride to have a greater role in corporate strategy setting.

Those trends include the spread of digital technologies; the "information imperative" that both creates new businesses, such as online stock brokerages and redefines existing businesses; the blurring of borders between work and personal life; an explosion in customization and choice; and globalization.

Those forces -- and how CIOs deal with them -- define the future of IS heads, he said. And it also will determine whether CIOs take "the next step" onto corporate boards or the CEO seat.

"The question we have is whether we are going to make it to the next step or whether we're going to backslide," he said.

One pitfall CIOs face is the year 2000 problem, panelists said. If a company survives the turn of the century with no systems failures from the millennium bug, its CIO could emerge a hero.

"Those who have painfully done a good job today will have opportunities -- both the companies and the individuals," said Sheri Anderson, CIO at Novell Inc.

On the flip side however, "if the company fails miserably, I think the CIO will be fingered," said Joyce Wrenn, vice president of information technology and CIO of Omaha, Neb.-based Union Pacific Railroad Co.

Both panelists and audience members -- largely IS heads themselves -- said one key step IS is making toward the corporate front line is a gradual transformation from its traditional role as a place into which companies sink money for systems and telecommunications, but expect no direct revenue in return. Now, as IS is seen as more of a strategic tool, IS departments are contributing more to a company's revenue -- such as building Internet-based systems that link a company with its customers, they said.

The role of IS as a revenue generator may even mean selling products and services, said audience member Robert Shearin, CIO at Express Services Inc., a franchiser of temporary worker businesses.

Shearin, who was formerly the CIO at Macintosh software vendor Filemaker Inc., said Express Services may sell software that his group originally developed for in-house use. The front-office system handles payroll, job orders and assignments of temporary workers and could either be sold as a package or as part of a suit of consulting services by the IS group, he said.

Not only would the business provide a new stream of revenue for Express Services, but the company's franchisees "would rather pay us a buck fifty than someone else a buck fifty and not know if they are in compliance with our standards," he said.

The changing role of corporate IS departments is also having an impact on vendors of services, such as Compaq Computer Corp., which, after taking over Digital Equipment Corp., and Tandem Computers Inc., now has a services organization of about 30,000 people worldwide.

"Services is not just about cost savings anymore -- where companies outsource their IS departments to cut costs .... information technology and CIOs are much more oriented toward business strategy now," said Wendell Jones, vice president of operations management services at Compaq. Rather than seeking to take over entire IS departments, Compaq's approach now is to "complement" a company's internal IS department.

"A company can consider aspects of IS as part of its core competency -- and we can complement that by offering network management services, or help manage server farms," while, for example, software expertise remains within the corporate mandate, Jones said.

Still, no matter how far CIOs looks to the outside, they can not neglect the needs of their own users.

"IT must listen to the internal customers and what they need," Wrenn said. "We have to keep balance between process, technology and people."