Get ready for another shift in the CIO’s role. The IT leadership role has in the past been transformed by new technologies and new business demands, and now it’s happening once more.
Transforming technologies included PCs in the 1980s, the Internet in the 1990s, and social media and mobile devices in the 2000s. At the same time, the business demanded higher-level leadership from CIOs, better alignment of IT with the business, and greater controls on IT spending. Each new technology and business demand required the role of the CIO to shift, sometimes subtly, other times dramatically.
Today, the new technologies include cloud computing, Everything as a Service, mobility and big data, which includes business analytics and equally big storage. The business drivers include the shift away from simply selling products and toward selling services and customer experiences instead.
But unlike in the past, today’s changes are occurring not gradually, but almost instantly. “The market is at hypervelocity today,” says Siva Ganesan, VP and Global Head of Assurance Services at Tata Consultancy Services (TCS), India’s largest IT services provider. “And when I say ‘market,’ I mean every enterprise dealing with the digital revolution.”
Adds Randy Mott, CIO of General Motors Corp., “The business is trying to respond to a customer that expects much more rapid change. And IT must respond to that rate.”
There’s little question that the IT mix is changing. Forrester Research, in its most recent annual report on worldwide IT spending, says investments in legacy desktop and server applications will continue to languish as more spending moves to cloud computing, big data, analytics and mobile application development. The market for computing tablets, for example, will grow by 36 percent this year over last, Forrester predicts.
Another major change being brought about by the latest innovations is the way these technologies lower the cost of entry. Large enterprises still have certain advantages over smaller ones. But with the rise of cloud-based services, some of those advantages are being erased. “Ten years ago, IT was king, and the CIO was running these multimillion dollar projects,” says Ray Wang, CEO of Constellation Research, a Cupertino, Calif.-based business research firm. “But now, two kids with a startup in Silicon Valley can come up with something new — and your whole business is disrupted.”
Adds Ganesan: “A confluence of digital forces—including the cloud, social media, mobility and big data—is rapidly weaving a web of social and societal commerce like never before in the history of computing. At TCS, this is something we see increasingly on a daily basis as we devise digital solutions for global customers.”
One result: “The CIO can no longer be the person in the wiring closet,” says Michael Chui, a San Francisco-based principal at the McKinsey Global Institute. Instead, he adds, CIOs need to become full-blown business leaders who understand both the impact of advanced new technologies on business metrics and how to make these new technologies effective.
Chris Garibaldi, a principal and Project Portfolio Management (PPM) Practice Lead at Deloitte Consulting LLP, adds that while the CIO is a respected position from a technological standpoint, the business wants more. More specifically, it’s starting to demand that the CIO be more of what he calls a “Steve Jobs-like figure,” someone with a vision for how IT drives the business and the ability to communicate that vision in a way that’s both clear and inspiring.
While all CIOs face similar pressures, they’re not all responding in lockstep. Far from it, in fact. At one end of the spectrum are companies such as Netflix that essentially run their entire businesses in the cloud. Netflix, the online movie provider, has been very public about the fact that many of its core systems run in the cloud, specifically with Amazon. At the other end of the spectrum is GM, where CIO Mott is bringing most IT systems back in-house, creating new data centers and hiring thousands of IT staff.
Mott joined GM in early 2012 after CIO stints with Hewlett-Packard, Dell and Wal-Mart Stores, and he has already pulled the plug on a $3 billion outsourcing contract with Hewlett-Packard. Now the CIO plans to invest hundreds of millions of dollars in new GM data and innovation centers, and to hire some 10,000 new IT employees over the next five years. The move is nothing short of radical. Previously, GM had outsourced 90 percent of its IT work. Now Mott wants to reverse that, and to have 90 percent of the work done by GM staff working in GM facilities.
Mott has also turned a cold shoulder on the cloud. “If you just look at some of the cloud offerings out there, it’s basically a subset of what a business needs,” he insists. “That means you still have to integrate to it, or have it as a standalone solution. And standalone, in my mind, is suboptimal.”
Instead, Mott is opting for an in-house solution because he believes it will be more integrated, more responsive and better able to scale. “With the efficiency we’re trying to gain in how we do our business, it makes sense for us to be providing that ourselves,” Mott says.
Mott is also consolidating. Until recently, GM operated 23 data centers, all managed for the automaker by third parties. Now the company is spending more than $545 million to create just two centers: a new “Enterprise Data Center” in Warren, Mich., and a future site in nearby Milford. Both will be managed by GM’s own IT staff. In addition, Mott wants GM to run four regional “innovation centers,” where some 1,500 software developers and engineers will work, encouraged to spend up to 70 percent of their time focused solely on solutions that involve serious customer-facing innovations.
While Mott does not plan to use the cloud, his vision for IT at GM does borrow some cloud concepts, most notably, the idea of building in flexible “bursting” capacity. Mott believes this will help make the company’s huge volumes of unstructured data more actionable for the business. “The first thing,” he explains, “is thinking of data holistically.”
For Mott and GM, that means pulling together a complete packet of information regarding a single vehicle: its components, engine, transmission, even where it was built. The goal: the ability to discover an issue—for example, a component that needs to be replaced—before it ever becomes an issue for the customer.
Mobile technology also has a part in Mott’s new CIO role. One tablet app helps salespeople at dealerships gain access to current and future inventory on their lots. In the future, Mott adds, prospective GM customers could be able to use their smartphones to scan the QR codes on the stickers of vehicles they’re eyeing, even when a dealership is closed. “Customers will be able to access features and functions and options of that car, which would help them in terms of a buying decision,” he adds.
Joe Bassani, until recently CIO at Customers Bank, a regional bank serving Pennsylvania, New Jersey and New York, is also high on mobile. He led the bank’s IT group to create a mobile application called CB Access for the bank’s customers; the free software lets users of Apple and Android smartphones get access to their checking accounts, check balances, transfer funds, make deposits and more. The app will need new bells and whistles going forward, and Bassani views that as a competitive advantage. “Customers need to be continually saying, ‘Wow, that’s cool. I want to use that,’” he explains. “Otherwise, they’ll be looking elsewhere.”
Customers Bank does not allow a bring-your-own-device (BYOD) policy for employees. “We had too much access to personal customer information and could not afford to have any malware introduced into the network,” Bassani recounts. At the same time, he had tried to strike a balance between security needs on the one hand and ease of access on the other. “We were really watching this area very closely,” he adds.
At a higher level, Bassani sees IT’s role shifting away from one of a cost center to one of being what he calls “an enabler of profit centers.” One potential area is big data, Bassani says. “Big data vendors are going to meet with CEOs, and the vendors are going to know the ones and zeros inside-out—and how to build dashboards around [the data].” But, he adds, “these vendors are not going to know what the CIO knows, namely, how to drive that data to help business make decisions to allocate resources for IT, or how to optimize that data for outcomes with real value for the business.”
Like Mott at GM, Bassani was not investing in the cloud. He says security and regulatory concerns prevented Customers Bank from deploying any cloud-based solutions. “Cloud is tempting, but we couldn’t really jump in there quite yet,” he says.
To be sure, Bassani and Mott are at one end of the cloud-implementation spectrum. At the other end are the many companies and CIOs who are implementing private and public clouds, and cloud-based IT and business services. As “Ten IT-Enabled Business Trends for the Decade Ahead,” a recent McKinsey & Co. report, states, “The cloud, with its ability to deliver digital power at low cost and in small increments, is not only changing the profile of corporate IT departments, but is also helping to spawn new business models by shifting the economics of ‘rent versus buy’ trade-offs for companies and consumers.”
In part, that’s because one of the cloud’s here-and-now benefits—the ability to cut costs—can enhance the new role of the CIO as a business leader. “Cloud’s ROI is essentially a move from capex [capital expenditures] to opex [operating expenditures],” notes Puneet Kumar, VP of Strategic Accounts at Tech Mahindra Ltd., a Mumbai-based IT services provider. That frees business from having to buy new software and hardware, and associated licenses, he says. Adds Ganesan of TCS: “The cloud is liberating enterprise IT from the day-to-day utility operations they’re currently running. Suddenly, businesses are looking to companies like ours to handle problems and manage any issues that arise.”
That’s already the case at cosmetics supplier Revlon Inc. According to the McKinsey & Co. report cited above, Revlon now operates more than 500 IT applications in a private cloud managed by an external provider. This saved Revlon $70 million in the first two years of the private cloud’s operation, the report states. In addition, when a Revlon data center in Venezuela was hit by fire, the company was able to shift those operations to a data center it runs in New Jersey in just two hours. “Moves like this, which suggest that cloud-delivered IT can be reliable and resilient, create new possibilities for the provision of mission-critical IT through external assets and suppliers,” the McKinsey report states.
The cloud can speed development times, too, an important factor in today’s hyperspeed marketplace. Kumar of Tech Mahindra says many of his CIO clients use the cloud to develop and build new business services. Many are licensing dedicated private cloud channels, which include the capacity for flexible bursting; this essentially frees up processing or storage capacity if a customer’s application or other requirements exceed anticipated levels. In this way, Kumar adds, they can test their products and reduce their cycle times from months to weeks.
The Mobile CIO
Mott and Bassani are far from alone in their adoption of mobile technology. TCS offers a social media platform called Knome (pronounced “know me”) that its 275,000 employees can access from their smart devices. “We see a lot of sharing, a lot of ideation and innovation happening because of that,” says VP Ganesan. “Channels leveraging the power of mobile devices liberate both consumers and enterprises from the desktop. What’s striking is the numerous ways businesses and IT departments have taken advantage of these new paradigms and embraced them into mainstream computing. TCS has created enterprise mobile apps to enhance the quality of banking for financial-services consumers and personalize travel experiences for airlines. Industrialized development and assurance methods hasten the agile deployment of such apps to enterprises.”
Similarly, Tech Mahindra has worked with one client to create a mobile app that deals with numerology—the belief in the occult significance of numbers. “India has a long-standing tradition where numerology is something a lot of people still have strong belief in,” explains Habeeb Mahaboob, Head of Information and Communications Technology Advisory and Transformation at Tech Mahindra. So when the CIO of a banking client wanted to differentiate his business, Tech Mahindra helped create a mobile numerology application. The software gives prospective customers a personalized account number that is automatically generated using an algorithmic combination of the birth date and letters of the person’s name. “That’s a classic example of how IT has made a difference,” Mahaboob says. “And it’s increased the number of people becoming customers of the bank.”
Big data is another area high on the agendas of many CIOs. Why? In large part, because today, an estimated 98 percent of all stored information is digital, up from 75 percent as recently as 2000, according to a 2013 report by the Council on Foreign Relations think tank titled, “The Rise of Big Data.” This fast-moving shift, which includes unstructured data created by social media, blogs and online videos, is a huge driver of the move toward not only big data, but also new data analytics and business intelligence tools to make that data actionable for business. Last year, when TCS surveyed more than 1,200 companies worldwide, it found that big data initiatives had already been undertaken by half of them.
Big data projects are far from simple. TCS says the biggest challenge that businesses face is overcoming organizational silos. This is a cultural challenge that cuts across functions and divisions, and at times prevents companies from turning this data into actionable insights. Until an organization’s raw data is collected and analyzed, it’s just a pile of meaningless bits and bytes.
When done right, however, big data has many applications. For example, one airline working with Tech Mahindra wants to glean the structured BI from the scads of raw unstructured data flowing in from airline staffers, in order to optimize flight routes around weather patterns. “We want to bring them the kinds of analytics they’ll need to get meaningful insights and to make better decisions for their business,” says Mahaboob.
While CIOs may disagree on the details, everyone agrees the role of the CIO is ripe for further change from new IT developments. One important trend, industry watchers say, is the so-called Internet of Things, in which physical objects are equipped with embedded sensors that use the Internet to communicate their status to applications on central servers. For example, a highway system could collect information on traffic jams, then communicate that information to the drivers of individual cars, helping them to find alternate routes. Or a factory line could send an alert whenever supplies of a certain part are running out. The “Ten IT-Enabled Business Trends” report from McKinsey sums up the trend nicely, stating: “The linking of physical objects with embedded sensors is being exploited at a breakneck pace, simultaneously creating massive network effects and opportunities.”
Chui of McKinsey’s Global Institute is especially excited about self-driving automobiles, which he calls “cars in the cloud.” Self-driving cars could help stem accidents on the road and shorten commuting times. And some industry analysts say self-driving cars represent a $200 billion opportunity both for companies that create the storage hardware involved in propelling the cars and those that license the software to automakers. These concepts, Chui says, “offer tremendous headroom across the entire business for being enabled by IT in transforming the way business provides value to [its] customers.”
IT sensors can also help “farm-to-fork” business processes, says Kumar at Tech Mahindra. His company is working with a CIO in the food industry who wants to add sensors to shipping containers filled with perishable goods so that their journeys across the globe can be followed. The sensors will report temperature and humidity inside the containers back to a tracking system responsible for the overall quality of goods. An alarm goes off whenever quality dips below par; then the container in question can be pulled. “This is a real preventive, machine-to-machine solution that provides value to the business,” Kumar says.
What’s next? In banking, Bassani envisions giving customers a mobile application that will ping their smartphones (provided they are enrolled in mobile banking) when they are in certain locations to give them restaurant and other recommendations as well as special discounts, as they travel around towns and cities. “That’s leveraging the Internet of Things as a value proposition for the business,” he says.
Similarly, TCS has developed a rural service delivery platform it calls mKRISHI® to cater to the unique needs of farmers. A mobile application on farmers’ phones pushes information between the mobile application and an expert’s Web console, and it can be customized according to the farmer’s regional language. The platform integrates multiple technologies to empower farmers with vital audio and video information based on their specific needs, such as providing updates on weather, fertilizers and pest control. Farmers benefit from the convergence of these technologies, along with the personalization and scalability that the platform provides.
At GM, CIO Mott believes there is so much untapped technology available, only a CIO’s vivid imagination can make it work for the business. “Some of these things, like sensors, are not really new,” he says. “They’re simply being imagined by people who are thinking, ‘Hey, this can provide a safer environment for our customers, or add an extra layer of convenience or comfort, or provide technical help that could mitigate a problem in a system.’”
That illustrates how important it is for CIOs to keep asking questions, Mott says, adding: “What if we did this? How would that change an outcome for the business? It’s that kind of ability to imagine that CIOs and IT organizations need to unlock.”